CHAPTER 1

INTRODUCTION TO REPORT

I have written this report after doing internship in the National bank of Pakistan. I
selected National bank of Pakistan because it is one of the leading banks of
Pakistan.

1.1 Background of study:

The socio economic growth of any developing country depends mainly on the health
of its monetary based institutions. The banking sector is one such example, which plays
a vital role in the development of the economy. Its involvement in the industrial sector,
trade and commerce of the country makes it an integral organ of the over all
development of the county.

National bank of Pakistan was established under the National bank of Pakistan
ordinance 1949. The primary objective of the setting of NBP was the purchase of jute
from the growers in the former East Pakistan and also to perform the commercial
banking functions in the country. The bank is also authorized to act as an agent and
trustee of State bank where the State bank of Pakistan (SBP) has no branches. The bank
therefore performs dual responsibility, one as commercial bank in its own right and at
the same time a trustee of business finance.

1.2 Purpose of study:

The purpose of this study is to fulfill an important requirement of BBA course that
is to write an internship report. The main focus of this study is on retail banking.

Apart from this there are other purposes such as:

a) To get practical knowledge about the working of the bank, i.e. the
procedures followed for the retail banking.

b) To get used to the working conditions of an organization.

c) To analyze the weaknesses of the said organization and give some

solutions to overcome these weaknesses.

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 d) To have a working experience.

1.3 Scope of study:

As an internee in the National bank of Pakistan, AITQ Branch Peshawar the main focus
of my study was gain to knowledge about the retail banking procedures of the bank.

These retail-banking procedures include clearing, remittances, deposits, and cash and
to some extent advances. This report identifies the problems faced by the bank in
these procedures and give workable recommendations for the solution of these
problems.

1.4 Methodology of report:

The methodology that I have adopted in preparing this research report is based on both
primary as well as secondary data.

Primary data is gathered by using different techniques such as:

a) Interviews

b) Discussions with staff

c) Personal observation

The main sources of the secondary data are:

a) Annual report

b) NBP brouchers

c) Leaflets, newsletter

d) Internship reports

During this process I observed that enough material regarding my topic was not
available in the books so 1 had to count on my personal observation and
interviews for writing this report.

I have spent 8 weeks in the branch; during my stay I interviewed few officers of the
bank and held discussions with others. As such most of the data used is primary in
nature.

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1.5 CHEME OF THE REPORT:

I have divided my report into five sections:

SECTION 1:

The first section of the report is "Introduction to the report". This section includes one
chapter. This chapter consists of background of study, purpose of study, scope of
work, methodology of report and scheme of the report.

SECTION 2:

The second section of the report is "Review". This section includes two chapters, in the
Second chapter of report the National bank of Pakistan as a whole is reviewed. Its
objectives, functions, human resource management and important products are
discussed. In the Third chapter of the report the branch operations and different
departments are reviewed. In the Fourth chapter Deposits and Cash departments are
explained. The Fifth chapter is regarding Cash department of the bank. In the Sixth
chapter of the report Remittances department has been explained in full detail. The
Seventh chapter explains the clearing department and its function in the banking
sector. The Eight chapter explains the Advances department, its working and
different products of the bank and the Ninth chapter explains the Foreign exchange
department National Bank of Pakistan The third section of report is "Analysis". This
section includes two chapters. In the fourth chapter of the report critical analysis of the
branch is given. In the fifth chapter the SWOT analysis of the branch is given.

The forth section of the report is "Findings and recommendations". It has one chapter.
In this chapter recommendations for solving various problems at the branch level arc
given.

The fifth and last section of the report is "Implementation plan". In this chapter the
implementation plan for the two recommendations is given.

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CHAPTER 2

BACK GROUND AND ORGANIZATION

2.1 Evolution of banking1:

It has not so far been decided as to how the word ‘bank’ originated. Some authors
opine that this word is derived from the words ‘Bancus’ or ‘Banque’ which means a
bench. The explanation of this origin is attributed to the feet that the Jews in Lombardy
transacted to the business of money exchange on benches in the market place; and
when the business failed, the people destroyed the ‘brancus’. Incidentally the word
‘bankrupt’ is said to have been evolved from the practice. Other authors hold the
opinion that the word 'bank' is derived from the German word 'back', which means
'joint stock bank'. Later on, when the Germans occupied major part of Italy, the
word 'back' was Italianized into 'bank1.

2.1.1 Early growth:

Banking in fact is as primitive as human society, forever since man came to realize
the importance of money as a medium of exchange, the necessity of a controlling or
regulating agency or institution was naturally felt. Perhaps it was the Babylonians
who developed banking system as early as 2000 BC. It is evident that the temple of
Babylon was used as 'banks of the prevalent respect and confidence in the clergy'.

2.1.2 Modern banking:

Despite the classical origin, banking in its modern form and structure started in Britain
when many of the Lombardy merchants came to England in the fourteenth century and
settled in the parts of the city of London now called Lombard street. In 1672, English
banking faced great crises when Charles II borrowed huge sums of money from the
goldsmiths and later refused to pay them back. Therefore, a number of goldsmith
bankers formed themselves into a corporation in 1695, known as the Bank of
England.

The modern commercial banking system actually developed in the nineteenth century.

2.1.3 Types of banks:

1
Siddiqui, Asrar H (1998). Practice and law of banking. Karachi: Royal Book company 1 to 9.

4
The types of banks are:

1. Commercial banks:

The commercial banks receive deposits from the general public, which are
repayable on demand upon written orders of the depositors. As their most
distinctive feature the commercial banks maintain checking accounts for the
constituents.

2. Merchant banks:

Merchant banks are those, which have been mainly financing the domestic and
international trade in United Kingdom. During the late eighteenth and early
nineteenth centuries the trade between countries was financed by bills of
exchange by well-reputed merchant houses for which they would change a
commission for their service. Thus the business of accepting bills of exchange
to finance the trade developed and gradually these business houses entered into
other banking activities and became known as "merchant banks".

3. Saving banks:

The basic purpose of saving banks is to inculcate the habit of savings in the
people. The saving bank deposits arc not repayable upon only the written
orders of the depositor but the depositor or his agent has to appear personally
at the saving bank to make withdrawal, and for this purpose he must present
a pass book, a certificate of deposit or some similar documents to prove his
right to receive payment.

4. Mortgage bank:

These banks mainly deal in loans for the acquisition or construction of real
estate against the security of mortgages. Quite a few banks arc operating in
developed part of the world. Saving and loans associations and farm loan
associations are some of the well-known forms of the mortgage bank.

5. Consumer banks:

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 These banks provide finance for purchasing consumption goods for the use of
the borrowers. Consumer finance companies, sale finance companies and
credit unions are some of the popular forms of consumer banks.

6. Investment banks:

The investment banks assist business houses and the government bodies to
raise money through the sale of stocks and bonds for usually long term
purposes. These banks perform the usual functions of raising deposits of idle
money from the public and finance the business houses and other bodies.

7. Central banks:

Central banks occupy unique position in the banking structure of the country
because they have been entrusted with the responsibility of controlling the
money supply, interest rates and financial market of the country for the
purpose of economic development. State bank of Pakistan, Bank of England
and Federal Reserve Bank of USA are well known central banks.

2.2 Banking in Pakistan2:

At present there are 45 commercial banks and 36 non-banking financial

institutions (NBFls) operating in Pakistan whose activities are regulated and
supervised by State Bank of Pakistan. The commercial banks comprise of 4
nationalized banks, 2 privatized banks, 15 private sector banks, 20 foreign banks, and 4
specialized banks.

Under the WTO commitments the operational status of branch network of foreign banks
operating in Pakistan as on 12-12-1997 has been protected and frozen. However,
existing foreign banks having less than 3 branches can have branches to the extent of
maximum number of 3 only. New foreign banks desirous of entering banking business
in Pakistan will now be required to incorporate as domestic bank under the local
laws. Equity participation of foreigners can be up to 49% in the total minimum capital
of US $ 11.5 million, subject to the principle of reciprocity. The branches of foreign
banks operating in Pakistan can also be converted into a local commercial bank by
incorporating under the local laws and subject to a minimum paid up capital of Rs. 500

2
NBP (2001) Economic Bulletin. Karachi: 20

6
million provided foreign share holding is restricted to a maximum of 49%.

TABLE # 1

Banking highlights: (Rs. Bn)

Dec 29, 2001 Dec 30, 2000

Scheduled banks deposits 1351.9 1198.3
Scheduled banks advances 898.1 861.2
Scheduled banks investments in 313.4 287.2
securities & shares
Notes in circulation 457.5 428.2
Approved foreign exchange 219.1 82.5

2.3 NBP Historical background:

National bank of Pakistan was established under the National bank of Pakistan
ordinance 1949. The primary objective of the setting of NBP was the purchase of jute
from the growers in the former East Pakistan and also to perform the commercial
banking functions in the country. The bank is also authorized to act as an agent and
trustee of State bank where the State bank of Pakistan (SBP) has no branches. The
bank therefore performs dual responsibility, one as commercial bank in its own right
and at the same time a trustee of business finance.

2.4 Objectives Of NBP:

National bank of Pakistan is also a commercial organization and its main objective
is profit maximization. This is achieved in two ways:

1. By increasing its deposits.

2. By charging interest on loans provided to the people due to increased deposits

These are explained as:

2.4.1 Increase in deposits:

Competition in banking is intense and every bank whether it is Pakistani, foreign,

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private or nationalized tries to increase its deposits by providing better facilities to its
customers. By increasing its deposits a bank can extend greater amount of loan and
hence achieves higher profit. NBP is also improving its facilities and services to attract
customers with higher volume of deposits. There are two main factors involved in
increasing the deposits. These factors are improving the services and courtesy. NBP is
continuously working on these two factors to increase its deposits.

2.4.2 Extension of loans:

The profitability of a bank largely depends on the amount given to people as loan and
the type of people to whom credit is given i.e. the credit worthiness of the borrowers.
This strategy has worked quite well for NBP. Deposits are collected from the people
and invested in different projects. NBP prefers to give loans to financially sound and
reliable parties, after securing the collators. NBP has an extremely well organized
section. The staff is trained and educated and competent. They carry out extensive
financial analysis before deciding on the loan. Interest charged on the loans
potentially contributes to higher profits.

Some of the other objectives of NBP are:

a) Improve customer services.

b) Quick disposal of credit.
c) Efficient operation of the officers.
d) Better cooperation.
e) Operation and advisory services for foreign exchange accounts activities.

2.5 Functions of NBP3:

Since NBP is a commercial bank, it performs a variety of functions. Like other

commercial banks, NBP is engaged in financing international trade. Its other major
functions include receiving deposits, advancing loans and discounting of exchange. The
functions performed by NBP are:

2.5.1 Accepting Deposits:

This function is important because banks largely depend on the funds deposited with

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Nayyab, Durre (1995) Internship Report on NBP Submitted to Institute of Management Studies, Peshawar 16 to 8

8
them by its customers. Deposits are of many types.

i). Current deposits:

Current deposits are also called demand liability on current deposits. NBP pays
practically no interest on current deposits. Businessmen usually open current
accounts. In NBP current account can be opened with a minimum amount of
Rs.500/-.

ii). PLS saving deposit:

Profit and loss sharing deposits (PLS) are also called checking accounts. One
can deposit and draw money easily. Profit on PLS is calculated every month but
paid after six months. PLS account can be opened with a minimum amount of
Rs.500/-.

iii). PLS term deposits:

Fixed term deposits are deposits with the bank for certain fixed period before
the expiry of which they cannot be withdrawn unless giving due notice. In this
case the rates of profit will be different depending upon the time period.

2.5.2. Discounting bills of exchange:

Discounting of bill is practically speaking lending for exchange at their market worth
i.e. it pays to holder of the bill an amount equal to the face value after deducting
interest at the current market rate for the period. This bill has to be mature. This is the
common way used for keeping a part of assets of the bank in a liquid form.

2.5.3. Agency service:

NBP also provides best and unique service to its valued customers. NBP provide the
following agency services to the customers:

i). Collection of dividends:

As NBP deals with the purchase and sale of various types of securities,
therefore NBP also provide dividend or interest earned on share or bonds or
invested money.

ii). Collection of Cheques:

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 In the collection and payment of Cheques, bills and promissory notes etc.
National bank of Pakistan acts as an agent for its customers.

iii). Acting as an agent:

NBP also acts as an agent correspondent or representative for its customer at

home or abroad.

iv). General utility services:

Utilities provided by NBP are as follows:

a) Clearance of utility bills:

NBP provides the service of clearing the utility bills i.e. electricity, gas and
telephone bills of its customers. For this purpose it also provides evening
banking services.

b) Lockers facility:

National bank of Pakistan also provides locker facilities to its customers

to keep their valuable assets in it. The charges of different size of lockers
are different.

c) Acts as a referee:

NBP provides useful services to its customers by acting as a referee to their

credit worthiness.

d) Supply of information:

NBP provides operational and advisory service for foreign exchange

accounts/activities.

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 ORGANIZATIONAL CHART
NATIONAL BANK OF PAKISTAN

FLOW CHART NO #1

Board of Directors

President Executive Committee

Regional Chief Executive

Corporate Branch Manager Zonal Chief

Branch Manager

Source: NBP (1998). NBP Journal report. Karachi.

2.6 Management and organization of NBP4:

The management of NBP can be described as:

2.6.1 Board of directors:

In the management of banks, the board of directors is at the top of the controlling
bodies. Since there are no private shareholders now, so there is no general meeting of
the shareholders and are no elected directors. The board now consists of a nominated
president, a secretary and other members. The secretary of the board presents the
annual report of the bank. The board has limited administrative powers.

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Durrani, Imran (2000) Internship Report on NBP submitted to Institute of Management Studies, Peshawar 45 to 65

11
Board members of NBP is led by the chairman who is the president Chief
executive officer (CHO) of the bank, together with a selected group of six directors,
who bring with them vast experience and qualities. The government appoints these
directors. The board of directors is as under

President of the bank 1 president

Three S.E.V.Ps of the bank 3 members/directors
Representative of Pakistan banking council 1 member/director
Representative of Govt. 1 member/director
2.6.2 Executive Board:
The general direction and supervision of the affairs of commercial banks lies in their
respective executive boards. The federal government appoints the president, secretary
and other members of the board. The president being the chief executive of the board
directs, controls, and manages the affairs of the bank.

NBP has an executive committee with the president as its Chairman, 5 Senior
executive vice presidents (SEVPs) as its members and president's advisor as an
observer. This body sees to the day-to-day affairs of the bank, having sanctioning
authority for financial and business proposals.

2.6.3 Chief executive:

The President is the administrative head of a bank. He presides over the meetings of
the Executive Board, manages and controls the affairs of the bank. The president
holds office at the pleasure of federal government.

2.6.4 Divisional chiefs:

In order to improve the management and operation of the bank, it has been split-up
into a number of divisions. Each division of the board is placed under the supervision
and control of divisional chief or senior executive vice president (SEVP) or executive
vice president (EVP).

The head office of NBP is at Karachi and the head office management controls all the
divisions. There are nine divisions in NBP, which are as follows and are shown in
flow chart#2:

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 a) Management support division.

b) Audit and inspection department.

c) Treasury management division.

d) Credit policy management division.

e) Marketing and development division.

DIVISIONS AT THE HEAD OFFICE

FLOW CHART NO # 2

President

Accountability Cell Bank Secretary Div

Management Audit & Treasury Credit Policy

Support Inspect Manage &
Division ion ment Manage
Divisio Division ment
n Division

Marketing & Overseas Special Information

Developi Bankin Assets &
ng g Manage Technolo
Division Divisio ment gy
n Division Division

Source: NBP (1998). NBP Journal Report Karachi.

2.6.5 Provincial Chiefs:

In order to improve the performance of the banking system, each bank has
provincial chief. The provincial has the powers for sanctioning finance and other
credit facilities. The headquarters of the chiefs are situated in each provincial

13
capital. The National bank of Pakistan has 9 regions (circles) in four provinces and
Azad Kashmir (A.K).

2.6.6 Circle Executives:

NBPS is divided into 9 circles. There are placed directly under the supervision and
control of chief executive. The chief executive is usually SVP or VP. Show in flow
chart # 3.

REGIONS (CIRCLES)
NATIONAL BANK OF PAKISTAN

FLOW CHART NO # 3

Islamabad
Muzaffarabad Lahore

Peshawar Faisalabad
Chief
Executive

Haiderabad Multan

Karachi Quetta

Source: NBP (1998). NBP Journal Report Karachi.

2.6.7 Zonal Head:

Each circle is divided into number of zones. Zonal head that holds the post of VP of
AVP administer these zones. NBP is divided into 40 zone.

2.6.8 Branch Manager:

Each zone of a commercial bank is divided into several branches. The control
supervision of each branch is mostly entrusted to AVP or officer of grade-II. A few
big and financially sound branches are even administered by SVPs and VPs. There

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are 1404 domestic branches and 23 foreign branches of NBP.

2.7 Branch Network5:

2 .7.1 Domestic network:

The bank carries its business through wide network of branches. The total number
of branches in Pakistan at the end of 2001 is 1404, to interlink the branches there
are 9 regional head quarters. All the management power rests with the head office,
which it delegates to zonal offices, regional headquarters and branch managers for
efficient performance. Directions and instructions are also communicated to branches
through regional heads and zonal heads from time to time.

2.7.2 Foreign network:

It maintains a presence in most of the major financial centers of the world through
its 23 overseas branches and 4 representative offices. Of these, three representative
offices have recently been setup at Tashkent (Uzbekistan), Baku (Azerbaijan) and
Almaghty (Kazakhstan) to take advantages of the emerging opportunities in
common wealth of independent states (CIS) countries. National bank of Pakistan's role
globally is well assisted by its network of correspondent banks located strategically in
Asia, America, Europe and Africa.

2.8 Important product and services of NBP:

Few of the important products and services are:

2.8.1 Discount house:

In 1996, National discounting services Ltd. Was launched as a wholly subsidiary of

NBP, with a capital base of Rs. 500 million. NDSL was set up to assist commerce.,
industry and the financial sector in the discounting of.

• Trade bills/ letters of credit/ accounts receivable

• Government securities

• Shares of listed companies

5
NBP (2000) Annual Report on NBP Karachi.

15
The objective is to provide better utilization of idle current assets at flexible terms and
conditions catering to the liquidity requirements of clients, and in the process contribute
to the development of the secondary market in the financial sector. NDSL would hope to
establish itself as the market leader in the field of discounting.

2.8.2 Automated teller machines:

With the rise in competition in the banking industry and the increased automation that
has taken place in the industry in the last few years. NBP decided to modernize its
services by installing automated teller machines called "cash link'1 at the selected
branches. At present there are 15 ATMs operational in major cities.

2.8.3 NBP Local Travelers Cheques:

These are used only in Pakistan. LTC are as good as cash because LTC has the power to
purchase and a feeling of security i.e. if one should lose them one will get a refund.

NBP LTC is accepted at major shops, travel agents, hotels, business establishment and
NBP branches. One does not have to be a NBP account holder to buy the local traveler
cheques.

2.8.4 US Commercial Paper:

National bank of Pakistan decided to diversify sources by accessing the US capital markets.
In this regard the bank had launched a S 75 million commercial paper. These were
utilized primarily for boosting up exports from the country.

2.9 Human Resource Management6:

Human resource management is the set of activities directed at attracting, developing

and maintaining an effective workforce. Human resources are critical for effective
organizational functioning.

Personnel department of National bank of Pakistan is working in the head office Karachi.
This department controls all the staff of National bank of Pakistan. The Human resource
management office of NBP perform the following functions:

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Iqbal Zafar (2000) Internship Report on NBP submitted to Institute of Management Studies, Peshawar 15 to 22

16
2.9.1 Recruitment:

Recruiting is the process of attracting qualified persons to apply for the jobs that are open.
As the National bank of Pakistan is a nationalized bank it advertises the vacancies
available to be filled through press. The requirements for selection depend upon the
post to be filled. The qualification required and the age is specified in advertisements.
Experience is considered necessary for the post like computer programmer and typist
etc.

a) Selection process:

Selection process is divided into following steps:

1) Short listing of the applicants:

The management of the bank scrutinizes application of the candidates and

candidates who fulfill the requirements are sent the test calls. In the first step
thousands of candidates apply for the limited posts available. The calls arc sent
by head office to only those candidates who fulfill the requirements of the job
advertised.

2) Tests:

Test is conducted by Pakistan banking council under the supervision of

Pakistan banking and finance service commission. In the tests the applicants are
further short-listed.

3) Interviews:

For the interviews only those candidates are called which qualify the written
test. Different types of questions are asked from the candidate by the
interviewing board such as

a) Questions about the personal background, extra ordinary activities

during education and about the personal contacts.

b) Questions about the subjects or courses studied by the candidate.

c) Question about current events of national and international importance.

17
 d) Role of banking in the current situation of economy.

e) Role of foreign enterprise in public economy.

Apart from these questions the candidate's personal interests are also
discussed and an effort is made to have understanding of the individuals.

4) Merit list:

After the final result, the successful candidates arc sent the appointment
letters and they are asked to sign the agreements with the bank.

2.9.2 Training:

Training is a vital and necessary activity in all organizations. It plays a large part n
determining the effectiveness and efficiency of the establishment. Training is he
organized procedure by which people learn knowledge and/or skills for a lefmite
purpose. The objective of training is to achieve a change in the behavior )f that
trained.

After an employee is recruited, selected and inducted, he is trained and developed :o

better fit the job and organization. The staff college receives junior bank officers for
further training in banking. The courses lasting from six to nine weeks with about
twenty five students in each course. The college is residential one and provides a
measure of collegiate atmosphere, which helps to impart a sense of camaraderie, which
in it is of great value. It is also of interest to record that the staff college receives
trainees from abroad as well as domestic, which helps to create worthwhile reference
to banking business.

The staff college courses are designed not only to impart technical instructions, but
also to develop qualities of judgment decision. The college is one of the most important
institution setup by the bank because its students are likely to become those men who
are expected to rise to the senior most executive positions, which the bank offers. The
bank motivates its officers to attend banking seminars both in Pakistan and abroad and
attaches great importance to the exchange of ideas, information and knowledge.

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2.9.3 Transfer policy:

Transfer is a change in the job of an employee from one job to another or from one
branch to another. It may involve a promotion, demotion, or no change in job status
other then moving from one job to another. It may also be possible at the request of
the employees. In NBP there are two types of transfer.

1) Inter transfer policy:

The management of the National bank of Pakistan transfers frequently its

workers from one station to the other. Usually managers are transferred to
enhance their managerial skills. Sometimes the efficient workers are sent to that
station where the performance of the staff is not satisfactory.

2) Inter departmental transfer:

Inter departmental transfer is related to the transfer from one department to another
department or one section to other section in a branch. The purpose of this is to
generalize the staff and to make them all rounder.

2.9.4 Promotion policy:

Promotion cannot be claimed as a matter of right as on the basis of seniority but on the
basis of performance. Main criteria for promotion arc the performance and skills of
the individuals, through seniority, it is also taken into consideration but it is of secondary
importance.

Person's career is a highly personal and extremely important element of life. Both
productivity and morale are facilitated if these personal decisions are based on objective
assessment of present and potential capability.

Promotion is a term, which covers a change, calls for greater responsibilities and
usually involves higher pay and better terms and conditions of service and
therefore a higher status.

The purpose of promotion is:

a) To provide satisfaction to the employees who are working hard.

b)To improve training, skill, experience and ability.

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 c) To provide an organization with a competent worker.

d) To find out the most competent and suitable candidates.

Criteria:

In NBP, the following criteria for promotion is laid down:

1) Seniority list

Seniority at different levels shall be maintained by NBP as follows.

a) For OG2, separately at circle level.

b) For OG1, and above up to SVP level at head office.

c) For EVPs and SEVPs the list on the integrated basis NCB's by PBC.

2) Annual Evaluation

Performance of an officer and executive shall be recorded in the annual

confidential report (ACR) at the end of the year by the immediate supervisor of
he executive concern.

3) Sanctioned Strength

After considering operational requirements of the bank, the board of directors

determines the strength in each cadre.

4) Process of evaluation

In order to make the evaluation objective, the following steps are taken into
account.

a. For the promotion of the officers from grade 3 to grade 2 the maximum
service required is 5 years.

b. For the promotion of the officers of grade 2 to grade 1 the maximum

service required is 4 years.

c. For promotion of officers of grade 1 to AVP the maximum service

requirement is 3 years in grade 1 and 8 years of banking experience.

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 d. The promotion of AVPs to the VP Xhe minimum service requirement is 3
years in grade 1 and 8 years of banking experience.

e. For the promotion of VPs to the SVPs position the maximum service
requirement is 3years at VP post and 13 years of banking experience.

f. For the promotion of the SVP's to the EVP's post the maximum service
requirement is 3 years at SVP position and 16 years of banking experience.

g. For the promotion of EVPs to the SKVPs post the maximum service
requirement is 3 years in the previous position and 19 years of banking
experience.

The evaluation of overall performance comprises of the following elements:

1. Education qualification.

2. Professional qualification.

3. Service in grade.

4. ACRs of 3 years.

5. Operating performance.

6. Experience in different discipline.

7. Posting faraway places.

Factors to be considered by the promotion committee:

a. Administrative ability and effectiveness at supervisory level.

b. Leadership qualities and initiative.

c. The ability to create a sense of discipline among the staff.

d. Self-confidence.

e. Commitment and motivation to achieve the organizational goals.

f. Ability to take prompt decisions and accepts responsibility.

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 g. Reputation of integrity and moral rectitude. This includes living
within
known sources of income and non-involvement in any business dealings
directly or indirectly.

h. Non-involvement directly or indirectly in any fraud or forgery case.

Promotion committees:

The promotion committees exist at the following levels.

a) Committee at circle office.

b) Committee at provincial head quarter level.

c) Committee No.l for head office personnel.

d) Committee No.2 for head office.

e) Inter banking promotion committee.

2.9.5 Salary Administration:

Compensation is the financial remuneration given by the organization to its

employees in exchange for their work. Compensation is an important and complex
part of the organization employee relationship. Basic compensation is necessary to
provide employees with the means to maintain a reasonable standard of living.

The TSIBP understands clearly its responsibilities and wants to earn a good name in term
of employer by pay scale, staff benefits, pensions and other fringe benefits. The bank
also provide its employees the most needed job security, for the security of the future
the bank also offers a delightful career to its employees. The salaries of the bank arc
quite adequate and they gradually increase with the rise in inflation.

2.9.6 Benefit packages for the employees:

The bank provides many facilities to the employees but use some of the benefits are
explained as under.

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1. Leaves:

At NBP following types of leaves are granted to employees.

a) Privilege leaves:

Privilege leave of 30 days is granted per calendar year. Privilege leave will not
be granted for a period in excess of the no of days to the credit of an employee.
Privilege may not be taken more than three times a year.

b) Casual leaves:

Maximum 11 days per calendar year and must be granted more than three days
at a time and may be granted in combination with other leaves.

c) Sick leaves:

The annual entitlement is 30 per calendar year on full pay. The bank may grant
additional on half pay up to one month the same year in which five sick leave on
full pay is allowed.

d) Pilgrimage leave:

Special leave with full pay for 40 days will be granted to visit holy places. For
performing Hajj 7 days before departure and 7 days after arrival shall be
allowed to the staff member once during the entire service.

2. Compensation:

a) Bonus:

It is determined on the basis of profit earned by the bank every year and
disbursed in the manner as approved by the board. The bonuses paid to the staff
are regular feature of the bank policy. The bonuses do help a lot to motivate the
staff members.

b) Provident fund:

All the staff members are required to contribute 7.5% of their salaries to their

23
 provident fund. These contributions arc pension able.

3. Allowances:

The grant of special payer allowance to the holder of a post or to any other
employee shall require the sanction the competent authority. Allowances for
employees are

a) Medical allowance:

The bank will reimburse the cost of medical attendants and medicines, claimed
the employees incurred on him and his dependents. Subject to providing of
actual bills on reimbursement basis.

b) House rent allowance:

The bank has constructed many colonies at different places to provide housing
eligibility for the employees. The rents are paid to the staff members who could
not accommodated in the residential areas constructed by the bank. The rent
of s house is at very reasonable terms.

4) Staff loan:

The bank according to the length of service and eligibility of employees

provides staff loans. NBP offers two types of loans:

a) House building loans:

It is provided to the employees basically for the construction of houses. Only a

art of their salary is deducted. When they complete the installments then they
become the owners of the houses. The loan could easily be acquired for the
construction of the houses.

b) Conveyance loans:

The bank provides loans to its staff member on very easy and convenient terms
and conditions. The staff members are granted loans to buy vehicles. The
repayment procedure of these loans is very simple.

24
2.10 NBP performance at a Glance:

National bank of Pakistan has performed well over the years. The performance of the bank
for last five years is:

NBP performance at a Glance7:

ITEMS 1996 1997 1998 1999 2000

Income 82.2 34.2 34.5 35.3 33.7

Expenditure 29.5 33.2 32.4 34.8 32.7

Pre-Tax Profit (Loss) (1.26) .995 2.14 .52 1.03

Total Assets 274.1 310.6 325.9 350.4 370.7

Deposits 235.9 254.9 273.4 294.8 316.5

Advances 85.9 105.6 109.5 122.6 140.3

Investments 108.2 109.5 102.9 91.5 80.4

Number of Branches 1555 1445 1434 1431 1428

Number of Employees 23730 18096 15785 15541 15351

7
NBP (2001) Economic Bulletin Karachi 25

25
CHAPTER 3
BRANCH OPERATIONS

3.1 An overview of NBP, AHQ Branch1:

National bank of Pakistan, AHQ Branch is located near Rear Air headquarter,
Peshawar. The suitable locations, facilities and available staff make the customers
visit convenient and agreeable.

Mr. Faisal Haq headed the branch. He was acting as a branch manager and he handled
the whole affairs and smooth working of all the departments. Besides the manager
there is managerial staff, clerical staff and non-clerical staff.

The main items used in the banks arc as follows:

3.1.1 Vouchers:
There are two types of vouchers:
a) Debit vouchers:

Debit vouchers are used to record the expenses incurred in the branch.
When a depositor withdraws some amount of money from his account his
account is debited, which means a depositors account is a liability of the bank
so whenever the customer withdraws the money the liability of the bank is
reduced.

b) Credit vouchers:

These are printed in pink color. These arc used to enter the credit part of
transaction, any income, which the bank receives or any other amounts received
are entered in the credit vouchers.

3.1.2 Main ledger:

The book in which the debit and credit transactions of panics are recorded in the branch
is called ledger. It contains on top full particular of the account such as the date when
the account was opened, no of A/C, title of account and full address with occupation,
cheque book issued date and serial number, special instruction for operation of the
1
Afridi, Mateen (2001) an interview with Mateen Afridi, Peshawar.

26
accounts etc.

3.1.3 Subsidiary ledger:

When transactions in respect of debit and credits of somewhat similar nature but of
various types are to be recorded for a temporary period or particular purposes and
where opening of main head account is not advisable. They are grouped under one
main head. All such items, which are grouped under one main head, are called
subhead of it.

3.1.4 Cash book-cum general ledger:

In this book on each page, all the main accounts of assets and liabilities, which
are necessary for passing the debit and credit entries during the course of daily
operation of the branch are recorded.

3.1.5 Receiving cashier book:

A book, which is maintained in the branch to record all the cash and receipt by
the cashier, is called "receiving cashier book".

3.1.6 Paying cashier book:

A book in which all the payments made in cash by the cashier are recorded on the
daily basis is called "paying cashier book".

3.1.7 Voucher register:

This register provides the ready statistical data regarding the daily total number of
vouchers of a branch as well as ledger wise or head of account wise number of
debit and credit vouchers of a particular day. It also gives total numbers of
vouchers of debit and credit of a branch.

Bank operative system has the following categories,

i) General banking operations.

ii) Advances department.

iii) Foreign exchange department.

27
General banking:

It concerns with the account opening, remittances, clearing, bills collection, cash
handling, returns and reconciliation, vouchers custody and account department.

3.2 Departments of the branch:

National bank of Pakistan, AHQ Branch Peshawar has following departments:

1. Deposits department

2. Cash department

3. Advances department.

4. Remittances department.

5. Computer department.

6. Clearing department.

7. Pension department

3.2.1 Deposits department2:

Deposit department is one of the main departments of the bank as it deals with the
supply of money to the bank. Deposits arc the inputs (raw material) for the bank. Each
and every bank tries to increase its deposits. A11Q Branch Peshawar of NBP is trying
its best to increase its deposits.

In deposits two types of accounts are operated:

1. Types of account:

a) Current account:

Current accounts are called demand liability in banking terminology. No profit

is paid on these accounts.

b) PLS accounts:

These are profit and loss sharing accounts. These accounts can be opened with

2
Qureshi, Rasheed Ahmad (2001) an interview with Rashid Ahmad Qureshi Peshawar.

28
 the amount not less than Rs 1000/-. In PLS account profit is calculated every
month but is paid after six months.

c) PLS term deposits:

PLS term deposits are accounts in which deposits are fixed for a specific period of
time and cannot be withdrawn before the time without notice. Interest rate of this
account is highest.

Rates of PLS accounts3

i) PLS Special Notice Accounts Rates of Interest

a) 7 to 29 days notice 4.00

b) 30 days and over notice 5.00

ii) PLS saving accounts (On monthly basis) 4.10

iii) PLS term deposit accounts

a. Three months 6.50

b. Six months 7.50
c. One year 8.00
d. Two years 8.50
e. Three years 9.00
f. Four years 9.20
g. Five and above 9.50

2. Classification of Accounts:

Current and PLS accounts can be further classified on the basis of conditions
imposed on these accounts.

a. Individual Accounts:

Individual accounts as the name implies can be opened and operated by a

single person.

3
NBP (2001) NBP Circular Karachi

29
b. Joint Account:

Two to four persons can open this type of account. If more than 4 person want
to open joint account then they can open only current account.

c. Minor account:

In case of a minor a guardian operate the account on behalf of the minor.

When the minor attains the age he can operate it by himself.

d. Staff account:

Staff account is maintained for the employees of the NBP. Salaries of the staff
are credited to their account.

e. Partnership account:

This account may be operated by a partnership of two or more persons. For this
account a partnership deed is required. Partnership account can only be a current
account.

3. Account opening procedure:

The main function of a bank is to collect and increase the amount of deposits. Deposits
are the inputs, which are processed in order to earn profit. The number of deposits
determines the financial strength of the bank.

a) Opening of account:

Account is opened on the request of customers. Only officers are allowed to

open the accounts. Accounts are opened only when the clients present
themselves in person. In case of Purda Nashin ladies accounts can be opened
in the absence of the account holder only after discrete inquiries and on the
manager's satisfaction of the account holder. When a client approaches
A1IQ branch for account opening, he is given an account opening form. He
has to fill the form and also get introducers signature. The introducer should be
an account holder of NBP A1TQ inch. Account opening form contains
following information.

b) Name:

30
 The name of the account opener is mentioned in the name column. Full name
is written in block letters with father's name.

c) Occupation:

This column the client is required to mention full particulars of occupation i.e.
case of business the nature of business and in case of service the name of
service should be given.

d) Address:

This column the client is required to give his/her complete postal address.
Special instructions to operate the account:

Is an important column and should never be kept blank. The clear instructions
regarding operation upon the account is given in this column i.e. who will
operate e account of the account holder. E.g. if a person has opened a account
and he mentions in this column that another person will operate the account
on his behalf, then the signatures of that will be taken and cheque book will be
issued in e name of that person.

e) Introducer's signatures:

The officer who will receive the account opening form must insist on the
introducer's full name and address along with signature.

f) Specimen signatures:

The officers must take the specimen signatures of the person who is to operate
the account. These signatures are taken on signature cards.

g) Identity card:

It is the basic requirement that the copy of national identity card is attached
with the account opening for. Apart from this original identity card must be
shown to the officer.

h) Chequebook Requisition Memo:

31
 When all the formalities of account opening form are found complete then the
chequebook is issued. For this purpose first of all the cheque book memo in the
form is filled and signed in the presence of the officer issuing the cheque
book who verify the signature.

3.2.2 Cash department4:

The basic goal or objective of the banks is to earn profit, and cash department plays
and important role in this matter. The bank receives cash from the clients and invests
it in business. Different instruments and procedures adopted in cash department of
NBP AIIQ Branch Peshawar are as under.

a) Tokens:

In bank payments are made only against tokens. The clerk for this job issues the
tokens. When a customer arrives with a cheque, the clerk receives the cheque
and gives token to the customer after writing the token number on the cheque.
The cheque after checking and posting signed and stamped by an officer reaches
the cashier. The customer can now receive money by presenting the token.

b) Cash received stamp:

Cash received stamp remains under the custody of officers only; cashier is not
allowed to handle the stamp. The stamp is affixed and an officer signs the
paying in slip or voucher only after satisfying himself that voucher is properly
signed by the cashier.

c) Receipt and payment:

Before payment of all cheques, the cashier satisfies that the cheques have been
duly posted, supervised and canceled by the authorized persons. Officer who
checks the cash is responsible to verify the totals of the receiving and paying
cashier's book.

d) Collections of bills:

4
Nasir, M Saeed (1998) Banking Currency and Finance, Faisalabad Kitab Markaz.

32
 The cash department of branch also collects the bills of Sui gas, PTCL. NTC
and PESCO.

e) Saving in cash:

The officer checking cash, checks cash physically in the afternoon before the
cash is put in the safe. The loose and unstitched notes of all denominations as
well as stitched notes of Rs500, Rs1000 and Rs100 are physically counted. In
addition the number of stitched bundles and sealed bags containing coins are
properly checked and tallied with the cash position.

i) Defective and cut notes:

Branch makes sure that defective and cut notes are not issued to the
customers. For this purpose branch collects sufficient fresh and reissue able
notes from the main branch to meet the requirements of the customers.

g) Cheque payment posting and cancellation:

Member of the cash department other then the cashier posts the cheques to the
ledger. Cashier is instructed not to make any payment to any person even to bank
staff against a cheque, which has not been duly posted in the ledger and
cancelled by the authorized officer.

h) Cheques:

A cheque is defined as a written order of a depositor upon a bank to pay or to

order of a designated party or to bearer, a specified sum of money on
demand. The person by whom or by whose authority the cheques drawn is
called the drawer or account holder and the person to whom the payment is
made is called the payee.

Drawee is the party, which acts upon the order of the drawer and pays the
money, which is always the banker.

i) Kinds of cheques:

33
 There are three kinds of cheques,

1. Bearer cheque:

a. It is cashable at the counter.

b. It can be collected through clearing.

2. Order cheques:

a. It is also cashable on the counter, but the holder of the cheque must
satisfy the banker that he is the proper man to collect the payment
of the cheque and he has to show his identity through an account
holder of the bank.

b. It can also be collected through clearing.

3. Cross cheques:

a. It is not cashable on the counter; it can only be debited and credited

by transfer.

b. If there are two person holding accounts at the same bank. One of
the account holder issues a cross cheque in favor of the other
account holder. Then the cheque will be credited to the account of
the person to whom the cheque was issued and debited from the
account of the person who has actually issued the cheque.

j) Reasons for returning cheque by bank:

The bank sometimes returns a cheque unpaid to the customer. The reason is
usually given on the cheque or upon a slip of paper attached to it. The principal
reasons for dishonoring a cheque are:

a) Amount in words and figures differ.

b) Cheque is (i) post dated (ii) out of date (iii) date doubtful (iv) date
irregularly written (v) date incomplete (vii) cheque without date
(viii) cheque mutilated (ix) requires bank guarantee.

c) Requires drawer's full signature.

34
 d) Drawer's signature differs from specimen recorded with the bank.

e) Crossed cheque must be presented through bank.

f) Effects not received, please present again.

g) Effects drawn against returned unpaid.

h) Exceed arrangements.

i) No advice, present again.

j) Full cover not received. Funds expected. Please present again.

k) Refer to drawer (a) insufficient funds (b) account closed.

l) Payment stopped by the drawer.

m) Receipt stamp required.

n) Payee's endorsement required.

o) Payee's endorsement irregular.

3.2.3 Advances department:

Advances department is one of the most important and sensitive departments in any
bank. The bank makes profit by advancing loan. National bank of Pakistan advances
loans to individuals and business for productive activities. Credit management
division of the head office directly controls advance department. In other words it
deals with the mobilization of its funds in order to generate its income. Advances are
of two types.

a. Long term advances.

b. Short term advances.

Long term advances range from 3 to 10 years while short-term advances are
seasonal loans periodical adjustments and they range from six months to two
years.

In national bank of Pakistan advances department responsible to deal with

35
following cases:

1) To handle all the cases of short and long term loans,

2) To process all the cases concerned.

3) To process all the cases for approval and consideration to the higher
authorities.

4) To deal with the borrower directly.

5) To implement the disbursement of the loan.

6) To give feed back to higher authorities on advances.

Forms of advances:

NBP, AHQ Branch advances loans to customers in following way:

a) By means of running finance:

The branch allows the facility of over drafting to their reliable and well-
established customers. The permission to draw over and above the money
actually deposited by the customers is the most convenient method open to
the borrowers. The branch charges interest on the extra money, which the
borrower takes from the bank.

b) Demand finance:

It is granted generally to mill owners and factory owners. Demand finance is

long-term finance. It is for rupees more then five hundred thousand and is
forwarded for the purchase of fixed assets such as land, building and machinery.

c) Housing finance:

It is granted to PAF officers for house building. The officers are selected by
PAF headquarter Chaklala. The list is forwarded to the branch, which it sends
to the RHQ of NBP. Which is the sanctioning authority. The house is
mortgaged to the bank. 45% markup is recovered over the total amount of
loan. The maturity period of the loan can be for 10 years and 15 years.

36
d) Staff Finance:

It is granted to the employees of the branch. It is given for house

building, motorcar and motorcycle purchase.

In case of house building there is no markup on the loan for the clerical staff. In
case of the officers 4% markup is charged on the loan, only when the total
amount is more then Rs425000. In this financing the house will be
mortgaged to the bank. The period of maturity for this kind of loan is 20 years.

Motorcar loans are only granted to officers. There is a markup of 4% on the

loan. Motorcycle loans arc granted to clerical staff with no markup. The
period of maturity for this type of loan is 10 years. The papers of motorcycle
and motorcar arc jointly prepared between bank and the staff member.

5
3.2.4 Remittances Department :

Remittances department deals with transfer of money for customers from one
sank to another bank or from one branch to another branch. In national bank of
Pakistan remittances takes place in the following ways:

a) Pay order

b) Demand draft (DD)

c) Telegraphic transfer (TT)

d) Mail transfer (MT)

a) Pay order:

Pay order is made for local transfer of money. National bank of Pakistan takes
fixed commission of Rs. 15 on pay order. Pay order also comes for clearing
from SBPr National bank of Pakistan official checks it with register and debits
the entry in register.

5
Nayyab, Durre (1995) Internship Report on NBP submitted to Institute of Management Studies, Peshawar 20 to 26

37
b) Demand draft (DD):

Demand draft DD is another mode of transfer. It is just like cheque. The

application form is filled in the beneficiary name, account number and sender's
name is written. The customers deposit the amount of DD in the branch
concerned. Then DD is made and given to customer. National bank of Pakistan
official note the transaction in issuance register on the page of that branch of
national bank of Pakistan in which the DD will be drawn. They also sent advice
to the branch to which the DD is sent.

DD advice from originating branch comes to responding branch where it is

recorded and account is credited; when DD comes for clearing they debit the
account.

Open DD is one in which direct payment is made. Cross DD is one on which

payment is made through account.

c) Telegraphic Transfer (TT):

It is the fastest transfer of money. The customer fill the forms and deposits
cash. The official of "National bank of Pakistan send telegram to concerned
branch and make telephone call to the said branch, they make payment to
customer. Vouchers are sent by ordinary mail to keep the record. Telephone
charges are also taken from customers. No excise duty is taken on TT.

d) Mail transfer (MT):

Customer tills same application and he deposit the cash in the same way.
National bank of Pakistan official record the transaction vouchers and advises
are made and sent to responding branch. National bank of Pakistan takes
Rs.10 as mail charges from application. No excise duty is charged on MT.

Remittances department also maintains complete record of inward

remittances and keep informed the deposit section about the transaction.

5.2.5 Computer Department:

All the transactions of the bank are stored in the computer at the end of the
working hours. Closing balance at the end of the day should match between the

38
 computer, cash department and scrolls of PLS and current accounts. NBP has
its own software, which is in use of the computer department. The diskettes
of all the transactions of current and saving account are sent to the computer
center.

3.2.6 Clearing department6:

a) What is Clearing:

Every bank performs the function of paying and collecting. The cheque drawn
on other bank by the customers of the bank is collected by the bank with or
without charging fee is called is called clearing. The bank through the
clearinghouse performs the function of clearing.

b) Clearing house:

A clearinghouse is a place where the representatives of all the banks get

together to settle the payment and receipt of cheques drawn on each other.

c) Functions of Clearing Department:

These functions are:

(i) To arrange the payment of cheque drawn on the branch and give
cheque for collection to any other branch of National bank of Pakistan
or any other member or sub member of local clearinghouse.

(ii) To collect amounts of cheques drawn on members of local

clearinghouse sent for collection by National bank of Pakistan
branches.

d) Types of clearing:

There are two types of clearing:

(i) Outward Clearing

(ii) Inward Clearing

Outward Clearing:
6
Iqbal Zafar (2000) Internship Report on NBP submitted to Institute of Management Studies, Peshawar 15 to 22

39
It includes those cheques and other instruments, which are sent by the bank to other
banks for payment on behalf of its own clients. Cheques are sent to clearing houses
through local main branch.

Procedure for Outward Clearing:

1. These procedures are:
2. Account number of payee/endorsee is written on the backside of the
cheque.
3. The investment and paying in slip are separated.
4. The instruments are sorted bank wise and branch wise.
5. Schedule is prepared.
6. Jottings of all the schedules are taken in the clearinghouse statement,
Amount of cheques is written in 'delivered' and 'to pay' columns.
7. After balancing the outward clearing, the pay in slip is released to the C.D
department.

8. After balancing, a transfer debit voucher is prepared.

9. The instrument, schedules etc are delivered to the message from the main
branch.

Inward clearing:
This includes the cheques drawn on the bank presented by other banks for
payments.

Procedure for Inward Clearing:

1. Number of instruments noted in the schedule is verified immediately on
receipt.

2. The amount of all the instruments are jotted down and totaled. It should
be equal to the amount mentioned in the IBDA from the local main
branch.

3. The IBDA is responded crediting the account in the IBDA from the main
local branch.

4. The IBDA is responded crediting the account of the main branch.

40
 5. The amounts are released to the concerned departments.

Types of cheques collected by clearing department:

1. Transfer cheque:

These are cheques, which are collected and paid by the same branch of
National bank of Pakistan. For example Mr. A is a customer of National bank of
Pakistan AHQ branch and draws a cheque in favor of Mr. B who is also the
customer of the same branch.

2. Transfer delivery cheque:

These are cheques, which are collected and paid by two different branches of a
bank situated in the same city. For example a person draws a cheque on
National bank of Pakistan AHQ branch in favor of another person who
maintains an account in bank road main branch of Mardan.

3. Clearing cheques:

When the payee/endorsee and the drawer of the cheque maintain account
with different banks, the collecting bank can receive the amount of cheque
from the paying bank in any of the following manner.

a) The bank can maintain an account with paying banks.

b) The cheques can be exchanged in clearinghouse through their
representative.

3.2.7 Pension Department:

AHQ branch carries the responsibility of paying pension to the pensioners. For this
purpose pension books are issued to the pensioners. In this book the officer writes the
amount due to him. The payment is made on the voucher issued by the officer. The
pensioner has to come personally. Incase he is not able to come; life certificate has to be
sent. B143 register is maintained for the record of pensioners.

Pension can be refused to a person in following cases:

• The person himself and his life certificate both are not present.
• Signature in the payment voucher is not present.

41
• He/she hasn't got pension book.

• Picture is not present on the pension book.

42
CHAPTER 4

CRITICAL ANALYSIS

During my short stay at the NBP AHQ branch Peshawar I spent around one week in
each department of the bank and this short span of time is not sufficient for getting alt
the information about the organization. During this short period of time, I
personally observed and experienced few problems along with those narrated by
concerned personnel of the branch. I do admit that these problems may or may not
be present in other branches of the bank. 1 have divided critical analysis into four
parts, which are as follows:

1. Problems at the branch.

2. Functional Analysis.
3. Administrative Analysis.
4. Personnel Management Analysis.
4.1 Problems at the branch:

4.1.1 Communication problems at the branch:

There is a single hall in the branch and the staff of the bank uses peon or shout to
communicate with the other employee. As a consequence there is noise and
disturbance in the branch. The flow of information is very slow as there is gap between
the counters. The relationship among the staff members was good but sometime in the
working hours the employees leave their chairs for a chat with their colleagues leaving
the customers stranded.

4.1.2 Limited number of staff:

The staff at AHQ branch is limited in number. When one employee goes on leave it
puts additional burden on the other employees, it affects the efficiency of the branch
and the customers have to wait for a long time. There is no telephone operator so when
another officer is busy receiving telephone calls the customers are left stranded. Tt gives
a bad impression about the bank and the branch. Also there was a need of public
relation officer (PRO). As the queries of the customers have to be answered by the busy staff,
which was resulting in loss of time.

43
4.1.3 Unequal distribution of workload:

During my internship 1 observed that the work is not equally distributed which resulted
in discomfort among the staff. On one hand there are employees who arc all day
without having much work to do whereas on the other hand there arc employees who
don't even have the time to relax for a moment. So this created a lot of over work
situation for some while relaxation for others.

4.1.4 Manual system:

As the system is manual, it takes a longer time to process the records. For instance, if a
customer asks for his balance it takes too much time to get the required information.
As the competition from HBI, branch is growing with the technological advancements
NBP is also taking on the challenge up but it is very slow. There is urgent need of
computerization of branch.

4.1.5 Cash counter:

Cash counter is a sub section of the operations department. Being a busy branch most
of the time there is a queue of five, six people at the cash counter.

4.1.6 Staff relationship:

Good relationship among staff members leads to the peak performance in any
organization. Apart from few occasions the overall the relationship between most of
the staff was cordial and friendly.

4.2 Functional analysis:

4.2.1 More accounts less deposits:

Efficient banking is one in which the emphasis is on total deposits not on number of
accounts. In NBP AHQ branch the number of account are higher with respect to
deposits. As a result of this personalized service cannot be provide to all the account
holders. This results in effecting the efficiency of the branch. There was higher
percentage of accounts with balance less then Rs. 1000.

44
4.2.2 Delegation of authority:

Manager has a limited authority. He has to take the approval from his management
authority i.e. in case of advances; he has to take approval of regional manager. In
branch the officers have limited authority. They have to take approval of chief
manager even in the case of minor issues. Due to this there is delay in decision-
making and these delay can result in poor performance. Decisions have to be taken
timely and have to be implemented quickly. Manager has no authority to sanction
loans.

4.2.3 Need for competitive attitude:

National bank of Pakistan has monopoly in the government transactions due to which
its employees lack in competitive attitude. There arc instances when not in good mood,
they simply say to the customers, you please go to any other bank. This is the thing,
which is responsible for the disaster of all the government control organizations
including National bank of Pakistan. The management of the branch has been
successful in minimizing this attitude.

4.2.4 Competition:

As it has already been mentioned that the competition in the banking business is
increasing day by day with the introduction of new private banks and now it is the
''survival of the fittest".

It is not only the privatized banks that are putting pressure on the nationalized banks
but there are also international banks that are doing good business in Pakistan. The
branch in study is facing a stiff competition from HBL branch, which has become
sounder with the computerization and addition of ATM facility. Right know NBP
branch is lacking in the technological field, as the branch is not computerized and
there is no ATM facility available in the branch

4.3 Administrative analysis:

4.3.1 Lack of specialized training in customer services:

National bank of Pakistan does not provide adequate facility of specialized training in
the customer services to its staff. As the workers finish their training they are inducted

45
into a specific field. The major deficiency in the staff of the branch was related to
customer service. Specific attention should be given to customer service in the training
programs of the bank.

4.3.2 Separation of activities:

There is lack of delineation of responsibilities. As such a function of remittances is

partially done in remittances and partially in deposits department. This creates
confusions and conflicts in the decision making process. There should be complete
separation of activities to avoid all this ambiguity and this may also reduce overlapping
of work. This problem is due to the shortage of space available to the branch.

4.3.3 Low profits:

Most of the customers shifted their account to the national saving center because of
the low profit rates of saving deposits. The bank management should increase their
profits to enhance business during this era of competition.

4.3.4 Delay in loan advancement:

It has been observed that there are delays in sanctioning of loans from the head office,
which results into customer dissatisfaction. This is primarily due to the fact the chain of
cycle of authority is very long and manager has very little powers. He has no power even
to sanction small loans.

4.3.5 High work load and improper distribution:

The workload on the employees of NBF AHQ branch is immense. As it is a very busy
branch due to the presence of accounts of government servants, so they should be
compensated for the extra time spent by them. Proper distribution of work leads to
success in every organization. Proper distribution of work prevents the employees
from over work and under work situations. So for the smooth running of an
organization, proper distribution of work is the hint to be followed, there are
employees who work tirelessly while there are employees who have little work to do.

4.3.6 The Role of Presentation:

In every walk of life presentation plays a very important role, specially the business
concerns have to care about their presentation. Clients are attracted by means of a

46
proper presentation. In the banking business the presentation of the branch office and
the officers both are very important. In the newly established private banks we can
observe that the officers are dressed smartly, it is all due to the policy of the bank. It
means that the getup of the officers attract the customers. Nicely and smartly dressed
people do make a lot of difference.

National bank of Pakistan has a lot of branches all over Pakistan, even in the
remotest part of the country, but the branches are not very well maintained. AHQ
Branch Peshawar was a very well maintained branch but the dress up is not up to the
mark and it needs a lot of improvement.

4.4 Personnel Management Analysis:

4.4.1 Need for Better Training Program:

The need of training is felt all over the world. Training of the personnel is a part of
human resource management. Once a candidate has been selected and placed on the
respective job, it becomes essential to train him adequately for the task. They should
learn new methods for motivating customers. The training program of the bank should
include scientific techniques to improve the decision making and interpersonal as well
as individual's needs of the employees.

The main area, which further needed improvement, was the customer service. This is
the area where the branch lacked and the training program of the bank should
concentrate.

4.4.2 Recruitment Policy:

Human resources are the lifeblood of organization. If the personnel are recruited
carefully they can become an asset to the organization and in the case of carelessness
the personnel can become a liability. Due to favoritism, nepotism and political
influence unsuitable candidates are selected. Both the top authority and staff union
tries their best to recruit their favorites. There were few employees who had
completely different academic background to what they are doing. One of them had
done masters in pharmacy.

47
4.4.3 Transfer Policy:

Promotion policy of NBP is very slow. Those employees who are having approach to
higher authorities are transferred to the seats or branches of their own choices, and
those who are not having approach are working on seats which they do not deserve, or
they will work in the branches which will not suit them either in one way or other.

4.4.4 Performance Appraisal:

The rating of the employees on the basis of their performance in an

organization, performing certain defined standards is called performance appraisal.

It is again a scientific tool provided by the personnel administration. National bank

of Pakistan has followed the checklist method for the evaluation of the employees.

It is a simple procedure of checking the lisi with the given set of objectives or
descriptive statement and these are used for the performance evaluation of the
employees.

In National Bank of Pakistan ACRs are used for the purpose of evaluation, but
the observation shows that the element of subjectivity is involved in it. The
confident report (CR) of the employees are signed by the immediate boss, and then it
is counter signed by two superiors. The superior may not know about the employee or
the hazards involved with the employee's work or the superior may not be in direct
contact with the employee.

48
CHAPTER 5
SWOT ANALYSIS

SWOT is an acronym for an organization's strengths, weaknesses, opportunities and

threats. A SWOT analysis consists of sizing up a firm's internal strengths and weaknesses
and its external opportunities and threats. It's a tool, to get a quick overview on a firm's
strategics situation. The SWOT analysis of NBP, AHQ branch is as follows:

5.1 Strengths OF NBP, AHQ Branch:

The strengths of NBP are as follows:

1) NBP, AHQ branch is a profitable branch.

2) Being a government branch it collects utility bills.

3) It has the goodwill of the people.

4) The branch staff is motivated to make it one of the best branches.

5) It is a secured branch.

5.2 Weaknesses OF The Branch:

There are some weaknesses of the branch. Which are discussed below:

1) The authority of the manager in decision-making is limited.

2) Employees are facing fears of downsizing.

3) It is not utilizing the IT tools. Such as computerization and ATM facility

4) Employees lack training in the consumer dealing.

5.3 Opportunities for The Branch:

Positive external conditions of NBP that cannot be controlled but which can be used to
take advantage are as follows:

1) If new schemes are introduced for the overseas Pakistanis, can get
the business of remittances more than any other bank or "Hundi
business".

49
 2) The branch should be computerized.

3) ATM facility should be introduced in the branch.

4) Employees should be sent for training and seminars to get advanced

knowledge about banking.

5.4 Threats of NBP:

The threats of NBP are as follows.

1) Increased competition especially from HBL branch, which has

introduced ATM facility and has computerized its branch.

2) Deteriorating confidence of people in bank.

3) Reduction in business activities in the country..

4) Politico economic situation of the country.

50
CHAPTER 6

FINDINGS AND RECOMMENDATIONS

During my internship of two months I observed a lot of things and I felt that there
is always a nice way of doing things so some recommendations arc suggested for
the bank in accordance to the critical analysis.

6.1 Availability of Required Staff:

Required staff should be provided to branch in order to improve the functioning

of the branch. Especially a telephone operator and a customer service officer should
he appointed. These are necessary because without the customer service officer the
customers are facing a lot of difficulties. The employees waste a lot of time on
attending telephone calls. The customers arc left stranded during this course of time,
damaging the reputation of the bank. The employees have to answer the queries of the
customers such as account balances on telephone. It wastes a lot of lime of the staff. In
these conditions there is a need of telephone operator.

There is a need for the establishment of customer information center. H will take one
additional person who will handle both of these jobs. Although it will cost the bank but
it will benefit the bank in goodwill and better working environment.

6.2 Computerization of Branches:

Computers should be introduced in NIVP, AHQ branch Peshawar, 1'his will reduce
administrative cost to great extent. Branch should be connected through computers
with zonal office and headquarter. This will help a lot in the operation of the bank.
Computer knowledge should imparted to the employees. Communication and
coordination problem will be solved to great extent. It will help in speeding up the
decision making process regarding the loans. The branch will send these proposals
instantly and the zonal office and headquarter will process it swiftly. This will save the
lime, which is lost in the delivery process.

Keeping in view the new world requirement it is essential for the bank to install a
computer information system. To achieve the organizations goals in limited time and
budget, it is felt that the bank must have modernization in its operations. This will

51
decrease the workload on the employees in the branch. The accuracy is also another
an advantage which comes with the use of computers. Although the installation of
computer in the branch will cost a lot initially but in the longer run it will produce
fruitful results. As the computers are fast they can do a lot more work than the human
being thus the need for future employment will decrease considerably. The employees
have to be paid with the fringe benefits, but the computers are bought once. Proper
training of computer has to be imparted to the staff. This can be done in terms of 2-
weeks short course at the computer center or evening coaching can be done at the
branch itself.

6.3 Inter Departmental Transfer:

There should be inter departmental transfer of employees, so that they should know about
all departments, in this way a proper coordination could be achieved. They must have
some basic information of other departments. There must be proper job rotation. This
will enhance the capabilities of the employees, as due to change in work they will
escape monotony. This will give them refreshing change and motivate them for their
work. In the branch there were few seats where the load of work was more then the other
seats so the need of rotation was felt there so that no body should be overburdened. As the
officers working in those departments a spent quite a lot of time so need of
interdepartmental transfer was felt. It was seen that these persons were not happy with
this and due to this their motivation level was not at the highest level.

6.4 Customer Friendly environment in branch:

Friendlier environment should be created because it will help to gain the interest of
employees in work. Noise in the office should be reduced because it has unfavorable
impact on the working environments. At the start of the month there is a rush in the
bank due to the payment of salaries, in this kind of situation a cool head is required as
there is an element of kick of discipline in the customers. H is required for the staff to
educate them to follow discipline. All of them should be treated equally; no relaxation
should be given to the near ones.

6.5 Professional Attitude:

More professional attitude is required from the bankers. The management should
curtail the unnecessary expenses lo improve profitability. All loop holes must be

52
closed that are used to incur expenses in respect of telephone, fuel, electricity, fringe
benefits etc. the bank should analyze each activity on cost and benefit basis (cost
benefit analysis).

As these are controllable expenses and they lead to the minimization of the profits of
the branch so the management should bring it to the minimum level. The staff of the
branch should be punctual and should follow the office timings very strictly. There
were few instances when the officers were not punctual and the customers had to wait
for the arrival of the officer. In today's world of competition the wastage of time is no I
tolerable so the staff should be loyal to their duties.

6.6 Personal marketing:

A very useful mode of contact is through personal marketing visits. Such visits have
importance for products, such as information about the customer's financial and
business position, about his market reputation and creating a feeling of importance in
the mind of client. Such visits should be properly planned with regularity and
consistency.

The staff of the branch is like an ambassador of the bank, by his personal contacts
and goodwill he can attract customers to the branch. This will help in increasing the
deposits of the branch and ultimately the profit of the branch. The officers of the
branch should increase their contacts among the local businessman who are the
potential customers for the bank.

6.7 Equal Distribution of Workload:

The employees of the branch should be given equal workload. The distribution of
workload should be such that there should be no undue load or burden on any one. This
will enhance the motivation and efficiency of the employees. No body should be given
undue relaxation. The personal contacts of some of the employees should not spoil the
environment of the branch. There were few officers who were over loaded with work,
at the same time there were few who had little work to do. This created a unfair
situation in which the overloaded person felt disheartened. For the elimination of this
kind of situation the management should distribute the workload equally. This will be
helpful in creating a better environment for work in which no body will felt
overburdened.

53
6.8 ATM Facility:

ATM facility should be introduced in AHQ branch. This technological advancement is

necessary for improving the service of the bank. This will allow the customer to get 24-
hour banking service. The need of ATM facility is felt even badly because of the fact the
biggest competitor of NBP AHQ branch HBL branch, has just introduced the ATM
facility to its customers. In this way the competitor has got a technological advantage of the
AHQ branch. To cope with this kind of competition the branch has to be up to date with
the technology, these types of facilities are the need of the customers. Without being
update it will be difficult for the NBP AHQ branch to compete with the better-equipped
competitor.

6.9 Delegation of authority:

In National bank of Pakistan there is lack of delegation of authority. All of the major
decisions are taken at higher level of management. Major decisions have to take
accordance with the employee's opinion. It will benefit both the management and the
organization.

As National bank of Pakistan is a centralized bank, the higher authority takes decisions.
The authority delegated to the managers of the branch is limited. They have to take
permission of the higher authority for almost every action, Same was the case in AHQ
branch where the manager had to take permissions form the higher authority for small
affairs.

6.10 Role of presentation:

As it is said, “first impression is the last impression”, National bank of Pakistan has to
improve its internal and external outlook of branches. As private banks are very good in
this field, so compete with them it is necessary that National bank of Pakistan should
concentrate on the internal and external outlook of its branches. The officers should be
dressed smartly so that they could attract the customers by their personality and
behavior.

As far as the outlook of NBP, AHQ branch is concerned its quite attractive. The only
thing that needs to improve is internal outlook i.e. the dress up of the officers of the
branch and their customer handling. They should always be properly dressed. It gives a

54
pleasure to the customers to come in a bank where every thing is attractive. This
improvement in the presentation of the branch will attract customers and they would
love to come the bank again and again.

6.11 Competition:

Competition is one of the major problems, that every business is facing and banking is not
exempted from the competition. NBP is facing competition both from private and
international banks.

NBP, AHQ branch is facing a stiff competition from HBL branch. As both are competing
for the PAF accounts so the one who will be diversified will lead. IIBL branch has just
computerized its branch apart for it it has added ATM facility, which gives it an edge. In
this time of competition NBP AHQ branch should not lag behind. It should improve in
technology and services. For keeping alive to the competition the manager of the branch
should make sure that all the staff members are motivated to give their hundred percent
efforts for the branch.

6.12 Consumer Satisfaction:

In today's world of competition only consumer's satisfaction can reduce competitive

advantage. As said in critical analysis there are some problems related to the
dissatisfaction of consumers.

The National bank of Pakistan AHQ Branch has to improve services provided to the
pensioners and also they have to adopt scientific methods of paying utility bills.
Improving the quality of consumer service can do all these things. If the consumers are
satisfied from the service he will expand his business with the bank. But if the level of
services is not good then the bank will loose its customers. For this proper training has
to be imparted to the employees.

55
CHAPTER 7

IMPLEMENTATION PLAN

IMPLEMENTATION PLAN:

I have chosen two recommendations for the implementation plan. These are:

• Computerization of the branch

• Setting up Customer information section

7.1 Computerization of the Branch:

The computerization of the branch will be done in following steps:

7.1.1 Tender notice:

Tender notice will be given in a local newspaper for the purchase of equipment for the
computerization of the branch. The successful party will perform added responsibility
of computer networking in the branch. As this advertisement will be given in a local
newspaper so the cost of advertising will be minimum.

7.1.2 Selection of the best party:

Selection of the best party will be based on the quotation given by the party and its
reputation. The selected party will be given a specific time period in which it has to
complete the whole work. The parties with the minimum quotation will be the most
likely to get the job.

7.1.3 Expected cost of the process:

The expected cost of the whole process of computerization is as follows; Expected cost
of computerization of branch:

The staff of the branch will be given training in computers at the computer center of the
bank in evening. It will be a two weeks course specially designed for the staff. This
course will make them familiar with the computers and all the procedures of the branch
operations.

56
TABLE # 4

S.No. Type of Equipment to be Purchased Total Estimated Cost

1. Server With
a. Dual Processor main board support.
b. Intel Xeon Processor
c. H/D Squazi 7200 RPM 40GB
d. Creative CD ROM 52X
e. Fdd 1.44, M + Key Board
f. Monitor ViewSonic 17``
g. Lan card (network interface card)
h. Modern external US Robotics. Rs. 110,000/-
2. COMPAQ (Original) Computers
Total ten computers with
P-III 1GHz Processor, 48X CD,
15`` Monitor, 6GB Hdd, 64MG Ram,
Lan Card, 1.44 Fdd, M+Key Board 30,000 x 10
Total Rs. 300,000/-
3. Intel Switch for 100 mpbs hub
Cable STP (Cat 5)
Connectors RJ45’
Printer HP Inkjet Rs. 39,000/-
4. Networking Cost Rs. 10,000/-
5. Newspapers add charges Rs. 1000/-
6. Cost of Additional Officer (Per year) Rs. 120,000/-
7. Installation charges Rs. 35,000/-
Total Estimated Cost Rs. 6,15,000/-

57
7.1.5 Officer to be recruited:

For the administration of the computers a network administrator will be recruited. He

will be an OG III officer. He will be specialist of computers and will be in charge of
the computer department of the branch.

7.1.6 Type of System:

Local area network (LAN) will be used for the computerization. The networking will be
server based. There will be one server and ten clients will be attached to it. Star topology
will be used for the networking of the branch.

7.2 Setting up of customers information section:

A customer information section was the need of the branch. It would be one-man
section. The main function of the section will be:

• Telephone operator.

• To answer all the queries of the customers.

• To coordinate between the staff.

The whole process of selection of the person will be done in the following steps:

7.2.1 Newspaper ad:

The ad for the post will be given in the local newspaper. Job specification and job
description will be given. The interested candidates will be asked to submit their
applications and relevant documents before a particular date. The job will be on ad
hoc basis. The selected candidate will be given fixed salary of Rs. 5000/-.

7.2.2 Job description and specification:

1. Job description:

The job description is as follows:

i) Graduate with minimum 2nd division.

58
ii) 2 year working experience in relevant field.

iii) Computer knowledge.

iv) Good communication skills.

2. Job specification:

The job specifications are:

i) Telephone operator.

ii) To answer all queries of the customers.

iii) To coordinate between the staff.

7.2.3 Selection of suitable candidates:

The suitable candidate will be selected after considering his qualification, experience and
communication skills. The selection of the person will e strictly on merit. The manager of
the branch will conduct interviews. The selected candidates will be asked to sign the
secrecy bond.

7.2.4 Training of the selected person:

The selected person will be imparted two weeks training in computer and other banking
services. The training will be imparted in the zonal headquarters. After the successful
completion of the training he will join the branch.

7.2.5 Cost to be incurred:

The cost of be incurred is as follows:

TABLE # 4

S.NO. TYPES OF COST TOTAL ESTIMATED COST

1. Cost of Advertisement Rs. 600/-

2. Cost of Salary (P/Y) Rs. 60,000/-

TOTAL COST Rs. 60,600/-

59
LIST OF PERSONS INTERVIEWED

Name of Designation Name Section Tel Time Remarks

Organizatio of Number and
n Person Date

National OG-III Mateen Pension 9216035 13:30 He briefed me

Bank of Afridi 15th about the
Pakistan July overall
2001 working of the
branch and
different items
used in the
branch. He
explained the
procedures
followed by
branch for the
payment of
pension.

National OG-III Rasheed Deposits 9216035 12:30 He briefed me

Bank of Ahmed 16th about the
Pakistan Qureshi July working of the
2001 deposit
department
specially the
opening and
closing of
accounts and
payments to be
made on
cheques.

60
BIBLIOGRAPHY

1. Durrani, Imran (2000). Internship report on NBP submitted to Institute of

management studies. Peshawar

2. Hasan, Mwmtaz (1998). The story of NBP, Karachi.

3. Harold, Koontz and Heiz Weihrich (1984). Management. McGraw hill 8th
edition.

4. Jqbal, Zafar (2000). Internship report on NBP submitted to institute of

management
studies. Peshawar.

5. Nayyab, Durre. Internship report on NBP submitted to Institute of

Management studies. Peshawar.

6. Nasir, M Saeed (1998). Banking, currency and finance. Faisalabad: Kitab markaz.

7. Nasir, M Saeed (2000). Economic theory. Faisalabad: llmi kitab khana.

8. NBP (1998). Annual report of NBP. Karachi.

9. NBP (2000). Annual report of NBP. Karachi,

10. NBP (1999). Bankbook instruction of NBP. Karachi.

11. NBP (2001). Economic bulletin of NBP. Karachi.

12. NBP (1999). NBP Journal report. Karachi.

13. Siddiqui, Asar H (1998), Practice and Law of banking, Pakistan. Karachi:
Royal book company.

14. Vaseer, Habib Ullah (2000). Fundamentals of economics. Lahore.

15. www.nby.com.yk

16. www.sby.ore.yk

61