Chapter 1 Banking Secior
Transcript of Chapter 1 Banking Secior
INTERNSHIP REPORT ON NATIONAL BANK OF PAKISTAN
CHAPTER # 1
INTRODUCTION OF BANKING
SECTOR
DEFINITIONS OF BANK
EVOLUTION OF BANKS IN PAKISTAN
NATIONALIZED SCHEDULES BANKS
De-NATIONALIZED SCHEDULE BANKS
SPECIALIZED BANKS
PRIVATE SCHEDULE BANKS
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1.0 Introduction of Banking Sector
The word 'Bank' is said to have been derived from the words Bancus or Banque or Bank.
This history of banking is traced to as early as 2000 B.C. The priests in Greece used to
keep money and valuables of the people in temples. These priests thus acted as financial
agents. The origin of banking is also traced to early goldsmiths. They used to keep strong
safes for storing the money and valuables of the people. The persons who had surplus
money found it safe and convenient of deposit their valuables with them. The first stage
in the development of modern banking, thus, was the accepting of deposits of cash from
those persons who had surplus money with them.
The goldsmiths used to issue receipts for the money deposited with them. These receipts
began to pass from hand to hand in settlement of transactions because people had
confidence in the integrity and solvency of goldsmiths. When it was found that these
receipts were fully accepted in payment of debts; then the receipts were drawn in such a
way that it entitled any holder to claim the specified amount of money from goldsmiths.
A depositor who is to make the payments may now get the money in cash from
goldsmiths or pay over the receipt to the creditor. These receipts were the earlier bank
notes. The second stage in the development of banking thus was the issue of bank notes.
The goldsmiths soon discovered that all the people who had deposited money with them
do not come to withdraw their funds in cash. They found that only a few persons
presented the receipts for encashment during a given period of time. They also found that
most of the money deposited with them was lying idle. At the same time; they found that
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they were being constantly requested for loan on good security. They thought it profitable
to lend at least some of the money deposited with them to the needy persons.
1.1 Definitions of Bank
1.1.1 Bank
“A financial institution, which deals with money and credit. It accepts Deposits from
individuals, firms and companies at a lower rate of Interest and gives at higher rate of
interest to those who need them.”
A financial establishment which uses money deposited by customers for investment,
pays it out when required, makes loan at interest, exchanges currency, etc.
1.1.2 J.W Gilbert
In his principles and practice banking defines a banker in these words:
“A banker is dealer in capital or more properly, a dealer in money. He is intermediate
party between the borrower and the lender. He borrows of one and lends to another”.
1.1.3 Sir John Paget
Defines banker in these terms:
“That no person or body, corporate or otherwise, can be a banker who does not
Take deposits accounts.
Take current accounts,
Issue and pay Cheques and
Collect Cheques crossed and uncrossed for his customers”
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1.2 Evolution of Banks in Pakistan
The first phase in evolution of banking in Pakistan sees very hard days for the whole
banking sector. Starting virtually from scratch in 1947, the country today possesses a full
range of banking and financial institutions to cope with various needs of the economy.
The area now constituting Pakistan was, relatively speaking, fairly well provided with
banking facilities in undivided India, in March 1947 there were 3496 offices of Indian
scheduled banks out of which as many as 487 were situated in territories now constituting
Pakistan.
The Reserve bank of India was the central banking authority in India. At the time of
partition it was decided that in the interest of smooth transition it should continue to
function in newly emerging state of Pakistan, until 30th Sep.1948.
In 1947 due to uncertainty and unsuitability the banking sector suffer heavy losses.
This resulted in a negative effect on baking service in Pakistan. The banks, which had
their registered offices in Pakistan, transferred them to India. In an effort to bring about
the collapse of the new state by pushing a deliberate policy of withdrawals the Indian
bank offices closed quickly. Those banks, which stayed, operated only in name pending
the winding up of their business. The number of scheduled banks thus declined form 487
branches before independence to only 195 branches by 30th June1948.5
1.2.1 Banking Growth during (1948-1970):
In this tense situation, a committee was immediately setup to formulate a scheme of
central banking legislation for Pakistan. Many specialists were of the opinion that in view
of the acute shortage of trained staff, any idea of establishing a central bank was I
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impractical and the best that could be attempted was the setting up of a currency board
until such times as sufficient staff could be organize to operate a central bank.
The questions as to whether the institution should be only a currency board or a full-
fledged central bank had exercised the mind of the Pakistan government since
independence. Through, it was realized that the shortage of trained personal to run the
central bank would present serious difficulty in view of the tangible advantages that a
central bank enjoyed over currency board, the government ultimately decided to take the
bold step of setting up a full fledged central banking authority. Among other factors,
which led to this decision, there was the fact the banking facilities in the country had
been totally disrupted and there was an urgent need for their rehabilitation, which a
central ban alone could meet. As there was hardly any time to pass as Act, an order was
drafted, known as the state bank of Pakistan order, which was promulgated by the
government of Pakistan on 12th may 1948. The state bank declared open on July 1, 1948
by the father of the nation.
One of the first tasks of the state bank was to arrange for the replacement of the Reserve
bank of India notes, which had continued to circulate in Pakistan during the transitional
period, by Pakistan currency.
The first Pakistan notes were issued in October 1948 in the denominations of Rs. 5, 10 &
100.An equally urgent task, which the new central bank had to address itself, was the
creation of a national banking system. To this end, while extending every help and
encouragement to Habib Bank to expand its organization, the state bank recommended
the setting up of a new banking institution to serve both as an agent to the state bank
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recommended the setting up of a new banking institution to serve both as an agent of the
state bank as well as the spearhead of its credit polices.
Accordingly the NATIONAL BANK OF PAKITSN was setup under an ordinance in
November 1949. It started with six offices in the former East Pakistan. In view of the
special role assigned to the new institution, contrary to traditional practices the Governor
of the state bank was appointed to head its board of Director in 1950. Under the fostering
care of the state bank and the support of the government, the new institution developed
rapidly. By using its special powers, the state bank made liberal advances to the new
bank to help it expand credit facilities in the country. By 1952, the National bank of
India. Shortly, afterwards, in November 1952, the governor of the state bank ceased to
function as the president of National bank of Pakistan.
With a view to broadening the institutional framework of the financial system, the state
bank also sponsored the establishment of specialized credit institutions in the filed of
agriculture and industry. Banking companies (control) act was passed in December 1948
specifically empowering the state bank to control the operations of banking companies in
Pakistan.
Moreover realizing that the most serious limitation on the expansion of banking services
in Pakistan was the lack of trained personal, the state bank sponsored a banking training
scheme, which was repeated after year and turned out a large number of bankers.
As the Commercial Banking facilities continued to expand, a new Pakistani bank, the
National Commercial Bank was established and registered as a scheduled bank. In the
filed of industrial finance a new institution known as the industrial credit and investment
cooperation was set up.
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The year 1958 marked the completion of the first decade of the working of the State Bank
of Pakistan. When it was established there were only 195 bank offices in existence. At
the end of June 1958 their number had increased to 307, of which Pakistani banks
accounted for 232 against 25 in mid 1948. Moreover at the end of June 1958. Pakistani
banks held 60% of the total banks deposits, and were responsible for 65 of total bank
credit.
When the Ayub Government took over in 1958, the banking and monetary scene was
significantly affected by Developments such as the liberalization of imports, transfer of
business in food grains to the private sector, and the firming up of commodity markets.
The demand of funds picked up and there was a substantial expansion of bank credit to
the private sector. The pace of expansion in the institutional frame work of the country’s
banking system quickened and a new Pakistani, bank, namely the United Bank Limited
was established.
Owning the five years 1960-65, the credit structure in Pakistan made rapid progress. The
bank extended its network by opening six new offices located at Chitagong, Peshawar,
Quetta, Khulna, Layallpur and Rawalpindi. The number of scheduled bank offices rose
from 430 at the end of June 1960 to 1591 in June 1965. Several new banks were added to
the list of scheduled banks.
Two principal additions were the commerce bank, and the standard bank. The number of
scheduled banks, which stood at 29 in June 1960 rose to 36 by June 1965.
Under the impact of economic growth and dear scope of private enterprises, bank credit
to the private sector rose from Rs. 1,458 millions to Rs. 5759 million. Thus the total
expansion in bank credit to the private sector during this period amounted to Rs. 4300
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million, which gave a annual expansion of Rs. 860 million compared to the annual
average increase of Rs. 144 million over the preceding five years. Banks deposits
increased from Rs. 2,493 million to Rs. 6883 million during the five years period ended
June 1965 compared to Rs. 231 million in the proceeding five years. Time deposits
during this period increased from Rs. 946 million to Rs. 3228 million, where demand
deposits rose from Rs. 1997 million to Rs 3655 million. The increase in time deposits
was particularly rapid. The ratio of time deposits to total deposits in June 1965 stood at
49.6 percent age as against 32.01 percent age five years earlier. Another salient feature of
banking development during this period was that since the rate of increase in bank
deposits lagged behind the rate of expansion in bank credit, the banked has to depend
increasingly on central bank finance. They borrowing from the state bank rose from Rs.
11 million in June 1960 to Rs. 1688 million in June 1965. Owing keen demand for bank
credit, bank’s investments could not increase as rapidly as their advances. Their
investments totaled to Rs. 1,874 million at the end of June 1965 compared to Rs. 1,231
million in June 1960. Investments which were almost equal to their advances in June
1960 were only about one third of the advances in June 1965.
The third plane period witnessed a further expansion of banking facilities in the country
the total number of scheduled banked offices increased from 1,591 at the end of June
1965 to 3133 at the close of June 1970. During the same bank credit to the private sector
rose from Rs. 5,789 million to Rs. 9492 million. There was also a substantial growth in
the bank deposits, which increased from Rs. 6883 million June 1965 to Rs. 13147 million
at the end of June 1970. A remarkable change occurred during this period related to the
composition of deposits.
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1.3 Pakistan Banking Sector
Nationalized Commercial Banks
Privatized Banks
Specialized banks
Private banks
Foreign banks
Other financial Institutions
1.3.1 Nationalized Schedule Banks:
First Women Bank Ltd.
National Bank of Pakistan
Habib Bank Ltd
1.3.2 De-nationalized Schedule Banks:
Allied Bank of Pakistan Limited
MCB Bank Limited
United Bank Ltd.
1.3.3 Specialized Banks:
Zarai Taraqiti Bank of Pakistan (ADBP)
Industrial Development Bank of Pakistan(IDBP)
Punjab Provincial Cooperative Bank
Federal bank for Cooperatives
1.3.4 Private Schedule Banks:
Askari Commercial Bank Ltd.
Bank Alfalah Ltd.
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Bank Al-Habib Ltd.
Bolan Bank Ltd.
Faysal Bank Ltd.
Habib Credit & Exchange Bank
Indus Bank Ltd.
Metropolitan Bank Ltd.
Platinum Bank Ltd.
Prime Commercial Bank Ltd.
Prudential Bank Ltd.
Soneri Bank Ltd.
The Bank of Khyber
The Bank of Punjab
Union Bank Ltd.
1.3.5 Foreign Banks:
ABN AMRO Bank N.V.
Albaraka Islamic Bank BSC (EC)
American Express Bank Ltd.
ANZ Grindlays Bank Ltd.
Bank of America (NT & SA)
Bank of Tokyo Mitsubishi Ltd.
Bank of Ceylon
Banque Indosuez
Citibank N.A.
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Credit Agricole A.G.
Deutche Bank A.G.
Doha Bank Ltd.
Emirates bank International Ltd. P.J.S.C.
Habib Bank A.G. Zurich
Hong Kong and Shangai Banking Crop. Ltd.
International Finance Investment and Commerce Bank Ltd.
Mashreq Bank PSC
Oman International Bank SOAG
Rupali Bank Ltd.
Societe Generale, the French Int. Bank Ltd.
Standard Chartered Bank
Trust Bank Ltd.
1.3.6 Development Financial Institutions (Dfis):
Investment Corp of Pakistan
National Development Finance Corp.
Pakistan Industrial Credit and Investment Corp.
Pak Kuwait Investment Company
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CHAPTER # 2
INTRODUCTION OF NATIONAL BANK
OF PAKISTAN
INTRODUCTION OF NATIONAL BANK OF
PAKISTAN
HISTORISAL BACKGROUND
BANK PROFILE
VISSION
MISSION
CORE VALUES
GOAL
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2.1 Introduction of National Bank Of Pakistan
National Bank of Pakistan is the largest commercial bank operating in Pakistan National
Bank of Pakistan was incorporated in Pakistan under the National Bank of Pakistan
Ordinance, 1949 and is listed on all the stock exchanges in Pakistan. It's registered and
head office is situated in Karachi.
NBP headquarters in Karachi, Pakistan with over 1,200 branches country wide. In
today's competitive business environment, NBP needed to redefine its role and shed the
public sector bank image, for a modern commercial bank. It has offloaded 23.2 percent
share in the stock market, and while it has not been completely privatized like the other
three public sector banks, partial privatization has taken place. It is now listed on the
Karachi Stock Exchange.
Handling of treasury transactions for the Government of Pakistan as agent to
the State Bank of Pakistan.
Accepting of deposits of money on current, fixed, saving, term deposit and
profit and loss sharing accounts.
Borrowing money and arranging finance from other banks and advancing and
lending money to its clients.
Buying, selling, dealing, including entering into forward contracts of foreign
exchange.
Financing of seasonal crops like cotton, wheat, rice, sugar cane, tobacco, etc.
Carrying on agency business of any description other than managing agent, on
behalf of clients including Government and local authorities.
Generating, undertaking, promoting, etc. of issue of shares and, bonds, etc.
Transacting guarantee and indemnity business.
Undertaking and executing trusts.
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2.2 Historical Background
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
then East Pakistan and directed its resources in financing of jute crop. The Bank’s
Karachi and Lahore offices were subsequently opened in December 1949.
State bank of Pakistan after its formation demanded from the Indian Reserve Bank the
assets against the Indian currency retired from Pakistan territory. Government of India
refused to hand over the assets worth about five hundred million rupees. The dispute is
still unsettled and these assets are still not delivered to Pakistan. Until June 1950, the
Bank was engaged exclusively on jute operation. Thereafter, it was felt that it could
expand its business to include other commodities as well. Bank took a big stride in 1952,
when it replaced the Imperial Bank of India, as an agent of State Bank of Pakistan.
With the passage of time its functioning diversified as they take over the function of
different institution with the passage of time like in past they took over the function of
Imperial bank of India and now of NDFC (national development finance corporation) It
is working as the agent of the state bank of Pakistan and performs its functions wherever
state bank of Pakistan is not present.
The government floated its 10 % of the shares in the open market in past and the ratio
became 60: 40 and in future they trying to make it 55: 45. In 1999 national bank
celebrated its golden jubilee during the last fifty years bank has made substantial strides
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in the financial services industry in Pakistan. In 1999 its market share was around 22%
and it remains the largest financial institution in Pakistan.
2.2.1 Branch Network
With the geographical development of its branches, the Bank has been able to extend its
services to a much larger number of Pakistanis all over the country. Today it has more
than 8.5 million accounts. Bank maintains its presence in all the major financial centers
of the world through its 15 overseas branches and 5 representative offices. Of these, three
representative offices have recently been set up at Tashkent (Uzbekistan), Baku
(Azerbaijan) and Almaty (Kazakhstan) to take advantage of the emerging opportunities in
CIS countries. Bank’s role globally is well assisted by its network of correspondent banks
located strategically in Asia, America, Europe and Africa.
Apart from having a vast branch network, Bank is at the forefront in the acquisition and
application of new technologies in every aspect of its banking facilities. It has acquired
leased telephone lines for on-line banking. The Bank has 12 Regional Computer Centers
to cover various on-line and batch system requirements of branches and controlling
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15 Overseas Branches4 Represative Offices
1 Subsidiary1 Joint Venture
29 Regional Offices1,189 Branches
4 Subsidiaries
NBP has an extensive domestic branch network of over 1500 branches located all over
Pakistan. The Bank also has a presence in 24 international locations including the USA,
United Kingdom, Europe and the Far East.
2.3 BRANCHES ALL OVER THE COUNTARY
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2.3.1 Ownership
NBP is 100% owned by the Government of Pakistan (GOP).
2.3.2 Deposits
NBP holds 24.6% share of time and demand deposits in the country. Local currency
deposits comprise 67% of bank's total deposits while foreign currency deposits account
for the rest.
2.3.3 Assets
NBP's total assets stood at PKR350 billion on December 2001. This included total
earning assets of about PKR268 billion with gross loan portfolio of PKR140 billion. The
bank also has an investment portfolio of PKR 91 billion, which comprises treasury
securities, corporate bonds, shares and other securities.
2.3.4 Deposits
As of December 2001 NBP had a paid-up capital of PKR1.46 billion divided into 146
million shares of 10 rupees each. Total shareholders' equity was PKR10 billion, however,
revaluation reserve has increased shareholders' funds to PKR16 billion. NBP has,
however, increased its paid up capital from PKR Rs. 1.46 billion to Rs. 3.73 billion
through issuance of bonus shares (subject to corporate and shareholder approvals
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2.4 Bank Profile
Type Government KSE:LSE
Established 1949
Headquarter Principal Office, Karachi Pakistan
Key People S. Ali Raza (President & Chairman)
Industry Banking, capital Market
Products Loans, Credit Card, Savings, Consumer Banking etc
Deposit 624,938 Million
Net income 15,459 Million
Total Assets 817,758 Million
Number of Employees 15,204
Number of Branches 1,276
Home page www.nbp.com.pk
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2.4.1 Vision
“To be recognized as a leader and a brand synonymous with trust, highest standards
of service quality, international best practices and social responsibility”
2.4.2 Mission
“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 values”
2.4.3 Core Values
Highest standards of Integrity
Institutionalizing team work and performance culture
Excellence in service
Advancement of skills for tomorrow’s challenges
Awareness of social and community responsibility
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2.4.4 Objectives of National Bank
Objectives are ends towards which an enterprise activity is aimed. The purpose of
business is production and marketing of economic goods and services but to accomplish
these objectives to a number of enterprise objectives may be necessary.
National bank of Pakistan has certain objectives. These objectives are
Advancing loans
Accept deposits
Remitting of funds
Sale of promissory notes
Selling and realizing property of bank claims
Investment or underwriting of stocks
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CHAPTER #3
ORGANAZATIONAL STRUCTURE
OVREALL ORGANIZATIONAL STRUCTURE
PROCESS DEPARTMENT
CUSTOMER DEPARTMENT
CREDIT MANAGEMENT GROUP
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3.1 DESIGNATIONS OF HIGHER LEVEL OFFICERS
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)
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3.1.1 Process Department
3.1.2 Customer Department
3.1.3 Credit Management Group
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Administration Wing
Administration Wing
SBP InspectionSBP Inspection Market & Liquidity Risk
Market & Liquidity Risk
Credit RiskCredit Risk
Compliance Group(Process Deptt)
Compliance Group(Process Deptt)
Customer Facilitation &
Admn.
Customer Facilitation &
Admn.
Customer Services & Govt. Business
Customer Services & Govt. Business
Financial Institutional &
Cash Manag.
Financial Institutional &
Cash Manag.
Operation Group(Customer Dep’t)Operation Group(Customer Dep’t)
Administration Wing
Administration Wing
Credit Monitoring
Wing
Credit Monitoring
Wing
Industrial Research
Wing
Industrial Research
Wing
Credit Policy & SME Wing
Credit Policy & SME Wing
Credit Management Group
(Functional Deptt)
Credit Management Group
(Functional Deptt)
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CHAPTER #4PRODUCT AND SERVICES MIX
PRESIDENT KAROBAR SCHEME
ADVANCE SALARY SCHEME
CASH n GOLD SCHEME
KISAN DOST SCHEME
KISAN TAQAT SCHEME
PAK REMIT
CASH CARD SCHEME
PREMIUM AAMADNI SCHEM
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4.1 Product & Services Mix of NBP
Marketing is the task of creating, promoting and delivering goods and services to
consumers and businesses. Organizations identify and profile distinct group of buyers
who might prefer or require varying products and marketing mixes. The customer seeks
for value and satisfaction. The organizations can increase the value of the customer
offering in several ways e.g. raising benefits, reducing costs etc. marketing mix is a set of
marketing tools that the firm uses to pursue its marketing objectives in the target market.
4.1.1 President Karobar Scheme
National Bank of Pakistan is providing financing under President Karobar Scheme with
the cooperation of government of Pakistan. The purpose of this scheme is to reduce
unemployment from the country. Main features are as under
Minimum down payment, 10% of asset price (5% for PCO & Telecaster)
Tenure of loans 1 to 5 years (for PCO 2 years)
Grace period 3 months
Maximum loan amount Rs. 200,000/-
Age 18-45 years
Mark-up (variable) 1 year KIBOR + 2.00% p.a.
The customer will pay markup @ 6% p.a., rest will be borne by GOP*
Life & disability insurance paid by GOP
NBP’S loan available for:
4.1.2 Advance Salary Scheme
NBP Advance Salary, the leading personal loan product of the country, is maintaining its
inimitability ever since it was launched. This was only possible due to its swift growth
and remarkable loan disbursement of over 138 billion.
Employees can avail up to 20 net take home salaries with easy repayment installments.
It’s hassle free acquisition with no prior formalities and easy availability in a short turn
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round time are attributed as the most distinguishing features of the product. The product
is offered countrywide. Its salient features are;
Easy installments of 1 to 60 months at your choice
Take up to 20 advance salaries
Quick processing and fastest disbursement
The product is for permanent employees of Government, Semi Government
and Autonomous bodies receiving salaries through NBP accounts
4.1.3 Cash n Gold Scheme
With NBP Cash n Gold, provide facility for ready cash against idle gold jewelry with no
minimum limit and provide extra benefit. The main features are:
Facility of Rs. 10, 000/-against each 10 gms of net weight of Gold Ornaments
No maximum limit of cash
Repayment after one year
Roll over facility
No penalty for each repayment
Rate of mark-up 13% p.a.
Weight and quality of gold to be determined by NBP appointed schroffs
4.1.4 Kisan Dost Scheme
National Bank of Pakistan is lending in agricultural field. National Bank of Pakistan is
lending farmers for development of agriculture sector of the country under certain terms
and conditions. NBP provide loan to farmers for production, development purposes, for
purchase of tractors, for installation of tube wells, for purchase of agricultural
instruments, micro loan, for construction of godwon, for construction of fish pond, for
development of livestock and farming, for mil processing, for cold storage, bio-gas
plants.
interest @ 14.5 percent per annum
Quick & easy processing
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Delivery at the farmer’s doorstep
Technical guidance to farmers
Wide range of financing schemes for farmers
Finance facility up to Rs. 500,000/- for landless farmers against personal
guarantee
Financing available against pass book, residential/commercial property, gold
ornaments and paper security
4.1.5 Kisan Taqat Scheme
Livestock and dairy farms.
NBP facilitates with livestock experts
Less documentation and easy to repay
Available at the next door step
Scheme is available in more than 50 branches of NBP
4.1.6 Pak Remit
Pak remit is an internet based Home Remittance Service. This service is available to U.S.
residents for sending money to their family and friends in Pakistan. One must have a
valid US Dollar account with a U.S. bank or a US Dollar credit or debit card in order to
remit funds through this channel.
Remitters in USA can log on to our user friendly website, www.pakremit.com and easily
remit funds to Pakistan from the comfort of their homes, in a matter of minutes. The
service is fully secure with advance encryption application and is available for use 24
hours a day, 7 days a week. Fees and exchange rate have been set at competitive levels
and the remitters have the ability to track delivery of funds as well.
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4.1.7 Cash Card Scheme
ATM + Debit Card
NBP Cash Card is a 24-hour direct access ATM/ Debit
card to bank account, which lets pay directly from the account as an alternative payment
method to cash. The transaction is authorized and processed by entering PIN. The NBP
Cash Card holders are able to transact at any of the 4000 + Merchants where Orix logo is
displayed and can withdraw cash from NBP, 1-Link & M-NET ATM’s across the count.
Use it as an ATM in any of the ATM’s in Pakistan
Use it as Debit Card in any of the outlets with ORIX POS machine
Cash withdrawal up to Rs. 20,000/- per day
Account Balance Enquiry
Mini Statement (Only at NBP ATM)
PIN Change facility (Only at NBP ATM)
Advantages
Customers don’t need to carry a lot of cash with you every time you go out.
Secure and Safe transaction.
Account Information on tips (like: Mini Statement, Balance Inquiry, Utility Bill Payment etc.)
Enable To Withdraw Cash From 1-Link ATMs / MNET ATMs.
Enable to make purchases round 4000 POS (Merchants) Countrywide including 2500+ POS in Karachi.
No Card Issuance Fee for first 12 Months
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4.1.8 Premium Aamadni Scheme
A monthly income scheme introduced by National Bank of Pakistan for investors as well
as for general public. Incentives are available for investors providing finance facility
against these certificates and also allowed to customers to convert existing deposits into
National Bank Premium Aamdani Certificates.
Earn up to 11% p.a.
Minimum deposit of Rs. 20,000/-
Maximum deposit of Rs. 5,000,000/-
Investment period is 5 years
Free Demand Draft, Pay Order and Cheque Book
Convenience of NBP online Aasan Banking (for online banking customers)
Free NBP Cash Card (ATM+Debit)
Running finance facility up to 90%
Profits paid on monthly basis
Period Profit Rates
1st year 7.50%
2nd year 8.50%
3rd year 9.50%
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4th year 10.50%
5th year 11%
CHAPTER # 5
DEPARTMENTALIZATION
CASH DEPARTMENT
CLEARANCE DEPARTMENT
ADVANCES DEPARTMENT
HUMAN RESOURCE MANAGEMENT
REMITTANCE DEPARTMENT
DEPOSIT DAPARTMENTS
FOREIGN EXCHANGE DEPARTMENTS
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5.1 Cash Department
Cash department performs the following functions:
5.1.1 Receipt
The money, which either comes or goes out from the bank, its record should be kept.
Cash department performs this function. The deposits of all customers of the bank are
controlled by means of ledger accounts. Every customer has its own ledger account and
has separate ledger cards.
5.1.2 Payments
It is a banker’s primary contract to repay money received for this customer’s account
usually by honoring his cheques.
5.1.3 Cheques and their Payment
The Negotiable Instruments. Act, 1881, “Cheque is a bill of exchange drawn on a
specified banker and not expressed to be payable otherwise than on demand”.
Since a Cheque has been declared to be a bill of exchange, it must have all its
characteristics as mentioned in Section 5 of the Negotiable Instruments Act, 1881.
Therefore, one can say that a Cheque can be defined as an:
“An unconditional order in writing drawn on a specified banker, signed by the drawer,
requiring the banker to pay on demand a sum certain in money to, or to the order of, a
specified person or to the bearer, and which does not order any act to be done in addition
to the payment of money”3. (Law of Banking by Dr. Hart, p.327).
5.1.4 The Requisites of Cheque
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There is no prescribed form of words or design of a Cheque, but in order to fulfill the
requirements mentioned in Section 6 above the Cheque must have the following.
It should be in writing
The unconditional order
Drawn on specific banker only
Payment on Demand
Sum certain in money
Payable to a specific person
Signed by the drawer
5.1.5 Parties to Cheque
The normal Cheque is one in which there is a drawer, a drawee banker and a payee, or no
payee but bearer.
The Drawer
The Drawee
The Payee
5.1.6 Types of Cheques
Bankers in Pakistan deal with three types of Cheques
Bearer Cheques
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Bearer cheques are cashable at the counter of the bank. These can also be collected
through clearing.4
Order Cheques
These types of cheques are also cashable on the counter but its holder must satisfy the
banker that he is the proper man to collect the payment of the cheque and he has to show
his identification. It can also be collected through clearing.
Crossed Cheques
These cheques are not payable in cash at the counters of a banker. It can only be credited
to the payee’s account. If there are two persons having accounts at the same bank, one of
the account holder issues a cross-cheque in favour of the other account holder. Then the
cheque will be credited to the account of the person to whom the cheque was issued and
debited from the account of the person who has actually issued the cheque.
5.1.7 Payment of Cheques
It is a banker’s primary contract to repay money received for his customer’s account
usually by honoring his Cheques. Payment of money deposited by the customer is one of
the root functions of banking. The acid test of banking is the receipt of money etc. from
the depositors, and repayment to them. This paying function is one, which is the
distinguishing mark of a banker and differentiates him from other institutions, which
receive money from the public. However the bankers’ legal protection is only when
payment is in ‘Due Course’. The payment in due course means payment in accordance
with the apparent tenor of the instrument, in good faith and without negligence to any
person in possession thereof under circumstances, which do not afford a reasonable
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ground of believing that he is not entitled to receive payment of the amount therein
mentioned. It is a contractual obligation of a banker to honor his customer’s cheques if
the following essentials are fulfilled.
Cheques should be in a proper form
Cheque should not be crossed
Cheque should be drawn on the particular bank
Cheque should not mutilated
Funds must be sufficient and available
The Cheque should not be post dated or stale
5.2 Clearance Department
A clearinghouse is an association of commercial banks set up in given locality for the
purpose of interchange and settlement of credit claims. The function of clearinghouse is
performed by the central bank of a country by tradition or by law. In Pakistan, the
clearing system is operated by the SBP. If SBP has no office at a place, then NBP, as a
representative of SBP act as a clearinghouse.
After the World War II, a rapid growth in banking institutions has taken place. The use of
cheques in making payments has also widely increased. The collection as settlement of
mutual obligations in the form of cheques is now a big task for all the commercial bank.
When Cheque is drawn on one bank and the holder (payee) deposits the same in his
account at the bank of the drawer, the mutual obligation are settled by the internal bank
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administration and there arises no inter bank debits from the use of cheques. The total
assets and total liabilities of the bank remain unchanged.
In practice, the person receiving a Cheque as rarely a depositor of the cheque at the same
bank as the drawer. He deposits the cheque with his bank other than of payer for the
collection of the amount. Now the bank in which the cheque has been deposited becomes
a creditor of the drawer’s bank. The depositor bank will pay his amount of the cheque by
transferring it from cash reserves if there are no offsetting transactions. The banks on
which the cheques are drawn become in debt to the bank in which the cheques are
deposited. At the same time, the creditors’ banks receive large amounts of cheques drawn
on other banks giving claims of payment by them.
The easy, safe and most efficient way is to offset the reciprocal claims against the other
and receive only the net amount owned by them. This facility of net inter bank payment
is provided by the clearinghouse.
The representatives of the local commercial banks meet at a fixed time on all the business
days of the week. The meeting is held in the office of the bank that officially performs the
duties of clearinghouse. The representatives of the commercial banks deliver the cheques
payable at other local banks and receive the cheques drawn on their bank. The cheques
are then sorted according to the bank on which they are drawn. A summary sheet is
prepared which shows the names of the banks, the total number of cheques delivered and
received by them. Totals are also made of all the cheques presented by or to each bank.
The difference between the total represents the amount to be paid by a particular bank
and the amount to be received by it. Each bank then receives the net amount due to it or
pays the net amount owed by it.
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5.2.1 In Word Clearing Books
The bank uses this book for the purpose of recording all the cheques that are being
received by the bank in the first clearing. All details of the cheques are recorded in this
book.
5.2.2 Out-Word Clearing Book
The bank uses outward clearing register for the purpose of recording all the details of the
cheques that the bank has delivered to other banks.
5.3 Advances Department
Advances department is one of the most sensitive and important departments of the bank.
The major portion of the profit is earned through this department. The job of this
department is to make proposals about the loans. The Credit Management Division of
Head Office directly controls all the advances. As we known bank is a profit seeking
institution. It attracts surplus balances from the customers at low rate of interest and
makes advances at a higher rate of interest to the individuals and business firms. Credit
extensions are the most important activity of all financial institutions, because it is the
main source of earning. However, at the same time, it is a very risky task and the risk
cannot be completely eliminated but could be minimized largely with certain techniques.
Any individual or company, who wants loan from NBP, first of all has to undergo the
filling of a prescribed form, which provides the following information to the banker.
5.3.1 Name and Address of the Borrower
Existing financial position of a borrower at a particular branch.
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Accounts details of other banks (if any).
Security against loan.
Exiting financial position of the company. (Balance Sheet & Income Statement).
Signing a promissory note is also a requirement of lending, through this note
borrower promise that he will be responsible to pay the certain amount of money
with interest.
5.3.2 Principles of Advances
There are five principles, which must be duly observed while advancing money to the
borrowers.
Safety
Liquidity
Dispersal
Remuneration
5.3.3 Safety
Banker’s funds comprise mainly of money borrowed from numerous customers on
various accounts such as Current Account, Savings Bank Account, Call Deposit Account,
Special Notice Account and Fixed Deposit Account. It indicates that whatever money the
banker holds is that of his customers who have entrusted the banker with it only because
they have full confidence in the expert handling of money by their banker. Therefore, the
banker must be very careful and ensure that his depositor’s money is advanced to safe
hands where the risk of loss does not exist. The elements of character, capacity and
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capital can help a banker in arriving at a conclusion regarding the safety of advances
allowed by him.
5.3.4 Character
It is the most important factor in determining the safety of advance, for there is no
substitute for character. A borrower’s character can indicate his intention to repay the
advance since his honesty and integrity is of primary importance. If the past record of the
borrower shows that his integrity has been questionable, the banker should avoid him,
especially when the securities offered by him are inadequate in covering the full amount
of advance.
It is obligation on the banker to ensure that his borrower is a person of character and has
capacity enough to repay the money borrowed including the interest thereon.
5.3.5 Capacity
This is the management ability factor, which tells how successful a business has been in
the past and what the future possibilities are. A businessman may not have vast financial
resources, but with sound management abilities, including the insight into a specific
business, he may make his business very profitable. On the other hand if a person has no
insight into the particular business for which he wants to borrow funds from the banker,
there are more chances of loss to the banker.
5.3.6 Capital
This is the monetary base because the money invested by the proprietors represents their
faith in the business and its future. The role of commercial banks is to provide short-term
capital for commerce and industry, yet some borrowers would insist that their bankers
provide most of the capital required. This makes the banker a partner. As such the banker
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must consider whether the amount requested for is reasonable to the borrowers own
resources or investment.
5.3.7 Liquidity
Liquidity means the possibilities of recovering the advances in emergency, because all
the money borrowed by the customer is repayable in lump sum on demand. Generally the
borrowers repay their loans steadily, and the funds thus released can be used to allow
fresh loans to other borrowers. Nevertheless, the banker must ensure that the money he is
lending is not blocked for an undue long time, and that the borrowers are in such a
financial position as to pay back the entire amount outstanding against them on a short
notice. In such a situation, it is very important for a banker to study his borrower’s assets
to liquidity, because he would prefer to lend only for a short period in order to meet the
shortfalls in the wording capital. If the borrower asks for an advance for the purchase of
fixed assets the banker should refuse because it shall not be possible for him to repay
when the banker wants his customer to repay the amount. Hence, the baker must adhere
to the consideration of the principles of liquidity very careful.
5.3.8 Dispersal
The dispersal of the amount of advance should be broadly based so that large number of
borrowing customer may benefit from the banker’s funds. The banker must ensure that
his funds are not invested in specific sectors like textile industry, heavy engineering or
agriculture. He must see that from his available funds he advances them to a wide range
of sector like commerce, industry, farming, agriculture, small business, housing projects
and various other financial concerns in order of priorities.
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Dispersal of advances is very necessary from the point of security as well, because it
reduces the risk of recovery when something goes wrong in one particular sector or in
one field.
5.3.9 Remuneration
A major portion of the banker’s earnings come form the interest charged on the money
borrowed by the customers. The banker needs sufficient earnings to meet the following:
Interest payable to the money deposited with him.
Salaries and fringe benefits payable to the staff members.
Overhead expense and depreciation and maintenance of the fixed assets of the
bank.
An adequate sum to meet possible losses.
Provisions for a reserve fund to meet unforeseen contingencies.
Payment of dividends to the shareholders.
Suitability
The word “suitability’ is not to be taken in its usual literary sense but in the broader sense
of purport. It means that advance should be allowed not only to the carefully selected and
suitable borrowers but also in keeping with the overall national development plans
chalked out by the authorities concerned. Before accommodating a borrower the banker
should ensure that the lending is for a purpose in conformity with the current national
credit policy laid down by the central bank of the country.
5.3.10 Forms of Loans
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In addition to purchase and discounting of bills, bankers in Pakistan generally lend in the
form of cash finance, overdrafts and loans. NBP provides advances to different people in
different ways as the case demand.
5.3.11Cash Finance
This is a very common form of borrowing by commercial and industrial concerns and is
made available either against pledge or hypothecation of goods, produce or merchandise.
In cash finance a borrower is allowed to borrow money from the banker up to a certain
limit, either at once or as and when required. If the borrower does not utilize the full
limit, the banker has to lose return on the un-utilized amount. In order to offset this loss,
the banker may provide for a suitable clause in the cash finance agreement, according to
which the borrower has to pay markup/service charges on at least on self or one quarter
of the amount of cash finance limit allowed to him even when he does not utilize that
amount.
5.3.12 overdraft/Running Finance
This is the most common form of bank lending. When a borrower requires temporary
accommodation his banker allows withdrawals on his account in excess of the balance
which the borrowing customer has in credit, and an overdraft thus occurs. This
accommodation is generally allowed against collateral securities. When it is against
collateral securities it is called “Secured Overdraft” and when the borrowing customer
cannot offer any collateral security except his personal security, the accommodation is
called a “Clean Overdraft”. The borrowing customer is in an advantageous position in an
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overdraft, because he has to pay service charges only on the balance outstanding against
him. The main difference between a cash finance and overdraft lies in the fact that cash
finance is a bank finance used for long term by commercial and industrial concern on
regular basis, while an overdraft is a temporary accommodation occasionally resorted to.
5.3.13Demand Financing/Loans
When a customer borrows from a banker a fixed amount repayable either in periodic
installments or in lump sum at a fixed future time, it is called a “loan”. When bankers
allow loans to their customers against collateral securities they are called “secured loans”
and when no collateral security is taken they are called “clean loans”.
The amount of loan is placed at the borrower’s disposal in lump sum for the period
agreed upon, and the borrowing customer has to pay interest on the entire amount. Thus
the borrower gets a fixed amount of money for his use, while the banker feels satisfied in
lending money in fixed amounts for definite short periods against a satisfactory security
5.4 Human Recourse Management
Human Resource plays a vital role in the success of every service organization. They
interact between man and machine. Their attitude can win or loose the customer. The
positive attitude could only be created in a conductive environment, which can make the
staff dedicated towards the organization and its objectives. In reality the man is more
important than machine as it is the human which could get maximum out of machine to
keep a happy customer. However, most organizations give little importance to this very
important asset.
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Various aspects related to human resource of National Bank of Pakistan are critically
examined in the following text:
5.4.1 Selection & Recruitment
Although the Bank believes in merit but in practice the selection of employees is not
done on merit. Most of the employees are low educated. This shows that candidates with
some strong family background or political pressure are given preference in recruitment
and qualified candidates are sometimes left behind.
5.4.2 Job for Life
Like the employee of public sector organizations in Pakistan, the employees of NBP also
enjoy their job for life. Since there is no risk of early retirement or redundancy in rank,
they do not perform with their full potentials. This is one redundancy in rank, they do not
perform with their full potentials, and this is one of the reasons responsible for the low
productivity of the employees of the Bank.
5.4.3 Performance Appraisal
The performance of employees of the Bank are appraised though their annual confidential
reports at the end of each year. This has become an outdated method of performance
appraisal and no longer used due to the following reasons:
The performance of employees is evaluated after quite a long time.
Element of subjectivity is involved in this method.
Employee’s participation is not ensured in the process of evaluation.
Objectives of employee’s are not quantified.
5.4.4 Inter Personal Relationship:
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Modern management acknowledges human resources as one ‘of the most important
assets of an organization. But by their very nature, human beings are also the most
unpredictable. Where a number of persons work together, interactions among them, of
necessity, will lead to conflicts and NBP is no exception. Most interpersonal conflicts in
NBP can be traced back to the following major heads.
5.4.5 Lack of Communication:
Lack of communication is for the biggest reason for conflicts. Not only it is due to the
failure to send a massage but to an interpretation given to the massage by the receiver is
different from that intended.
5.4.6 Diversity in Values:
Diversity in values, perceptions, cultural background and life-style is another reason
responsible for inter personal conflicts in NBP. Different values and perceptions about
the same issue, event or personality hinder understanding. When things come to such a
pavement, therefore, interpersonal conflicts are generated.
The dominant trend in all modern industrial societies of the world is merit and expertise,
which helps promote cohesion and reduce conflicts. But the feudalistic mindset is still
very strong in our set up and there is no tradition of tolerance for differing viewpoints.
Hence, interpersonal conflicts are generated.
5.4.7 Corruption:
Our social acceptance of corruption gives rise to corruption at every level of social and
organizational set up. Corruption involves financial embezzlement, favoritism, nepotism,
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cronyism and other number of such practices. All these cause resentment that keep
building up and lead to conflict sooner or later.
In the past few years, some cases of frauds have happened in different branches. The
reasons can be linked with the employee dissatisfaction of NBP.
5.4.8 Discipline & Authority:
Maintaining discipline and implementation of authority (tables) in letter and spirit is the
key to success of any organization. In NBP, The authority tables are not strictly
maintained. Line managers are not fully equipped with the authority with no vertical or
horizontal interference
5.5 Remittance Department
Remittance means a sum of money sent in payment for something. This department deals
with either the transfer of money from one bank to other bank or from one branch to
another branch for their customers. NBP offers the following forms of remittances.
5.5.1 Demand Draft:
Demand draft is a popular mode of transfer. The customer fills the application form.
Application form includes the beneficiary name, account number and a sender’s name.
The customer deposits the amount of DD in the branch. After the payment the DD is
prepared and given to the customer. NBP officials note the transaction in issuance
register on the page of that branch of NBP on which DD is drawn and will prepare the
advice to send to that branch. The account of the customer is credited when the DD
advice from originating branch comes to the responding branch and the account is
debited when DD comes for clearance. DD are of two types.
Open DD: Where direct payment is made.
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Cross DD: Where payment is made though account.
NBP CHARGES FOR DD
Up to Rs. 50,000/- is Rs 50/- only
Over Rs. 50,000/- is 0.1%
5.5.2 Pay Order:
Pay order is made for local transfer of money. Pay order is the most convenient, simple
and secure way of transfer of money. NBP takes fixed commission of Rs. 25 per pay
order from the account holder and Rs. 100 from a non-account holder.
5.5.3 Telegraphic Transfer:
Telegraphic transfer or cable transfer is the quickest method of making remittances.
Telegraphic transfer is an order by telegram to a bank to pay a specified sum of money to
the specified person. The customer for requesting TT fills an application form. Vouchers
are prepared and sent by ordinary mail to keep the record. TT charges are taken from the
customer. No excise duty is charged on TT. The TT charges are:
Telegram/ Fax Charges on TT = Actual-minimum Rs.125.
Cable telegram transfer costs more as compared to other title of money. In cable transfer
the bank uses a secret system of private code, which is known to the person concerned
with this department and branch manager.
5.5.4 Mail Transfer:
When the money is not required immediately, the remittances can also be made by mail
transfer (MT). Here the selling office of the bank sends instructions in writing by mail to
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the paying bank for the payment of a specified amount of money. Debiting to the buyer’s
account at the selling office and crediting to the recipient’s account at the paying bank
make the payment under this transfer. NBP taxes mail charges from the applicant where
no excise duty is charged. Postage charges on mail transfer are actual minimum Rs. 40/-
if sent by registered post locally Rs.40/- if sent by registered post inland on party’s
request
5.6 Deposit Department
It controls the following activities:
A/C opening.
Issuance of cheque book.
Current a/c
Saving a/c
Cheque cancellation
Cash
5.6.1 Account opening:
The opening of an account is the establishment of banker customer relationship. Before a
banker opens a new account, the banker should determine the prospective customer’s
integrity, respectability, occupation and the nature of business by the introductory
references given at the time of account opening. Preliminary investigation is necessary
because of the following reasons.
Avoiding frauds
Safe guard against unintended over draft.
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Negligence.
Inquiries about clients.
There are certain formalities, which are to be observed for opening an account with a
bank.
Formal Application
Introduction
Specimen Signature
Minimum Initial Deposit
Operating the Account
Pay-In-Slip Book
Pass Book
Issuing Cheque Book
5.6.2 Qualification of Customer:
The relation of the banker and the customer is purely a contractual one, however, he must
have the following basic qualifications.
He must be of the age of majority.
He must be of sound mind.
Law must not disqualify him.
The agreement should be made for lawful object, which create legal relationship
Not expressly declared void.
5.6.3 Types of Accounts:
Following are the main types of accounts
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Individual Account
Joint Account
Accounts of Special Types
Partnership account
Joint stock company account
Accounts of clubs, societies and associations
Agents account
Trust account
Executors and administrators accounts
Pak rupee non-resident accounts
5.6.4 Issuing Of Cheque Book:
This department issue cheque books to account holders.
Requirements for issuing cheque book
The account holder must sign the requisition slip
Entry should be made in the cheque book issuing book
Three rupees per cheque should be recovered from a/c holder if not then debit
his/her account.
5.6.5 Current Account:
These are payable to the customer whenever they are demanded. When a banker accepts
a demand deposit, he incurs the obligation of paying all cheques etc. drawn against him
to the extent of the balance in the account. Because of their nature, these deposits are
treated as current liabilities by the banks. Bankers in Pakistan do not allow any profit on
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these deposits, and customers are required to maintain a minimum balance, failing which
incidental charges are deducted from such accounts. This is because the depositors may
withdraw Current Account at any time, and as such the bank is not entirely free to
employ such deposits.
Until a few decades back, the proportion of Current Deposits in relation to Fixed
Deposits was very small. In recent years, however, the position has changed remarkably.
Now, the Current Deposits have become more important; but still the proportion of
Current Deposits and Fixed Deposits varies from bank to bank, branch to branch, and
from time to time.
5.6.6 Saving Account:
Savings Deposits account can be opened with very small amount of money, and the
depositor is issued a Cheques book for withdrawals. Profit is paid at a flexible rate
calculated on six-month basis under the Interest-Free Banking System. There is no
restriction on the withdrawals from the deposit accounts but the amount of money
withdrawn is deleted from the amount to be taken for calculation of products for
assessment of profit to be paid to the account holder. It discourages unnecessary
withdrawals from the deposits.
In order to popularize this scheme the State Bank of Pakistan has allowed the Savings
Scheme for school and college students and industrial labor also. The purpose of these
accounts is to inculcate the habit of savings in the constituents. As such, the initial
deposit required for opening these accounts is very nominal.
5.6.7 Cheque Cancellation:
This dept can cancel a cheque on the basis of;
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Post dated cheque
Stale cheque
Warn out cheque
Wrong sign etc
5.7 Foreign Exchange Department
This dept mainly deals with the foreign business. The main functions of this dept are:
L/C dealing.
Foreign currency accounts dealing.
Foreign Remittance dealing.
5.7.1 L/C dealing:
NBP is committed to offering its business customers the widest range of options in the
area of money transfer. If you are a commercial enterprise then our Letter of Credit
service is just what you are looking for. With competitive rates, security, and ease of
transaction, NBP Letters of Credit are the best way to do your business transactions.
5.7.2 Foreign Currency Account Dealing:
This deptt deals with the foreign currency accounts which mainly include dollar account,
euro account etc.
5.7.3 Foreign Remittance Dealing.
This is very important function of this deptt.
Cash Department
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General Banking Department.
5.7.4 Cash Department:
Cash department mainly deals in cash. The Head of department is Mr. Imdad Khan and
two cashier Mehraban Shah and Faiq Shah the objective of cash department.
“To facilitate people in the payments of their bills and taxes and repayments of cash”
There are two main functions of cash department.
Payment
Receipts
Payments are the function that they pay their cheques and pay cash.
Receipts mean collection of utilities bills, taxes etc.
5.7.5 General Banking:
In this section of the bank the general banking function is performed. It is divided into
five departments.
Remittances Department.
Computer Department.
Advances Department.
Clearing Department.
Establishment Department.
5.7.6 Remittances Department:
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This department is header by Zahoor Ahmad a very competent person. The objective of
this department is:-
“To transfer the money of people from one place to another place in safe and comparable
way”
The main functions of this department are:
Issuing of demand draft.
Issuing of Mail transfer.
Issuing of Telegraphic transfer.
CHAPTER # 6
FINANCIAL ANALYSIS
FINANCIAL ANALYSIS OF BALANCE SHEET
ANALYSIS OF PROFIT AND LOSS ACCOUNT
FINANCIAL RATIO ANALYSIS
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6.0 Financial Analysis
Financial analysis, though varying according to the particular interests of the analyst,
always involves the use of various financial statement primarily the balance sheet and
income statement. The balance sheet summarizes the assets, liabilities, and owner’s
equity of a business at a point in time, and thee income statement summarizes revenues
and expenses of the over a particular period f time. A conceptual framework for financial
analysis provides the analyst with an interlocking means for structuring the financing.
6.1.1 Horizontal Analysis:
It is conducted by setting consecutive balance sheet, income statement or statement of
cash flow side-by-side and reviewing changes in individual categories on a year-to-year
or multiyear basis.
A comparison of statements over several years reveals direction, speed and extent of a
trend(s). The horizontal financial statements analysis is done by restating amount of each
item or group of items as a percentage.
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6.2 Horizontal Analysis
National Bank of Pakistan
Statement of Financial Position
As on December 31, 2008
Assets 2009(%) 2008(%) GrowthCash & Balances with treasury Banks 112 121 16.5
Balances with other banks 102 92 -3Lending to financial institutions-net 80 93 -13
Investment-net 81 151 16Advances-net 121 108 14.5Operating fix assets 93 268 80.5Deferred tax Assets-netOther assets 144 114 29
Liabilities107 120 14
Bill payables 145 67 6Borrowings 374 92 133
Deposit and other accounts 106 118 12Liabilities against assets subject to finance lease 75 253 64
deferred tax liabilities-net 0 214 7other liabilities 128 116 22
111 117 14Net Assets 88 142 15
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Represented ByShare capital 110 115 12.5Reserves 126 114 20Unappropriated profit 116 141 28.5
117 131 24
Surplus on revaluation of Assets-net 45 163 488 142 15
6.2.1 Analysis
Total assets growth rate is 140% this is because of Cash and Balances with treasury
banks grow by 60% which caused by increase 21% in 2008 and 12% in 2009, Advances-
net grow by 40.5% in current year increase by 21% as compare to 8% in 2008. Operating
fixed assets growth rate 80.5% but current year Operating fixed decrease by 7% Other
assets also show a greater increase from 14% to 44% in current year and its growth rate
approximately 29%,while lending to financial institution shows declining trend since last
few years over all declining 13% and Balance with other banks declining at rate of 3%.
Liabilities growing by 14% Other liabilities increase from 16% to 28% with growth rate
22%, Borrowing and Liabilities against subject to finance lease show greater increase
with growth rate of 133% and 64% respectively, and Bill payable & deposit in other
banks also increasing with growth rate of 6%-12% respectively, Equity show positive
trend with growth rate of 24% this is because of Reserves and Un-appropriated profit
increasing with rate of 20% and 28.5% & Share capital increasing with 12.5%.
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6.3 Income Statement
Income Statement
As on December 31, 2008
2009(%) 2008(%) GrowthMark-up/Return/Interest earned 120.5 115 17.6Mark-up/Return/Interest expensed 141 121 31Net-Mark-up/interest Income 110 111 10.5provision against non-performing advances 224 153 89Provision for/(reversal of) diminution in the value of investment -927 5 -561Provision against off balance sheet obligations 755.09 327.5Bad debt written off directly 232 199 116Mark-up/interest Income after provisions 90.25 104.048 -2.85Non-Mark-up/interest Incomefee,commision and brokerage income 117 110 13.6dividend income 88.22 113 0.53Income from dealing in foreign currencies 380.6 78 179Gain on sale and redemption of securities-net 17 200.2274 9Unrealized/(loss) on revaluation of investments classified as held-for-trading -5.34 716 310Other income 845 23.5 384Total Non-Mark-up/interest Income 121 111 16
100 106 3Non-Mark-up/interest expensesAdministrative expenses 127 105 16Other provisions/write offs 445 -972 -264Other charges 3403 8 1655
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Total Non-Mark-up/interest expenses 135 105 2082 107 -6
Profit Before Taxation 82 107 -6Taxation-current 141 96 19 -prior years 74 -63 -deferred -1304 522 -390
84 97 -10Profit After Taxation 76 112 -6Un-appropriated profit brought forward 141 166 54Transfer from surplus on revaluation of fix assets on account of incremental depreciation 334 95 164Profit available for appropriation 119 140 30
6.3.1 Analysis:
Markup/interest earned increasing at the rate of 17.7% on other hand Interest expenses
also increasing with the rate of 31% that’s why, Net markup/interest income after
provisions decrease by 10% as compare to last year Interest Income After provision
decreasing with rate of approximately 3% this decrease is because of increase in
Provision against off balance sheet obligations and Bad debts written off directly with
rate of 218% & 116%,and Provisions against Non performing assets with greater increase
rate about 81% but on the other hand Provisions for/diminution in the rate of investment
shows greater decrease at rate of 561%,Total Non Markup/Interest Income increase in
current year increase from 11% to 21% with rate of 16% this increase is because of
greater increase in Other Income and Unrealized/on revaluation of investment classified
as held for trading with rate of 384%& 310 respectively and Income from dealing in
foreign currencies, current year shows greater increase of 380% as compare to last year
with rate of 179%.
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Profit Before taxation shows declining trend 18% decrease in current year profit with
decreasing rate of 6% this decrease is caused by greater increase in Interest expense
increase from 5% to 35% with 200% growth rate this increase is because of greater
increase in other charges with growth rate of 1655%, Admin expense increase from 5%
to 27%, Profit after tax in current year less than the previous year because of greater
increase in Current taxation by 37% as compare to last year tax.
6.4 Ratio Analysis
2009 (%) 2008 (%) 2007 (%)
1. Return on Assets 2.8 3.7 4.1
2. Return on equity 17.7 27.4 32.1
3. Rate paid on
funds
3.05 2.36 2.6
4. Net Interest
Margin
5.8 5.5 5.8
5. Reserve as a
percentage of
188 334 451
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loans
6. Debt to Equity 879 932 1043
7. Advances to
Assets50.5 45 50
8. Equity to Assets 10 9 8.4
9. Equity to advances30 48 17
10. Deposit times
capital 1 times 1 times 9.5 times
6.4.1 Interpretation:
The ROA shows declining trend which means the overall effectiveness in
generating profit with available assets is decreasing in current year 2.8% as
compare to 3.7% in 2008 &4.1% in 2007 which means the assets not properly
utilizing to generating profit,ROA major Effected by declining in Net profit.
ROE also shows declining trend since last few years return against equity is
decreasing because of decrease in Profit before taxation in current year is less
as compare to 2008 & 2007.
Rate of interest paid from assets is improving this is because of increase in
interest expense.
Net interest margin is greater in 2009 which is 5.8% as compare to 5.5% in
07, this improvement is because of increase in Net interest income which is
caused by increase in interest earned.
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Reserves as percentage of loan decreasing means reserve account to cover un
expected default on loans by borrowers is decreasing, non performing loans
decreasing and the effect on provision for loan losses decreasing and Net
income & earning/share also less.
Debt to Equity shows declining which means the dependency on debt is
decreasing and also the difficulty regarding to borrow more funds.
Advances to Asset measure total Advances outstanding as percentage of total
asset, current year ratio is 50.5% which is more than 07 & 06 which indicates
that NBP is loaned up and its liquidity is decreasing this increase risk to
default.
Equity to assets is common measure used to analyze capital adequacy of bank,
The adequacy of NBP shows increasing trend.
Equity to advances reflects the degree of equity coverage to outstanding
advances/loans, the degree of equity coverage to outstanding is decreasing,
and this decrease is because of increase in loans/advances in current year.
Deposit time capital in 2009 & 2008 shows that deposits and equity are equal
but in 2007 deposit was 9 times greater than equity which was because of
greater increase in deposits.
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CHAPTER # 7
INFORMATION ABOUT MY BRANCH
MANAGEMENT OF THE BRANCH
DEPOSITS
PROFIT
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FINANCING & ADVANCES
NUMBER OF ACCOUNTS
I did my internship in National Bank of Pakistan Katchery Bazar Branch Okara. Some
important information about my branch which I observed is as follows:
7.1 Management of The Branch
Branch Manager Abrar Bari
Operational Manager Nadeem Rafi
Credit Manager Muhammad Asif
Forex Manager Muhammad Saeed
Chief Cashier Mirza Laqiat Beig
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Cashier Gulzair Ahmed
CSO Rao Arif
Other General Information of the Branch
7.1.1 Deposits
The total deposits of this about to 510 million. In deposit there is increasing trend.
7.1.2 Profit
Total profit of this branch is 35 million in 2009.there is also increasing trend in profit
from 2008 to 2009 because of higher mark up rate charged on the finances. :
7.1.3 Financing & Advances:
Mainly, the short term financing such as cash finance, running finance, Demand finance,
ERF II, FAFB, FBP are being dealt here.
7.2 Number of accounts:
Accounts in this branch of MCB are as follows:
7.2.1 Current account:
Total numbers of current accounts are 7600.
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7.2.2 PLS account:
Total numbers of profit and loss accounts are 18550.
7.2.3 NBP Saving account:
These are about to 700 accounts
7.2.4 NBP Gold Accounts
There are about to 110 accounts.
7.2.5 Foreign Currency Accounts:
There are about to 170 accounts.
CHAPTER # 8
WORK DONE BY ME
OPENING OF NEW ACCOUNT
PROCEDURE TO OPEN AN ACCOUNT
HOW TO CLOSE AN ACCOUNT
UTILITY BILLS COLLECTIONS
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CASH MANAGEMENT
PROCEDURE FOR ADVANCING LOAN
Learning
8.1 Work Done By Me
During my internship in the National Bank of Pakistan Limited, I really enjoyed to work
with the staff of Branch, Katchery Bazar Branch from 21.06.2010 to 04.08.2010, 2010
and have a wish to be employee of National Bank of Pakistan Limited. It was almost
impossible to work in all the departments within that limited time. But on my request, the
staff of the branch provided me the opportunity to work in the different departments for
the sake of practical knowledge. I am really very thankful to branch Staff that provides
me a learning environment in the branch.
During my internship training in the National Bank of Pakistan as I early mentioned that I
have worked in different departments & seats and learnt the followings.
8.1.1 Opening of New Account
Account opening and closing is the function of accounts departments. Bank’s customers
may be individuals (Single or Joint), firms (partnership/proprietorship), Autonomous
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corporations, Limited Companies, Charitable Institutions, Associations Educational
Institutions or Local Bodies. NBP normally opens following types of accounts.
Current account
Saving account
8.1.2 Basics to Open an Account
During the span of mine internship in National Bank, I learned and observed a lot of
about the opening of an account. Basically I think that the opening of an account is the
establishment of a contractual relationship between the banker and the customer. By
opening an account at a bank a person becomes a ‘customer’ of a bank. Further I am
going to express the basic requirements and steps involved in the opening of an account.
8.1.3 Introduction and Preliminary Investigation
Before opening an account National Bank of Pakistan as like the other banks in Pakistan
ascertain whether or not the person who is going to open the account is a desirable
customer or not. Then National Bank of Pakistan determine the prospective customer’s
integrity, respectability, occupation and the nature of business by the introductory
references given at the time of account opening. Negligence in this informal preliminary
investigation may result in serious consequences not only for the banker concerned
directly but also for other bankers and the general public who may be affected indirectly.
In order to further strengthen and streamline this process, the Federal Ombudsman of
Pakistan, vide his ruling on complaint No. II/31/5186, has directed the banks to retain
with the account opening form a Photostat copy each of the National Identity Cards of the
person desiring to open an account as well as that of the introducer. As per these
directions, the concerned Branch Managers are required to obtain the original National
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Identity Cards along with their Photostat copies and then return the original after attesting
the authenticity of the retained copy.
Preliminary investigation is necessary because of the following reasons:
Avoid Frauds: In this regard I learned that if a banker does not make the
necessary inquiries mentioned above he may enable dishonest persons to possess
cheque books for fraudulent purposes. If any such person happens to be an
undercharged bankrupt, the banker might be placed in an awkward position for
having allowed such a person to open and open a bank account.
Safeguard against unintended overdrafts: Sometimes due to a mistake an account
may be given an overdraft, For instance, the ledger keeper, misreading the
balance of an account honors a cheque for an amount larger than the balance.
Similarly a credit entry belonging to a customer may be made by mistake in
another customer’s account. In such situations the excess amount withdrawn by
the customer can only be realized if the customer is a respectable person.
Inquiries about clients: Being a banker I think National Bank of Pakistan has a
business obligation to respond to inquiries from other banks etc. about his
customer’s financial position. Though the banker gives only a general ideal about
the financial standing of his customer, it should nevertheless have the necessary
information available with him.
8.1.4 Specimen Signature
When an account is opened with National Bank of Pakistan customer provides to the
bank a specimen of the form of signature which would appear on all his cheques to
express his authority for the payment of cheques drawn on his banker. This specimen is
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taken generally on a card specially designed for this purpose, and rule for the customers,
full name, and account number are entered on it.
If the bank has reasons to doubt the genuineness of a signature, he should either get it
confirmed for his satisfaction or return the cheque with the remark ‘Signature differs’. If
the signature of the customer is forged the banker cannot escape his liability because he
has actually acted on his customer’s mandate.
8.1.5 Signature Other Than In English
If a customer signs in a language other than English or Urdu, he is requested to fill a
Vernacular Form. This is a type of indemnity whereby the customer relieves the bank of
any responsibility in case there is any mis-verification of signatures by the bank and the
cheque is paid. The vernacular Form is obtained because the bank officers are not used to
verification of signatures other than in English or Urdu; hence there is likelihood of mis-
verification.
8.1.6 How to Open an Account (General)
Before opening an account in National Bank of Pakistan I observed that the following
points must be considered in this regard.
Another account holder of the bank should properly introduce the new customer.
The account holder should sign the account opening form in the presence of bank
officer and the signature is duly verified.
A copy of identity Card is required by Bank.
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Against submission of the Bank’s prescribed application form, duly introduced in
the manner provided and on supplying such document, as may be required and
account may be opened. The Bank reserves to itself the right to refuse to open and
account without assigning any reason.
Each account shall be allotted a distinct number that is to be quoted in all
correspondence with the bank relation to the account.
Minimum amount for opening and continued maintenance of various types of
accounts is as follows:
Rs.
Saving 500
Current 500
Term Deposit 1000
The bank reserves the right to change the above mentioned minimum balance
requirement at any time without any notice.
8.1.7 Procedure to Open an Account
According to my practice in National Bank of Pakistan, when a customer wants to open
an account, the bank officer gives him an application form. All information, which is
necessary to be known by the bank, are requirements of the application form. Form also
requires the essential documents to be attached by the customer.
Basically following information is required to open an account with National Bank of
Pakistan.
Title of Account
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Full Name of Applicant
Occupation
Address
Telephone No.
Currency of account
Nature of Business
Introducer’s Name, Address & Signatures
Special instruction regarding the account
Initial Amount of the Deposit
Signature of the applicant
8.1.8 Documents to Be Attached
Further I learned that if you wanted to open an account with National Bank of Pakistan
then you should attach the following documents with your application form which are
different for different categories.
8.1.9 Sole Proprietor’s Account
In order to open an account with National Bank of Pakistan Limited Sole Proprietors
have to submit their business registration certificate number.
8.1.10 Private / Joint Accounts:
For individual or private or joint accounts National Identity Card is required.
8.1.11 Joint Stock Company
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Before an account of a Public Limited Company is opened National Bank of Pakistan
Limited must ask the person authorized to do so to submit the certified copies or the
following documents:
Certified true copy of the Memorandum and Articles of Association of the
company.
Certified true copy of the resolution of the board of directors / managing
committee / governing body regarding conduct of the account.
Certified list containing names and signatures of the directors / office bearers.
Certified true copy of the certificate of incorporation or registration.
Certified true copy of the certificate of commencement of business (in case of
public limited companies).
Balance Sheet
I.D. Card copy of each director
Original is also enclosed for inspection and return
List of persons authorized to operate the account.
Power of Attorney in favor of the person opening account.
8.1.12 Partnership Firm Account
Information which is required to be submitted to National Bank of Pakistan Limited by a
partnership firm in this case is as follows:
Full Names
Address
Specimen of signatures of the partners
Certified true copy of partnership deed
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Registration No. if the Partnership is registered.
8.2 Issuance of Cheque Book
When a customer opens an account with the bank, he is provided with cheque book for
withdrawals from account. However, the first cheque book is given to the customer only
when all the required documents are checked. A cheque book contains ten, twenty five,
fifty or hundred leaves. The cheque book also carries a requisition slip for the issuance of
the new cheque book. This slip is duly filled and singed by the customer. The signature of
the customer is verified by the bank and new cheque book is issued to the customer and
serial numbers of the cheque are duly entered in the book of the bank. Along with the
signature, person should also write his full name & address.
Usually only one cheque book is issued at a time, however big concerns who need a
number of cheque books at a time, may ask the bank to stock as number of cheque books
in their name and to point their name on these cheque books. Bank debits the client’s
account for excise duty of Rs.2.50/- per cheque and keeps the cheque book ready for the
customer, as on his advice.
The officer keeps and maintains the cheque book register Cheque book inventory and
cheque books issued are recorded in this register. The account number for which the
cheque book is issued and the number of leaves are also recorded in this register when the
cheque book issued an entry is passed in the cheque book issue register.
In case of loss of cheque book or requisition slip on cheque book the customer has to fill
the Form No. 216-B to obtain a new cheque book.
8.2.1 Payment of Cheques
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In the National Bank of Pakistan Limited I learnt how to make payment of a cheque. In
fact I done the duty of token clerk mostly but I also worked and participated the
procedure followed for the payment of cheques. Actually the customer is required to
withdraw its deposits through the cheques out of cheque book issued to him drawn on the
branch where he is maintaining the account. The cheques are paid in one of the following
ways:-
By cash payment over the counter
By transfer (from one account to an other)
By collection/clearing
8.2.2 Tokens / Handling / Issuance
Before commencement of business, the cashier in charge shall hand over the stock of
tokens (supplied by C. O. K) to the token issuing official against acknowledgement in the
token issue (hand over) Register R-84, indicating therein the number of tokens received.
Token issuing official shall count the tokens received, arrange them in serial order in a
poker ready for issuance. At the close of the business, all un-issued tokens shall be
received back by the cahier in charge, against his initials in the register from the token
issuing official. He shall tally the total with the number of tokens issued in the morning
by adding the number of tokens received back by him (from customers) and number of
tokens pending with the customer (if any). When the quantity of tokens physically held
by him agrees with the number of tokens issued in the morning, these shall be placed in
the cash safe along with the closing cash of the day.
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The loss of any token need not to be circulated amount the branches and be treated as
local issue to be dealt by branch at its own. The paying cashier will keep a list of numbers
of the tokens which have been lost.
On presentation of cheque instrument for cash payment a token shall be issued by the
token issuing official after scrutinizing its following aspects:-
The cheque/instrument presented relates to the branch and is not crossed.
The cheque/instrument is bearer or order, in case it is an order one the payee is
known to the branch.
The date on the cheque/instrument is in order. The instrument is not undated or
post-dated or stale. A cheque is stale or out of date, which is more than six months
old on the date of presentation.
Amount in words and figures agrees and is absolutely certain.
It has been duly signed by drawer i. e. the account holder/issuing branch and is
also signed by the payee/bearer.
There is no alteration/cutting/over-writing.
The cheque/instrument is not mutilated, torn or cancelled.
All cancellations and alterations on the cheque instruments have been
authenticated by the drawer under his full signature.
Crossed cheques/instrument presented by a bank for payment at the counter is
accompanied by its memo dully signed by authorized person (s) of the presenting
bank.
In case of telegraphic transfers the payee has signed revenue stamps of adequate
value affixed on the receipt, and his signatures have been verified.
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Cash Payment voucher has been signed:
By manager and accountant/authorized officer of the branch.
By the payee on the reverse.
In case of demand draft/pay order payee has been identified and has signed on the
back of the instrument.
After verifying the above points and satisfying that cheque/instrument is apparently in
order the token issuing official will affix the rubber stamp on the reverse of the
cheque/instrument as per specimen given below. He shall give token No. of the token
being issued by him against the cheque, record the date and time of issuance and shall put
his initials at the relevant column. At the time of payment, cashier making the payment
shall note down the time of payment under his initial:-
After recording token No., date and time on the back of the cheque, token issuing official
shall state in the relevant column. Token No. and Nature of Account, Name of Account
through bearer or self and amount on the payment side of the cash book. In case of
telegraphic transfer demand draft, pay order and cash payment vouchers relevant head of
account, amount and other particulars shall be noted by him.
The token made of brass, engraved with bank and branch name and serial number shall
be delivered to the bearer of cheque and other instruments ensuring that it is being
delivered to the presenter only and in case of any doubt fresh signature of the presenter
shall be taken before delivering the taken.
8.2.3 Posting of Cheques/Other Instruments and Fixation of Stamp as Per Nature of
Payment:
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After proper scrutiny the cheque is posted in the ledger/card folio number/sheet number
of the account is entered on the top left corner of the cheque and “Pay Cash” or
“TRANSFER” stamp as the case may be is affixed on the face of the cheque. The ledger
keeper shall sign on the cheque with the narration “Entered” to signify that it has been
posted after proper checking and is in order. In case transfer cheques another stamp as per
specimen given, is affixed:
Debits to an account against unlearned cheque are not allowed without the authority of
the branch manager. The credit slips on local banks shall be retained till receipt of
proceeds from them. The credits to the accounts in respect of cheque in clearing shall be
posted in the evening on receipt of advices from the main branch (clearing) and
withdrawal against such credits will be allowed on the next morning.
If payment of a cheque creates an authorized or unauthorized finance or a debit balance is
within or excess of the authorized drawing power, then all such cheques be entered in the
payment Authority Register (R-No. 65) with full particulars of the cheque, the balance of
the account against which they are drawn and the amount of the authorized drawing
power and /or unlearned cheques (if any) be presented in register to the manager, who
shall write “Pay” or “Return” in the register under his initials. In case of “Return” he
shall add the objection under which it is to be dishonored. The officer in charge Deposits
must see by reference to this register that no such cheque is paid without the sanction of
the manager.
8.2.4 When Cheques Are Retuned For Insufficient Funds The Relative Memos
Must Be Initialed By The Manager / Accountant
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The Officer In charge Deposits/Accountants/Manager shall again scrutinize the cheque
and after satisfying himself that the cheque is in order in all respects he will pass it in the
ledger or in the account card for payment under his full signatures. The cheques shall be
cancelled in red ink in such a way that signatures of authorized officer cross out the
signatures of the drawer. Cheques shall be passed by authorized officers singly or jointly
in accordance with the signing/passing powers delegated.
The Cheque cancelled/passed for cash payment shall be forwarded to the paying cashier
for payment.
8.3 How to Close an Account
The account can be closed by the customer at any point in time. The customer is required
to submit and application for closing the account. Then the account is closed out and his
balance is paid to him. Cheque book is returned back to bank and the officer cancel and
the remaining cheques in cheque book.
8.4 Utility Bills Collection
I worked in the utility bills collection department as the National Bank of Pakistan
collects utility bills on behalf of WAPDA, Sui Gas Companies, and Pakistan
Telecommunication Corporation Limited by putting the stamp on the utility bills “Paid”,
Date of payment, Signature of the officer receiving the utility bills. After receiving utility
bills a list is made on the form which is called Bills scroll form. One copy of the scroll is
with the bank for evidence whereas the original copy with the receipt of the bills is sent
to the billing department of the respective corporation. The bank charge commission on
the bills.
8.4.1 Cash Management
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The most important department of National Bank of Pakistan limited which deals in
money (receiving deposits at lower rates and lend them out at higher rates of interest).
This department also called as Chest Department and manager of it is called Cash
Manager or Chest Manager. In those branches where this department is not separately
existed, the branch manager performs the duties of the Chest Manager.
The excess cash (More than its insured limit by the insurance company) of the branches
of the region is collected by the main branch. The main branch is also bound to send its
excess cash (more than its insured limit) to the State Bank of Pakistan. No branch can
have cash its safe more than its insurance at any time at the time of closing cash, if it is so
the manager will be responsible (not the insurance company) whether or not he informed
to the regional office (exception to the limit which is insured for the day).
New Notes and Prize Bonds are also part and parcel of the Cash Management. Keys of
the Safe lockers are with the three authorized persons each one of them is responsible for
cash as at the time of closing the cash the officers including Cash officer presented and
lock the safe after counting and scrutinize the cash. The cash officer maintain its daily
cash book with specification of notes (Bonds are also recorded in the books in relation
with cash) and other vouchers, after being satisfied the manager authenticates the books
and vouchers regarding cash with stamp and signature. at the end I would like to
conclude that the cash management is being done in the National Bank of Pakistan
Limited very effectively.
8.4.2 Procedure for Advancing Loan
I also worked in the credit department, where I learnt about credit applications. In this
regard the bank adopts the following procedure in order to grant a loan. A customer
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applies for a loan to the manager, who says him to give details of his property. The
details of the proposal and the photocopies of the document to the title of property are
sent to the legal advisor of bank. The legal advisor gives his legal opinion upon the
documents. The branch manager, in the light of the opinion received from the legal
advisor, discusses the proposal with the advancing manager whether to give or not the
loan to the applicant. If manager allows granting the loan all the documents along with
request letter are sent to regional office for approval. In the regional office the proposal
is analyzed and if the office is satisfied a consent letter prepared which is signed by the
regional controller credit. This letter is sent to the branch manager. After receiving it the
manager finance reviews the consent letter, and prepares a DAC (Disbursement
Authorization Certificate). DAC can be made only for people who have a bank account.
The following documentation is made for loan.
An application or request letter for loan by the customer
Legal opinion of the legal advisor of the bank (for the title deeds)
Consent letter from the regional office
Vetting Certificate (includes consent No., Facility whether fund based or no-fund
based, addresses etc.)
Valuation of property any consultant or any panel of consultants approved by
State Bank of Pakistan
Original title deed or sale deed
Affidavit
General power of attorney (made by advocate for the person/owner taking loan
for the company)
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Mortgage deed
Mutation document made
Verification of the property by the bank from the competent authority
Hypothecation of stock certificate (Running is to be given against 75% margin of
stock)
IB-25R Letter of hypothecation (duly signed by the party)
IB-12 , DP Note/Promissory Note (Bank prepared itself, duly signed by the party,
revenue stamps of Rs. 100 put on it)
IB-6R Agreement of finance mark up (Contract with party for taking mark up on
quarterly basis)
IB-24 (used for title deed)
IB-29 (used for guarantee from party)
IB-26 (used for pledge of stock, margin is different for different goods)
No. IB-28 (used for lien) etc.
8.5 Learning as a Student Intern
There are following learning points for me in the bank.
8.5.1 Duties
In my 1st and 2nd week in NBP I work under the assistance of Operation Manager
from where I learn about activities related to Deposit Dept: and performed such
activities like:
Opening an account
Issue new cheques books
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And I also scroll the challan of Government and pass vouchers.
In my 3rd and 4th week in NBP, I work in the Clearance Department and advance Dept: in
which I learn about the clearing of In-Word Clearing Books
Out-Word Clearing Book and about the proposal of loans and there procedure.
In 5th and 6th week I work in the remittance activities that includes
Demand Draft
Telegraphic Transfer
Pay Order
Mail Transfer
CHAPTER#9
SWOT ANALYSIS
STRENGTH
WEAKENESS
OPPERTUNITIES
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THREAT
9.1 Strength
9.1.1 Oldest Institution:
NBP in one of the oldest bank of Pakistan and first nationalized bank Hence its customer
base is strength from this plus point as customers have more confidence in the bank. The
additional value services as the privilege for the bank.
9.1.2 Alternate Duties in SBP Absence:
The NBP performs additional services for its customers as well as the other bank
customer in the absence of SBP.
9.1.3 More Deposits than Other Banks:
NBP has the relative competence in having more deposits than the other bank. This is
because of the confidence the customer have in the bank. The bank being the privileged
and oldest bank in banking sector of Pakistan enjoys this edge over all others, lacking it.
9.1.4 Broad Network:
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The bank has another competency i.e. it has broad-basses network of branches throughout
the country also more than one branch in high productive cities. The customers are
provided services at their nearest possible place to confirm customer satisfied.
9.1.5 Strictly Followed Rules & Regulations:
The employees at NBP are strict followers of rule & regulation imposed by bank. The
disciplined environment at NBP bolsters its image and also enhances the over all out put
of the organization.
9.1.6 Professional Competence:
The employees at NBP here have a good hold on their descriptions, as they are highly
skilled Professionals with back ground in business administration, banking, economics
etc. These professional competencies enable the employees to understand and perform
the function and operation in better way.
9.1.7 Western Union Facility:
National Bank of Pakistan is only one bank which has the facility of Western union. In
this particular scheme money is transfer in Pakistan from abroad. This is the fastest way
to money transfer. You can receive the money from bank to see the name and password
of particular client.
9.1.8 ATM Finder:
There is also strength of NBP that they are found the ATM. They now provide this
facility to the customers.
9.1.9 Customer Satisfaction:
Because of government’s bank, it is enjoying the customer’s satisfaction. Customers feels
secure their money in NBP.
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9.1.10 Online Banking:
There is also strength of NBP that 130 branches are online. It helps the speedy services
giving to the customers. There is also help in checking the balances and daily transactions
just at one key press. Employee’s loyalty: Employees are very much loyal to NBP.
Employee’s turnover is very low in NBP. Very few employees are leaving the jobs in
NBP. So it is very big strength that your employees are loyal to your organization.
9.2 Weakness
9.2.1 Lack of Marketing Effort:
The bank does not promote its corporate image, services, etc on a competitive way.
Hence lacks far behind in marketing effort .A need for aggressive marketing in there in
the era marketing in now becoming a part of every organization.
9.2.2 NBP under Political Pressure:
The strong political hold of some parties and government and their dominance is
affecting the bank in a negative way. They sometime have to provide loan under the
pressure, which leads to uneven and adjusted feeling in the bank employees.
9.2.3 Lack of Financial Product:
The bank falls far behind when the innovative and new schemes are considered. It has not
been involved in the tug of war between the competitors to the accounts and strengthens
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the existing customer base. This stands out to be the major incompetence and weakness
of the banks.
9.2.4 Inefficient Counter Services in the Rush Hours:
During the rush hours, the bank is founded out to be a total flop to handle the mob of
people peaking from windows and doors. The bank has deficiency to operate in the stages
of rush hours where the people find them services entangled in a situation of nowhere
because they are not well served.
9.2.5 Lack of Computerized Network:
The bank lack the strength of being powered by the network of computers, which have
saved time, energy and would have lessened the mental stress, the employees have
currently. This would add to the strength if it were powered by network of computers.
9.2.6 Lack of Modern Equipment:
The bank lacks the modern Equipment that is note counting machine computers. Even if
there is any equipment they lack to fall in the criteria of being rearmed as update and
upgraded
9.2.7 Uneven Work Distribution:
The workload in NBP is not evenly distributed and the workload tends to be more on
some employees while others abscond away from their responsibilities, which server as a
de motivation factor for employees performing above average work.
9.2.8 Lack of Communication between Employees:
During the internship in NBP I found the problem of lack of communication between the
employees and management. They have not very much understanding with each other
and not share the work of each other.
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9.2.9 Public Dealing Is Not Very Effective:
Public respect is not very effective in NBP. Employees are not taking care of the
customers, especially in pension and bills department.
9.2.10 Staff Shortage:
There is also weak point for NBP that staff is very short and more staff is required to
meet the needs of the branch work.
9.3 Opportunities
9.3.1 Electronic Banking:
The world today has become a global village because of advancement in the
technologies, especially in communication sector. More emphasis is now given to avail
the modern technologies to better the performances. NBP can utilize the electronic
banking opportunity to ensure on line banking 24 hours a day. This would give a
competitive edge over others.
9.3.2 Growing Banking System:
Nowadays banking system is growing quickly so NBP have opportunities to improve the
standard and get the more share in the market.
9.3.3 Increase In Economic Activities:
The economic activities are increase nowadays, so banks are contributes more in
economic activities. Banks are played role in trade and commerce. So the business of
commercial banks is increase.
9.4 Threats
9.4.1 Emergence of New Competitors:
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The bank is facing threats with the emergence of new competitors especially in terms of
foreign banks. These foreign banks are equipped with heavy financial power with
excellent and innovative ways of promoting and performing their services. The bank
has to take initiative in this regard or will find itself far back in competition.
Political Pressure by Elected Govt: The ongoing shift in power in political arena in the
country effects the performance of the bank has to forward loans to politically powerful
persons which create a sense of insecurity and demoralization in the customer as well as
employees.
9.4.2 Customer Complaints:
There exists no regular and specific system of the removal of customer complaints. Now
a day a need for total customer satisfaction is emerging and in their demanding
consequences customer's complaints are ignored
9.4.3 Increase in No. Of Banks:
Increase in no. of banks is a threat for National Bank of Pakistan. No. of private banks
(commercial and private) are operating their business and provide the same facilities. So
increase in no. of banks is a threat for NBP.
9.4.4 Modern Type of Banking:
Modern and computerized banking is required to fulfill the customer’s need. So
maximum branches of NBP are worked in old traditional ways.
9.4.5 The Whole Structure Changes To Online:
NBP have wide network of branches. Only 130 branches are online, so it is very difficult
and time consumed to convert all branches to online system. So there is also risk involves
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that if one commuter of one branch suffers in problem, all system and all commuters of
all branches must be turnoff.
CHAPTER # 10
RECOMMENDATIONA
CONCLUSIONS
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10.0 Recommendations
"You cannot change your destination overnight, but you can change your direction
overnight."(Jim Rohn, 1997)
The branch daily expense are increase day by day branch management need to
control the extra expenses
At present, there is no prayer room for ladies in the bank. They either offer their
prayers in the locker’s room (or whatever space is available to them). A proper
prayer room for the ladies working in the bank may be made in for them to offer
their prayers comfortably.
At present, all over the bank, if a person is not on his/her seat, his or her phone
keeps ringing unless someone thinks of picking it up. The caller could be an
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important customer, or for that matter, could any customer need urgent
information and when that information is not received, it creates a bad image
about the bank and its services.
There may be no discrimination between the contractual and the permanent
employee for training and promotion purpose. Even discrimination should not
take place in any where. Promotions should not be one the basis of seniority and
experience but also young people who are more motivated and thus should be
given an opportunity to grow.
Promotions should not be one the basis of seniority and experience but also young
people who are more motivated and thus should be given an opportunity to grow.
The employees may be given tasks according to their qualification so that the
work relates to them and they relate to the work.
The employees may be given time to socialize and this can be done by teamwork.
We can’t change everything at once. Change is difficult. Making large changes is
even more difficult.
10.2 Conclusion
The public sector banks focused on superior services, niche marketing and the intensive
use of technology to capture dissatisfied customers, in this industry segment, NBP widely
regarded as top level bank because of its financial strength in the term of its capital
position, prudent management and deposit security. NBP is in the unique position of
finding a balance between the strengths and weaknesses of a corporate image that
strongly identified main accounts. All the new private commercial bank suffered from a
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problem of credibility, as well as the collapse of the Punjab Co-operatives, Pakistan’s
equivalent of the American savings and loan crisis
The bank has successfully penetrated key market through branch expansion and business
diversification. A system of regional management is in the place to ensure greater trust
and improved productivity. As far as internship is concerned it is a good career
opportunity in general is scarce in Pakistan. Internship opportunities in particular are
quite limited. Internship programs take some effort to set up and not/ all companies
support the internship programs.
In the end I want to say that my internship experience in United Bank Limited have
strengthened my career plans toward joining banking sector and I hope skills and
knowledge which I gained their will help in perusing my career plans.
10.3 References
www.nbp.com
www.sbp.org.pk
www.ibp.org.pk
www.google.com.pk
Annual report NBP 2008-09
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