INTERNSHIP REPORT

ON

NATIONAL BANK OF PAKISTAN LIMITED

Submitted to :

Submitted by:
BBA(Hons)
Roll No.
Session ( )

DEPARTMENT OF BUSINESS ADMINISTRATION

 CONTENTS
Preface
Chapter No Title Page No.
I INTRODUCTION 2
 Background of the study 2
 Purpose of the study 3
 Scope of the work 3
 Limitation of Study 3
 Methodology of Data Collection

II ABOUT THE NATIONAL BANK

 History of NBP 34-36
 Objectives of NBP 37-41
 Management Structure of NBP 42-43
 International Network 44-46
I11 BANKING OPERATION 47
 Account of customers 48-50
 Checks & its procedure 51-59
 Endorsement 60-61
IV GENERAL BANKING OPERATION 62
 Account opening section. 63-66
 Deposit section. 67
 Clearing section. 67-70
 Remittance section. 70-71
 Accounts section. 72-74
V ADVANCES DEPARTMENT. 75
 Over draft 76
 Cash credit. 77
 Demand loan 77

VI PRINCIPLES OF ADVANCING MONEY. 78

 Safety. 79
 Liquidity. 80
 Disposal. 80-81
 Remuneration. 81
 Suitability. 82-84
VII CASH DEPARTMENT 85
 Cash Receipts 86
 Cash Payments 87-90
IX PERFORMANCE ANALYSIS OF NBP 91
 Observation, Problems & Suggestions 92-94
 Analysis of six year performance of National Bank of Pakistan
95-107
 SWOT Analysis 108-113
 Absolute increase/decrease 113-117
 Trend analysis (Annexure B-J)
 Common size Analysis (Annexure A)

Bibliography 118
 PREFACE

Every student of Master of Business Administration(B&F) at Gomal University,

D.I.Khan have an essential requirement to do six month internship in any of the well
reputed organization in two spells. The purpose of this program is to acquaint the
students with practical applications of theoretical concepts taught to them during
conduct of their MBA(B&F) program.
My internship was arranged by the IBP at Regional Office of NBP,D.I.Khan for first
three months and at NBP ,Gomal University Branch, D.I.Khan for second spell.
Really, it this opportunity provided me a chance to have a close comparison of
theoretical concept in practical field, involving the use of primary and secondary
data. All the efforts on the way are summarized in shape of this Internship Report.
This Report may depict deficiencies on my part but still it is an output of a students’
efforts, for which I beg pardon.
The out put of my analysis is summarized in a shape of Internship Report, the
contents of the report shows the detail of sequence of these. The report is concluded
with problem and suggestions.
I have no wards to express my gratitude to the chairman department of Business
Administration and my advisors for their intellectual guidance without which it could
have been rather difficult for me to complete this report.
CHAPTER NO I

INTRODUCTION
INTRODUCTION

BACKGROUND OF THE STUDY

All the students of M.B.A(Banking & Finance) are required to do their six
week internship in financial institutions/commercial banks. Being employee of the
NBP my internship was arranged by IBP at Regional office D.I.Khan for first three
months and in Gomal University branch State Life Building D.I.Khan for second
three months. The purpose of this internship is to acquaint the student with the
practical knowledge and to provide an opportunity to understand the differences of
theory and practices.

National Bank of Pakistan was established on November 9, 1949 under the

National Bank of Pakistan Ordinance No.XIX of 1949 in order to cope with the crisis
conditions which were developed after trade deadlock with India and devaluation of
Indian Rupee in 1949. Initially the bank was established with the objective to extend
credit to the agriculture sector. The normal procedure of establishing a banking
company under the companies Law was set aside and the Bank was established
through the promulgation of an ordinance due to the crisis situation that had
developed with regard to financing of jute trade. The Bank commenced its operations
from November 20th 1949 at six important jute centers in the then East Pakistan and
directed its resources in financing of jute crop. Bank’s Karachi and Lahore offices
were subsequently opened in December 1949.

1.1 PURPOSE OF THE STUDY

The purpose of my study is to first study the functioning of both Regional

office and branch and to analyze the overall performance of National bank of Pakistan
in the finance and banking sector of Pakistan. The purpose of this study is to analyze
the theoretical application of different fields of studies i.e. Management, Finance etc.
in practical field of banking with reference to National bank of Pakistan. I have tried
my best to cover each and every aspect of the Regional office and branch.

1.2 LIMITATIONS OF STUDY

The following are most common hurdles which I even being a bank employee
and internee felt:
 secrecy of the bank.
 non-availability of information
 Lack of Appropriate data
 Fidelity bond holder

1.3 METHODOLOGY OF DATA COLLECTION

The following three sources are used to collect and present the data:

 Primary data
 Secondary data
 Field experience

For primary data collection, I have used interview and observation method. I
have interviewed different persons in the branch which include the branch manager
and other staff members and also the customers of the branch. I have also interviewed
the OG III and Assistant Vice President because he remained compliance officer in the
branch. I have also used Observation method for the primary data collection. I
observed the condition of the branch, the working environment, its staff, records and
other operations of the bank.
 For secondary data collection, I have consulted different published material. I
studied different circulars of National bank of Pakistan. I have also studied the annual
report of the National bank of Pakistan, some books on banking and also the financial
statements of the bank.

CHAPTER NO II

ABOUT THE NATIONAL BANK

INTERNSHIP REPORT

ON

THE WORKING OF NBP ,GOMAL UNIVERSITY BRANCH

,D.I.KHAN
HISTORY OF THE N.B.P.

The history of the N.B.P. is part of Pakistan struggle for economic

independence.
In 1947 at the time of partition the economy of the country was mainly
controlled by non-Pakistanis, most of them were Hindus. This partition of the Sub-
Continent brought wide spread disturbance and bloodshed on both side of the border.
This resulted in the mass migration of population from. one country to another. In this
situation the economy of the country influenced badly.

At the time of independence it had been arranged between India and Pakistan
that Reserve Bank of India should act as the common monetary authority for both
countries upto end of September, 1948. But the arrangement did not prove
satisfactory. In August, 1947, Pakistan had been given a first installment of twenty
crore of rupees, out of its shares of cash balance of undivided India to meet immediate
requirements. The balance amounting to fifty crore rupees was to be paid later, But
when Pakistan demanded that amount, they refused to hand over the money unless
Pakistan agreed to give up interest in Kashmir and thus the Government of Pakistan
could not agree. This situation occurred, when Reserve Bank of India was functioning
as the Central Bank of Pakistan.

As a result of this experience, Pakistan felt it could not place any reliance on
the Reserve Bank of India. It was clear that its own central Bank was an indispensable
necessity and it was opened by the Quaid-e-Azam on the first of July, 1948. When
state Bank came into existence, it claimed its share of the assets of the Reserve Bank
of India against the Indian currency, retired from Pakistan territory

But again dispute arose. The dispute is still unsettled and these assets have not
been delivered to Pakistan.
 Many other disputes occurred between the two countries. As a result of ratio
controversy, the regular trade and payments between the two countries came to stand
still. One of the immediate consequences of this situation was the withdrawal by
Marwari merchants of the India Finance which used to be employed annually for the
movement of Pakistan's Jute Crop. A crisis of the first magnitude threatened, because
the Jute Crop was already in the market and so their was no money to move it, prices
begin to fall precipitously. At that time there was no JUTE in Pakistan, not a single
jute loom or spindle and no posibi1ity of utilizing any of the crop within the country.
As jute prices collapsed, foreign merchants and foreign Banks to promote agrarian
nearest. It was very evident that the Government of Pakistan could not afford to
continue as a spectator of these developments.

So two ordinance were passed immediately, one setting up the Jute. Board,
and the other the decision of establishing of National Bank of Pakistan. The object of
the Jute Board was to re-organize and rehabilitate the Jute trade by helping parties to
handle it and to stabilize the market. The National Bank was established to provide
finance to suitable parties

Thus it came about that The National Bank stood behind the Jute trade, the
State Bank of Pakistan stood behind the National Bank and the Government stood
behind the State Bank.
 OBJECTIVES OF THE BANK

Commercial Banks operate under profit motive and perform various functions
in a modern society.

National Bank of Pakistan is a commercial Bank till with socioeconomic

objectives e.g. to earn profit and at the same time develop the economy of the country
and uplift the socioeconomic status of community. The main objectives of the Bank
are as follows

1. MAXIMUM PROFIT

As the name of the Bank indicates that it was established to finance the nation.
As a Business organization its objective is to earn more and more profit by the least
expenditures.

2. GOOD ADMINISTRATION.

A good administration is an objectives of the Bank. Without proper

administration no organization can run successfully. A good administration should
have the following qualities:-

a: Quick decision.
b: Correct decision.

3. CUSTOMER SERVICE.

The main objective of the Bank is to serve his customers. It serves the
customers on both directly and indirectly. Bank collects money from an individual,
firms, and limited Companies etc. It also gives loan to the people.

4. DEVELOPMENTS.

Banks spending large amount of its profit for its own development. Therefore,
the large amount of its profit is spent on opening the new branches of the bank and
increasing the work efficiency of the Bank.

5. EXPENDITURE DISCIPLINE.

Bank is trying to minimize its expenditure. So, it keeps strict control over
expenditure and avoids wastage of money at every stage. Branch expenditure must
not increase more then 15% of the last year's budget for correspondence.

6. ZONAL INSPECTION.

Every branch should be inspected by Zonal inspector at least once a month as

directed by Principal Office under B.D. may verify from time to time.

7. MAXIMUM UTILIZATION OF STAFF.

The staff requirement of the most branches is sufficient. However, services

should be utilized systematically for effective functioning.
 ROLE OF BANK IN ECONOMIC DEVELOPMENT

Banks are the instruments of economic development. In the mobilization of

money, the banking sector can greatly help the country. It can promote the growth of
internal resources for development by attracting deposits from the public to the
maximum possible extent and channeling these deposits into productive loans and
investments.

The Bank has been playing major role in financing developmental activities in
Pakistan. National Bank of Pakistan has helped in the growth of economy in all
spheres of our National life. It has contributed significantly to economic growth of the
country and has served trade and industry, generally in wide sphere of operations.

For the agricultural growth, N.B.P was the first Bank to introduce scheme of
credit to small borrowers, farmers, craftsman, and small traders etc. The Bank
advances liberal credit for rural and agricultural development and has taken the
Banking services literally to the farmer's doors, small, short run loans given farmers
are free of interest. It helps the farmers giving advances without interest in shape of
fertilizers, seeds and other agricultural instruments so that the country may become
self sufficient in wheat and other crops.

The National Bank of Pakistan has been playing a major role in industrial
development. The Pakistan Government has encouraged private enterprises by giving
fiscal and monetary concessions and has tried to create a favorable climate for foreign
investment in specified industries. The National Bank of Pakistan has continued to
serve industrial needs in its sphere all along. It provides usually short-term and in
some cases medium term finances. The N.B.P has a predominant share in the total
advances to the industry in country.

This has been possible mainly because of the large resource at the disposal.
The large number of branches all over the country which help them to attract large
deposits, and the comparatively low rate of interest at which bank is able to make
advance to the industry.

National Bank of Pakistan has assisted to accelerate industrial growth in the

country. Now Bank also provide finances to small scale industries upto a period of
five years. National Bank of Pakistan has introduced the people's credit facilities to
the common man on a large and more liberal scale than before. The main objective of
this scheme is to make a contribution towards building up of a strong middle class
which is essential for ensuring strengthened stability to a developing economy. Bank
also helps to promote the establishment of new companies by underwriting their
shares. Bank is making an ever increasing contribution to the industrialization of the
country. Through their foreign exchange business in Pakistan and operation abroad
the Bank makes a contribution towards the earning of foreign exchange.

The Bank has also introduced various saving schemes and a perpetual income
plan on attractive term to encourage saving and promote social security.

The NATIONAL Bank of Pakistan is working as an agent of State Bank of

Pakistan. But it does not mean that the Bank has monopoly on Government Business.
It also faces the keenest possible competition from other banks. The Bank has been
able to maintain its position in the Banking System of the county and to make a
substantial contribution to the development of economy. Efforts had been made, by its
officers and staff particularly the senior officers to improve the working efficiency of
the Bank, to secure more business and to build up sound working traditions.

As regard the future, the task of the Bank is plain enough, it has been an
instrument of NATIONAL policy in the past, so it shall continue in the years to come.
Its doors have been opened for anybody, from anywhere in Pakistan. They will keep
open as before.
 NATIONAL Bank of Pakistan is trying to improve the work efficiency of their
Bank and they want that their Bank and they want that their Bank should serve the
people so the Bank is serving the nation by different ways and it is playing a major
role in economic development of the country. It will continue to perform these tasks
with the same enthusiasm and vigor. I trust and believe, it will always be said that the
National Bank of Pakistan truly exists in the service of the National.
MANAGEMENT AND ORGANIZATION OF A BANK.

The management and or~v1anizational structure of N.B.P. are described as

under:-

1. BOARD OF DIRECTORS
In the management of the Bank, the Board of Directors is at the top of. the
controlling bodies. Since there are no private share holders, so there is no general
meeting of the share holders and are no elected Directors. The Board consists of a
nominated President, a Secretary and 9 other members. After nationalization of Bank
in 1974 most of the powers of Board have been transferred to Banking Council and
executive Board. The Secretary of the board has limited administrative powers.

2. EXECUTIVE BOARD
The general direction and supervision of the' affairs of the Bank lies in their
respective Executive Boards. The President, Secretary and 0 other members of the
Executive Board are appointed by the Federal Government. The President being the
Chief executive of the Board directors, controls and
manages the affairs of the Bank.

3. CHIEF EXECUTIVE.
The President is the administrative head of a Bank. He presided 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.

4. DIVISIONAL CHIEFS.
In order to improve the management and operation of a Bank, it has been split
up into a number of divisions. Each division of a Bank is placed under this
supervision and control of Divisional Chief or Senior Executive Vice president
(SEVP) or Executive Vice President (EVP).
5. PROVINCIAL CHIEFS.
In order to improve the performance of the Banking system, each Bank has a
PROVINCIAL Chief. The Provincial Chief has the powers for sanctioning finance
and other credit facilities. The headquarters of the Chiefs are situated in each Province
i.e. Lahore, Karachi, Peshawar and Quetta.

6. CIRCLE EXECUTIVE.
Bank has a number of circles. They are placed directly under the supervision
and control of the Chief executive. The chief executive is usually SVP or VP.

7. AREA MANAGER.
Each region is divided into a number of clusters. Area Manager that holds the
posts of VP or AVP administers these clusters.

8. BRANCH MANAGERS.
Each zone is divided into several branches. The control and supervision of
each branch is mostly entrusted to AVP or Officer of Class II. A few big and
financially sound branches are even administered by SVPS and VPS.

It is important to be noted that the head Quarter of NATIONAL Bank of

Pakistan is located in Karachi
Organizational Chart of National Bank of Pakistan

CHAIRMAN
CHAIRMAN

BoardofofDirectors
Board Directors

ExecutiveCommittee
Executive Committee

President
President

RegionalHeadquarter
Regional Headquarter

RegionalManager
Regional Manager

AreaManager
Area Manager

BranchManagers
Branch Managers

CashDeptt.
Cash Deptt. Admn.Deptt.
Admn. Deptt. Operations Deptt. .
OperationsDeptt FinanceDeptt.
Finance Deptt.
Officer
Officer Officer
Officer Officer
Officer Officer
Officer
 Operation
Operation Corporate
Overseas Corporate
Overseas Group
Group Invest
Operation Invest
Operation Banking
Group Banking
Group Fin Group
Fin Group
Org
Org
Devel
Devel Special
Special
&Training
&Training Assets
Assets
Dept
Dept Group
Group

Strategic
Strategic
Head
HeadOffice
Office Plan &&
Plan Econ
Econ
HRM
HRM Mgt
Mgt Research
Research
Dept.
Dept. Structure
Structure Group
Group

L.T Planning
L.T Planning Treasury
Treasury
Dept. &&
Dept. Imp
Imp Mgt
Mgt
Group
Group Group
Group

Audit
Audit Risk
Risk
&Inspection
&Inspection Comercial Mgt
Mgt
Comercial
Group
Group &&Retail Group
Group
Retail
Banking
Banking
Group
Group
International Net Work
CHAPTER NO III

BANKING OPERATION
BANKING OPERATIONS

The Bank provides a wide range of facilities for transacting money in and
outside the country. Being' custodian of the money, it manages the assets in such a
way that the Bank remain solve and liquid to a high degree so that it is able to meet
the demand of the customers for cash payments. In the operation of a Bank, there i£~
a close relation between the Banker and the customer.

BANK AND CUSTOMER

Banker is a person, whether corporate or not who carries on the business of the
banking. The customer is a person who has some sort of account either current or
fixed o~ some similar relation with a banker.

BANKER AND CUSTOMER RELATION

The relationship between Banker and customer is primarily that of debtor and
creditor with the rules reserved where the customers are relying on a loan from the
banker.

DUTIES OF A BANKER.

1. To honor a customers cheques.

The Banker's duty is to honor the cheques of the customers.
i. They are properly drawn.
ii. The customers has balances to his credit.
iii. The loan contract has been signed.
iv. There is no legal bar attaching to the customers funds.

2. Standing orders:-

The Bank abides by the standing orders of the customers in making periodical
payments on his behalf such as club, library and insurance perineum etc.

3. Secrecy of the customers. Account: -

The Bank owes a contractual duty not to disclose the customers financial
position with out his consent.

4. Valuables for safe custody:-

The Bank takes care of the property deposited with it by the customers with or
without charge. When a Bank does not charge, the Banker is called gratuitous bailey
and when a specific charge is made, the Banker is then a paid bailey.

ACCOUNTS OF CUSTOMERS.

A Bank should not open an account for a customer unless his integrity and
responsibility is duly authenticated by a responsible person known to the Bank. By
opening of an account, the Banker usually gets the specimen signatures on cards.

a. Authorities to sign an Account.

If a customer desires that his agent also operate on his Account, the
Bank should get a precise written mandate from his customer. The person to whom
the authority has been delegated will continue operating the account till the authority
is revoked in writing.

b. Mental patients:

If the Bank comes to know of a customers lunacy, the Bank will immediately
suspend the OPERATIONS on the account until the court gives order or the Bank has
full proof that his customer has fully recovered. When the customers is mentally
unsound, the court appoints a receiver who operates the accounts under the direction
of Master in Lunacy.
c. Husband and wide account:

If husband and wife both open an account it will be considered an ordinary

joint account by the Bank. At the death of the husband, the widow is fully authorized
to withdraw the balance.

d. Infants:-

An infant can open an account with a Bank, but he is not allowed to overdraw
the account. If the infant customer wishes to have an over draft, an adult should draw
and sign on indemnity contract.

e. Partners:-

When an account is opened by the partner they are to sign a mandate

authorizing any or all of their member to make with drawls. The partners are jointly
responsible for all the loans and other obligation incurred by the firm.

f. Societies, Clubs etc:-

If an incorporate body opens an account in a Bank, the committee of

management deputes certain of lice bearers to operate on the account. The bank
obtains a copy of the resolution of the society or clubs appointing certain members to
administrative funds. If there is any change in the committee of management, it is
notified to the Bank immediately. The. members of the society who are operating the
account or not liable for any draft.

g. Death of a customers:-

If a Bank receives the notice of a customers death , all operations on the

account are suspended until the executors or administrators produce the probate. All
credits received after the notice of the death of customer are placed in a new account
for disposal by the executor or administrator later.
CHEQUES

A cheque is a bill of exchange drawn on a Banker and payable on demand.

According to Dr. Hard, "A cheque is an unconditional order in writing drawn on a
Banker signed by the drawer, requiring the Banker to pay on demand a certain sum in
money to or to the order of a specified person or to learner." Cheque is merely an
order on a Bank by its clients to pay a sum of money to himself or to a third party on
demand.

There are three parties involve in a cheque:

(i) The drawer.

(ii) The drawee and
(iii) The payee.

The drawer is the person who signs the cheque. The party which is authorized
to pay back the money is called drawer. The person to whom or to whose or order the
money is to be paid is called payee. A cheque in order to be valid must bear the
signature of the drawer. It should be in writing preferable by means of a pen.

KINDS OF CHEQUES.

There are three kinds of cheques :

1. Bearer Cheque:
ii. Order Cheque: and
iii. Cross Cheque:

(i) Bearer cheque:

Bearer cheque is that which can be cashed from a Bank by any person who
possesses the cheque and presents it at the counter.
(ii) Order Cheque:

If the word bearer is struck off from the cheque, it then becomes an order
cheque. Order cheque is a safe form of payment because it can not be encashed unless
it is ascertained by a Bank that it is paid to the right person. If cheque is drawn
payable to the order of a specified person the Bank will make the payment only after
the identification of the specified person.

(iii) Cross Cheque:

If the parallel lines are drawn across the face of the cheque and the words "&
Co" are written between them, it becomes a crossed cheque. The payments made by
the crossed cheque are the safest forms of payments because a cheque can only be
deposited in the payee's account or it can be endorsed to somebody's else account by
the payee. The crossed cheque can not be cashed when it is presented at the counter of
the Banker.

(I) DATE OF THE CHEQUE:

(i) Undated cheque:

If a cheque does not bear any date, the holder of the cheque can insert the date
and cheque will quite valid.

(ii) Post dated cheque:

The post dated cheque is, infect, not a cheque because it is not payable on
demand. It is equivalent to a bill of exchange, when the cheque is due for payment,
the cheque will be honored by the Bank.

If a Bank makes payment of post dated cheque before it falls due, the Bank
would be liable to the drawer for the amount.

(iii) Stale and Over due cheque:

If a cheque is in circulation for an unreasonable period of time, the cheque is

said to be stale or over due. Normally, if the cheque is presented six on seven months
after the date, it is marked as "Stale" or "out of date". The out of date cheque requires
the confirmation of the drawer.

(iv) Alterations on a cheque:

If the drawer is to make changes in the date or amount or in the name of the
person then full signature must be obtained on all the material alterations made on the
cheque.

(v) Mutilated Cheque:

If a cheque is torn in two or more than two-pieces and after pasting the pieces
together is presented to the Bank for payment. the Bank would return it to the drawer
marked, "Multitude Cheque". If the drawer confirms the mutilated cheque, the Bank's
position is then quite safe.

2. PAYMENT BY CHEQUE:

(i) Conditional payment:

A cheque or bill of exchange is not a legal tender money. A debtor, therefore,

can not compel a creditor to accept the cheque or bill of exchange as a means of
payment. When the cheque is honored and payment is made by the Bank, the date is
then effectual discharged.

(ii) Cheque through the post:

If a cheque or other negotiable instrument is sent by post and is lost in transit

and is presented and paid by the bank, the loss if any rests on the sender. However, if
the creditor requests the debtor to send the cheque by post, than the risk is to be borne
by the creditor.

(iii) Cheques as evidence of payment:

When the payee receives the amount written on the cheque from the Bank, it
serves prima face as evidence of receipt.

THE PAYING BANKER:

1. The obligation to pay: the paying Banker or the drawer Bank is under
legal to honor his customer’s cheque provided:-

a. There is sufficient credit in the account of the customers to cover the amount
written on the face of the cheque :

b. The cheque are properly drawn:

c. Are not stale or over due: and

d. There is no legal prohibiting the Bank to make payment.

2. Time Allowed for Payment :

When a cheque is presented over the counter, the following rules are usually
observed:

a. If a cheque is properly drawn and is complete in every respect it must

ordinarily be said or dishonored at once.

b. If a cheque is presented through a clearing House, then the rules of the

Clearance House regarding time are to be observed.

c. If the cheque of a customer is sent by another commercial Bank is to send the

notification of payment or dishonor within 24 hours of the receipt of the
cheque to the presenting Bank.

d. If the holder of a cheque presents it through the post to the paying Banker the
usual practice for drawer Bank is to send back the cheque instructing the
holder to either present the cheque in person or the collection should be made
through another Bank.
3. Payment in Due Course :

If a cheque is drawn in proper form and is paid by the paying Banker in good
faith the Bank does not incur any liability.

4. Protection of paying Banker:

If the paying Banker makes payment of a cheque drawn on him with forged
signature of the drawer, He will not be held responsible provided:

a. The payment is made in good faith.

b. The payment is made in the ordinary course of Business.

Similarly, in case of crossed cheque, the drawer Bank is protected of the

forged document only if

a. The payment is made in good faith:

b. In the ordinary course of Business:
C. Without the negligence of the Banker: and
d. According to directions contained in crossing.

5. Fraudulent Alteration of amount :

If a drawer draws the cheque in such a manner that it makes room for
alternation of the amount, or hi signs a Blank cheque, and the Bank pays in good faith
the amount which is fraudulently increased, the Bank will not be held responsible for
the customers loss.
 BANKER'S AUTHORITY TO TERMINATE THE PAYMENT OF CHEQUES:

1. Countermand of payment: -

The drawer of a cheque can stop the payment of a cheque by informing the
Banker either on telephone or through a special message or in writing. The Banker
will mark on the orders not to pay or payment countermanded by telegram payment
postponed pending confirmation present again:. If the cheque has been presented and
cashed before the countermand is received in time, the Banker will stop the payment
of the cheque even if he was about to pay.

In all such cases, where the payment is stopped well in time, the operative
signatures are cancelled and the cheque is returned with a marked "Cancelled in error,
payment countermand."

2. Customer's Balance:-

The Banker can refuse to make the payment of a customer's cheque 1 if his
balance is not sufficient to cover the cheque. However, if the Bank has allowed the
facility of overdraft, the Banker is bound to make the payment provided the amount is
within the limit of the overdraft.

3. Cheque is not an assignment of funds:-

A holder of a cheque can not ask the Banker to earmarl. credit balance of the
drawer in his favor. If the customer's balance is sufficient to cover the cheque, the
payment will be made. The cheque will be dishonored if the Balance available for
drawing the cheque is not sufficient. The holder of the cheque can not either have an
equitable claim against the drawer Banker.

4. Payment in due Course:-

The Banker will refuse to make the payment. of a cheque if :

i. It is not in accordance with the drawers instructions and

ii. It is also presented after office hours or is not in the ordinary course of
Business.
5. Advising Fate By Telegram:-

If cheques are presented direct to the Banker or through the collecting Banker
with a request to wire fate and the paying Banker's answer is in the affirmative then
the Banker has to make the payment even if he receives the countermand of payment
written or oral from the Customer.

6. Marking Cheques:-

A drawer may get a particular cheque 'Marked' from his Banker. The Banker
will retain the amount in order to honor the "marked" cheques. If' the other cheques
issued by him are not covering his credit Balance, Bank will dishonor them for want
of funds.

7. Forgery of the Drawer's signatures:-

If the Banker is doubtful of the drawer's signature of in the alternation of

amount the Bank can refuse to make the payment.

8. Notice of Customers Death:-

The Banker will terminate the payment of a cheque if he receives the notice of
the customer death.

9. Bankruptcy Petition:-

If the customer is unable to pay his debt i.e. he is insolvent, then he or his
creditors present as petition to the court to take over the debtors, property for
distribution among creditors. If the Bank receives a notice of t he refuse to honor the
cheque forthwith.

10. Making of a Receiving order:-

If the customer is satisfied that the customer appears to be insolvent, it will

immediately issue a receiving order. The Bank will refuse to make payment on the
advertisement of receiving order of its customer in the news paper or on direct
intimation from the court.
11. Trust Funds:-

If the Banker is satisfied that his customer by breach of trust is crediting the
trust fund to his account, the Banker may refuse to pay the cheques.

12. Garnishee Order:-

If the creditor of Banks customer gets a garnishee order from the court, the
customer is not allowed to operate the account by the Bank.

13. Account Closed:-

If the drawer has closed his account, the Bank will dishonor the cheque
presented to the Bank.

14. Mutilated Cheques:-

If a cheque is mutilated, torn or cancelled, the Bank will refuse to debit the
account of the customer. The payment on. the torn cheque can, however, he made, if it
is confirmed from the drawer or from the payees Banker.

15. Difference in words and Figures, :-

If the amount stated in words differ from the amount expressed in figures, the
Bank will refer the cheque to the drawer remarking: amount in words and figures
differs.

16. Irregular endorsement:-

Ii the endorsement on the cheque is irregular, the Bank will not make the
payment on the cheque presented to it.

17. Lost or Stolen Cheque:-

If a cheque is lost or stolen and the drawer informs the Bank well ii. time, the
Bank will refuse to honor the cheque if presented after the receipt of the notice.
18. Stop Cheque note:-

If a customer informs the Bank orally or verbally for stopping the payment of
the particular cheque, the Bank will obey the instructions and will put "Stop Cheque
Notice" in red ink in the account of the drawer.

19. Receipt of Notice of Indemnity:-

If the Bank comes to know that a particular customer has become insane or is
of unsound mind and the Bank is satisfied that hi customer is unable to act rationally,
the authority of the Bank to act as agent will then cease. If the Bank receives the
lunacy order from the court, the cheques will be returned with the remark "refer to
drawer.

20. Joint Account:-

If there is a joint account the Banker will get definite instructions as to how
the account is to be operated upon whether all of them shall operate the account or
delegate the authority to one. On the death of any party to a joint account, the balance
rests in the surveyor or surveyors subject to an expressed authority on the contrary.

21. Partnership Account:-

In case of a partnership firm, every partner can open an account in his name.
But the Banker would not allow until and unless it is signed by all partners, giving the
manner of operation. The death or retirement of a partner dissolves the partnership
then the Bank should not allow any operation on such an account.

22. Company Account:-

If the Company or a corporation wants to open an account with the Bank it

would provide a copy of resolution passed by the Board of Directors appointing it as a
Banker to the Company, naming the person or persons authorized to operate the
account. If any authorized person draws a cheque on behalf of the company, then it
would be dishonored.
ENDORSEMENT:

A cheque or a bill is endorsed when the transfer puts his signature on the back
or an along of a cheque and a bill as a part of its negotiation. If the cheque is bearer, it
needs no endorsement. However, in our country, the Banker insists on getting the
endorsement (signature) on the back of the cheque. If the holder of the cheque does
not agree to put his signature, then he shall have to give a properly stamped receipt for
the amount paid to him. If the cheque or bill is drawn payable to order, it requires the
endorsement of the transferor, so that the payment is made in due course

REQUIREMENTS OF VALID ENDORSEMENT:

The main requirements of endorsement to be effective are as follows;

1. The endorsement must be on the back or on an along of the cheque or bill. If

the endorser simply put down his signature on the back of the cheque, the
endorsement is valid.

2. Endorsement may be made in ink, print, pencil or with a rubber stamp. The
Bank prefers the endorsement to be wholly in ink as it is not liable to
obliteration as well as alteration.

3. The endorsement must be of the entire value of the Cheque and bill. Partial
endorsement which may be in the name of one endorsee or more than one
endorsees separately is not legally valid.

4. If the number of endorsees or payees is more than one on the bill then all the
payees are the endorse unless one endorsee has the authority to endorse on
behalf of other payees as it is generally in partnership.

5. Another important requisite of valid endorsement is that the endorsement must

correspond with that of the drawing. For instance, if the name of the endorsee
is misspells. The payee should also endorser the bill in the misspells version.
However, the endorsee can at the proper signature, if he so desires. If the
names of the payees are two or more than two, the endorsement should also be
 in the same order, which is penned down on the back of the bill.

CLASSIFICATION OF ENDORSEMENT.

The Main classification of endorsement are as follows:

1. Conditional endorsement :

If the endorsement makes the payment of a bill subject to the fulfillment of a

condition or conditions, the endorsement is called conditional endorsement. The Bank
or the payer can disregard the conditions and make the payment to the endorsee and
the payment will be considered valid.

2. Blank Endorsement :

It the endorser signs his name on the bill but does not give the name of any
other person to whom he wishes to transfer the cheque, the endorsement is called
blank. When there is no endorsee specified on the bill, it becomes payable to bearer
even though it may be originally drawn to order.

3. Special Endorsement :

An endorsement which specifies the name of the transferor for the payment of
the bill is called special endorsement. Special endorsement is payable to order.

4. Restrictive Endorsement: -

A restrictive endorsement is one which restricts or prohibits the further

negotiation of the bill. For instance, pay to Hamid only signed by Rafique.

5. Partial Endorsement:-

If the bill purports to be endorsed for a part of the amount payable, the
endorsement is called partial endorsement is legally in effective.
CHAPTER NO V

GENERAL BANKING OPERATIONS

Chapter-IV

GENERAL BANKING DEPARTMENT

This department consists of the following sections:-

1. Account opening section.

2. Deposit section.

3. Clearing section.

4. Remittance section.

5. Accounts section.

1. ACCOUNT OPENING SECTION:

A. HOW TO OPEN AN ACCOUNT

There are certain formalities which are to be observed for opening of a current or
saving account with a Bank. These formalities in brief are as under

i. FORMAL APPLICATION:

The customer is to filling "Account Opening Form 11 It is a formal request by a

customer to the bank to allow him to have and operate the current or saving account.

ii. OBTAINING INTRODUCTION:-

The bank before opening , and account obtains introduction of the customer from
old customer, responsible person etc.

iii. SPECIMEN SIGNATURE

when the Banker is satisfied about the integrity of the customer, he agrees to open
the account. The Banker obtains the specimen signatures of the customer on the signature
book or on card.
IV. MINIMUM INITIAL DEPOSIT:-

In Pakistan the current account can be opened with a minimum of Rs. 500/- and
PLS Saving Account with a minimum of Rs 100/- These amounts are also the minimum
balances to be maintained by the account holders with the Bank.

V. OPERATING THE ACCOUNT.

When an account is opened in a Bank, the Banker gives to the customer.

i. Pay in slip book.

ii. Cheque Book and pass book with a view to operate it.

IV. PRECAUTIONS IN PREPARING THE PASS BOOK:-

The Banker should be careful in preparing the pass book However, the customer himself
should.

i. Send the pass book for making entries and also periodically check up them.

ii. He should also see that the entries are initialed by the accountant.

iii. The customer should verify the entries with own books of account.

iv. In order to safe guard the secrecy of the account, the customer should receive the
pass book in closed cover.

B. WITH-DRAWL.

Withdrawal is made on cheques supplied by the Bank. A new cheque book is

issued only on receipts of the requisition slip attached to the cheque book issued
previously and this presented along with the depositor pass book for entire against cheque
book challan. Cheque book is issued on discretion of the branch manager.
C. INTEREST.

The current rate of interest allowed on deposit in saving Bank account is

ascertained at the Bank. This rate is subject to change. The amount of interest is
calculated for each calendar month on the lowest balance at credit of an account between
the close of the sixth day of a month and the end of the month and only on every
complete sum of ten rupees.

Every account is made up half yearly to 30th June 31st December, and the interest
calculated as above is added to the balance of each account as on these dates.

D. TRANSFER OF AN ACCOUNT.

Account can be transferred to any other branches of N.B.P. free of charge. If a

depositor wants to transfer his account, he presents his pass book personally or sends it to
Bank and writes an application for the transfer of an account.

E. CLOSING OF AN ACCOUNT:

A depositor willing to do ,e his account must present his pass book in order that
with drawls and the amount of interest due on the account is entered therein and final
balance stuck. This balance is then paid to the depositor and his receipt is taken, the pass
book is canceled, unused cheque forms on hand are also surrendered at the same time.

F. SECRECY:

The secrecy of depositor’s account is the. responsibility of every official engaged

in the Bank service.

G. MONEY DEPOSITED OR DRAWN BY POST:

When money is sent by post for deposit, the pass book and a letter starting the
amount of the deposit and the number of the account accompany it.
 When a depositor wishes to withdraw money by post he must forwards his pass
book with a letter starting the number of his account, the amount to be drawn and either
the money is to be remitted by money-order or in currency notes registered.

H. TYPES OF BANK ACCOUNT.

i. Saving account

Saving Account is that account in which customer puts his surplus money which
he saves from his daily expenditure.

The account can be operated by depositing a minimum cash of Rs. 5/-. Small
percentage of interest is allowed on the balance of this account.

ii. CURRENT ACCOUNT:

The current account is that one which the customer draws his daily cheques and is
normally operated by the Business-men. It can be operated by minimum amount of Rs.
500/- Any number of cheque amounting undue minimum balance limit can be issued by
the account holder for withdrawal or for payment. No interest is allowed on this account.

iii JOIN ACCOUNT

A joint account occurs when two or more than two customers have one account.
The parties to a joint account are considered in law as they are one person.

iv. PROFIT AND LOSS SHARING ACCOUNT.

This can be operated by ~ person, firm or organization by depositing Rs. 100/- or

above. The holder of this account will get profit of his amount, or he will bear the loss as
the case may be. So an individual is equally participant in profit and loss.
The holder of account can withdraw upto Rs. 15,000/- per month is eight
withdrawals, in case of higher withdrawal, seven day prior notice is necessary. This
account is operated under interest free system.
v. FIXED DEPOSIT ACCOUNT.

In this account an amount is deposited into the Bank for a fixed period of time.
The fixed period may be three months, six months, one year, two years, five years and
more. The Bank allows a higher rate of interest for larger period.

At the time of operating on account the Bank issues deposit certificates for the
period and amount. The account holder can not withdraw his amount before the specified
period, but the same Bank will allow loan against that certificate. Bank is liable to give
interest on this account on maturity date.

2. DEPOSITS SECTION:

There are two types of deposits i.e. current and saving There are different forms
present in the section of or deposits.

1. Current account form.

ii Saving account form.

iii Private or individual form

iv Private firm account form

In he above mentioned forms, the bank makes an agreement with his customers.

3. CLEARING SECTION.

Every Bank performs the paying and receiving functions. Cheques are collected
which are drawn upto Banks for customers. Similarly the cheques drawn on different
Banks and deposited by Banks own customers for collection within the city is know as
clearing The functions of receiving and paying is mostly done through the clearing house.
A clearing house can be defined as "AA place where that representatives of all Bank get
together to settle the receipts and payment of cheques drawn on each other" Clearing
House provides the facility which can hardly be dispensed with especially, in case of
crossed cheques.

There are two main types of clearing.

i Outward clearing
ii Inward clearing.

i. OUTWARD CLEARING:

It includes those cheques and other instruments which are sent by the Bank to the
Banks for payment on behalf of its own clients. Cheques are sent to clearing house
thorough local main branch.

A delivery message from the local main branch comes to every branch at a fixed
time to pick its outward clearing or outward returns as the case maybe.

Outward Clearing at Branch

a. Account number of payee/endorsee is written on the back side of the cheques.
b. The instrument and the paying in slips are separated.
c. The instruments are sorted I Bank-wise and branch wise.
d. Schedules are prepared.
e. Jotting of all the schedules are taken in the clearing House statement. Amount of
the cheques in written in the "Delivered" and to pay column.
f. After balancing the outward clearing, the pay in slips are released to C.D.
department.
g. After balancing, a transfer debit voucher is prepared.
h. The instrument, schedule. etc. are delivered to the messenger from the main
branch.

ii. INWARD CLEARING.

The cheques drawn is called inward clearing. drawn on National Bank through its
representatives on the Bank presented by other Banks for payment It includes those
cheques and other instruments of Pakistan branches which other Banks present at the
clearing house.

Inward Clearing At The Drawn Branch

a. Number of instruments noted in the schedules are verified immediately. on

receipt.
b. The amount's of all the instruments are jotted down and totaled. If should be equal
to the amount mentioned in schedule from the local main branch.
c. The amounts are debarred to the relevant accounts if otherwise in order.
d. The IBCO is prepared crediting the amount of the main branch.
e. If there is any return, that is deducted from the total and IBCO prepared for the
remaining amount.

TYPES OF CHEQUES COLLECTED BY CLEARING SECTION.

1. TRANSFER CHEQUES.
These are the cheques which are collected and paid by same branch of N.B.P. For
example Mr. Ali is a customer of N.B.P. of Khaplu branch and draws a cheque in favor of
Mr. Hussain who is also the customer of the same branch.

2. TRANSFER DELIVERY CHEQUES.

The 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 N.B.P. main branch,
DIKhan in favor of another person who maintains an account with N.B.P. Rakh Mandra
branch, DIKhan.

3. CLEARING CHEQUES.

When the payee/endorse and the drawer of cheque maintains account with
different Banks, the collection Bank in any one of the following methods:-

a. it can collect cash by sending its representative with the cheques to each of the
paying Banks. It is not so much appropriate.
b. the Bank maintains an account with the paying Bank.

c. the cheques can be exchanged by representative of the various Banks who meet at
a fixed time and at a fixed place. This is the most efficient method of collection
and paying cheques.

FUNCTIONS OF CLEARING SECTION IN A BRANCH.

a. To accept transfer, transfer delivery and clearing cheques from the customer of the
branch a~ d to arrange for their collection.
b. To arrange payment of cheques drawn on the branch and gives for collection to
any other branch of N.B.P. or any other member or such member of local clearing
house.
c. To collect amounts of cheques drawn on members of the local clearing house sent
for collection by N.B.P. branches not represented at the local clearing house.

PROCEDURE FOR CLEARANCE OF CHEQUE.

The customers are provided with the copes of pay4n-slip, whenever the customer
wants to deposit any cheque, he fills in the pay in slip himself and hands it over the
counter along with the instrument.

4. REMITTANCE SECTION

Remittance means transfer of money from one place to another place. It is of two
kind.

I. Inland remittance.
II. Home remittance.

1. INLAND REMITTANCE.

An inland remittance means a transfer of money payable at a certain place within

the country. Inland remittances can be classified as under:-
 a. Within locality.

b. Out side locality.

a. WITHIN LOCALITY

When a branch situated in DIkhan is required to send drafts to any other branch
situated in the same city The process is know as within locality. For example N.B.P. Main
Branch, DIKhan sends any draft to N.B.P. Rakh Mandar branch ,DIKhan.

b. OUTSIDE LOCALITY.

Outside locality is an important type of inland remittances, which means the

transfer of money payable outside the city. For example, N.B.P. Main Branch DIkhan
sends any draft to a Branch situated at D.I.Khan.

It is commonly done through the following three means:-

i. Telegraphic transfer (T.T)

ii Mail Transfer (M.T)
iii Demand Draft (D. D)

i. TELEGRAPHIC TRANSFER

In telegraphic transfer, the Bank takes commission and telegram charges from the
sender. A receipt is issued to the sender for the value received.

The Bank itself transfer the funds to the drawee branch though a coded message
in telegram, confirmatory of which is also sent through routine dak mentioning all details.
All bank Branches have been provided with their code books name Bank Keys Code
Book where from the coded message is agreed by the drawee branch. T.T. can be sent
open, which may be paid in cash in drawee branch, or may be direct y creditable to
relevant account.
ii MAIL TRANSFER (M.T.)

The Money can be remitted through this means also. In this case the payable
amount at the drawee branch can only be transferred to an account, amount can not be
paid in cash. Other procedure is same as T. deposit of money at sending branch.
Difference is only of postage and. telegram charges. The M.T. which in its self is an
advice also is sent by registered post, while T.T. is sent through telegram.

iii DEMAND DRAFT (D.D)

Demand draft is a written order by a branch of a specified Bank, drawn on another

branch of the same Bank to pay a certain sum of money only to or to the order of the
Payee. Demand drafts are purchased by the clients and after receipt of money Bank issues
and delivers the D.D. to the purchaser, who himself sends it to the payee. In D.D. the
Banks do not recover postal charges as it is payable by the purchaser. The Bank, after
deliver of D.D. to the purchaser also sends its own advice called IBCO (Inter Branch
Credit Order) to the drawee branch mentioning therein all details of issued draft.

5. ACCOUNT SECTION.

Every Business organization deals in money matters. Bank also deals in money
and more over since the money belong to the depositors therefore, it is of utmost
importance to keep systematic and correct record.

Further-more, the Banks are commercial institutions and its main objective is to
earn profit, therefore, then record of all incomes and expenditures are kept correct an(t
systematically.

In N.B.P. the responsibility for maintaining necessary accounting data and to keep
upto date records In a systematic manner has been assigned to the Accounts Department.
 The Branches of Bank Pt perform their daily routine work and deal in money that
belongs k) deposii6rs. Here account department hold great importance in banking,
because it keeps all the accounting records properly.

ACCOUNTS TERMS.

The account department maintain all the accounting records properly There are
certain accounting terms which are defined into the following

1. ACCOUNT

A summary of all debit and credit transaction pertaining to a similar nature or to

an individual or body of persons is called an account.

2. VOUCHERS

A written evidence recorded on a price of paper in respect of a money transaction

is called voucher.

3. GENERAL LEDGER.

Main ledger is a book, where various accounts of different type are kept.
Generally this book is in binded form containing several sheets for several accounts.

4. SUBSIDIARY LEDGER.

Where a main head has got different sub-head of it: subsidiary leader are
maintained. These subsidiary ledgers are maintained from the main ledger.

BOOKS AND STATIONERY.

The account department uses the following books and stationery

a. Cash book cum-general ledger.

b. Abstract book.
 c. Income and expenditure ledger.
d. Register of vouchers
e. Transfer book.
f. Receiving cashier book.
g. Paying cashier book.
h. Supplementary sheets.
i. Different vouchers.

FUNCTIONS OF THE ACCOUNT SECTION.

The main functions of the account section of a branch are as follows: -

1. Balancing and maintenance of books.

11. Preparation of statement.

During the course of daily business of the branch, a number of cheques are
presented by customer for cash payment, though transfer, delivery and clearing cheques
at the counter. Also a number of new accounts are opened and cash is deposited by the
customers. A number of new vouchers are passed by the branch by debiting, one account
and crediting another account.

So in order to ensure that during the day all the transactions have properly been
recorded and they are complete in all respects and are recorded in proper books by the
branch this recording is done on daily basis and maintained by account section.

1. BALANCING AND MAINTAINING OF BOOKS.

Balancing the cash book means that all the transactions have properly been
recorded and there is no mistake in any of these vouchers.

1.. Arrangement of voucher.

11. Preparation of suplimentaries.

111. Preparation of summary.

iv. Agreement of total of the summary, with the total of transfer book.

2. PREPARATION OF STATEMENTS.

To Judge the performance of branches, the Head Office requires periodic

statements from them. Through these statements the top management watches the
progress of the branches and they provide them necessary guidance, The top management
decisions depend upon these statements also. The following are the important statements
prepared by the account section: -

a. Balance sheet on daily basis.

b. Pak account on daily basis.

c. Provisional income and expenditure statement on monthly basis.

CHAPTER NO V

ADVANCES DEPARTMENT
 ADVANCES DEPARTMENT.

The advances department deals with all cases of financial accommodation and
control credit facilities.

Advance means to give loan to the parties, amount may be small or big. These
parties can take the loan through a specified procedure in which the parties show all of
there assets, then they take loan from the Bank on the rate of 14% interest. Bank pay 10%
of interest to the state Bank of Pakistan, the rest 4% interest should be the profit of that
Bank.

MAJOR FUNCTIONS OF ADVANCES.

1. To finance the export and import of the country.

2. To finance the industries, trade and agriculture.

3. To give loan to student for higher education.

4. To give loan to the business men.

5. To give loan to the farmer.

6. To give loan for house building.

TYPES OF ADVANCES.

There are three types of advances,

i. Over draft

ii. Cash credit.

iii. Demand loan.

i OVER DRAFT (O.D).

N.B.P. like the commercial Bank has provided the over draft facilities to worthy
reputed current account holders.

Over draft is a form of loan which is provided on request of account holders more
than the amount in his account. No formal documentary or any other type of securities are
necessary for such loan over draft is extended for one year only and in some cases may
be for two years 14% interest is charged against over draft.

ii. CASH CREDIT.

There are two types of cash credit:

a. Pledge.
b. Hypothetically.

a. PLEDGE.

The pledge is that in which the stocks and properties are in the control of Bank.
The Bank is responsible to look after the properties.

b. HYPOTHETICATION.

In Hypothetication, the properties are under the custody of parties. The parties are
sending daily, weekly, monthly and annually published reports to inform the Bank.

iii. DEMAND LOAN.

To advance demand loan, applicant is not necessary to be account holder such

loans are extended on the disposal of the Manager.
CHAPTER NO VI

PRINCIPLES OF ADVANCING MONEY.

PRINCIPLES OF ADVANCING MONEY

Basically there are five principles which must be duly observed while advancing
money to the borrowers
i. Safety.
ii. Liquidity.
iii. Disposal.
iv. Remuneration.
v. Suitability.

1. SAFETY.

Banker's fund comprises mainly of money borrowed from numerous customers on

various accounts , such as current Account, Saving Bank Account, Call Deposit Account
Special Notice Account and Term Deposit Account. It indicates whatever money the
Bankers holds is that of his customers who have entrusted the Banner with it only
because they have full confidence in the expert handling of money by their Banker.
Therefore, the Baker must be very careful and ensure that his depositor's money is
advanced to safe hands where the risk of loss does not exist.

The elements of safety i.e. character, capacity and capital can help a Banker in
arriving at a conclusion regarding the safety of advances allowed by him.

a. CHARACTER.

It is the most important factor in determining the safety of advance, as there is no

substitute character. A Borrowers character can indicate his intention to repay the
advance. Since his honesty and integrity is of primary importance.
 If the post record of the borrower shows that his integrity has been questionable,
the Banker should avoid him, especially when these securities offered by him are
inadequate in covering the full amount of advance.

The sobriety, the promptness of payment, good habits, personality, the ability and
willingness to carryout a project through from beginning to end, and the reputation of the
people with whom he deals, will go to make the character of a customer.

b. CAPACITY.

A businessman may not Lave vast financial resources, but with sound
management abilities including the insight into a specific business, he may make his
business very profitable.

On the other hand if a person has no insight into the particular business for which
he wants to borrow funds from the Banker, there are more chances of loss to the Banker.

c. CAPITAL.

This is monetary base, because the money invested by the proprietors represent
their faith in the business and its future. The role of commercial Bank is to provide short
term capital for commerce and industry.

11. LIQUIDITY.

Liquidity means the possibilities of recovering the advance in emergency, because

all the money borrowed by the customer is repayable in lump sum on demand. Generally,
the borrowers repay their loans steadily and thus released funds can be used to allow
fresh loans to other borrowers.

Nevertheless, the banker must ensure that the money lending is not blocked for an
undue long time and that the borrowers are in such financial position so as to pay back all
the amount outstanding against them on a short notice. In such a situation, it is very
important for a banker to study the borrowers assets for liquidity. because he would
prefer to lend only for a short period in order to meet the short falls in the working
capital.

iii. DISPOSAL.

As a principle, the disposal of the amount of advances should be broadly based so

that a large number of borrowing customers may be benefited from the Banker's funds.
The Banker must ensure that his funds are not invested in specific sector like textile
industry, heavy engineering or agriculture etc.

The Banker must give advances to a wide range of sectors like commerce,
industry, farming agriculture concerns, small business, housing projects and various
financial concerns in order of priorities. Disposal of advance is very necessary from point
of security because it reduces the risk of non-recovery when some thing goes wrong in
one particular sector or in one field.

iv. REMUNERATION.

The Banker needs sufficient earnings to see the followings:

a. Profit payable to the money deposited with him.
b. Salaries and fringe benefits payable to the staff members.
c. Overhead expense and depreciation and maintenance of the fixed assets
of the bank.
d. Adequate sum to meet possible losses.
e. Provisions for a reserve fund to meet unforeseen contingencies.
f. Payments of dividends to the shareholders.

A major portion of the bankers, earnings comes from the mark up charged on the
money borrowers by the customers. The fixation of the rate of markup to be charged for
advances of various classes depends on the type of security offered to him and also on the
duration for which the advance is allowed. When the security offered is sound and easily
encashable, the Banker may charge a lower rate of markup on an advance for a fixed
period as compared to that of fluctuating over draft.
 In order to meet his above mentioned expenses the Banker runs a great risk and he
has to think twice that the money advance should not become bad or doubtful He should
not lend his funds to a borrower with when remuneration may be much bit also equally
risky. On the other hand Banker should prefer a borrower who is willing to offer a higher
rate of markup on a comparatively lesser risk.

v. SUITABILITY.

Here the word "Suitability" is not to be taken in its usual literary sense. It is used
broader sense, which means that advance should be allowed not only to the suitable
borrowers, but also in keeping with the overall national development plans chalk out by
the authorized concerned.

Before accommodating a borrower, a Banker should ensure that the lending is for
the purpose in conformity with the current national credit policy laid down by the Central
Bank of the country. Since the Bankers mainly provide short term working capital to
commerce and industry. They should see that their lending solve borrowers financial
problems. In doing so the Bankers should retain his primary status as commercial lender
only.

PROCEDURE OF ADVANCE.

Bank after allows the advances to its valuable customers against registered
mortgage of immovable properties such as Factories Mills, etc. In such cases the
advances are allowed on a long term basis and are meant to cover all types of Banking
facilities outstanding against the part. Such mortgages are so draw tip that, irrespective
of partial or total adjustment, so large as the limit remains enforced, the mortgage
security continues for Bank benefits.
ADVANCES AGAINST REGISTERED MORTGAGE

TYPE OF MORTGAGES.

There are two types of mortgages.

1. Legal mortgage.
ii Equitable mortgage.

1. LEGAL MORTGAGE

a. Legal mortgage is obtained where the borrower is mortgaging his own

property.
b. Legal mortgage is obtained where a third party is mortgaging his property
for advance to borrower.
c. Legal mortgage is obtaining form a limited company whether private or
public.

EXECUTION OF LEGAL MORTGAGE.

The deed of mortgage is signed by all owners of the property Where the property
belongs to a partnership firm, the mortgage deed is signed by all the partners of the firm.
Where the property belongs to a limited company, the common seal of the company is
affixed on the mortgage deed and one of two directors also sign the same

ii EQUITABLE MORTGAGE.

Equitable mortgage is created by title deeds and so an equitable mortgage can not
be created by a person who does not possess title deeds to his property. Before accepting
equitable mortgage special care is taken to ensure that all title deeds of the property are
obtained and kept with he Bank.
 A memorandum of deposit is obtained form the mortgager. In obtaining this
memorandum the special care must be taken the following points.

a. The memoranda states “I have already deposited” use of past tense here is of
utmost importance, otherwise the memorandum will require to be stamped and
registered without which it will be invalid. By using the past tense, the
memorandum will not require either to be stamped or registered.

b. The equitable mortgage only be created at district head quarter towns. It is,
therefore, important that the memorandum of deposit is addressed either to the
Head Office or the Zonal Office.

c. The memorandum, due to deposit, must be signed in accordance with the above
instructions. For signing legal mortgages, it is, however, not necessary that
memorandum of deposit be witnessed by witnesses.
CHAPTER NO VII

CASH DEPARTMENT
CASH DEPARTMENT

PROCEDURE OF CASH RECEIPTS AND PAYMENTS

The cash department is the largest department in Banking. The basic goals or
objective of the Bank are to earn profit. Therefore, receive money from their clients and
invest in business. The adopted in the Bank is as under

TOKEN

The payments are made only against the tokens. The tokens are issued by the
clerk deputed for this job. The branches have code numbers of There own branch
engraved on the existing stock of tokens. When the cashier makes payment against
tokens, he ensures that beside, the token number, the Code number is also correct.

The token are checked daily by the officer responsible for checking of cash and he
tallies the number with the number shown in the stock on hand in the furniture and fixture
register.

CASH RECEIVED STAMP

"Cash Received Stamp" remains under the custody of an Officer only. Cashier is
not allowed to handle the stamp. The stamp is affixed and under officer signs in the
paying-in-slip or voucher only after satisfying himself that such paying-in-slip or voucher
in properly signed in full by the cashier or the Officer receiving cash in token of having
received the cash.

An appropriate sign board which displayed at cash counters in the branches which
clearly gives indication to the depositors that such Cash Receipts will not be valid if
signed by one signatory only. The depositors thoroughly check their receipt of cash
deposits that these bear two authorized Signature.
 At branches where then is no cashier, this stamp remains in the custody of an
officer other than the person who receives cash. In the afternoon, the stamp is safe in
along with the cash in hand.

Entries in the Receiving cashier's Book is initialed by the Officer holding the
"Cash Received" stamp only after tailing the figures in the registered with the figures
given in the vouchers or the pay-in-slip.

RECEIPTS AND PAYMENTS.

Before payments of all cheques, the cashier or paying officer satisfies himself that
the cheques have between duly posted, supervised and cancelled by authorized persons

It is the responsibility of the Manager or the Sub-Manager who check the cash,
and verify the totals of the receiving and paying cashier's Book.

SAVING-IN-CASH-CHECKING THEREOF.

The Manager or the officer checking the cash, checks the cash physically in the
afternoon before the cash is safed in.

Loose and unstitched notes of all denomination as well as stitched notes of Rs.
100/- denomination are physically counted. In addition, the number of sticked bundles
and sealed bags containing coins are properly checked and tallied with the cash position
before the cash is safe-in. It is the personal responsibility of the Manger and Sub-
Manager to see that till such time the cash is safe-in, One Officer always remain in the
branch. The branch hours of the officers art so fixed that at least one officer remains in
the branch till the cash is safe-in.

When the cashier goes to lunch, be safes-in the cash properly and does not leave it
in his drawers or in box. All the branches are given a limit permission for keeping cash.
No branch is allowed and are strictly prohibited to keep excess cash to its prescribed
limit.
DEFECTIVE AND CUT NOTES

Defective and cut notes are not issued by the Bank to the public. Branch collects
sufficient fresh and re-issuable notes from State Bank of Pakistan to meet the requirement
of the customers in particular and public in general.

SECURITY ARRANGEMENTS KEEPING OF EXCESS CASH

The branches takeout, in ~e morning that cash from the safe which is needed for
days transactions, keeping in mind that some payments could be made from receipts also.

During transaction hours large receipts are transferred to the safe immediately to
void accumulation of cash in the department.

The Manager of the branch checks the armed chowkidar who remains in the
branch or accompany the cash actually know how to handle the gun.

At night a chowkidar sleeps in the branch premises as the wage commission

award if called upon, he is bound to do round the clock duty.

During counter hours no other work is taken from the chowkidar except to guard
the premises. The chowkidar stands behind the counter and in a position that they can not
be over powered easily. In the case of robbery the chowkidar has within his rights and is
fully protected if he opens fire with a view to injure or even to kill the Dakotas at the time
of commission of robbery or when they are escaping with the loot. The chowkidars are
instructed by the Zonal Chief on the Manager of the Branch.

CASH-IN-TRANSIT

At the time of feeding cash to the branches or lift surplus cash from the branches
the cash is accompanied with a gun-man an Officer and a cashier. The boxes containing
with cash are locked. Whenever The cash is transferred from the van to the branch or vice
versa, the gun-man accompanying the cash and chowkidar of the Branch are standing on
Guard at some distance with loaded gun so that any attempt of robbery may be failed.

Cash is not taken out from the cash trunks in the van but the locked cash trunks
are taken inside the branch, the necessary amount of cash is delivered. The branch
Manager thoroughly checks up the antecedents of the occupants of the adjacent shape;
boarding the walls of the branches in order to ensure that a burglary by breaking the wall
or digging a tunnel underneath is avoided.

PETTY CASH.

An advance for petty cash is given to the cashier on the first of each month by
debit to suspense Account. Advance for "Petty Cash" payments. form petty cash are made
on the authority of the Manager givens on the relative petty cash Memo. The cashier
maintains a petty cash statement/register. The supervisory Officer checks the register
regularly and initialed on it. The advance is kept separate from other money in cashier’s
hand, At the end of the month the Suspense Account entry is adjusted by debiting the
amount expended to Expenditure Account under relevant sub-heads. The petty cash
Memos are attached with the relative expenditure account voucher. At least once in a
week the balance of the advance given for petty cash is verified by a supervisory officer
on different day.

Similar verification is carried out by the Manager or second officer at least once a
month on different days.

EXCESS/SHORT CASH

At the time of Balancing the cash by the Cashier if the Manager finds that the
cash is in excess. In such cases, the excess account is kept in Sundry Deposit sundry
Creditors Account by passing a credit voucher.

If any claim there after is received by branch it is paid to the claimant after
thorough scrutiny by reversing the entry of Sundry Deposit-Sundry creditor Account.
 Similarly in case of short cash, a voucher debiting Suspense Account Sundry
Debtor is passed by the branch. The short cash is immediately report to Zonal and as per
instruction of Zonal Office/Head Office the entry of Suspense Account Sundry Debtors is
reversed.

CASH BALANCE BOOK.

Daily cash balance with the details of The denominations of notes is recorded in
the cash balance book, which is signed by the cashier and Manager of the Branch, who
have checked the cash.

In this connection the branches are instructed that the cash balance book should
be kept in steel cabinet under lock and keys and it should never be kept in the cash safe of
the branch.

A memo of such cash balance duly signed by Manager is also prepared and
attached to the General vouchers of the branch.
CHAPTER NO VIII

PERFORMANCE ANALYSIS OF NBP

 OBSERVATIONS, PROBLEMS AND
SUGGESTIONS

1. PERFORMANCE OF GENERAL BANKING DEPARTMENTS

General Banking Department, particularly the Account Opening section is not

performing well. The people who are working in the Account Opening sections are not
properly trained in public dealings. Their behavior with the clients were not appreciable.

SUGGESTION

All department should be careful about their performance. Branch should be

inspected by inspecting parties. They should especially examine the public dealings of the
employees.

2. LACK OF PROPER TRAINING

There is not proper training system among the staff. Training is necessary to show
good performance and efficiency.

SUGGESTION

I suggest that an arrangement of refresher courses and in service training must be

made to increase the knowledge and skills of the employees. This will help enabling them
to meet modern Banking requirement and to fill the efficient staff qualities.

3. INTERFERENCE OF UNION

The elected unions are headache for management now a days, they interfere in
administrative matters. So There is heavy pressure of union on management, due to
which they remain under stress and pressure. If management wants to take disciplinary
action against an employee, it can not be taken due to the pressure of union.

SUGGESTION
Bank should not influence by union. Rules and regulations should be followed strictly.
Management would be diplomatic towards the union.

4 DELEGATION OF AUTHORITY

There is no proper delegation of authority.

SUGGESTION

Executive at all level should be given sufficient power and authority to make
quick decisions. This will increase the effectiveness and efficiency of the organization.

5. DISTRIBUTION OF WORK

There is no proper distribution of work.

SUGGESTION

All work must be distributed properly among the employees.

6. SHORTAGE OF STENO TYPIST

There is no steno typist is the branch to settle all types of institutional

correspondence. Due to non-availability of typist, a lot of work relating to staffs remains
pending.

SUGGESTION

The Bank must appoint £ typist to perform its staff function well. It will help also
in facilitating and expediting the communication well.

7. IN ADEQUACY OF STAFF

In my observation, I felt that the strength of the present staff is insufficient. The
staff is affecting badly due to burden of over work.
SUGGESTION

The shortage of staff must be fulfilled immediately, In this way, the staff will be
able to perform its duties appropriately.

8. INADEQUATE BUILDING

The building hired by the Bank is not only a good one 'Jut also is insufficient for
proper functioning of the staff.

SUGGESTION

I suggest that it should be either changed or widened.

9. NON-INSTALLATION OF COMPUTER

This is an era of science and computer. Most of the Banks functioning in Pakistan
have adopted computer system. This branch is deprived of this facility yet.

SUGGESTION

I suggest that Bank must be computerized. In this way, it will be easy to keep upto
date records, of all accounts. So the Bank must gain benefit from this modern electronics.

10. LACK OF LIBRARY

The library is an essential requirement for the Bank. But this Bank has no library
yet.

SUGGESTION

The Bank must establish a library having all kinds of books, particularly about the
Banking, economic and Accounts.
ANALYSIS OF SIX YEARS PERFORMANCE OF NATIONAL BANK OF
PAKISTAN

The performance of National bank of Pakistan can be examined by analyzing its

different heads. (All the following amounts are Rupees in million)

Fig 9.1 Six Year Performance at a Glance

Six Year Performance at a Glance

(Rs. In Million)
Total Deposits Advances investments Shareholders’
Assests Equity
2001 415,089 349,617 170,319 71,759 11,959
2002 432,803 362,866 140,547 143,525 14,279
2003 468,972 395,492 161,266 166,196 18,134
2004 553,231 465,572 220,794 149,350 24,900
2005 577,719 463,427 268,839 156,985 37,636
2006 635,133 501,872 316,110 139,947 53,045
9.1.1 Assets

If we analyze total assets, there is a consistent increase in total assets each year. In
year 2001, total assets were 415,089. In 2005, its assets were 577,719. During these
years, there was maximum increase in the assets. The increase was 162,630. Then from
2005 to 2006 increase was 57,414, which was also good. This increase shows that the
assets increases in the six years which is batten for the organization.

Fig 9.2

9.1.2 Deposits
 Deposits of the National Bank of Pakistan increased during these sex years. In
2001 total deposits were 349,617 while after six years the sum of total deposits was
501,872. This shows the consistency of growth in National Bank of Pakistan. The year
which shows the maximum change was from 2003 to 2004. In this year the increase in
deposits was 70,080. The year, which shows minimum increase in deposits is from 2001
to 2002.
Fig 9.3

9.1.3 Advances

Advances of National Bank of Pakistan has increased from 170,319 to 316,110.

The best year for the advances was from 2004 to 2005. In this year increase in advances
was of 48,045. From 2001 to 2002, instead of increasing, the advances fell down from
170,319 to 140,547. But in very next year it has again increased.
Fig 9.4

Investment

166196 156985
200000
143522 149350 139947
150000
71759
100000

50000

0
2001 2002 2003 2004 2005 2006

9.1.4 Investment

National Bank of Pakistan has increased its investment up to 2001. Although this
increase was not consistent. From 2001 to 2002, its investment increased from 71,759 to
143,522 which show an increase of 71,763. Then again in the next year they increased
investment from 143,522 to 166,196. But in the 2004 the investment fell down up to
149,350. After 2004 National Bank started to cut back its investment. Now in 2006 the
Investment downs to the investment was 139,947.
Fig 9.5

9.1.5 Share Holders’ Equity

Almost every year, there is an increase in share holders’ equity. From 2001 to
2006, it goes to 11,959 from 53,045. The maximum increase in the Share Holders’ equity
was during 2005 to 2005. Share holders’ equity increased from 37,636 to 53,045.
FIG 9.6
Fig 9.7

9.1.6 Pre-Tax Profit

Change in the Pre-Tax profit was consistent. From year 2001 to 2006, the Pre-Tax
profit increased from 3,016 to 26,311. So, there was consistent change in Pre-Tax profit
of National Bank of Pakistan.
Fig 9.9

9.1.7 After-Tax Profit

Change in the After-Tax Profit was also consistent. From year 2001 to 2006, the
Pre-Tax profit increased from 1,149 to 17,022. it is clear from the figure that there is
consistent change in the after tax profit.
Fig 9.10

9.1.8 Earnings Per Share

From year 2001 to 2006, the EPS increased from 3.08 to 24.01, which shows the
consistency. Which have positive impact for the owner's. The major change appeared
from 2001 to 2006 is 20.93.
Fig 9.11

9.1.9 Return on Assets (Pre- Tax Profit)

Change in the Return on Assets (Pre-Tax profit) was consistent. From year 2001
to 2006, the Return on Assets (Pre-Tax profit) increased from 0.8 % to 4.3%. From 2001
to 2006 there is no down fall seen.
Fig 9.12

Number of Branches

1260 1245 1250

1242
1240 1226

1220 1204 1199

1200
1180
1160
2001 2002 2003 2004 2005 2006

9.1.10 Number of Branches

National Bank of Pakistan reduced its operation from 2001 to 2003 by closing
branches up to 2003. There is a decrease in number of branches during this period. But
after 2003, it started to increase its branches. In 2001, total number of branches is 1245.
This number was decreased to 1199 in 1996. But now the total number of Branches is
1250.
Fig 9.12

Number of Employees

20000
15163 12195 13272 13745 13824 14019
15000

10000

5000

0
2001 2002 2003 2004 2005 2006

9.1.11 Number of Employees

The number of employees of National Bank of Pakistan has decreased during

2001 to 2002 from 15136 to 12195. Then in the next year it increases to 13272. In the
next year it again increase to 130745. In 2005 this number again raised to 13824. And
now in 2006 the total number of Employees of National Bank of Pakistan is 14019.
9.2 SWOT ANALYSIS BASED ON OBSERVATION:

SWOT Analysis is the most important part of the report, because it depends on
my personal observation. Only a good, keen and comprehensive analysis leads to good
recommendations for the improvement of the existing conditions. Therefore in NBP I
have observed many things and I have analyzed them to the best of my efforts &
knowledge. Through the technique of “SWOT” one can analyze the present performance
conditions of a given organization and its weaknesses. Also the opportunities it can grab
in the external environment and the threats it faces. This technique serves as a base for
sound recommendations and conclusions.

9.2.1 STRENGTHS
Following are the main Strengths of NBP:

1. Serving as an Agent:
National Bank of Pakistan Gomal University Branch serve as an agent of State
Bank of Pakistan. No other bank is allowed to do the Clearing task but NBP act on the
behalf of SBP the clearing task.

2 No of Branches:
Strength of NBP is that there are 1183 branches in Pakistan and 16 branches in
overseas of NBP. So NBP staff members are scattered on the land of Pakistan and World
to provide benefits and serve the people.

3 Experience Employees
The staff members of NBP Gomal University Branch are an experience, though
they are not qualified people but yet they have enough experience to carry on the work of
bank. It is said that “Knowledge is power and experience is wisdom but experience
cannot be defeated by knowledge”.
 4 Modernization:

National Bank of Pakistan is the first bank, which has started a Foreign Exchange
Company in order to regularize the inflows of foreign money and control the undesirable
blackmailing of private foreign exchange companies in the country.
It is the only domestic bank of the country, which has been awarded “The Best Domestic
Bank” consecutively in 2001 and 2002.

9.2.2 WEAKNESSES

Following are the main weaknesses of NBP:

1. Delegation of Authority:
National Bank of Pakistan to great extent is a centralized bank. The manager of
the Gomal University Branch has very limited authority, especially in case of advances.
Lack of delegation of authority creates problems and when the manager is not present in
his office and customers have to wait for many hours. There is top to bottom flow of
authority and lower level of employees cannot participate in the decision making process.
The top level of the organization takes all the decision. This completely centralized
decision-making decreases the interest and also reduces efficiency of the bank.

2. Seniority Based Promotions:

Promotion in NBP is purely on seniority basis rather than on performance. This
really de-motivates the employees because they know that it doesn’t matter whether they
perform well or bad.

3. Job Rotation:
Most of the employees work in a particular department and they specialize only in
one department. In case of absence of one employee, any other employee cannot perform
this work. In this way bank not only loses the business but also results in dissatisfaction
of the customer.
4. Lack of Theoretical Knowledge of Employees:
There is a lack of theoretical knowledge of the employees of National Bank of
Pakistan. Although their work is mostly routine and practical but sometimes low
background education can disturb the routine work. They have to consult the Regional
Manager Office or General Manager Office. This factor affects their efficiency.

5. Discouragement of Small Depositors:

The staff members give proper attention and respect to those customers who have
deposited huge amount of money while the small depositors mostly; the salaried people
are discouraged to open an account within the branch. In this way they discourage saving
habits in the general public.

6. Lack of Discipline:
During my training in National Bank of Pakistan, Gomal University Branch I
observed lack of discipline in the way that some of the employees do not care about the
office timings. They usually come late in the morning. Similarly employees take long
leaves without any valid reasons.

7. Excessive Paper Work:

There is excessive paper work in NBP, which takes more time and reduces the
effective banking performance.

8. Lengthy Process of Loan:

To meet the immediate requirements of the business, customers require quick
financing but due to centralization of decision-making there are unnecessary delays in
sanctioning of loans, resulting in dissatisfaction of the customers.

9. Inadequate Fringe Benefits:

The main purpose of fringe benefits is to retain the employees in the organization
on long-term basis. It has been analyzed that the package of fringe benefits offered by
NBP is not much attractive as compared to other organizations. Recently NBP has
furthermore reduced the fringe benefits of the employees that may result in de-motivation
& reduction the performance of existing employees.

10. Low Rate of Return:

Due to low rate of return, the depositors are drawing their money from the banks
and depositing in the saving centers, which are offering a good rate of return as compared
to the banks.

11. Limited Application of Electronic Media:

NBP is not utilizing the electronic media for its promotional campaign. There is
lack of awareness among the customers and general public about the schemes offered by
NBP.

12. Improper Working Conditions:

Most of the branches of NBP are facing the problem of shortage of space like
NBP, Gomal University Branch . The frequent movement of the staff in the manager’s
office discourages the customers and it is also risky from security point of view. The
arrangement of foreign exchange department in Gomal University Branch is even worse.
There is lack of furniture and inappropriate arrangements of the seating for the customers.

13. Limited Application of Technology in Bank:

NBP branches are not fully computerized, which is very important to provide the
quick and quality services.

14. Political Interference:

Banks are not free from political influences. Due to political pressures on the
management for sanctioning the loans in favor of their political persons resulted in huge
amount of bad debts because in this way the bank is unable to recover the loan very
difficult, and these loans are not used for productive purposes.

9.2.3 OPPORTUNITIES

Following are the main weaknesses of NBP:

1. Financing

Now a day’s people have enough savings and they want some luxurious type’s
products such as Car, House and Business etc. So the opportunity for NBP is to start car
financing scheme to be beneficial for the organization (Bank).

2. Modernization:

Another opportunity for NBP is to modernize itself because all other banks have
best methodologies to compete others and market there products. As I know that NBP
have not enough modernize system to be competible with other banks.

3. Strong Competition:

As we know that today’s era is the era of competition. In all the banks are
involved in struck competition so; it is an opportunity for NBP to develop a strong
marketing policies and campaign to further develop itself.

9.2.4 THREATS:

Followings are the major threats for NBP:

1. Other Banks
The major threat for NBP is other banks that have started function in such as
Bank Alfalah , MCB , UBL , ABL , PICIC , Khyber Bank etc. These are the banks that
NBP face competition with them. These banks provides a vide variety of services as
compared to NBP.

2. Political Interference:
Banks are not free from political influences. Due to political pressures on the
management for sanctioning the loans in favor of their political persons resulted in huge
amount of bad debts because in this way the bank is unable to recover the loan very
difficult, and these loans are not used for productive purposes.
FINANCIAL ANALYSIS

The scope and purpose of financial analysis:

Financial analysis is an evaluation of both a bank’s past financial performance and its
prospects for the future. Typically, it involves an analysis of the bank’s financial
statements and its flow of funds. Financial statement analysis involves the horizontal ,
vertical and various ratios analysis. It is used by such interested parties as creditors,
investors and managers to determine the bank’s financial position relative to that of other.
The way in which bank’s financial position and operating results are viewed by investors
and creditors will have an impact on the firm’s reputation.

ANALYSIS OF FINANCIAL STATEMENT

Data presented in financial statement is of significance to analyst. They develop

the relation among the various items of balance sheet and income statement and interpret
their results in theoretical perspective. For this analysis they adopt various tool and
techniques.

TOOL OF ANALYSIS

Comparative Statement.
Absolute increase/Decrease.
Absolute Increase/Decrease in % ages
Trend percentages
Common size percentages
Ratio analysis

1. COMPARATIVE STATEMENT
In this statement two or more than two years data is presented for comparison.
2. ABSOLUTE INCREASE/DECREASE
It is a type of Horizontal analysis. It gives changes in absolute data intern of Rupees
amount. It enable the analyst to point out the direction of business.

3. TREND PERCENTAGES
This is the second type of horizontal analysis. It is adopted to know the tendencies of
business position. In it one year is chosen as base year and item of financial statement of
base year related with other years relevant items.

4. COMMON SIZE PERCENTAGES

This method is for vertical analysis. It represents the change in percentages in relation to
total assets, total liabilities and owner equity. In this method we take total assets,
liabilities and owner equity and sales individually 100% and develop relationship with
their relevant components.

5. RATIO ANALYSIS
Ratio is mathematical relationship of one item to other items. For analysis these ratios are
compared with other years relevant ratios or with the ratios of other companies of the
same nature are industrial averages. Ratios are really adopted to know the liquidity,
stability and profitability position of the company.

ACCOUNT SECTION:

Like other business organization banks also deals in money matters, as the bank is
custodian of deposited money, therefore, it is of utmost importance to keep a
chronological record, further more, the banks are commercial institutions therefore, the
records of all incomes and expenditure are kept correctly and systematically.
In Bank of Khyber, the responsibility for maintaining necessary accounting data and to
keep up to date record in a systematic manner has been assigned to tin; account
department. Hundreds of banks branches perform their daily routine work and deal in
money that belongs to depositor. Here account section holder great importance in
banking, because it keeps all the accounting records properly.

ACCOUNTING SYSTEM:
In NBP under the companies Act 1913 accounts arc-maintained according to
British System, According to this system every monetary transactions has got two fold
effects, termed as debit and credit. NATIONAL BANK OF PAKISTAN also follows
the same procedure. Accounting Terms:
1. Account:
A summary of all the debit and credit transaction pertaining to a similar nature or to an
individual or group of persons called account.
2. Voucher:
Written evidence recorded on a piece of paper in respect of monetary transaction
called a voucher.
3. Main Ledger:
Main ledger is a Book where various accounts of different types are kepi. Generally this
book is in bindedform containing several sheets for several accounts.
4. Subsidiary Ledger:
Where a main head has got different sub heads of it, subsidiary ledgers for each sub head
are also maintained. Thus subsidiary ledgers are maintained a part from the main ledger.
Book and Stationary used by NBP
In account section the following books and stationary are used.
1. Cash Book.
2. General ledger.
3. Abstract book.
4. Income and Expenditure Ledger.
5. Vouchers Register
6. Transfer Book.
7. Receiving Cashier book
8. Paying Cashier Book.
9. Supplementary.
10. Different Vouchers.

FUNCTIONS OF ACCOUNT SECTION:

The main functions of the account department of a branch are as following:
1. Balancing and Maintenance of Book.
2. Preparation of Statements.

During the course of daily business of branch a number of cheques arc presented by
customers for cash payment, through transfer delivery, clearing and also a number of new
accounts are opened and cash is deposited by the customers A number of new vouchers
are recorded by debiting the account and crediting another account in branch.

So in order to ensure that during the day all the transactions have properly been recorded,
are completed in all respect and are posted in proper books by the branch. This recording
is done on daily basis maintained by account section.
BALANCING AND MAINTENANCE OF BOOKS:

Balancing the cashbook means that all these transactions (cash, clearing and transfer)
have property been recorded and there is no mistake in any voucher.
a. Arrangements of voucher
b. Preparation of supplementaries.
c. Preparation of summery.
d. Equating the total summary with the total of transfer books.

PREPARATION OF STATEMENT:
To Judge the performance of branches, the Head Office requires periodical statements
from banks through these statements the top management control performance of the
branches and provides necessary guidance. The top management decisions depend upon
these statements. The following are (lie important statement prepared by the account
section,
1. Balance Sheet.
2. Pak Account Extract.
3. Provisional Income and expenditure Statement.

1. BALANCE SHEET:
Balance sheet or statement of affairs is prepared on bank printed proof or ma with the
help of figure contained in the cash book and general ledger. This statement is prepared
on daily basis in the Branch.

PAK ACCOUNT EXTRACT:

Apart from account section, there is central accounts department functioning at Head
Office. Each branch is required to submit its daily statement known as Pak Account
Extract. According to prevailing procedure two separate statements are prepared by each
branch. The extract is used for "original entries and other is used for Responding
Entries".
 BIBLIOGRAPHY:

1. Hasan, Mumtaz (1998). The story of NBP. Karachi.

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