MOHI UD DIN ISLAMIC UNIVERSITY, I-9, ISLAMABAD DEPARTMENT OF MANAGEMENT SCIENCES

INTERNSHIP REPORT BANK ALFALAH LIMITED

Submitted By Saad Ur Rehman MBA Finance Session 2010-2012

Chapter No.1
Objectives of studying the NBP
Here are the some important objectives of the is as follow The main objective of studying the National bank of Pakistan is to know how to work in the bank. The objective of studying the National bank of Pakistan is to aware the different working sectors of bank. The objective of studying the National bank of Pakistan is to know that how to attract the customer and who to behave. The objective of studying the National bank of Pakistan is to make good relations with the staff of bank and the other customers. The objective of studying the National bank of Pakistan is to work and learn more and more from the departments where I work which will be helpful for in the future. The objective of studying the National bank of Pakistan is to build the basic concepts about the banking sector. The objective of studying the National bank of Pakistan is to learn who to apply theories which I study in the books.

History of National Bank of Pakistan

The establishment of National bank of Pakistan came into being due to the reason when at that time newly born country was facing the economic crises. So, National bank of Pakistan established on November 8, 1948 through a special ordinance in the National Assembly. National bank of Pakistan was established to provide finance to suitable parties. Thus it came about that National Bank of Pakistan stood behind the jute trade and State Bank of Pakistan behind the National Bank, and government stood behind the State Bank. It was all organized so rapidly (six branches came into being at once) that any doubt that might have lurked in the minds of outsiders about Pakistans ability to tackle the situation were dispelled once and or all. 2

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. National Bank of Pakistan, besides providing the general banking services is also acting as an agent to State Bank of Pakistan, in areas where State Bank of Pakistan does not has its own branches. National bank of Pakistan is working with the State Bank of Pakistan in effective implementation of the credit policies that have been formulated from time to time by the government and State Bank of Pakistan to control and monitor the fiscal and monetary situation in the country. In January 1964, the bank started its well-known peoples credit scheme. The scheme was designed to provide financial assistance to the smaller businessmen on easy and liberal terms. It was welcomed all aver the country and has been of considerable service ever since. Its major objective was to build a strong middleclass, which is a powerful guarantee of social stability in an otherwise uncertain world. In the deposits area the bank is providing special accounts such as PLS Term Deposits (Monthly Income account), which provides a monthly with draw able return on the account. And there is a National Income Daily Account, carrying hybrid characteristics of saving and current accounts, distributes all profits on daily product basis to the account holders. The bank is trying to revolutionize the services that are provided over the counter and is working for an early change in all the branches of the bank. The introduction of a new set of services in shape of foreign currency accounts has further given a sharp rise in the banking field. This has made easy for the foreigners residing in Pakistan to be encouraged and make the inflow of foreign exchange in the country more stable. This new service, though shaken its importance after undue freezing of all accounts in 1998 have spread a situation of non-confidence among the masses, still these accounts are increasing in number. The management is considering the fact and doing planning for the sake of getting it through these unjustified pressures but still not been able to implement them in good manner. This is a further disturbed by the demotivated and unqualified staff that is working with the bank. To be able to regain the level of performance and profitability the bank has to take serious measures to escape from the political influence, build a competent and qualified pool of 3

employees, make all possible efforts to introduce the modern technology that is serving the banks in the world and to enhance the confidence of the customer, are necessary steps be taken by the bank.

Nature Of The Organization

National bank of Pakistan is working as a commercial bank and also providing specialized services to the government and State Bank of Pakistan. The bank was nationalized with other major banks in early seventies and since then being a government owned organization it has not been able to gibe a remarkable performance. Further, the privatization of other banks has also created a stiff environment in the banking industry. National Bank of Pakistan, besides providing the general banking services is also acting as an agent to State Bank of Pakistan, in areas where State Bank of Pakistan does not has its own branches. National bank of Pakistan is working with the State Bank of Pakistan in effective implementation of the credit policies that have been formulated from time to time by the government and State Bank of Pakistan to control and monitor the fiscal and monetary situation in the country. National Bank of Pakistan currently has a wide network of branches inside the country and in all commercial centers of the world as well. Through this huge network of branches the Bank is providing all sorts of services that have become part of the modern banking. Nation Bank of Pakistan successfully adopts new innovations and new products, which are rapidly adding up in the product mix of banking industry. The Bank is providing deposits facilities to more than five hundred thousand customers in the country and which is increasing by the time. The bank has been providing a service to the government of making salary payments to all government employees on behalf of the government. These payments are sent to the bank for distribution from the provincial divisions of all concerning departments.

Product Lines Of The Organization

The product line of the National bank is as follow: 4

Monthly income scheme

in the monthly income scheme the amount of investment required from Rs. 20,000/- to Rs. 5,000,000 and the investment period is 5 years and the bank is offering free Demand Draft, Pay Order and NBP Online Aasan Banking, Free Cheque Book / NBP Cash Card (ATM + Debit) and financing facility available up to 90% of the deposit value.

PLS Saving Account

NBP offers to earn up to 7.25% p.a. on the minimum saving balance of Rs. 20,001/- & a maximum balance of Rs. 300,000/- Free NBP Cash Card (ATM + Debit). It convenience of NBP Online Aasan Banking (for online banking customers) and two debit withdrawals allowed in a month & no limit on number of deposit transactions and also profit calculated on monthly and paid on half yearly basis.

Mera Apna Karobar

NBP offers the minimum down payment, 10% of asset price (5% for PCO & Telecaster) with tenure of 1 to 5 years (for PCO 2 years) with grace period 3 month. The maximum loan amount is Rs. 200,000. For the purpose of loan the age limit is 18-45 years.

Home Financing

NBP offers financing facilities for home purchase, for home construction, for home renovation and for purchase of land + construction.

Personal Loan
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NBP offers personal loan facility on easy installments of 1 to 60 months at your choice and no minimum income collateral & insurance charges required, quick processing and fastest disbursement. The product is for permanent employees of Government, Semi Government and Autonomous bodies receiving salaries through NBP accounts

ATM + Debit Card

Use it as an ATM in any of the ATMs in Pakistan and alsi use it as Debit Card in any of the outlets with ORIX POS machine and you can withdraw cash up to Rs. 20,000/- per day.

Financing Facility for Stock Investors

NBP offers a very comfortable environment for trading, no security requirement, except for the customers equity, customers equity freely available for investment and equity acceptable in cash or approved shares

Ready Cash Against Gold

NBP offers the facility of Rs. 10, 000/-against each 10 gms of net weight of Gold Ornaments and no maximum limit of cash and repayment after one year.

Agriculture Farming Program

NBP offers a very competitive mark-up rate on agriculture farming program and it has quick & easy processing, delivery at the farmers doorstep, technical guidance to farmers, wide range of financing schemes for farmers and finance facility up to Rs. 500,000/for landless farmers against personal guarantee.

Organizational Structure
Clerical Staff 6

 Assistant, Sr. Assistant, Godown Keeper, Godown Inspectors, Cashier, SR. Cashier, Head Cashier, Where as the non-clerical staff can be categorized as follows:

Branch set up

Structure of the NBP

The National bank of Pakistan is a well organized bank of the Pakistan. In NBP there is a link between the employees of the bank. Every employee is working under the senior employee. So in the NBP there is a branch hierarchy where there is a Vice President which has a link with his assistant and the Assistant of Vice President has three types of officers which have three grade officers which are OG-1, OG-2, OG-3, and then there is messenger then peon and then sweeper in the branch hierarchy. In the above category of NBP there is President, , Member of Board, Senior Executive Vice President, Executive Vice President and then the Senior Vice President.

Finance and Accounting Operations of NBP

The role of finance and the accounts department is to manage then different account of customers and the employees of bank. Here are the following types of accounts which bank manages on the behalf of customers and the employees.

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

Saving account
The purpose of this account is to induce the habit of saving individuals in the neighborhood. The profit on PLS saving Accounts in NBP is checking accounts paid on the basis of profit and loss calculated after six month. The minimum deposit for opening the account is Rs.100/-. 8

Notice Deposits
Notice Deposits are kind of fixed deposits. The minimum balance requirement for opening the account is Rs.5000/- and payment is drawn on maturity of the specific period.
Notice Deposit is of the two kinds:

One for which a prior notice of 7 days is required from the customer

before with drawing deposited amount and for which rate of return (ROR) is the 7 days rate. Second for which a prior notice of 30 days is required from the customer before with drawing the deposited amount and for which rate of return (ROR) is the 30 days rate. These rates are more than the saving rate but less than the rate calculated after six month. These are one-year deposits and the rate of return (ROR) is supposed 7%. If person withdraw the amount before maturity, suppose 7th month then we charge him the saving rate, which is, suppose 4% and the remaining 3% is our recovery.

Term deposits
A term deposit is a deposit that is made for a certain periods of time (not more than 5 years). At the end of the specific period, the customer is allowed to with draw the principle amount. The term deposit account rate varies after six month and rate is depend upon the period of term deposits, as period is increased the rate is also increased and the minimum balance requirement is Rs.1000/- but no maximum limit. Prior A/C is not required for term deposits.

Role of Financial Managers

Role of the financial managers in establishing or maintaining the relationship with the other financial institutions in terms of accounts, cash management and the credit management is very important. Because the dealing with the other financial institutions is very important so that the relation with the other bank for the purpose of solving the finance problems and for the purpose of making some of important decisions. So, 9

that financial manager can take its intuitions on the peak by creating good relation with the other financial intuitions. The financial manger should manage the cash that he can use it for the purpose of short term financing of for long term financing and in term of cash financing. In this term of financing the borrower is allowed to make withdrawals of funds as he requires, but the total amount outstanding cannot exceed the limit sanctioned. The mark-up / interest is calculated on the amount outstanding on his account. The calculation of mark-up / interest are based on the number of days a specific amount is withdrawn. This finance is normally borrowed by small traders or individuals for their petty matters involving cash transactions up to rupees three hundred thousand maximum. These are normally for the seasonal business like cotton, which have 6-8 month business.

Use of Electronic Data in Decision Making

National bank of Pakistan District Court Branch is using different types of software for the purpose of getting control on the transactions of the bank and in making decision making. In NBP there is use of Internet because of it the branch is online and can make transactions and transfer or receive money from the every corner of the country. National bank of Pakistan is using accounting software in the accounts department to mange the accounts and it is locally build software by the local software making company. National bank of Pakistan is also using remittance software in the remittance department and it is also locally build software from Mahmood software company S.P chock Multan. National bank of Pakistan is also using SWIFT which is very helpful for the bank.

Sources, Generation and Allocation of funds for National bank of Pakistan

Sources of funds for the National bank Of Pakistan is revenue, deposits, advances, investments, lending to the financial institutors, net mark-up / interest income, fee, commission and brokerage income, Income from dealing in foreign currencies, and gain on sale of securities. These are the sources of funds and income of the bank. 10

Chapter No.2
ACCOUNT OPENING DEPARTMENT
Borrowing funds from different sources has become an essential feature of todays business enterprises. But in the case of a bank borrowing funds from outside parties is all more vital because the entire banking system is based on it. The borrowed capital of a bank is much greater their own capital. Banks borrowing is mostly in the form of deposits. These deposits are lent out to different parties. Such deposit creation is done through opening an account in the bank.

ACCOUNT OPENING PROCEDURE

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

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

Documentation
All the peoples are required to bring a copy of their NIC and Illiterate persons are required to bring three passport size photos as well.

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

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Documentation
For joint account copy of N-I-C Card of all the persons is obtained other things remaining same as in individuals account.

OPERATION
The person checks the type of account and type of operation required in the respective box on the form. The persons fill in the Part-I and Part-II in the form. Signatures of both persons are obtained on the form in the area specified for signature and SS Cards. In the title of account space names of all persons are maintained. Accounts holder specified in the form that they would operate the account singly or jointly.

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

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

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

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PARTNER SHIP ACCOUNT

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

Documentation
Application to open the account on the firm letter pad. Copy of N.I.C. Card of all partners. Partner ship deed in case registered partnership firm. Letter showing the implied authority of one or more partners to act on behalf of the firm. In case of non-registered partnership firm, undertaking on behalf of the firm to remain liable for all acts of the firm. Names, addresses of all partners are written on the pad.

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

LIMITED COMPANY ACCOUNT

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

Documentation
Memorandum of Associations. Articles of Association. Resolution of the Board of Directors. Certificate of Incorporation. Certificate of Commencement of business. N.I.C. 13

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

LETTER OF THANKS
At the end, after opening the account, NBP issues letter of thanks to Account opener and Account introducer for the trust they have on NBP at the same day. The purpose of this letter is to check the address of both the parties for future contact.

STAMPING POSTED
After completing all this process, the forms are signed from managers of the branch after which these forms are stamped across as POSTED on one corner of the front side of the form. And these form are sent for posting in the computer, then they are posted in the respective. Account Opening File.

PROCEDURE FOR OPENING OTHER ACCOUNT Notice Deposit

The procedure for issuing Notice Deposit in NBP is as follows: The customer comes to the bank and specifies the number of days for which he wants to deposit his money in Notice Deposit. The credit voucher is made for the amount of cash to be deposited the presence of account is not necessary. The officer then fills the notice/deposit form. The date of opening, the period, the name of the customer, the signatures etc. are all written on the form. 14

 The Notice Deposit receipt is filled accordingly. All the requirements are carried out the signature of the customer and the authorized officer, the stamp of the bank etc. The number of the Notice Deposit form and Notice Deposit is noted receipt is then given to the customer. The Notice Deposit receipt is then given to the customer. The number of the Notice Deposit form and Notice Deposit receipt is noted in the Notice Deposit register. After completion of the form, it is posted in the Notice Deposit file. A 0.2% tax on the principal amount is taken while issuing the receipt. A credit voucher made and the amount is credited to the tax on ND.

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

Other responsibilities of account opening department Account closing

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

Procedure
The customer for individuals account writes an application to the manager of the bank on a simple paper about the closing of his account with the bank (In case of proprietor ship partnership and limited company account the application should be written on firm or company letter-pad). The individual or in case of other type-proprietor firm and company surrender the cheque-book to the bank. The cheque-book is then torn from one side and is attached with the application. 15

 In case of Ltd. Company Account resolution of the board of directors is also obtained to attach it with the application. The account opening form of the account holder is taken from the accountopening file, and the application, cheque-book, and resolution of board of directors in case of limited company account are attached with the form. Lastly, it is written in Red Ink on the form that account closed and Date of account closing. Then the form is put in the account-closing file.

Receiving inward checks

Another responsibility and function of account opening department is to receive inward cheques for collection from other banks as well as of NBP. Then these cheques are sent to clearing official who clears these checks at SBP from other banks.

Cheque-book issuing
Check books are issued only for checking account such as current account, saving account. They are not issued for other fixed and term deposits because of their long-term accounts nature. When an account is opened, cheque-book is usually issued the next day, however they too are issued on the same day of opening the account keeping in view the energy requirements the account holder. Cheque-books leaves vary with the nature of the account. For example, 50 leaves and 100 leaves cheque-book are issued for current accounts depending upon the energy of the account holder. Where as 10 or 25 leaves cheque-book are for saving accounts. 10 leaves cheque-books are handed over to easily individuals account, holder. There is Rs.2/- excise duty carried on cheque-book leave.

Issuing Procedure
Signatures on cheque-book requisition are verified by matching with signatures on SS Cards.

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

Everyday posting
At the end of each day, posting of cheque-books is performed, the account department makes credit vouchers of excise duty on cheque-book leaves, and posts it in the company.

Govt. collections
NBP is also entitled for the govt. collections including the Sales Taxes, Income Taxes, Property Taxes, Professional Taxes, and WAPDA Bills, PTCL Bills, Sui Gas Bills as well. All the taxes and bills are collected on the cash counter, cashier count the money and received the voucher and put the stamp Cash Received and break the voucher in to two parts and give one portion to the customer and one keep in the counter. Each types of taxes or bills have a certain lot size when the lot size is completed the cashier send the lot of bills or taxes to the account opening dept. and now the responsibility of the account opening officer to prepares the separate Scroll for each categories of bills or taxes and make correctly the subtotal or grand total. Then after the 1.30PM the cashier matches the total amount of all the bills and taxes and then account-opening officer makes the credit vouchers to transfer the amount in to the concerned accounts. At the end of each week the account opening officer calculate the weekly commission or exchange on the collection of the bills or taxes and pass the debit voucher to the concerned accounts.

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Other then bills or taxes the NBP is also entitled to pay the Pension to the retired govt. employees after each month. When a pentionist come to the bank they present their pension book to the officer, he will check the monthly amount to be paid and Then he sees whether the payment is of one month or more. He will writes the amount to be paid along with the date on the pension form. And also enter in the pension register, from the register he verify the signature and also the person because the bank has a photograph of pensioner on the register and put the stamp Signature Verified branch stamp and the stamp that pay cash. Then the amount is checked an other officer and counter signs it and then pensioner present the form to the cash counter and received the cash.

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Chapter No.3
CREDIT DEPARTMENT
The earning of a commercial bank is chiefly derived from interest charges on loans and discounts it. Now loans are recognized as advances or finances. The advances are made through the deposits that are kept in the bank by the customers. The bank pays profit on the deposited amount and receives mark up on the advances made of different amounts. NBP introduced the mark up based advancing in Jan1, 1985 when the Islamization of the economy was influence under this system of advancing the bank is entitled to receive a constant sum of money on the amount that is outstanding on the account of the party.

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

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

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

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CREDIT PORTFOLIO LIMITS

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

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

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

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

Financing Against Share

Where as credit facility will not be extended towards floatation of share capital of Public Listed Companies, facilities will not be considered against unlisted shares. Where facilities are considered against quoted share. Which are freely marketable, such financing are subject to the margin requirement of the regulatory authorities or as determined by the credit committee whichever being the higher.

Borrower Liquidity/ Leverage Ratios

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

Credit Reviews
All limits are subject to at least an annual review and where necessary branch managers will forward half- yearly reviews. This review function is the responsibility of the 20

branches that will submit periodic reports to the credit division immediately notifying any change in environmental factors. The changes are assessed on expiry of limits or reassessed before the scheduled periodic review whenever necessary.

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

Authority
Credit are extended in accordance with the authority levels approved/ delegated by the Board of Directors from time to time; provided credit approval is required at short notice rather than that at normal span, the proposal may be referred directly to the credit division. The credit division has authority with the agreement of a quorum of the members of with the appropriate credit committee, to extend the loan.

Documentation
It is the essential that the proposal defines clearly the purpose of the facility, the source of repayment, the agreed repayment schedule, the value of security and the customer relationship consideration implicit in the credit division. The security to be accepted as collateral for the facility and all documentation relating to the security of the facilities must be in the approved form. All approval procedures and required documentation must be completed and security is perfected, prior to the disbursement of the facility.

Credit Risk Assessment

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

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documentation is collected before the facility request is sent to the credit division or committee.

Prevention of Criminal Use of Banking Channels

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

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

Facility Evidence Maintenance

All legal documents and register of security must be maintained at branch such documents may include:

Signed credit agreement Signed guarantees or other evidence of credit security or collateral agreements. All concerned documents are held in the secure location. Credit Monitoring
Responsibility
Responsibility lies in branch manager to monitor the overall profile and risk aspect of the credit portfolio in accordance with criteria setout in Banks Credit Policy. This review is held to judge performance responsibility of the manager to ensure at each credit extension the portfolio complies with all limits set. The branch manager must provide a classification summary to the Credit Division which include following information: Total Facilities 22

 Term Facilities Exposure to customer group Unsecured facilities Industry exposures. He will provide a commentary on any local development, which may impact upon limit setting and the risk of the credit portfolio.

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

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

Safety & Character

Character, capacity, capital and collateral are the three basic credit factors of the borrower to discharge his obligation in accordance with the term of the loan agreement. Integrity is considered of vital importance. Careful observation of business will assist in 23

evaluating the integrity factor. Assessment of the character is very important. A banker must have an ability to judge the character and credit worthiness of the borrower.

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

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

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

Repayment of advances
Source of repayment of the borrower is required to be inquired. A banker must see at the time of lending that the loan will be liquidated with in time and also without restoring to a legal action against the borrowers assets. A banker is to see that his funds are 24

not stuck and this is why he carefully investigates the borrowers assets. After the completion of investigation a decision can be made for approving or declining a loan application.

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

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

TYPES OF FINANCES
Finances can be classified into two categories:

Unsecured / Clean Finances. Secured Finances. UNSECURED FINANCES

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

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

Legal Documentation
Formal request for grant facility. Authentic proof from the concerned department about his salary. 25

 N.I.C. Undertaking from the employee that the salary for the applicant shall be remitted to the branch and in case of clients inability to repay the finance the same would be adjusted from his dues. Sanctioning of the loan.

SECURED FINANCES
Secured finances are those finances against which security has been pledged. Security can be the property, stocks, deposits, prize bonds, hypothecation charges, shares, mortgages on tangible readily reliable unencumbered assets, and govt. securities. Secured finances are of the following categories: 1. Running Finance. 2. Agri. Finance. 3. Demand Finance (Gold Finance). 4. Cash Finance. 5. Small Finance. These are also known as the short-term finances.

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

Operation
Formal request for the finance. N.I.C. Application form for Running Finance has been properly filled. Pledge original certificates of the security. 26

 Sanction for the loan convey to the customer.

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

Demand Finance (Gold Finance)

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

Cash Finance
In this mode of financing the borrower is allowed to make withdrawals of funds as he requires, but the total amount outstanding cannot exceed the limit sanctioned. The mark-up / interest is calculated on the amount outstanding on his account. The calculation of mark-up / interest is based on the number of days a specific amount is withdrawn. This finance is 27

normally borrowed by small traders or individuals for their petty matters involving cash transactions up to rupees three hundred thousand maximum. These are normally for the seasonal business like cotton, which have 6-8 month business.

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

Security
Hypothecation. Pledge. Stock. Mortgage. Vehicles.

LONG TERM FINANCES

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

LEVEL OF LENDING
The structure for lending in NBP has three levels: Credit Committee at Zonal Office. Credit Committee at Head Office. Board of Directors. 28

CREDIT COMMITTEE at Zonal Office

There is no authority to the Branch credit committee, the branch credit committee is only the responsible to make the case for the loan and forward it to the Zonal Office for approval. The Credit Committee at Zonal Office gives first approval. It has discretionary powers with in which it implements Credit Facility decisions. The credit department in branch prepares credit line proposal (CLP) for each advance along with other supporting documents. The supporting documents and CLP are presented to the Credit Committee at Zonal Office for considerations. The credit committee at Zonal Office exercises judgment individually and judiciously on accordance with Banks lending criteria. If the proposal is within the discretional powers of the Credit Committee of Zonal Office, the proposal may be approved after thorough evaluation of the credit risk. The approval limit is returned to Credit Department of Branch for post approval administration. After that disbursement authorization certificate are obtained from the committee, which are signed by the Branch Committee and counter signed by the Resident Auditor to ensure that support is perfected before release of funds.

Borrowers credit worthiness

In order to get a complete picture of the borrowers credit worthiness, inquiries will have to be made about: His business. Trade experience. Assets and liabilities. His account with bank or other banks. His financial statements and income tax returns. An interview with him will be necessary to elucidate or supplement the information that may have been collected. There is hardly any credit agencies in Pakistan, which assist banks by giving reports on parties. Even a report on borrower obtained through banks in Pakistan is usually brief and does not give sufficient information that could be of practical use. It would appear that banks could be in better position to serve the business community and themselves, if they evolve a system by which detailed credit reports on customers are communicated to each other. 29

Sources of information on borrowers

Banks get information on borrowers through various sources as ahead as follows: Loan application / credit proposal / personal investigation. Bazaar reports through friends or rivals mostly from the borrowers trade or Borrowers account with the bank or statement of accounts with other banks. Statement of assets and liabilities. In the case of companies, their balance

business line.

sheets and profits and loss accounts for say three years, records of the Registrar of Joint Stock Companies. Income tax statements. Wealth tax statements. Sales tax statements. Trade and other reports in the press. Reports about actions and decrees in Govt. Gazettes. Registration, revenue, and/ or municipal records. Other bankers and branches of the bank. Operations by a customer on his safe custody account or locker SBP credit information Bureau. Personal Contacts including personal interviews. Chamber of commerce / Trade Bodies.

LEGAL PROCEEDING IN DEFAULTNESS

NBP all limits should be sanctioned / renewed in such a way that expiry date of all accounts fall either on June 30 or December 31 each year. The banker is required to calculate the mark up on June 30 or December 31 each year for the purpose of distribution among the depositors. This is under stood that client is advised to pay resale value, which is marked up amount on or before the date of final adjustment and no withdrawals are allowed after this date. NBP has decided that the date for final adjustment of the limit in respect of working capital for trade and industry should 30 days after the expiry date. If during this period the person dont adjust the bank issued one-month notice for adjustment. If there is no 30

response, then another notice has been send. If still there is no response then the bank will contact to the legal advisor, (advocate) he will send a legal notice for adjustment within 15 days other wise bank will register post (A.D). Then after that Bank will suit file proposal to Zonal Office, which will further forwarded to Regional Head Quarter. After that they will file the case in the banking court. The banking court makes Decree (degree) in favor of bank, and stated that if there is no response your property has been auctioned. Then banking court nominates an auction judge and takes the auction money as charges. The judge then give the advertisement in the news regarding the auction of the property along with the terms and conditions of the auction and a written notice to the borrower and bank as well. The auction judge will sale the property on maximum prices, and bank has to decide whether it is enough to collect its amount then auction will be end other wise objection order is implemented by the court. If the auction sale price is greater than the dues of the customer towards the bank then the bank returned the difference to the client but if the auction sale price is less than the dues of the customer towards the bank then his warrant for arresting him has been issued and they try to find out his other property to satisfy the bank dues. In case if he prove himself as insolvent in the court then the loan has been forgive to him.

Chapter No.4
FOREIGN EXCHANGE DEPARTMENT
To promote flow of foreign exchange in the country, the Government of Pakistan started a new scheme of opening of bank accounts in foreign currency. These accounts were entitled to receive profit percentage in shape of the currency in which the account was kept (Dollar account shall be paid profit in dollars). This has increased the flow of foreign currency especially from the Pakistani foreign residents, who used to send money to their families at home. The State Bank of Pakistan was given special

31

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

Limited License
Authority to deal in certain foreign currencies/transactions

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

Functions of Foreign Exchange Department

Foreign exchange department is controlled by OG-III. Different functions are performed by this department such as: 1. Foreign Currency Deposits. 2. Imports. 3. Exports. 4. Foreign Remittance. Previously another function was also performed by foreign exchanged department as Export Finance Part-I and Part-II but due to some restrictions by SBP that function is not performed now.

FOREIGN CURRENCY DEPOSITS

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

Types of Foreign Currency Account

The National Bank of Pakistan is currently providing foreign currency accounts services in four currencies: 32

1. US Dollars 2. Pound Sterling 3. Dutch Mark 4. Japanese Yen Foreign currency accounts can be operated by Pakistani residents abroad and residents at home, plus foreign nationals who are residents in Pakistan. The opening of foreign currency goes through the same kind of process that is used for opening of an ordinary deposit account. A prescribed form has to be filled as an application for opening of account. Personal identification card and introducer is required who can be an old account holder with the Bank or an officer of the Bank. Foreign Currency accounts can be opened in following three types. 1. Foreign Currency Current Account 2. Foreign Currency PLS Account 3. Foreign Currency Fixed Deposit Account

Foreign Currency Current Account

Foreign currency current account can be opened with a minimum balance of $500. This account is not entitled to any profit.

Foreign Currency PLS Account

Foreign currency PLS account require $100 for opening and this account is eligible to share the profits and losses at the rate that is prescribed by the Head office from time to time.

Foreign Currency Fixed Deposit Account

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

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FOREIGN REMITTANCES
Remittance is transfer of funds from one place to the other by way of using an intermediate dealer. These dealers are authorized agents who provide these services on commission. Foreign remittances are the most significant type of transaction that is carried on in case of a foreign currency accounts. The remittance can primarily of two types. 1. Inward Remittances 2. Outward Remittances

Inward Remittances
Funds coming into the country on account. The inward remittances are coming through either Telegraphic Transfer (T.T) or in form of Demand Draft (D.D). Further these remittances are coming in either in foreign currency or are in Pak Rupees. The remittances coming into NBP City Branch, Multan cam be classified into the following types. Case 1: Remittances where the beneficiary or the payee is an account holder in the City Branch. Case 2: Remittances where the beneficiary or the payee is an account holder of any NBP branch other than City Br. Multan. Case 3: Remittances where the beneficiary or the payee is an account holder in a Bank other than NBP. All the above-mentioned types of remittances are handled differently and the reimbursement of the amount is done through separate recordings in the books. The instruments of inward remittances carry instructions for the proper reimbursement of the amount to be credited to the account holder on realization. The reimbursement on TTs is available as follows: For Pak Rupee: Reimbursement is made from Nadir House Br. Karachi For Foreign Currency: Reimbursement is made from NBP Head Off. Karachi All TTs received from foreign bank are initially put on a test to verify the genuineness of the massage received. This test confirms the amount, the beneficiary, the case and the sending 34

branch of a bank. There are special codes that are used for testing the instrument. Once the message is confirmed then its payees status is checked.

Case 1
If the payee is an account holder of the City Br. then it is recorded as following: Dr. Account at Nadir House Br. Karachi (if remittance is in Pak Rupees) OR Dr. Account at NBP Head Office, Karachi (if remittance is in foreign currency) Cr. Payees account The responding branch is sent a debit advice along with copy of the message received.

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

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

Outward Remittances
Funds going out of the country on account. Sending amount outside the country is an outward remittance. Again this remittance can be made by T.T or demand draft. The condition for these remittances requires the sender to be the account holder of the Branch. That account holder has to submit a written cheque along with the payees particulars and responding bank. This procedure has charges that are higher in case of T.T and comparatively lesser for demand draft. These charges can be deposited in cash or can be debited from the account of the sender as the case may be.

35

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

FOREIGN BILLS FOR COLLECTION

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

Credit. Payees Account For collection of the international DDs, NBP has maintained agency relations with following Banks: American Express Bank Al-Jazeera National Exchange corp. for Americas, Europe and Asia or Saudi Arabia for Emirates

These collections can be in form either Pak Rupees or in foreign currency. For collection from abroad the cheque/draft is sent to American Express Karachi. On realization of the 36

amounts the Bank receives a credit advice from the agent bank and the Bank makes a new entry. Debit. Account at Nadir House Br. Karachi (if remittance is in Pak rupees) OR Debit. Account at NBP Head Office, Karachi (if remittance is in foreign currency) Credit. DP Account This collection process requires some charges that have to be born by the customer who deposits the cheque/draft for collection.

Local Bill for Collection

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

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

LETTER OF CREDIT
As a credit instrument and as a mean of making security of the payment, the documentary credit is essential these days for conducting safe and sound foreign trade. A documentary credit represents a commitment of a Banks to value honor cheques and other means of obligation against his customer to the amount of value of goods traded, on the presentation of the documents evidencing the bonafide conduct. One mode of payment is Letter of Credit (LC). It is a conditional undertaking by the Bank to make payment to the exporter if he fulfills the terms of credit by presenting the required documents to the bank in his country. In fact LC is a legal document on behalf on which the payment made by the importers bank to the exporters bank. 37

National Bank of Pakistan is providing this service to its customers who have an account with the branch and other businessmen too. This facility has been recognized as a modern banking activity of all commercial banks that are included in the list of 6000 Banks internationally.

Information in LC Document
The name of the local company, which is importing the goods. The name of foreign company, which is exporting the goods. The details of the goods to be transacted including the amount, quality, mode of packing etc. The total amount of the LC. The number of days for which the LC is valid. The name of the banks, which are regulating all these dealings. The name of the carrier, which will be used for the shipment of the goods to the importer. The bill of shipment number.

PARTIES INVOLVED IN A LETTER OF CREDIT

There are normally six parties involved in a letter of credit: 1. Buyer (known as the importer, account party or consignee) 2. Buyers Bank (known as opening, or paying bank) 3. Seller (known as the exporter, shipper, or beneficiary) 4. Sellers bank (known as advising, confirming, negotiating bank) 5. Carrier (known as the shipping company) 6. Insurance Company

TYPES OF LCS
Irrevocable LC
An irrevocable LC is one that is a definite undertaking by the issuing Bank that it cannot be cancelled or amended without the consent of all the parties to the credit. This means that all the provisions for the payment, acceptance or negotiation contained in the credit shall be fulfilled if the documents and drafts/cheques are presented that comply with 38

the terms and conditions of the credit. This type of LC is the most commonly used LC for the international trade purposes. The exporter feels himself safe and assured that his payment will be met in time without delay.

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

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

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

Requirement Before Opening LC

According to the international trade policy of the GOP it is prescribed that no person or a company can import or export until it gets itself registered with the Export Promotion Bureau (EPB) and gets a valid certificate of registration. On being granted the certificate he is eligible to import or export from the country. For an importer to open a LC for the first time has to make an application to the State Bank of Pakistan, through a scheduled commercial bank for grant of the permission to open a LC.

39

This importer on getting of the permission is also not bound to open the LC from the same bank. He is free to go to any bank that suits him for the purpose. All imports must be done under observance of all rules and regulations that are prescribed by SBP and Government, which are subject to change from time to time.

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

Documentation For Export LC

For this purpose the Banks has to make sure that it has acquired the duly required documents from the exporter that include the following: E Form (which describes the detail of the goods to be exported, the importers particulars, the amount of foreign currency payment and the details of the importer as well. Original Invoices of the transaction for sale. Bills of Exchange drawn on the importer by the exporter. Bills of Lading from the shipping company along with the details. Insurance documents. Along with these documents the Bank certifies that: Exporter is known to the Bank and is a bonafide businessman and customer in Pakistan. He has made arrangements with realization of the export proceeds, which must be made within 120 days from the date of the shipment of the goods. The Bank shall receive export proceeds against shipment on firm contract within the prescribed period by the State Bank. Failure to make the receipts, the Bank shall inform the State Bank the circumstances and reasons shall comply with it. 40

 In case of non-realization of export proceed within the prescribed period Bank obtain from the exporter the circumstances and the reasons. Banks certifies those firms for which: Arrangements have been made for realizations of export proceeds. Bonafide of importer/consignee abroad and credentials have been checked and verified. Arrangements have been made for the receipt of export proceeds. Genuineness of the charter party where shipment is to be made against charter party bill of lading has verified. After submission of all the related documents to the negotiating Bank, seller is bound to receive payment. The Bank on its part is also bound to make payment however it is only reasonable to allow the banks sufficient time to scrutinize the documents that exporter has submitted.

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

MINISTRY INVOLVED IN IMPORT

Ministry of commerce is for commodity movement whereas ministry of finance is responsible for monetary transactions. These ministries have to be informed about all the international transaction carried on by any businessman.

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

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NATURE OF PAYMENT
The nature of payment can be of three types: Sight: where the payment is made on the presentation of the documents Usance: where payment is made after 30, 60, or 120 days of presentation of the documents At Collection: Here high commission is charge and payment is made after 150 & 180 days. The issue authority (in this case the bank) has to be confirmed about the bonafide of the customer the same way as in case of export LC negotiations.

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

PAYMENT OF THE LC
The negotiating bank after receiving the documents from the exporter verifies for the genuineness and confirms the conditions set in the LC makes payment to the exporter (if it is a sight transaction). If the transaction is Usance then the bank makes the payment after number of days mentioned in the LC document from the date of presentation of the documents. These documents when checked are sent to the issuing bank for reimbursement of 42

the amount paid to the exporter. The issuing bank once again checks and confirms the genuineness and sends the amount to the negotiating bank through remittance instrument.

FOREIGN CURRENCY TRAVELERS CHEQUES

Travelers Cheque is a credit instrument that is used for safe and easy mode of carrying money. It is innovation of modern banking that has replaced carrying cash and being at the risk of theft or robbery. Travelers cheque is piece of paper that gives the holder the right to claim from the issuing bank to make payment up to the amount written on it. These cheques have become widely used in all business trade transactions. NBP dont sell Dollars by hand but they issue traveler cheques.

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

The quotas shall be issued in form of Travelers Cheque only. There is restriction (subject to change) on the amount, which is US $ 2,100 or US $
50 per day whichever is less that can be issued in form of TCs in one calendar year to one expatriate. The need for over this amount can be negotiated and permission can be achieved from SBP.

Only US$ 100 can be issued in shape of hard cash that is to facilitate the most urgent
need of the traveler. 43

ISSUANCE OF TRAVELERS CHEQUE

The documents required for issue of T.Cs includes: A travel ticket issued by a registered travel agent. A copy of passport that has a visa stamped and is still valid. A copy of the national identity card of the applicant. The Bank must also assure that the traveler has a confirmed flight at minimum 14 days from the application for the T.Cs. A copy of all the documents must be sent to SBP along with T-I Form (form on which the application for T.C is recorded) There are different quotas for which T.Cs are issued:

FOREIGN CURRENCY BEARER CERTIFICATE (FCBC)

FCBCs are the tool for the SBP to increase foreign exchange reserve in order to make balance of payment favorable for the countrys economy. FCBCs are floated at the order of the President of Pakistan. When these are issued they are recorded in the cheque-book register and in the register of cheque-book for collection. Important characteristics of FCBCs The profit on FCBCs is 14.5% annually. No tax or Zakat is deducted on these certificates. These are considered as white money. Maturity period is 6 years.

PROCEDURE FOR ISSUANCE OF FCBC

Following are the requirements for the issuance of FCBC, which are imposed by SBP to be followed by the banks, and are subject to change from time to time. Covering letter of sale of FCBC to the H.O. National Bank of Pakistan and C.C to Chief Manager SBP Public Debt Office Karachi. Secretary SBP, Karachi. The SVP investment Division H.O. Karachi. Precede realization/encashment certificate to senior deputy director SBP.

44

 Statement showing the sale of FCBC as on date of sale to the above mentioned three persons. Copy of the I.D card of the Buyer of FCBC. Credit is send to SBP after three days of the issuance of FCBCs.

Chapter No.5
REMITTANCE DEPARTMENT
Remittance department provides services to the customer of the bank. The main function of this department is transfer of funds. Remittance is a major function of the bank. It is the transfer of money from one place to another place without directly involving cash. By proving this service to the customers the National Bank earns a lot of income in the form of Exchange 45

INSTRUMENTS OF BILLS AND REMITTANCE DEPARTMENT

The instruments that are handled in the Remittance department are as follow: Demand Draft. Mail transfer. Telegraphic transfer. Pay order. Pay slip. OBC (outward bill for collections). IBC (inward bill for collections).

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

Issuance Procedure
A demand draft application is given to the customer; he fills the relevant information and signs it. The officer in charge then checks the information form. The charges such as excise duty, postage is charged as per effective schedule of Charges. Tax is exempted if he is taxpayer and knows his No. In case of cash deposit the cashiers counts his amounts and signs the DD application and enters it in the register. The cash received equals the amount of remittance and the cheques there on. Then the officer of the bills and remittance department signs it and operation manager counter signs it. The entry is the made in the DD issuing register. It is given to the customer. 46

 Vouchers are passed. The vouchers and the DD form given for posting at the computer. The DD advises be printed at the computer and mailed to the respective branch.

Payment:
On the contrary, when a DD is received i.e. a customer comes to bank with the DD, the procedure is as follow. The DD credit advice is received through mail. The Nos are checked and signatures are verified. An entry is made on the DD payable register, and the voucher is made. The DD credit is attached with the vouchers and given for the posting at the computer. When DD is received, The test Nos are checked, and the payment is made. The vouchers are given for posting. The vouchers are given for posting. And the entry that was made in register is closed.

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

Issuance procedure
A voucher is filled with the information about the receiver his account number, responding branch of the bank, date, and amount. The amount to be sent is deposited in cash or a cheque is attached with the voucher. Based on the information provide the MT leaf is filled. It is recorded in the concerned register. Send to the officer for signature and authentication. 47

 A signature is taken on the counter folio of MT from the customer. The MT drawn is sent to the concerned branch with a fanfold by the bank itself.

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

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

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

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

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

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

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

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

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

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

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

OUTWARD BILLS FOR COLLECTION

Concept
The bills, which are sent to, other city banks for the local clearing in that city are called outward bills for collection. 50

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

INWARD BILLS FOR COLLECTION

Concept
The bills, received from other banks out of city for the local clearing, are called inward bill for collection.

OTHER FUNCTIONS Balancing the Register

At the end of the day, all the registers are balanced with the computer balances. The heads are as follows. DD payable. 51

 TT payable. MT payable. OBC lodged. OBC Collection IBC lodged. IBC collection Bills payable P.S. Issued. Bills payable P.O. issued. If the payables are not cleared for a lot of days, a reminder is sent to the respective branches.

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Chapter No.6
CASH DEPARTMENT
Cash department is very sensitive and risky part of the bank. Very cautious and competent personnel are needed for the job. NBP has really such a diligent staff with appreciable competencies and will to do work. Main function of Cash department is to deal with cash payment and cash receipts. The Branch has online computer system, hence firstly he check the balance in his account by giving the account number and check the title of account as well, and debit the account by the mentioned amount. When cheque is found in order, the token clerk affixes Token Stamp on the cheque, writes the token number on it and puts his initial there and after this token is given to the presenter and cheque is handed over to the authorized officer for further processing.

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

Procedure The customer fills the pay slip. The cashier receives the pay slip and cash. He counts the cash and makes the detail of the notes at the bank of the pay slip. Then he compares the detail with amount written on the pay slip and signs the pay
slip.

Writes the entries in the Receiving cashier's book, i.e. serial No, account type,
Account Number, and amount.

Puts the stamp of the Cash Received on the pay slips and writes the serial number
from the receiving cashbook. 53

 The first portion i.e. the Receipt is taken and given to the customer. While the latter
portion is handed over to the person for the entry in order to update the data.

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

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

CALCULATION OF ENDING CASH BALANCE

The official time for receiving deposits and payments is till 1:30. However some important customer is accommodated afterwards. The cash in hand is counted. It contains the cash at the counter and the cash in the strong room. Then opening balance is taken, i.e., the ending balance of the previous day. The receipts are added. The payments are deducted. Because this branch is online hence they are not written and maintain the daily book manually but printed daily cash position books by the computer. 54

CASH MANAGEMENT
Cash management is a technique of managing cash according to the requirements of the bank on daily basis. The operation manager manages this aspect of cash. Every Branch has an accountant at the State Bank of Pakistan. A 5% of the total deposits have to be maintains so there are two main sources of the cash. State Bank of Pakistan. Head Office. If Branches borrows cash from Head Office it has to pay an interest of 13%. On the other hand. If the cash is remitted to head Office, The branch gets a profit at 12.75%.

CHEQUES
According to the Negotiable Instrument Act 1881, Cheque is bill of exchange drawn on specified banker and not expressed to be payable other wise than on demand.

The Request of a Cheque

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

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

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Open cheque
When cheque is presented at cash counter for payment, the token clerk examines the cheque before issuing token. The following is looked into: The cheque is drawn on the same branch of the bank. The cheque is not crossed that it is open cheque. It is not stale or post dated. The drawer has signed the cheque. The amount written in words and figure is same. The drawer of the cheque duly signs all alteration or cancellation. The presenter has signed at the back of the cheque.

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

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Crossed cheque
The customer of the branch deposits the cheque drawn on same branch, for payment to be credited into his account, attached with pay slip. The officer accepts it after looking into the following: The person depositing the instrument for collection is the customer of the branch. The correct pay slip (Current / Saving) is attached with the cheque. The depositor signature is present on the pay slip. The word and figure of the amount tally with each other. The cheque is neither post dated not stale. The drawer signature is present on the cheque. The alteration on the cheque are signed by the drawer. The cheque in the name of company, firm etc is not going in to the account of any other person.

Returning of the cheque

Cheque can be returned back to presenter due to various reasons. When a cheque is returned Cheque Returned Memo is attached to it. In the memo following information is mentioned: The name of the branch. Date. Cheque number. Reason for returning the cheque. The authorized officer signs the memo and Branch Stamp is place near his signature. When the cheque (along with memo) is returned to the presenter, the token is taken back from him and token number written at the back of the cheque and Token Issued Register is crossed. Some of the reasons for returning the cheque are: Stop payment from the drawer. Insufficient funds in the account. Signature differ form specimen signature. Necessary stamps found missing. Account has a joint operation where as the cheque has single signature. 57

 Effects not cleared, may be presented again. Amount in words and figure differ. Cheque crossed. Any other.

Stop payment of cheque

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

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Chapter No.7
Clearing department
There is no legal obligation on a banker to collect cheques drawn upon other banks for a customer. However it is function of almost every modern bank of the collection of cheques and bills on behalf of the customer. Clearing department services are provided in order to make arrangements for the economic collection of the cheques, DD and other negotiable instruments. A large part of this work is carried on through the clearinghouse. Suppose X is an account holder of NBP, and he has to pay Rs.2, 000/- to Y who is an account holder of MCB. X draws a cheque in favor of Y and gives it to Y. Now Y instead of coming to NBP for payment, deposit the cheque at MCB. The MCB clearing members will bring those cheques to the clearinghouse and gives it to NBP clearing members. The NBP clearing members brings it back to the bank and checks the validity of the cheques and in the second clearing the MCB members told that his cheque has been cleared.

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

First clearing
The clearing members take the outward cheques and go to the clearinghouse. The outward cheques are given to the respective branch members and inward cheques received. A summary is prepared and given to the supervisor of the clearinghouse. He balances the accounts of all the banks. 59

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

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

Clearing Summary Register

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

Inward Clearing Register

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

Outward Clearing Register

The outward clearing register is used to write down the detail of the outward cheques. Outward cheques are those cheques, which have been delivered to different banks. The amount of these cheques will be debited to SBP account so these cheques are in favor of us and have a positive effect. Different instruction is dealt in he clearing department. All negotiable instruments e.g. Cheques Pay slips Pay orders 60

 Term deposits In order to make arrangements for the speedy and economic collection of cheques, bills and other documents payable or deliverable at offices of clearing house. State Bank of Pakistan provides clearing services in all the big cities. Where State Bank of Pakistan has no office then NBP act the role of clearing house.

Procedure
The branch for clearing items adopts the following procedure. All cheques, drafts, pay orders etc. accepted for clearing shall be stamped with clearing stamp on the face of the instruments, customers, counterfoil and the pay in slip with date of the next working day. All cheques received for outwards clearing to be deposited by the customers are be accepted on the banks relevant pay-in slip duly filled in by the depositor as per printed columns of the pay-in slip. The depositor should write the instrument number, the name, and the branch of the bank drawn on and should sign at the prescribed column (deposited by) for his signature. Immediately on the receipt of the instrument the cleaning official of the bank affixes the banks crossing and clearing stamps on the face of the instrument endorsement stamp of the bank. The pay-in-slip shall be stamped on both parts with the clearing signature beneath the stamp. The pay in slip along with the instrument is passed on to the operation manager for his signature on the pay-in-slip. All instrument received over the counter and from branches for outward clearing are entered in the outward clearing register (NBP SC/LSC register). All columns of the registers are filled in for each instrument received from any other branch of the bank, the name of the branch is mentioned in the column for the name of depositor. All instruments are received for outward clearing shall be sorted bank wise. They are posted at the computer in the next date are received print out.

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 The grand totals of all schedules amount and number of instruments must agree with the totals as per outwards clearing register. After completing the above formalities vouchers for the outward clearing are prepared and signed.

Clearing position statement

After the 1st and 2nd clearing the clearing positions are prepared. A B Inwards cheques, Demand Draft, Pay orders, palsys etc. out wards Cheques, pending cheques

If amount B is greater than amount A, it means that our cash balance at SBP has increased and so it is a favorable for bank. On the contrary, if A is greater than B it means that our cash balance at SBP account has decreased and here it is unfavorable for the bank.

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Financial Analysis

Balance Sheet

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Income Statement

Ratio Analysis
Ratio analysis helps in determining a logical relationship between different heads of income statement and balance sheet. This logical relationship is helpful in making various useful interpretations about the financial position of the bank, liquidity of the bank and most of all the profitability of its operations. Following ratios have been calculated:

1) Return on Assets
Return on Assets = {Net Income / Total Assets}*100 (Amount in millions) Years 2009 2010 2011 65

Net Income Total Assets Ratio

17450.8 218810.8 7.97529%

17809.3 220431.9 8.079275%

17711.8 274673.5 6.448310%

Comments
Return on asset is lower than the previous year thats bad sign. It means that bank is earning less from its total assets. But the banks total assets have also increased which means that the volume of the bank is growing. It will be beneficial for the bank for the longer time period.

2) Return On Equity
Return On Equity = {Net Income / Shareholder Equity}*100 (Amount in millions) Years Net Income Shareholder Equity Ratio 2009 17450.8 120792.6 14.446911 % 2010 17809.3 131298.8 13.5639472 % 2011 17711.8 135794.4 13.04310%

Comments
Return on equity is less than the previous year thats a not good sign. But some times it increases that is a good sign. It means that bank is not relying on outsourcing. It is self sufficient and believes on equity base business. It is a good indicator of a strong business. This ratio is perfectly according to the market requirements.

3) Working Capital
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Working Capital = Current Assets Current Liabilities (Amount in millions) Years Current Assets Current Liabilities Working Capital 2009 218810.8 804884.1 -586073.3 2010 220431.9 893169.5 -672737.6 2011 274673.5 1001038.9 -726365.4

Comments
The working capital of the bank has decreased in 2009, 2010,2011. Actually working capital is the liquidity of capital available to the organization from which it conducts its business. It is a minor difference doesnt affect the credibility of the banks. It shows that how much the management is efficient and having control on the organization.

4) Current Ratio
Current Ratio= Current Assets / Current Liabilities (Amount in millions) Years Current Assets Current Liabilities Ratio 2009 218810.8 804884.1 0.2718537 2010 220431.9 893169.5 0.24679738 2011 274673.5 1001038.9 0.2743884

Comments
This ratio means how much a bank has its Current assets against its Current Liabilities. This is higher from last two years. It means that bank is focusing on the fixed assets and the management is efficient in implementing its control over the organization its a good sign for the bank.

Organizational Analysis with Reference to the Industries Listed on the Stock Exchange
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The following Exchange Companies are empowered by NBP to remit from Middle East or their representatives around the globe anywhere in Pakistan or on our overseas network. 1. Oman Exchange Company 2. Alfalah Exchange 3. Lari Exchange 4. UAE Exchange 5. Habib Exchange Company 6. Wall Street Exchange Co. LLC 7. Aldar Exchange Works 8. Dollarco Exchange Company The above listed exchange companies are empowered by the NBP and very helpful for the NBP to generate funds and also give a edge to the NBP on the other competitors.

Future Prospects of the NBP

To be recognized in the market place by institutionalizing a merit & performance culture, creating a powerful & distinctive brand identity, achieving top-tier financial performance, and adopting & living out our core values. To be pre-eminent financial institution in Pakistan and achieve market recognition both in the quality and delivery of services as well as the range of product offering and the major objective of NBP is to handle the crises because when it came into being there were jute crises in East Pakistan and it was assigned to handle those crises. At present the main objective of NBP is to support the economy with the help of its financial policies rather to maximize profit. It is objective of NBP to capture the deposits of the Govt. as well public.

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CONCLUSION
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Being a Govt. bank it is ignored from the beginning. It has to followed strict rules & regulations imposed by SBP & Govt. It has great burden of Govt. services, which is not much beneficial for the bank. Due to the pressure of Govt. activities like payment of pension and receipt of Govt. a rush of work is there, which disturb the normal banking business. Also such type of activities is performed by the National Bank without any services charges. Another burden for the National Bank is salaried accounts. Those are in large numbers. National Bank is not gaining any advantages from these types of accounts besides of wasting the time. These salaried accounts are dead assets for the bank. National Bank is still working on manual basis. It is very time consuming activity thats why customers feel uncomforted as they have to wait for long time even for a single cheque and also the chances of mistakes and frauds are greater in manual work system. Motivation plays an important role in the success of any organization. So, there is late schedule for upgrading the employees status. Promotion should be in time and according to the individuals performance. Due to the manual work system employees have to spent most of their time in the bank to complete even their daily routine work. They have to sit till 9:00 or 10:00 PM. For this reason their normal life is disturbing which create the irritation in the behavior of employees. As compare to the other banks the working environment of National Bank is very poor. Most of its branches are still in old decors and poorly conditioned buildings. These working conditions effect in two ways. First from employees side if the working conditions are not reasonable then their work efficiency will be very low and Second from the customers side that the customers dont like to go in such type of environment. Being a Govt. Bank, political and beurucratic pressure is much more as compared to the other banks. As a result the bad debts are high. Due to all above-mentioned factors the customers of NBP are shifting towards other banks and also the deposits of National Bank is decreasing.

Suggestions & recommendations

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Based on the SWOT analysis of the National Bank of Pakistan, it is observed that the Bank like the other public sector industries has not been showing up to mark performance. There is a long list of weaknesses that is given on the previous page. Most of them are going along since long time and that all efforts made to remove them have not succeeded. On the basis of SWOT analysis of the Bank the following suggestions and recommendations are given.

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These and many others that can make a good set of recommendations, which have to be made possible to escape from the threats and weaknesses and the risks in environment that surrounds the Bank. The management do considers the policy matter that are not helping the Bank, but are still in practice due the absence of prudentially regulated system to protect them and the Bank. Efforts have been made with serious concern to give NBP a status that it has to maintain by having practices of: Right sizing of the employees. By closing unprofitable branches. By introducing a merit based selection criteria. Promotions made conditional with qualifications.

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References
1. Mr. Ch. Ejaz (Branch Manager)

2. Mr. Sohail Rasool (Operation Manager) 3. Mr. Muhammad Arashad ( O.G-1) 4. Mr. Muhammad Jewan Khan (OG-11) 5. Mr. Muhammad Ali (Incharge Government Section) 6. MR. Aziz Baig (Incharge Foreign Exchange) 7. Mr. Ameer Muslim Gardezi (Incharge Bill & Remittance) 8. Mr. Mohsin Ali (Incharge Western Union)
9. Mr. Kashif (Cashier in Govt. Department)

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