Bank Punjab Final

Internship Report The Bank Of Punjab

TABLE OF CONTENTS

Chapter 1 Introduction

Executive summary------------------------------------------------03 Preface---------------------------------------------------------------04 Acknowledgement--------------------------------------------------05 College permission letter------------------------------------------05 Internship Certificate----------------------------------------------06 Introduction to the Report----------------------------------------07 Introduction to Banking sector----------------------------------08 Functions of the Banks-------------------------------------------09 Vision and Mission statement------------------------------------10 History & Background of BOP----------------------------------12

Branch Network---------------------------------------------------13 Management of Bank of Punjab--------------------------------16 Division management---------------------------------------------18

Organizational Structure Profile of the company Policy Formulation Process Communication Patterns

Chapter 2 Activities of internship programme

Account Department----------------------------------------------24

Nature of account Opening new account

Cash Department--------------------------------------------------31

Cash counter Cash payment Cash received Cash book balance Token book Inter-bank accounts

Clearing Department----------------------------------------------38

Outward clearing Inward clearing Local remittances

Hailey College of Commerce 1


Credit Department---------------------------------------------46

Lending operations Advances

Chapter 3 Financial Analysis

Balance sheet----------------------------------------------------69 Ratio Calculations----------------------------------------------70 Income statement-----------------------------------------------74

Chapter 4 SWOT Analysis Strengths----------------------------------------------------------76 Weaknesses-------------------------------------------------------77 Opportunities-----------------------------------------------------78 Threats------------------------------------------------------------78

Chapter 5

Problems-----------------------------------------------------80 Recommendations------------------------------------------81 Conclusion---------------------------------------------------82



EXECUTIVE SUMMARYEXECUTIVE SUMMARY

The objective behind this report is to have every thing in writing, which I have learnt

from my internship at The bank of Punjab. This report will definitely help me and all

those who are having limited exposure about The bank of Punjab. I believe the

preparation of this report will be my first step towards never ending learning process.

The first chapter is comprised of introduction and management of the bank. Second

chapter purely discusses activities of internship program. Here I describe all the activities,

which I learnt over there. Chapter three related with financial analysis. Chapter four

focuses on SWOT analysis. Chapter five deals with Problems, recommendations and

Conclusion.



PREFACE

The pre-requisite of internship program is to make the students of B.Com(Hons.), aware of the practical expertise and to acquaint them with the real management process.

With an intention of grooming the best executives of the future, the department of management science has organized a comprehensive internship-training program. All of us were placed in leading organizations of business arena to gain first hand knowledge and insight into their management and working. So, when I was given the chance of selecting an organization, I opted for The Bank of Punjab.

Getting a chance of working in Bank of Punjab proved to be very beneficial for me. I think that I gained comprehensive insight into the working of a bank. But nothing could have been possible without the co-operation and guidance of the officers of BOP.

After the completion of internship program, internship report has been prepared just in accordance with the practical exposure. It has been my endeavor to stipulate my experience in a way that the reader may clearly understand the core concepts.



A C K N O W L E D G E M E N T

I bow my head in infinite humanity before God who gave me the courage and strength to complete this dissertation. All praise for Almighty Allah whose uniqueness oneness and wholeness is unchallengeable, guided me in different circumstances. All respects are for his holly prophet Hazrat Mohammad (p.b.u.h) enable us to recognize the oneness of my creator.

Preparing the manuscript for this report has been an unusually enjoyable and exciting experience for me. Perhaps the most memorable aspects of the project has been the opportunity to know better a number of people who have provided information for various portion of the work in the course of the research, I became the object of a number of individuals but only a few of them can be mentioned here. My thanks go first to my parents who gave me permission to move to and fro easily. I am thankful to my Brother who helped me in many ways. Special regards to my Brother Mohsin Baig who helped me at every moment especially in typing and in editing this report with wonderful efficiency and dispatch.

After giving homage to my blood relations first of all I would appreciate myself that I worked hard for the completion of this project but I was nothing without the help of others who encouraged me and help me in many ways.

I am obliged to Prof. Hassan Mubeen Alam who has contributed a lot by way of improving the text and presentation of this report.

I started to collect data from the very first day of my internship and the first person to whom I will like to give my regards is the operational manager of the branch Mr.Rana Nawaz Ahmed. I am also deeply indebted to OG ll, Mr. Jahanzeb Khan and OG lll, Mr. Abdullah who gave me very useful tips and information for one of the portion of the report.

I want to acknowledge my deep thanks to my friend Yasir Waheed, who helped me to give the final touch to my report.



D E D I C A T I O N

Dedicated to my loving parents, teachers and those who remember me in prayers



INTRODUCTION TO THE REPORT

The basic purpose behind the preparation of an internship report is to make the student jot down the experiences of the internship and discuss the understanding of the operations of the organization.

The following pages discuss my experiences at Bank of Punjab, Wahdat Road Branch Lahore. Before I proceed, I would like to mention that the experience of working in a small, established branch was in itself a treat. All the employees were extremely cooperative and accommodating. All the employees under whom I worked were very qualified and experience person.



INTRODUCTION TO

BANKING STRUCTURE IN PAKISTAN

At the time of independence of Pakistan, the total numbers of commercial banks were 38. Out of those, Pakistani banks were only two. There were 3496 branches of Indian scheduled bank in the subcontinent at the time of independence, out of which Pakistan has 631 branches. 126 branches were located in former East Pakistan and 487 were in West Pakistan. The situation further deteriorated when 409 branches were abruptly closed after independence and on first July 1948 the number of branches declined to 195 and out of Pakistan banks most of these were newly born and had limited business. Development and growth of banking in Pakistan started with the establishment of State Bank of Pakistan on 1st July 1948 and national Bank Of Pakistan in 1949. Despite separation of East Pakistan, Banking marches ahead at rapid pace. In 1952 the NBP was assumed as an agent of SBP. SBP also restricted the foreign banks to major cities only and for rest of country local banks were encouraged to open branches.In 1973 National Development Finance corporation (NDFC) was established for providing short-term loans to small business.

By the end of 1973 commercial banks numbered 13 with 3442 branches. The success achieved by the banking system was indeed spectacular. However the banks failed to play effective role in ensuring a wide and equitable concentration of credit in big accounts and urban areas and unethical practices had creep into banking.

As a result on 1st January 1977 the Govt of Pakistan nationalized all banks in Pakistan and all banks were brought under five names.

National bank of Pakistan (NBP)

United Bank Ltd. (UBL)

Habib Bank Ltd. (HBL)

Allied bank Limited. (ABL)

Muslim Commercial Bank Limited. (MCB)

The share of Pakistani banks in total branch deposits and credits has increased manifold. The share of Pakistani bank branches which was 12% in 1948 increased to 99% in 1991 and share in total deposits increased from 29% in 1948 to 88% in 1991. This shows a rapid progress of banking system in Pakistan. At present State Bank of Pakistan is functioning as State Bank and there are seventeen commercial banks, National Bank of Pakistan, Habib Bank Ltd, United Bank Ltd, Muslim Commercial Bank, Allied Bank Ltd, Askari bank Ltd, Soneri Bank, The Bank of Punjab Ltd, Prime Commercial bank, Union



Bank, Saudi Pak Bank, Faysal bank Ltd, Bank Al-Habib, The Bank of Khyber, Standard Chartered, ABN-AMRO, KASB Bank

Functions

Primary Or Basic Functions Secondary Or Subsidiary Functions

Accepting Deposits Making Loans & Advances

Agency Functions & Services Utility Functions

Fixed or time deposits

Purchasing and discounting of bills

Collection of checks, bills, interest etc

Foreign exchange business

Saving deposits Drafts

Execution of standing Orders, payment of Orders, payment of

Act as referee

Current deposits Cash credits Purchase and sale of securities

Issuance of travelers checks

- Loans Transfer of funds Supply of trade information

- - Acting as trustee Export promotion



THE BANK OF PUNJAB

VISION STATEMENT

“T o b e a c u s t o m e r f o c u s b a n k w i t h s e r v i c e e x c e l l e n c e ”

MISSION STATEMENT

‘T o e x c e e d t h e e x p e c t a t i o n s o f o u r s t a k e h o l d e r s b y l e v e r a g i n g o u r r e l a t i o n s h i p w i t h t h e G o v e r n m e n t o f P u n j a b a n d d e l i v e r i n g a c o m p l e t e r a n g e o f p r o f e s s i o n a l s s o l u t i o n s w i t h a f o c u s o n p r o g r a m d r i v e n p r o d u c t s & s e r v i c e s i n t h e A g r i c u l t u r e a n d M i d d l e T i e r M a r k e t s t h r o u g h a m o t i v a t e d t e a m ’



CORE VALUES

Our Customer is our first priority. Recognition and Reward for Talented and High performing Employees. Integrity in our dealing in all affairs. Respect for everyone whom ever contact with us Excellence in every thing we do. Profitability for our Stake holders Corporate Social Responsibility is to work for the welfare of society

OBJECTIVES OF THE BANK OF PUNJAB

Follow the rules, regulations and policies of the State Bank of Pakistan.

To carry on the business of a “banking company” as defined by the Banking Companies Ordinance, 1962.

Acting as “Modarba Company” under the provision of Modarba Companies and Modarba Ordinance, 1980.

Acquiring and undertaking the whole or any part of the business of any person or company, when such is of a nature enumerated or described in section 7 of the Banking Companies Ordinance 1962.

The providing of finance as defined in Banking Tribunals Ordinance, 1984.

Contracting for public and private loans and negotiating and issuing the same.

The effecting, insuring, guaranteeing, underwriting, participating in managing and carrying out of any issue, public or private, Government, municipal or other loans or of shares, stock, debenture stock or other securities of any company, corporation or association and lending of money for the purpose of any such issue.

The collecting and transmitting of money and securities. The providing of safe deposit values. The purchasing and selling of bonds, scrip’s or other form of

securities, participation term certificate, term finance certificate, musharika certificates, modarba certificates and such other instrument as may be approved by the State Bank of Pakistan participation on behalf of constituents or others.

Acting as agent for any Government or local authority or any other person or persons.

The buying and selling of foreign exchange including foreign bank notes

The negotiating of loans and advances. The borrowing, raising or taking up of money.



The lending or advancing of money either upon or without security.

The granting and issuing of letters of credit, traveler’s cheques and circular notes.

The receiving of all kinds of bonds, scrip’s, valuables on deposit or for safe custody or otherwise.

Undertaking and executing trusts. Managing, selling and realizing any property, which may come

into the possession of the Bank in satisfaction or part of satisfaction of any of its claims Carrying on and transacting every kind of guarantee and indemnity

business. Selling, improving, managing, developing, exchanging, leasing,

mortgaging, disposing of or turning into account or otherwise dealing with all or any part of the property and rights of the Bank.

Subscribing to or guaranteeing moneys for charitable or benevolent objects or for any exhibition or for any public, general or useful object.

Granting pensions and allowances and making payments towards insurance.

Undertaking the administration of estates as executor, trustee or otherwise.

Doing all such other things as are incidental or conductive to the promotion or advancement of the business of the Bank.

HistoryThe Bank of Punjab was established in pursuance of The Bank of Punjab Act, 1989The scheduled bank status was given by the State Bank of Pakistan on September 19, 1994.The bank is listed on Lahore, Karachi & Islamabad Stock Exchanges.The majority shares of the bank are held by Government of the Province of the Punjab.The Bank has fully owned subsidiary M/s Punjab Modaraba Services (Pvt) Ltd, which is profitably managing a modaraba company.

Recognize the role of technology in effective/efficient operations of financial sector. The Bank has computerized all its branches which are inter connected vide online real time system. Bank’s’ customers are facilitated by shared network of on line ATM in all major cites of Pakistan.

Bank enjoys substantial shares in economic growth, especially of agricultural and SME sectors. Penetration into Agri-economic was made possible through strategic positioning of braches and introduction of a number of Agri-based financing schemes allowing the bank to play a pivotal role in strengthening this sector of our economy.



Branches network

The Bank of Punjab has 266 branches at all major business centers of the city throughout the Pakistan, and 246 of them are online and interconnected with each other. The Bank of Punjab has increased the banking time i.e. from 9 to 5.

Regional Network

Lahore 67 BranchesFaisalabad 43 BranchesGujranwala 45 BranchesKarachi 05 BranchesMultan 63 BranchesPeshawar 06 BranchesRawalpindi 37 Branches

The Bank of Punjab can also be divided into six segments according to its banking functions:



Branch BankingConsumer BankingCorporate BankingRetail BankingSmall Medium EnterprisesSpecial Asset Recovery Management

Online Banking

The Bank of Punjab first time introduce Online Banking in Pakistan , with the help of online banking the customers of The Bank of Punjab can transfer their funds for one branch to another branch and to transfer their funds to other accounts holders from 9 to 5’o clock.

Role in National Economy

The Bank of Punjab plays a vi tal role in the nat ional economy through

Mobil izat ion of hi ther to untapped local resources Promoting savings and providing funds for investments. Attractive rated of profi t on al l types of deposits Opening of Foreign Currency Accounts Handling of Foreign Exchange business such as Imports , Exports

and Remit tances , Financing, Trade Industry for working capi tal requirements Money Market operat ions

Credit Rating of Bank of Punjab

M/S PACRA has awarded the Bank with the credi t ra ting

For Long term AA-

For Short term A1+

On the basis of bank financial resul ts for the year ended as on 31st

December 2005.

Lending policy of Bank

The lending policy of Bank is not only cautions and construct ive but a lso based on pr inciples of prudent lending with maximum emphasis on Hailey College of Commerce 14


securi ty . As agricul ture is considered as backbone of our economy the Bank of Punjab has Introduced “Kisan Dost Agricul ture Finance Scheme” to small farmers .

The Bank of Punjab has indeed entered a new era of science to the nat ion under experience and professional hands of i ts management .

Service Provided By the Bank.

The Bank provides fol lowing types of banking services

Deposi t in Local Currency Client Deposit in Foreign Currency Remittances Advances to Business Trade Industry Agricul ture .

Awards and Achievements

Best Corporate Report Awards

The Joint Committee of the ICAP and ICMAP selected the BOP for winning 3rd position for The Best Corporate Report Award 2004 for the financial sector.

Merit Award by South Asian Federation of Accountants (SAFA)

On the bases of evaluation of the Annual Report 2004, the South Asian Federation of Accounts (SAFA) adjudged the Bank of Punjab as the recipient of Merit Award under the Banking Sector subject to prudential Supervision category.

2nd Kisan Time Awards

The Bank was adjudged as Best Agri Loan Bank and has been awarded 2nd Kisan Time Award.

15th Bolan Excellence Award

The Bank was awarded Best Bank Award under 15 th Bolan Excellence Awards distribution in 2005



Achievement Award

The Lahore Chamber of Commerce & Industry rated Bank as Best Performing Bank in year 2005.

Management of Bank of Punjab

President Secretariat

Mr. Naeem-ud-Din. President

Information Technology Division

Mr. Faisal Azmat General ManagerMr. Rizwan Al i Chief Manager

Human Resource Division

Mr. Naveed Hafeez Shaikh General ManagerMr. Riaz Akhtar E.O.C. / Chief Manager

Law Department

Mohsan Ranjha Lega l HeadMr. Kamran In-charge

Operation Divis ion

Mr. Sher jea l Masud General ManagerMr. Athar Aziz Dogar Chief Manager

1. Corporate Banking Head

Mr. Hafeez ud Din Country Corporate Head

2. Trade Processing Centre

Mr. Aamir Hameed



3. Compliance Cell

Muhammad Lat i f E.O.C. / Chief Compliance Off icer

D. Finance Division

Mr. Nadeem Amir Off ic ia t ing Genera l ManagerMr. Rashid Mehboob Financia l Analyst International & Treasury Division

Mr. Muhammad Sal im Mirza General ManagerMrs . Saba Far rukh A.V.P/Chief Dealer

Audit & Inspection Division

Mr. Muhammad Hanif Head

Credit Risk Management DivisionMr. Nouman Ahmad General ManagerMr. Tar iq Javed But t V.P

Agriculture Credit Department

Mr. Moazzam Mahmood Maneka Head AgriShares Department

Mr. Muhammad Iqbal A.V.P. / Assis tant Secreta ry

H. Special Asset Management Division

Mr. Shaheen Nazar Qureshi E.V.P / Genera l Manager Mr. Bi la l Husnain Chandan E.O.C

I. Liability & Consumer Products Development Division

Mr. Mahmood Sadiq Khan E.O.C. / General ManagMr. Haj i Muhammad Aslam V.P

1. Products / SME DivisionMr. S .M.Ati f . General ManagerOfficer’s Training Institute

Mr. Tar iq Mahmood Mughal A.V.P

Head Office

10-B-E/ I I , GULBERG-I I I , LAHORE.(Pakistan)

Tel : (042) 5783700-10 Hailey College of Commerce 17


Fax: (042) 5783795

Main Branch, Lahore (Pakistan)

Chief ManagerTel : (042) 9200419, 9200187Fax: (042) 9200351

BOP Division

Finance Division 042-5783700-10, 5783794Comm Assets Division 042-9203705Marketing Division 042-9203820Special Assets Management Division 042-9200421-28Treasury & Intl Division 021-2412114-6Operations Division 042-9200165Information Technology Division 042-6315362, 6310799Liability Division 042-5783720, 5783700-10Products/SME Division 042-9200421-28HR Division 042-5783700-10, 5783792A & I Division 042-5783700-10, 5783734Credit Risk Management Division 042-9200421-28Credit Policy Division 042-5783700-10Training, Research, Communication & Publication Division 042-9200178

Organogram of Bank of Punjab

(WAHDAT ROAD BRANCH)

Sheikh M.Tahir Manager

Rana Nawaz Ahmed OG-Ι Operational Manager

Jahanzeb Khan OG – II Salary Administrator

Miss.Asma OG- II Remittance Incharge

Abdullah Javed OG- III BSA/Operation Officer

Abid Zaheer Cash Officer



M.Fayyaz Utility Bill Collector

M.Ahmed Assistant Administrator

M.Nisar Office Boy

ORGANIZATIONAL STRUCTURE

FUNCTIONAL STRUCTURE

In a functional structure activities are grouped together by common function from the bottom to top of the organization. Bank of Punjab has high functional structure. They strictly follow the rules, regulations and polices in carrying its day-to-day business.

Tasks allocated to each employees according to their experience and specialization. Well defined authority. Promotion is based on performance

Organizational bureaucracy and control

Bureaucratic Structure

Bank of Punjab has a strong bureaucratic structure. In BOP there are strict rules, regulations and polices in carrying its day-to-day

business. In BOP most of its work consists of routine, repetitive tasks. Employee do the same work which was explained to him in the job description

provided when he joins the bank. In BOP employees are technically qualified person. In BOP there is high Hierarchy of Authority. In BOP there is a written communications and record. Tasks allocated to employees according to their experience and specialization

STRUCTURAL DIMENSIONS OF THE BOP

Structural dimension provides label to describe the internal characteristics of an organization.

FORMALIZATION

In Bank of Punjab there is written rules and procedure. Documents include procedures, job description, regulations and policy manuals.

SPECIALIZATION



Specialization is the degree to which organizational tasks are subdivided into separate jobs. Specialization is low in Bank of Punjab so that the employee performs a wide range of tasks in their jobs.

HIERACHY OF AUTHORITY

Hierarchy of Authority describes who repots to whom and the span of control for each manager. In Bank of Punjab span of control differ from department to department according to task and requirement.

PERSONAL RATIO

Personnel Ratio refers to the deployment of employees to various functions and departments. In the BOP it is according to requirement that includes administrative ratio, clerical ratio, and professional staff.

CENTRALIZATION

Centralization refers t the hierarchical level that has the authority to make a decision. When decision making is kept at the top level, the organization is centralized. In BOP decision making is mostly made at the top so it is highly centralized organization.

PROFESSIONILISM

Work staff is highly educated and experience according to their post or job title. Staff has both formal education and job experience

CONTEXTUAL DIMENSIONS OF THE BOP

Contextual dimensions characterize the whole organization which includes size, technology, environment and goals.

SIZE

Size is the organization’s magnitude as reflected in the number of people in the organization. There are 266 branches of BOP in which a large number of employees, administrative staff, clerical staff and others are performing different functions accordingly.



ENVIRONMENT

It includes all the elements present outside the BOP like customer, government, suppliers and financial community. They all have an influence on BOP and the management wants to satisfy entire community.

GOALS AND STRATEGIES

Organization’s goal and strategy define the purpose and competitive techniques that set it apart from other organization. BOP has goals and strategies to have an edge on its competitors.

ORGANIZATIONAL CULTURE

A culture is the underlying set of key values, beliefs, understandings and norms shared by the employees. BOP has a good corporate culture.

INTER-CONECTIVITY AMONG THE DEPARTMENTS

There is a “pooled interdependence” in which each department is the part of the organization and contributes to the common good of the organization but works independently. In BOP inter connectivity among department is very high each and every department contribute for the wellbeing of BOP.

COMMUNICATIOON AND COORDINATION

Communication activity and frequency increases as task variety increases. Frequent problems require more information sharing to solve problems and ensure proper completion of activities. The direction of communication in Bank of Punjab is both horizontal and vertical. If task is highly analyzable, statically and written forms of communication is used such as reports, memos and rules. If the task is less analyzable information is conveyed through mails, telephone or in small meetings

PORTER’S COMPETITIVE SRATEGY

COMPETITIVE ADVANTAGE

LOW COST UNIQUENESS

BROAD

COMPETITIVE SCOPE Hailey College of Commerce 21

Low Cost Leadership

BOP

Differentiation

Focused Low Cost leadership

Focused Differentiation


NARROW

The BOP is placed in Low Cost Leadership strategy because it increase market share by emphasize Low Cost as compared to competitors. With this strategy BOP seeks efficient facilities, cost reduction and use tight control to work more efficiently than its competitors.

MILES AND SNOW STRATEGY TYPOLOGY

In “MILES AND SNOW STRATEGY TYPOLOGY” BOP is in analyzer. It tries to maintain a stable business while innovating on periphery. It is a midway between prospector and defender. Some products were targeted towards stable environment in which an efficiency strategy designed to keep current customer is used, other will targeted towards stable environment where growth is possible.

ORGANIZATION CULTURE

ENVIRONMENT

UNSTABLE STABLE

External

Strategic Focus

Internal

BOP has a bureaucratic culture. There are strict rules & regulations, it has a stable working environment and main focus of organization is internal operations.


Entrepreneurial Mission

Clan Bureaucratic

BOP


BOP culture is

All the employees should reach at 8.50 at the bank All the mail employees should wear formal dressing and wear tie also. All the employees should be at the bank till the work is finished. Bank timing should be till 5.00p.m Bank will not be closed before 5.00 p.m.

ORGANIZATIO LIFE CYCLE & CINTROL

BOP is large size organization and it is bureaucratic in nature therefore there are strict rules & regulations and procedures, communication is less frequent. The main emphasize on internal stability, market expansion and customer satisfaction. So company is placed in formalization stage according to the organization life cycle theory.

BOP obtains internal stability through morale building of their employees and control structure.

BOP builds customer satisfaction through positive image of Bp through advertisement on different Medias.

BOP achieve market expansion goal by increasing the branches in whole country so they are increasing their market share.



MY ACTIVITIES IN BOP

1st WEAK

ACCOUNTS DEPARTMENT

The account-opening department is run by who is always very eager to open an account for you, if you visit him for any purpose?

Nature of Accounts

Customer can open Current account Profit & loss Saving account Fixed deposit account Basic banking account Saving plus account Corporate premier Account Foreign currency current account Foreign currency saving account

Categorization: These accounts can be categorized as follows

Individuals Firm Company Trust Staff Partnership accounts Limited companies Others

Basic Banking Account (BBA)



The minimum initial deposit will be Rs.1000. No profit will be Payable. No fee (service charges) for maintaining such accounts will be charged. There will be no limit for maintain minimum balance. In the cases, there balance in BBA's remain "NIL" for a continuous 6 month period, such accounts will be closed. Account holder will be allowed a maximum of deposit transactions and

2 checking withdrawals, free of charge either through cash/through clearing per month otherwise service charges of a regular banking account shall be applicable for that month as per Bank's Schedule of Charges. Unlimited free of charge ATM withdrawals from Ban's own ATM's will be allowed. In case of withdrawals from BBA though the ATM Machine of other Banks, the Charges of these Banks shall be applicable for such transaction.

PROFIT & LOSS SHARING ACCOUNT

PLS Saving Accounts

These accounts are special type of deposit account which is intended primary for small savers. The rate of profit on Saving accounts is usually a little lower than then on Term (Fixed) deposits. The rate on PLS fairly remains static, it does not vary with easy change in base rate except a fractional change which is declared after the end of each half year by the bank. The rate of profit is 6% on PLS saving accounts as declared by the bank for the half year ended June 30, 2000. Zakat is deducted every year @ 2.50 % .It is only applicable on PLS accounts. There is exemption for Fiqua sect, non Muslims and non Pakistani.

CURRENT ACCOUNT

Current Account can be classified as business account and are specially designed for persons who need their money back at any time from the bank. Therefore the bank cannot invest the money so there is no interest paid on these rather service chares are deducted for the safe custody and other service provided by the bank. For opening a Current Account bank standard form is to be completed by applicant by the office attending him. The introducer details (name and account number) and signature are included on the specimen signature card in the space provided.

Procedures and rules applied for opening account are almost same as for saving account except minimum limit of balance requirement.

Minimum Balance

Minimum balance requirement for current account is Rs. 500. If any account goes below this limit account holder is intimated to bring balance at required level.



ZAKAT

There is no deduction of Zakat on Current Account

FOREIGN ACCOUNT

The Bank of Punjab is currently dealing in the following foreign currencies.

US DOLLARS ($) POUND STERLING JAPANESE YEN

According to new rules and regulations of the Govt. everybody can open the foreign currency account.

As earlier discussed PLS and current accounts the same types of accounts can be opened in the foreign currency.

Corporate premier Account

The minimum initial deposit will be Rs. One Crore. No limit on deposit transaction and checks withdrawals. Statement of account will be issued every time you want. (Charges of statement of account is Rs.50 for one month & above is Rs.70)

FOREIGN SAVING ACCOUNTS FOREIGN CURRENT ACCOUNTS FOREIGN TERM DEPOSITS

Opening new account

Documents required for opening an account

Individuals

Attested copy of National Identity Card or Passport of the individual. In case of salaried person attested copy of his service card. In case of illiterate person a passport size of the account holder besides taking his

right and left thumb impression on SS card Hailey College of Commerce 26


Partnership

Attested copy of National Identity Card of all partners. Attested copy of “Partnership deed” duly signed by all partners of the firm. Attested copy of Registration Certificate with Registrar of firm. Authority letter in favor of person authorized to operate on the account of the

firm.

Club/society/association

Certificate of registration Certified copy of partnership deed Certified copy of rules Certified copy of resolution Copy by-laws Copy of NTN certificate

Trust Account

Attested copy of Certificate of Registration. Attested copy of NIC of all the trustees. Certificate copies of Instrument of Trust.

Joint Stock /Companies

List Of all Directors Memorandum Of Association Article Of Association Certificate Of Incorporation(In case of Public Ltd company) Certificate To Commence Business NIC Copies Of all Directors

Account Opening Process

Introduction & Preliminary Investigation



Before a bank office opens a new account he should ascertain whether or not the person desirous of opening an account is desirable customer. The officer will also determine the prospective.Customer’s integrity, respectability, occupation and the nature of the business by the introductory reference given at the account opening. Negligence in this informal preliminary investigation may result in serious consequence not only for the officer concerned directly by but also for other officer of the bank and the general public who may be affected indirectly.

The following steps are taken for opening an account;

Customer must personally visit the branch so the officer gets the knowledge of the customer.

Maximum information relating to the means, line and place of the customer should be obtained.

Completion of Account Opening Form Signature on the account opening forms as well as on SS card must be attested. Introduction of the person who has any account with the Bank of Punjab Computerized NIC in original shall be scrutinized and compare with its

photocopy. In case of joint account the following information must be obtained Who shall operate an account? To whom the balance shall be paid in case of death of any partner. Account may be opened with cash only. The account opener shall put his sign. on the account opening form. At the end of the day the account opening form shall be pasted on the account

opening form file. Letter of thanks must be sent to every new account holder, letter shall also be sent

to the introducer.

Rules for opening an Account

Accounts shall be opened upon submission of duly filled-in Bank’s prescribed Account Opening Form properly introduced and all the documents related to the Account Opening procedure.

Bank has the right to refuse to open an account without assigning any reason.

Account shall be opened with an initial/minimum deposit as stipulated by bank.

A distinct no. shall be given to every account.

SPECIMEN SIGNATURES

When an account is opened with bank the customer gives the bank a specimen of the form of signature, which would appear on his cheque drawn on his bank. This specimen Hailey College of Commerce 28


is taken generally on a card specially designed for the purpose. And rules for the customers full name, and account number are entered on it. If the bank officer has reason to doubt genuineness of a signature, he should either get it conformed from his satisfaction or return the cheque with the remark “Signature differs”.

VERISYS

Verification of NIC. By NADRA. This is obtained by bank from NADRA on the behalf of its customer.

DEPOSITING THE CASH

After all the documents have been filled, then officer will make entry in the account opening registered allot the new account number to the customer. The customer will fill in the deposit slip and deposit cash in his account. This amount is also written on the account opening form against the column initial deposit.

ISSUANCE OF CHEQUE BOOK

After opening an A/C with the bank, the A/C holder once again makes a request in the name of bank for the issuance of a cheque book. The A/C holder mentions title of A/C, A/C number, sign it properly and mentions the no of leaves he requires. Normally BAL issues a cheque book having at least 25 leaves. Every cheque book also contains one leaf that is used for another issue of a cheque book.

Entry Of A cheque book:

Before issuance of a cheque book, the employee performs certain functions. They include:

Stamping every leaf with specific A/C number. Enters it in the cheque book issue register. Check whether or not a senior officer has verified the signatures, if no then first

he gets them verified.

After entry in the manual register, the employee issues the cheque book to the A/C holder after his/her signature on the register.

Charges of a Cheque Book

For PLS saving account with 25 leaves charges is Rs. 75. For PLS saving account with 50 leaves charges is Rs.100. For Current account with 25 leaves charges is Rs. 100. For Current account with 50 leaves charges is Rs. 125.



Letter of Thanks

Bank prepares two ‘LETTER OF THANKS’ one for the new customer and the other for his introducer. This act promotes good will between the customer and the introducer.

Procedure Followed In Order To Close An Account

The procedure followed for the purpose of closure of an account is described in the following steps

The client who wishes to close an account first has to give an application, duly signed on the pre-printed application of the bank. The client has to attach this application with the liability form (explained below). The client can also give an application on a plain paper, but correct signatures are very necessary.

Then it has to be made sure that if the account to be closed is a Saving, Current Account then the account balance before closing should be zero. If a client wishes to close an account then the bank also charge some money at the time of closing the account.

Along with the application to close the account client’s Cheque book is also received from him and then it is destroyed in order to prevent any misuse in the future.

Other Types Of Accounts

Term Deposit Accounts:

Term deposit account is essentially a fixed deposit account. It is opened if a customer is willing to deposit his funds with the bank for a period within which he cannot withdraw his money. In case a customer withdraws his amount then he is given no interest at all on the principal. Normally people tend to fix their deposits with the bank for a relatively longer period of time (3 years, 5 years etc.) although the facility of opening a term deposit account is also offered for short tenors like 7 days, 30 days etc. reason being that as there is a positive relationship between the tenor and the rate of interest i.e. longer the tenor higher would be the rate of interest. Customers benefit by opening a fixed/term deposit account as they earn a higher rate of interest which cannot be earned if you are operating, say for example a savings account. At this point one thing must be taken into immediate consideration that only those people will fix their money that do not face any problem regarding liquidity, people having one would feel contend with a lower rate of interest but would certainly go for some other account like royal profit or savings account. Banks benefit by opening a term deposit account as funds are placed with them



for a longer period of time and the bank can earn a lot by advancing these funds more than once, specifically if the advancing is short or medium term.

CALL DEPOSIT RECEIPT:

Issuance of call deposit receipts is basically a free of cost facility offered by Bank Alfalah Limited not only to its own customer’s but also to walk in clients. When government organizations, or for that matter non government organizations float tenders for execution of a particular task, they require that the organizations who are participating in that tender i.e. organizations who have applied for the tender should, along with other documents, also submit a monetary guarantee certifying that they will definitely perform the required task upon acceptance of their offer. This requirement is basically put forth in order to safeguard the government organization from facing a situation in which the participants show inability or inadequacy to perform the required task after acceptance is granted in their favor. Such a situation generally is not desirable as the government organizations have to under go the procedural steps of floating and accepting the offers and in the process they have to incur additional costs. For this purpose the call deposit receipts is issued which is a monetary guarantee that if the organization does not work as per the tender requirements the government organization can en-cash the call deposit receipt and recover its losses.

Cash Department:

2nd WEAK

CASH COUNTER

The department deals with cash payments and cash receipts. The cash counter maintains the following ledger of accounts.

Cash payment vouchers Cash receipt vouchers Cash balance book Token register

Manual registers are maintained in cash department. All the daily transactions are recorded in these registers and ledgers. Different staff member like checking officer, accountant, cashier and clerk maintain these ledgers.



CASH PAYMENTS

When a party comes to the bank to withdraw money, he presents the Cheque to the clerk. The clerk performs different verifications like

Verify signature Posting of cheque on Computer Authentication of Cheque Payment of Cash

If the clerk finds any fault regarding with that Cheque, he returns the cheque to the customer for rectification.

After a careful inspection, the clerk sends this cheque to the officer for the issuance of token no.

Signature Verification:

After issuance of the token next step is to verify the signature of the customer Customer must have two signatures on the back of the cheque and one signature

on the front of the cheque. The officer matches the signature of the customer through SS Card.

In case of illiterate person officer shall take the thumb impression of the customer one on front side of the cheque and two on the back of the cheque. After it the officer must match the photo of the customer.

Officer put the verified signature stamp and initial of the officer on that stamp.

Posting of cheque on Computer

After the cheque is verified the Assistant Administrator post the cheque on computer on which he write the

Account number Cheque number Account Dr Cheque Amount After posting computer gave the number which is written on the cheque. While posting on the computer the Assistant Administrator check whether the

account has sufficient balance or not. So that the customer can draw money from bank

He also checks whether the stop payment instructions are received from account-holder or not in case of account holder not come.



Authentication of Cheque

After posting on the computer the cheque is authenticated by the Officer.

The Cheque is verified by only one officer if the cheque up to Rs.50, 000 The Cheque is verified by officer and branch manager if the cheque exceeds the

amount of Rs.50, 000. Payment of Cash After posting the cheque the officer send the cheque to the cashier. After receiving the cheque cashier enter the following things in the “Cash

payment Register” The cashier enters the cheque number. The cashier enters the account number. The cashier enters the token number. Then the cashier enters the amount.

After follow such steps then cashier call the token number and pay to the person who has that token number.

CASH RECEIVED

Cash is the key component of banking operation handled by the first desk. The cash dealing staff and infrastructure provided as must be presentable and major emphasis must include quality service to the customer. In this department Mr. Hassan Saif help me understand all this.

State Bank requires that “Cash Department” deals in the following things.

Cash Receipt Utility Bills Collection Prize Bond sold and purchased

In our bank one person for Utility Bills Collection and one person deals in other things.

Cashier maintain the following register

Cash Receipt Register Cash Payment Register Prize Bond sold and purchased Register



Vault Register Total Balance Register Cash Sorting Register

Cash Receipt Register:

In this register all receipts receive from the customer is written. All the receipts are through deposit slip in which the customers write the account number, name, amount and depositor put the signature on the deposit slip. After stamping of cash received stamp the half slip return to the customer and one slip cashier put himself.

The cashier writes the following things in Cash Receipt Register

Account number Name of the Account Holder Amount

Cashier sum the amount of Cash Receipt Register and match with the computer receipt payment.

Posting of Deposit slip:

Cashier gives all the receipt to the officer to be posted on the computer. Officer must write the account number and credit the customer account. After posting computer give the computer number which is written on the deposit slip.

Authentication of Deposit Slip

After posting on the computer the deposit is authenticated by the Officer.

The Deposit is verified by only one officer if the deposit up to Rs.5000 The Deposit is verified by officer and branch manager if the deposit exceeds the

amount of Rs.5000

Prize Bond sold and purchased Register:

Cashier also maintains the Prize Bond sold and purchased Register. Cashier writes the Prize Bond number whenever it is sale or purchase

Total Balance Register

Cashier also maintains Total Balance Register on the daily basis. He writes the total amount and the denomination of Rs and also coin. Hailey College of Commerce 34


Format of Total Balance Register is

Today Opening balance

+Receipt

Grand Total

-Payment

Closing Balance

Next Day Opening Balance (Previous Closing Balance)

+Receipt

Grand Total

-Payment

Closing Balance

Denomination

Rupees

1000* # 500* # 100*# 50*# 20*# 10*#

Coins 5*# 2*# 1*#

Cash Sorting Register

The duty of the cash register is to maintain the Cash Sorting Register on the daily basis and separate the sorting and non-sorting notes.

Format of Cash Sorting Register is

Date Denomination Amount Sorting Sorting Unsorted Hailey College of Commerce 35


Issuable Non Issuable

The duty of the cashier is to sort the defective and non-defective notes daily and give the customer only sorted non-defective notes because it is the requirement of State Bank of Pakistan.

As a matter of policy once a packet of bank notes is sorted the sorting bank/branch shall clearly stamp on the wrapper of the packet as sorted along with the name of the bank/branch and date of sorting.

Special teams constituted at SBP BSC Officers will pay surprise visits to bank branches periodically to examine whether the banks are maintaining the cash sorting register.

Banks are required to maintain on a daily basis minimum surplus cash balance in Sorted Re-Issuable balance of at least One day average requirement for the proceeding month. However following banks are exempted from this condition:

Branches making an average daily payment of less than Rs.0.50 million.

Branches having immediate access to Re-Issuable good quality Currency notes such as withdrawal facility from SBP BSC (Bank) local

officers/NBP Chests.

Vault Register

The duty of the cashier is to maintain Vault Register on the daily basis; this register is placed in the safe. When the cashier put and takes out the money from safe he notes the amount, time and denomination of the rupees in the vault register. The cashier wants to maintain the cash balance.

There our two parts of the Vault Register

In and Out

In: If the packet of rupees increases from the previous day then it means packet of rupees increase of the specific denomination (100,500 etc)

Out: If the packet of rupees decreases from the previous day then it means packet of rupees decrease of the specific denomination (100,500 etc).

Utility Bills Collection



In this department Mr. Nisar Ahmad help me understand all this.

Infrastructure

Following infrastructure shall be provided at each branch to facilitate the Utility Bills depositors.

Timing for collection of bill from 9.00 am to 5.00 am Drinking water arrangements will be provided at each location. Appropriate sheds conducive to whether will be provided. Separate queues shall be made to accommodate senior citizen and ladies for

paying their Utility Bills.

Operation Procedure

Bill up to Rs.5000 will be received under single signature by utility bill collection officer.

Bill above Rs.5000 will be received under joint signature of utility bill collection officer and other officer.

Funds collected in each account shall be transferred as per instructions of the concerned Utility organization.

A separate scroll will be prepared for each collection account. 3 Scrolls of LESCO Bills 3 Scrolls of SUI Bills 3 Scrolls of WASA Bills 4 Scrolls of PTCL Bills

LESCO Scrolls

Two copies of LESCO scrolls in LESCO office and one is the office copy.

SUI Scrolls

One copy in SUI office, one copy in Empire Center branch one day after and one is office copy.

WASA ScrollsTwo scrolls of bills shall be sent to Empire Center branch one dayafter and one is office copy.

PTCL Scrolls



One copy in PTCL office, two copies in Empire Center branch one day after and one is office copy.

TOKEN BOOK

Token book is maintained to issue token no. to each payment voucher. Cheque no. amount, date and token no. is recorded in the token book. For more than 10000 and less than 10000, different token no. are issued.

After the issuance of token no. the cheque goes to an officer, who checks the balance of that particular account.

He verifies, whether the amount mentioned on the cheque falls within the balance range or it exceeds the range. If the amount exceeds, he returns the cheque to the customer. If the amount falls in the range then he posts the entries in the ledger by debiting the account of the customer. After that he signs this particular cheque and puts the ledger no and folio on the cheque.

Now the cheque is given to the customer and is asked to take it to the cashier. Cashier checks whether the token no., signature of the officer, ledger no, folio are present or not. If they are present, it means that cheque has been properly posted in the ledger. Now the cashier make payment to the customer and record this entry in the cash payment register, which he maintains at the counter. With the help of this payment register, he prepares the final cash balance of the branch at daily basis.

INTER-BANK ACCOUNTS

Like inter-branch accounts of a bank, different banks have correspondent accounts with each other. Main branches of banks in a city maintain these inter-bank accounts. So, money is transferred from one branch of a bank to another bank’s branch through these inter-bank and inter-branch accounts.

CLEARING Department:

3rd and 4th WEAK

As we know that, one of the basic economic function of commercial banks is to receive deposits and to honor cheques drawn upon them. So, cheque is a most commonly used instrument for making payments by account holders. Along with the cheques, there are some other negotiable instruments like PO, DD,TC, PS, CDR etc. (discussed in the next part), that are used for making payments and are drawn upon a bank.



The question arises that how these cheques & other negotiable instruments drawn on one bank are deposited in other banks and money is transferred from one bank to another.

Clearing House has provided this facility. Clearing house facilitates different banks, in one city, to get their cheques drawn upon other banks to be cleared.

Cheques lodged in clearing constitute two types of clearing:

Outward Clearing Inward Clearing

OUTWARD CLEARING

When cheques, TC’s and other negotiable instruments drawn upon other banks like MCB, ABN-AMRO of the same city(as Lahore) are presented in Bank of Punjab. to deposit them in the respective payee’s accounts, these instruments are lodged in outward clearing (o/w clg) of Bank of Punjab.

STAMPS PUT ON THE CHEQUES:

When the cheques are presented in BAL to be deposited in their respective payee’s accounts, different stamps are put on cheques before their lodgment in outward clearing.

i) CROSSING THE CHEQUES:

Crossing means two parallel transverse lines, drawn across the face of the cheques with or without words written in between them.

Crossing may be general or special. In clearing cheques are crossed specially. Cheques are stamped with bank’s name between two transverse parallel lines to constitute special crossing.

After the cheques have been crossed specially, the holder cannot receive payment except through the banker named on the cheque. Basic advantage of crossing is to save the instrument to go it from illegal hands. If, a crossed cheque is lost or stolen, there is no risk of wrong payment. So it is an effective means of minimizing the risk of loss or forgery.

ii) CLEARING STAMP:

After the cheques have been crossed specially, clearing stamp is put on the cheques and other instruments, with the following day’s date, as these cheques would have to be presented in their concerned drawee banks on the subsequent day. Hailey College of Commerce 39


iii) ENDORSEMENT STAMP:

The word endorsement is derived from Latin word ‘indorsum’ which means ‘on the back’. Ordinarily, it means anything written or printed upon the back of an instrument.

So, at the end, the cheques are endorsed in full (endorsed specially) by putting the stamp with words describing “ Payee’s account Credited in BOP Wahdat road, Lahore”.

After putting these three stamps on cheques & other negotiable instruments, they are sent to NIFT (National Institutional Facilitation Authority) with Add List. NIFT after segregating the cheques of different banks delivers them to their concerned banks, which constitute the inward clearing for those (drawee) banks.

ACCOUNTING PROCEDURE:

After lodgment of all cheques in outward clearing, Payee’s accounts are credited by the amount of their vouchers. Drawee banks will debit the drawer’s accounts in their inward clearing (discussed later).

As main branch Lhr. of bop deals with other banks through inter-bank accounts and we deal with our main branch. So, we (BAL Circular road) debit our main br. account, maintained with us, by the total amount of outward clearing and an IBDA (inter branch debit advise) with a debit voucher is sent to main branch Lhr.

Account Titles Debit CreditLocal Clearing Main branchPayee’s Accounts

RETURN IN OUTWARD CLEARING:

Some of the cheques lodged in o/w clearing are dishonored by the concerned branches due to some deficiencies and returned back through NIFT. This process is carried out under main branch’s governance.

Either, these cheques are again lodged in outward clearing or returned to customers by canceling bank’s all stamps, based on the reasons.

Now, the accounting entries opposite to first are passed i.e. Payee’s accounts are debited & main branch’s account is credited.



INWARD CLEARING

Cheques and other negotiable instruments (PO, DD, PS, CDR etc.) drawn on Bank Alfalah Circular Road, sent by other banks, constitute the inward clearing of BAL.

After having all the stamps and dates of cheques confirmed, the concerned drawer’s accounts are debited (in BAL Circular Road) and main branch’s account is credited by the total amount.

Account Titles Debit CreditDrawer’s AccountsLocal Clearing Main branch

RETURN IN INWARD CLEARING:

In case of cheques dishonored (returned) due to some deficiencies, the main branch’s account is debited by the amount of cheques returned. As,

Account Titles Debit CreditDrawer’s Accounts

Local Clearing Main branchLocal Clearing Main branch

COLLECTION

When cheques, TC’s and other negotiable instruments drawn upon other banks outside the city (Lhr.) are presented in BOP (Circular Road) to deposit in payee’s accounts, then instead of clearing, these instruments are lodged in collection and constitute OBC’s (outward bills for collection).



Cheques of cities, where BOP,s branch exists (e.g. Faisalabad), are sent to that branch where these cheques are lodged in outward clearing. Otherwise, they are directly sent to the drawee bank. Postage & other charges are deducted on account of payee according to SOC (Schedule of Charges).


i) When a Cheque is lodged in OBC:

Account Titles Debit CreditCustomer’s Liability on OBCBanker’s Liability on OBC

ii) On Realization of OBC:

when this cheque is got cleared (through outward clearing) in the concerned BAL branch (e.g. Faisalabad Br.), then IBCA is sent to our branch and thus an outstation cheque is deposited in payee’s account. So,

Account Titles Debit CreditBanker’s Liability on OBCCustomer’s Liability on OBC

&Account Titles Debit CreditConcerned BAL br.’s AccountPayee’s Account

LOCAL REMITTANCES

(Negotiable Instruments)

Besides cheques, banker’s also handle Promissory Note, Bill of Exchange (will be discussed in later part), Bank Drafts, Pay Orders, Traveler Cheques, Pay Slips, Call



Deposit Receipts; as negotiable instruments. Here, I have tried to describe PO, DD, PS & CDR and their processing in accordance with my observation, during first two weeks.

1) PAY ORDER (PO):

“Pay Order is a negotiable instrument made by the bank, on account of a customer, to pay on order the specified amount to the directed person (payee)”.

Pay Orders are used to make payment or to transfer money, with in the same city. Pay Order is always drawn on the bank that has issued it.

MAKING OFA PO:

When a person requires a Pay Order (made by BAL Circular Road, Lhr.), he is asked to complete the prescribed application form in which the amount of pay order is to be stated. Certain amount of commission and advance tax is charged on issuance of pay order (according to SOC).

After having the total amount deposited in the bank (in cash or through cheque, in case of account holder), pay order is issued in the favour of payee.

Like cheques, when pay orders issued by BOP McLeod Road, are presented in other banks to get them deposited in the payee’s accounts, they constitute the outward clearing for those banks and inward clearing for BOP Wahdat Road


i) When a Pay Order is issued, cash department debits cash account & Pay Order issued account is credited as:Account Titles Debit CreditCash DepositsPO Issued

Commission on Remittances

Tax on PO & DD

ii) When Pay Order is received in inward clearing:

Account Titles Debit CreditPO Issued



Cash Deposits

2) DEMAND DRAFT (DD):

“A Demand Draft is a negotiable instrument issued by the bank, on account of a person, and drawn on its own branch in a specific city or on the branch of another bank in that city (in case bank doesn’t have any branch there), requesting it to pay the specified amount to the person named on it”.

Demand Drafts are used to make outstation payments or to transfer money, out of the city. Therefore, a DD is always made for a particular city.

MAKING OFA DD:

When a customer requests his banker to provide him a DD made on his account for a particular city like Faisalabad. Then, after having the total amount (including commission and advance tax) to be deposited with application form, demand draft is issued in favor of the specified person in Faisalabad (supposed) and is drawn on BAL Faisalabad Branch.

So, when this demand draft is presented by payee in any bank, it constitute the inward clearing of BOP Fsd. Branch.


i) When BOP mcload road issues a Demand Draft drawn on BOP Faisalabad Br. Then, an IBCA with DD advice is sent to Faisalabad Br. (letter is also sent for DD’s amounting more than Rs.100, 000)

ii) Upon receipt of advice in Faisalabad Br. they will credit DD Payable a/c.

iii) DD Payable Account is debited (in Faisalabad Br.) when DD is presented in inward clearing.

In case, advice is not received by BOP Faisalabad Br. and DD is presented first, then instead of DD Payable, Suspense account is debited to make payment.

Similar is the process for demand drafts drawn on BAL Circular Road Branch.

3) CALL DEPOSIT RECEIPT (CDR):

BOP also issues Call Deposit Receipts (CDR). “It is an instrument like cheque issued by the bank on account of a customer & in favour of a person, to pay the specified amount”.



CDR’s are issued to make payments, especially when a company goes for some tenders or for purchase of government securities. The bank enjoys the benefit of keeping funds deposited until the payment is not made. During this time, the bank uses the deposit and earns income on that.

4) PAY SLIP (PS):

“It is a negotiable instrument like cheque issued by the bank on its own account to pay a specified amount to the directed person”.

Pay Slips are used to make payment by the bank itself against certain expenses incurred; like furniture purchased by bank, charges of Mucaddams etc.

Instead of writing the issuing date on pay slip, date of encashment (realization) is written when it is presented in bank.

CANCELLATION OF PO, DD & CDR

After issuance of Pay Order, Demand Draft or Call Deposit Receipt by BAL Circular Road, when any one of these has to be cancelled by the customer and it is returned in the bank. Then, after deducting the cancellation charges Rs.100, the remaining (net) amount is paid to the customer through Cash Payment Voucher. Suppose a demand draft amounting Rs.5,000 has to be cancelled, then

Account Titles Debit CreditDD Issued 5,000Cash

Misc. Earning

4,900

100

ADVANCE TAX AGAINST REMITTANCES

Advance Tax is deducted on issuance of PO & DD ( when customers don’t have tax exemption form) and credited in Tax on PO & DD account (discussed earlier).

Tax deducted has to be paid to State Bank of Pakistan (SBP) with in one week of issuance of these instruments. So to pay this tax, Pay Order in favour or SBP Lahore is made, with a challan form. And,Account Titles Debit Credit



Tax on PO & DDPO Issued

CREDITS

5th and 6th WEAK

After working for two weeks in Trade Finance Department, I was moved on to the Credit Department. Mr. Farrukh, Incharge Credits, welcomed me in his department. For him, I would just say, that I did not find such a lenient and cooperative person in my career.

In Credit department, I worked for the last two weeks of my internship program. One major difference that I observed in credit department and other departments was the difference in the nature of work. After working in credit department, I realized the importance of lending operations for a bank. Here, I have tried to describe my experience and observation in credit department

LENDING OPERATIONS

Since, the basic function of a bank is to receive deposits (at low rate of return) and to lend money (at high rate of return). So, the lending operations of a bank constitute the most vital part of its business.

Bank’s funds comprise mainly of money borrowed from numerous customers on various accounts such as saving accounts, current accounts, fixed deposits and notice deposits etc. whereas, the major part of total income of a bank is generated through the utilization of these funds. So, a banker

KINDS OF CREDIT

Bank provides credit facilities to its customers for a specific maturity. This maturity or duration of credit is not an independent factor; it depends upon the purpose of the loan.

According to the maturity of credit, it has three basic kinds.

1. Short Term Credit2. Medium Term Credit



3. Long Term Credit

SHORT TERM CREDIT:

The period of a short-term credit is generally less than or equal to one year. This credit is used for the creation of current assets e.g. for the purchase of raw material and to meet the working capital requirements.

MEDIUM TERM CREDIT:

Medium term credit is normally issued for one to three years. It is used for the purchase of machinery, furniture etc. by the firms.

LONG TERM CREDIT:

Credit facilities sanctioned for 3 to 5 years is considered as the long-term credit. Long-term credit is required for capital expenditures, such as purchase of building and heavy machinery.

Loan To Customer

Bank of Punjab offer following types of loan to customer

Consumer Aasaish Loan Green Tractor Scheme Consumer Vehicle Loan Consumer HOUSE Demand BOP SME LOAN Chief Minister Green Punjab Rickshaw Scheme Kisan Dost Scheme

Consumer Aasaish Loan

There is a contract between BOP with LG and PEL.0% Mark-Up (12 months) 0% Down Payment( 12 months)FREE Home Delivery Financing Tenures of 18, 24 & 36 months are also available with nominal markup Easily Affordable & Flexible Installments Quick Processing No Hidden Cost



No Insurance cost Product BOP Aasaish Loan is Demand finance facility for purchase of consumer durable goods

TV, Refrigerators, Mobiles, Microwave Ovens, Fans, Audio/Video system AC, Split unit etc.

Eligibility Criteria Salaried Person: Confirmed permanent employee with one year experience Salary is routed through a bank account.

Private Employees:

In addition to the above mentioned conditions: Having age between 25 and 59 years OR date of retirement, whichever is earlier. Having minimum basic salary of Rs.10, 000/month.

Self-employed business / Professional

In addition to condition # 1 & 2: Having age between 25 and 57 years (57 Years at maturity of facility) Minimum 2 years in current business. Having minimum Net Income of Rs.15, 000/month.

Documentation required for processing

Application form Copy of NIC Customer Consent Form, if loan is Rs. 50,000/- OR above The Govt. employees will submit the following two A. Latest Salary Slip B. Employer Certificate on letterhead

Additional requirements for private employees

The Private employees will submit the following three documents in addition to documents mentioned in Serial # 1, 2, 3, A & B.

Bank Statement for last 3 months Latest Copy of utility bills (Electricity & phone) Income Tax Return/Wealth Statement

Additional requirements for self-employed professional/business persons



The Self-employed Professional/Businesspersons will submit the followingdocuments in addition to documents mentioned in Serial # 1, 2 & 3 Bank Statement for last 6 months

Latest Copy of utility bills (Electricity & phone) of residence

Consumer Vehicle Loan

Easily Affordable & Flexible Installments Quick Processing Minimum Down Payment Minimum Insurance

Product BOP car loan is a Demand Finance Facility to Purchase Brand new locally manufactured/ Assembled Cars for Personal Use

Eligibility Criteria

1. Salaried Person: Permanent employee of selected organizations with at least 3 years of service experience with a minimum salary of Rs.15, 000.

2. Govt. Employees: Net salary of Rs. 12,000/- 3.Self-employed: Business person and professional having minimum 3 years

in current business - Holder of computerized national identity card - Between 25 and 57 years of age

Loan facility you can avail Minimum amount is Rs.200, 000 and maximum amount is Rs. 1,000,000

Tenure of the loan:

Loan is available for a period of minimum 3 years and maximum 5 years.

Mark up rate charged:

Most competitive rate available in the market

Other ChargesNon refundable fee Rs.450/-Processing Fee/ Documentation charges Rs. 3,750/-Registration Charges Actual Hailey College of Commerce 49


Initial down payment:Down payment is 10 to 20% of value of the car.

Car insurance:

BOP has arranged insurance facility from its approved list of companies at discount rates for the convenience of its customers. Insurance premium for the first year will be paid in full up front with down payment and for subsequent years along with installment.

Tenor of Loan Pricing Factor3 Years 0.031114 Years 0.024185 Years 0.02004Your loan amount x pricing = monthly installment

(excluding insurance)

Your loan amount x pricing = monthly installment (excluding insurance)

Documents are required

For salaried individuals:

Copy of NIC 2 Recent Photographs Latest Salary Slip / Certificates on Comp. Letterhead Bank Statement for last 6 months Latest Copy of Utility Bills

For self employed business persons/professionals:

Copy of CNIC Two recent photographs

Bank statement for the last I year of business account If not banking with us

Banking certificate from branch manager stating Title, Account number, Business entity,

Maintained since, Authorized signatory Copy of Latest utility bills



Business Related Documents:

Documentary evidence in business or in profession for the last 3 years

Income Tax return / wealth tax statement Proprietorship/Partnership Deed Articles & Memorandum of Association Latest copy of paid utility bills (Phone & Electricity) of current business address Membership/payment receipts of Chamber of Commerce/Trade

Association/Anjuman-e-Tajiran, if available

Consumer House Loan

Product BOP house loan is long term finance facility for purchase of house/flat or construction of house on self-owned plot or for renovation/ home improvement.

Eligibility Criteria:

Salaried Person: Permanent employees of selected organizations with a minimum take home salary of Rs.20, 000

Self-employed: Business person and professional having minimum 5 years in current business-Holder of computerized National Identity Card

- Between 25 and 60 years of age

Loan facility available:

Purpose Minimum Amount

Maximum Amount Bank Rate

Purchase of House/Flat& Construction Rs. 300.000/- Rs. 7,500,000/-

Bank financing up to 70% of assessed value

Home Improvement/ Renovation / Addition Rs. 300.000/- Rs. 3,000,000/-

Bank financing up to 20 % of assessed value



Income of spouse can also be considered in determining the debt paying capacity & hence loan amount.

Tenure of the loanPurpose Minimun MaximumPurchase of House/ flat 3 years 15 yearsConstruction 3 years 15 years with maximum 12 months grace period.Home improvement 3 years 05 years

Mark up rate charged

Most Competitive rate in the market, which will be calculated on daily product basis(For each year new amortization schedule will be provided to the customer in case of any change in mark up.)

Other ChargesNon-refundable fee Rs.450/-Processing Fee Rs. 2,950/-Valuation charges, legal charges Stamp duties, levies etc Actual

Loan repayment

Loan will be repaid in equal monthly installments through postdated cheques. Total monthly installment includes principal, mark up and insurance amount. Monthly installment can easily be calculated for e.g. .if, you take a loan for Rs. 1,000,000 for 15 years. Simply multiply the 15-year factor by your amount Rs. 1,000,000 * 0.00985 = Rs. 9850 will be your monthly installment payable excluding insurance(Life & Property).Financing period Pricing Factor3 0.031574 0.024655 0.020526 0.017787 0.015848 0.01439



9 0.0132810 0.0124011 0.0116912 0.0111013 0.0106114 0.0102015 0.00985

(Insurance premium for the first year will be paid in full up front with down payment and for subsequent years along with installments.)

Security of the loan

House/flat purchased Plot on which construction is to be carried out House on which renovation is to be carried out

Documents Required

Copy of CNIC Two recent photographs Last three Salary slips/ salary certificate on company's letter head with joining

date Current designation, length of service, gross salary & certificate from HR department for perks.(for salaried individuals)

Bank statement for last six months for salaried individuals and for the last I year incase of self-employed businessperson

Copy of utility bills Fee slip of children if applicable Income tax return / wealth statement Copy of Rent agreement if living in rented house

BOP SME LOAN

Product BOP SME loan is a running finance facility to meet working capital requirements or to expand existing business against owner occupied residential/commercial property.

Eligibility Criteria The facility is available for

Businesspersons & self-employed professionals Holders of computerized national identity card



Between 25 and 55 years of age Have minimum 3 years in current business / practice Assessed net monthly income Rs. 36,000/-* Member of trade body or chamber of commerce or anjuman-e-Tajran for atleast 3 years

Loan facility availableMinimum amount is Rs.1, 000,000/- and maximum amount is Rs. 7,500,000/-

Tenure of the loan

Loan is available for a period of 1 year, which can be renewed subject to satisfactory conduct of account, business health & value of property.

Other ChargesNon refundable fee Rs.450/-

Processing fee Rs.4, 950 for loans up to 3,000,000

Valuation Charges, All stamp duties Legal and documentation charges Actual

Rs.8, 950 for loans over 3,000,000

Insurance Property insurance is mandatory from bank's approved companies

(List will be provided)

Loan repaymentLoan will be repaid on demand / lump sum, whereas mark up is to be paid monthly by the 10th. of every month

Documents required Copy of CNIC Two recent photographs Copy of paid utility bills showing bills for last 12 months Income tax return / wealth statement

Banking relationship information, if not banking with us Last "1" year bank statement of business account Bank certificate from Branch manger stating- Title -Account number - Constitution with name(s) of proprietor/partner/directors - Maintained Since - Authorized signatory Hailey College of Commerce 54


Chief Minister Green Punjab Rickshaw Scheme

Purpose: Provision of financial facility to people for purchase of rickshaw for the fullment of their desire.

Three types of rickshaw BOP is offering

PAK HERO Rs. 115,000

SAZGAR Rs. 125,000

STAR ASIA Rs. 110,000

ADVANCE on each Rickshaw is 40,000

Installment on

PAK HERO Rs. 2500/ month

SAZGAR Rs. 2600/ month

STAR ASIA Rs. 2300/ month

Terms & Conditions

The delivery to the borrower will be made only after issuance of delivery of delivery order by BOP.

The delivery order will be issued after getting rickshaw registered, insured and completion of bank’s documents.

Documents Require

Original file of Rickshaw Engine & chassis no. of rickshaw Date when rickshaw delivered at point of delivery Point of delivery (name of designated dealer, address, contact#) Guarantor who has shop or house License of LTV



ID card of a person This refers to tri-party MOU signed between Dept. of transport Govt. of Punjab The Bank of Punjab & your company

Kisan Dost Scheme

Kisan dost agriculture finance scheme

Purpose: Provision of financial facility to farmers for purchase of inputs (Seed, fertilizers, pesticides, fungicides e.t.c.).

Eligibility: Resident Self Cultivator having Agriculture maximum 50 acres

Owner-cum tenant having minimum land 5 acres under cultivation Tenant having valid lease agreement for reasonable tenure (minimum area of subsistence land holding) .

Amount: Maximum Rs.500, 000/- according to per acre limit of the crop.

Security: Charge on Agriculture Land through Agri. Pass Book.

OR Registered / Equitable mortgage of urban property assessed by PBA's approved surveyor and cleared by Bank's legal counsel.

OR Liquid security in the shape Bank's Fixed Deposited Receipts/DSC/NSC or Regular Income Certificates

One person guarantee of reputable person. ACO along with Regional Chief can waive this condition if they deem the borrower to be very credit worthy. Two written satisfactory market checking reports must be obtained before disbursement.

Margin on Security:

50% Margin on Agri land or Urban property. 25% margin on liquid security.



Insurance: The borrower will have to arrange life assurance under the Bank 's charge.

Mark-up: 9% per annum.

Repayment: Once in a year along with mark up.

Renewal: Automatic renewal upon adjustment of entire principal with full markup within one year. Fresh documents will be obtained after three

KISAN DOST TRACTOR FINANCE SCHEME

Purpose: Provision of financial facility to the farmers and non farmers (those who provide tractors to farmers on rental basis for various tractor related operations), for purchase of Tractor on Lease Finance Basis.

Eligibility: Resident Self Cultivator having Agriculture Land minimum 5 acres and maximum 50 acres OR Persons providing their tractors to farmers on rental basis for their various Agriculture and Farming activities.

The persons who are related with the business of providing services for tractor related farming practices to the farmers on rental Basis.

Amount: Maximum Rs.500,000/-.

Equity: 10% to 20% of the cost of Tractor will be paid by the borrower on case to case basis.

Security: Farmers: Lease Tractor (to be registered in the name of Bank)

Charge on Agriculture Land through Agri. Pass Book

One personal guarantee of reputable person.. ACO along with Regional Chief can waive this condition if they deem the borrower to be very credit worthy. Two written satisfactory market checking reports must be obtained before disbursement Hailey College of Commerce 57


Non Farmers: Lease Tractor (to be registered in the name of Bank)

Charge on urban immovable property through equitable/registered mortgage One personal guarantee of reputable person. ACO along with Regional Chief can waive this condition if they deem the borrower to be very credit worthy. Two written satisfactory market checking reports must be obtained before disbursement.

Insurance: The Lessee will arrange comprehensive insurance of tractor life assurance of lessee under the Bank's charge.


Repayment: 10 equal half yearly installments (within five years).

KISAN DOST AABIARI SCHEME

Purpose

Provision of financial facility to the farmers for purchase of Tube well

Eligibility Resident Self Cultivator having Agriculture Land minimum 5 acres and maximum 50 acres.

Amount Maximum Rs.500,000/-.

Equity 20% of the cost of project will be paid by the borrower.

Security: Farmers

Lease Assets i.e. Engine, Tube well and other related implements (The vendor will issue receipt in the name of Bank)

Charge on Agriculture Land through Agri. Pass Book



One personal guarantee of reputable person.ACO along with Regional Chief can waive this condition if they deem the borrower to be very credit worthy. Two written satisfactory market checking reports must be obtained before disbursement

Insurance The Lessee will arrange comprehensive insurance of implements/assets life assurance of lessee under the Bank's charge.

Mark-up 11% per annum.

Repayment 8-10 equal half yearly (within four to five years)

KISAN DOST MECHANIZATIONS SUPPOR SCHEME

Purpose: Provision of financial facility to the farmers for purchase of Agricultural Implements e.g. Trolley, thresher, plough, richer etc.

Eligibility: Resident Self Cultivator having Agriculture Land measuring 5 acres to maximum 50 acres.


Equity: 20% of the cost of machinery, tool and implements.

Security: Farmers: Lease Assets/implements (The vendor will issue receipt in the name of Bank) Charge on Agriculture Land through Agri. Pass Book

One personal guarantee of reputable person.. ACO along with Regional Chief can waive this condition if they deem the borrower to be very credit worthy. Two written satisfactory market checking reports must be obtained before disbursement

Insurance: Hailey College of Commerce 59


The Lessee will arrange comprehensive insurance of assets life assurance of lessee under the Bank's charge.


Repayment: 8 equal half yearly installments (within four years).

KISAN DOST FARM TRASPORT SCHEME

Purpose: Provision of financial facility to the farmers for purchase of Farm Transport Vehicles e.g. Small Pickups, VP/Vans and small chillers.

Eligibility: Resident Self Cultivator having Agriculture Land minimum 5 acres and maximum 50 acres.


Equity: 20% of the cost of Vehicle will be paid by the borrower.

Security: Farmers: Leased Vehicle (to be registered in the name of Bank)

Charge on Agriculture Land through Agri. Pass Book. One personal guarantee of reputable person. ACO along with Regional Chief can waive this condition if they deem the borrower to be very credit worthy. Two written satisfactory market checking reports must be obtained before disbursement.



Insurance: The Lessee will arrange comprehensive insurance of Vehicle life assurance of lessee under the Bank's charge.


Repayment: 10 equal half yearly installments (within five years).

KISAN DOST ESLAH-E- ARAZI SCHEME

Purpose: Provision of financial facility to the farmers for development of their non productive lands into productive ones by conductive on farm works of Land leveling, laser leveling, and land improvement clearance of jungle and land reclamation.

Eligibility: Resident Self Cultivator having Agriculture Land minimum 5 acres and maximum 50 acres.

Amount: Maximum Rs.500,000/-

Equity: Borrower will pay 20% cost of the project.

Security: Farmers: Charge on Agriculture Land through Agri. Pass Book

On person guarantee of reputable person. ACO along with Regional Chief can waive this condition if they deem the borrower to be very credit worthy. Two written satisfactory market checking reports must be obtained before disbursement



Insurance: Life assurance of lessee under the Bank's charge.


Repayment: 8-10 equal half yearly installments (within four to five years).

KISAN DOST LIVE STOCK DEVELOPMENT SCHEME

Purpose: Provision of financial facility for purchase of animals (Milk & meat production, cattle farming, Poultry Farming and Fish farming) to the farmers and non farmers (those who have their own live stock farm/fish farm for commercial purposes).

Eligibility: Sufficient experience to handle Dairy Farm, Cattle Farm, Goat Farm, Poultry and Fish Farming. The persons who have their self owned Dairy Farms for production of milk on commercial basis).The applicant should be having adequate arrangements to sell out the products properly e.g. supply contract with milk processing company.

Amount: 80% of cost of animals (Maximum facility can be granted upto 50% of forced sale value of property).

Security: Leased Animals (receipt will be issued in the name of Bank) Charge on Agriculture Land through Agri. Pass Book

OR Charge on urban immovable property through equitable/registered mortgage. The property will be cleared by Bank's approved legal counsel and will be assessed by Bank's Hailey College of Commerce 62


and PBA's approved surveyor. Liquid security in the shape Bank's Fixed Deposited Receipts/DSC/NSC or Regular Income Certificates

Margin on Security:

50% margin on landed property (Agri/Urban). 25% margin in case of liquid security

Insurance: The Lessee will arrange comprehensive insurance of Animals. In case of Poultry and Fish farming Borrower will have to arrange comprehensive insurance of poultry and fish stock himself form Bank's approved A rated company life assurance of lessee under the Bank's charge.

Mark-up: Average 6 month's KIBOR + 600bps with floor of 11% per annum.In case of written assurance for recovery from DCO/Nazim mark-up will be KIBOR + 6% with floor of 8%.

Period: 5 years (including one year dry period).

Repayment: 16 equal quarterly installments within four years excluding one year dry period.

KISAN DOST LIVE STOCK SCHEME

Finance for live Stock breed improvement through village veterinary workers

Purpose:

Provision of financial facility to the Village Veterinary Workers (trained by Live Stock and Dairy Development Department) for purchase of Artificial Insemination kits on lease finance basis

Eligibility:

Village Veterinary Workers having diploma certificate and recommendations from Live Stock and Dairy Development Department Govt. of Punjab)

Amount:

Maximum Rs.45, 000/- or 90% of purchase price of kit and bicycle. Hailey College of Commerce 63


Security:

1. Lease Assets (Receipt will be issued in the name of Bank).2. Two personal guarantees of reputable persons having fixed assets equivalent or

more to value of advance.

Insurance:

Comprehensive Insurance of Leased Assets life assurance of lessee under the Bank's chargeMark-up:

11% per annum

Repayment:

Equal monthly or quarterly installments (within five years)

KISAN DOST COMMERCIAL AGRO SERVICE FINANCE SCHEME

Purpose:

Provision of financial facility to the commercially viable entities with immaculate track record for acquisition of Agri implements and equipments i.e. tractor trolleys, harvesters e.t.c. for providing agri services to farmers

Eligibility:

Commercially viable entities with immaculate track record with the Bank/Other financial institutions

Amount:

To be decided on case to case basis keeping in view the financial/commercial viability of the transaction. Not to exceed 80% of the value of equipments/implements.

Mode of Finance

It shall be demand finance/lease finance.

Security:

1. Lease Assets (Vehicles/Tractors will be registered in the name of Bank or Receipt of equipments will be issued in the name of Bank)



2. Bank charge on Agri Land through Agri Pass Book Or Bank's Charge on urban property through registered and equitable mortgage

3. One personal guarantee of reputable person. ACO along with Regional Chief can waive this condition if they deem the borrower to be very credit worthy. Two written satisfactory market checking reports must be obtained before disbursement

Insurance:

Comprehensive Insurance of Leased Assets life assurance of lessee under the Bank's charge

Mark-up:

9% per annum

Repayment:

Equal quarterly installments (within five years)

KISAN DOST AGRI MALL FINANCE SCHEME

Purpose of Finance: Four renowned companies of the country such as M/S Ali Akbar Group, Millat Tractors, PSO and Angro Services have established a joint venture company in the name of the Agrimall (Pvt) Ltd to provide agro services under one roof through its Franchisees. The Agrimall (Pvt) Ltd has approached our Bank to provide financial help to their franchisees to establish and run these Agrimalls under their specialized management through out the country.

We have launched a Kissan Dost Agrimall Finance Scheme. All facilities required by the Franchisees of the Agrimall (Pvt) Ltd will be provided through this scheme. The farmers who will be the clients of Franchisees, will also be provided production loans through Bank's Kisan Dost Agriculture Finance Scheme (For purchase of inputs).

Amount of Finance: The amount of Finance will be 9.5 (M) maximum for all package of facilities mainly as under:

Demand Finance: Maximum Rs.2.5 (M) for construction of site.

Lease Finance: Maximum Rs.1.50 (M) for purchase of tractors and machinery.



Running Finance:

Maximum Rs.3.0 (M) for stocks of seed, fertilizers, pesticides and oil etc.

L/C Limit: Maximum Rs.2.5 (M) for import of pre-engineered construction material for construction of site one time transaction.

RATE OF INTEREST:

Rate of interest against these advances vary according to the duration. Shorter is the period of loan; greater is the rate of interest because, in long-term credits, there is less risk of idle cost of funds.

In BOP Wahdat Road, only the short-term credit facilities are being provided.

Advances

SECURITIES FOR ADVANCES

No doubt, the advancing of credit involves a great risk for the bank. Therefore, to cover this risk, the bank keeps different tangible and non-tangible securities, before sanctioning the credit facility to a customer. The bankers prefer such securities that carry less risk of depreciation due to market fluctuations and are easily saleable, even under changing market conditions.

Common securities against banker advances are as under:

PLEDGE

Pledge is the actual delivery of the movable & tangible property to the lender, as a security for a credit. In a pledge, the possession of movable assets is with bank but the ownership remains with the client. Pledge is against short-term finances and is considered to be the best security for the bank. The commodities that are pledged include generally, raw material, consumables, finished goods and in certain cases work in process (WIP).

MARGIN:

For every credit, the bank needs security with margin or cushion. Similar is the case with pledge. For example, if, there is 25% margin requirement then to obtain loan of Rs.1 million, the security that is to be pledged should be of worth Rs. 1.25 million. Hailey College of Commerce 66


Since, in pledge, the possession of the goods is with bank, so bank keeps these goods in the godowns under the custody of Mucaddams.

MUCADDAMS:

People who look after the pledged goods for bank are called Mucaddam. If cotton (raw material) is to be pledged by the bank, it doesn’t mean that this cotton will be kept in bank; such type of goods is kept in the godowns of the company. So, to make these goods secure, the bank appoints its own men called Mucaddams to take care of stock.

PRECAUTIONS:

There are certain factors that a banker must take into consideration before advancing against pledge.

1) Client:

In case of pledge, godowns are in the premises of the clients under the custody of Mucaddams, whose honesty can be bought at any time. Therefore greater risk is imposed by the client. So, the must be satisfied with the honesty and credibility of the client.

2) Nature of Commodity:

The banker must be aware of the nature of the property i.e. whether the commodity is a perishable item like sugar. Also the commodity being pledged should be easily saleable, so that in case of default of client, bank can easily sell it in the market.

3) Market Awareness:

A banker must have market awareness e.g.. Fluctuation in prices. Such commodities should not be pledged that might have low demand in the market and have many associated risks.

4) Suitability of Godown:

Suitability of godown depends upon the nature of the commodity. Banker must be fully satisfies with the appropriation of godown. Like in case of medicines to be pledged, the godown should have clean environment and proper mechanism of cooling, to maintain the temperature.

5) Proper Valuation: Hailey College of Commerce 67


Whenever goods are pledged, the banker should be aware of the true cost of the product as the client always overvalues his products. Sales taxes, excise duties are also paid on the

FINANCIAL ANALYSIS

Finance can be defined as the science and art of managing resources especially money. Virtually all the organizations earn or raise money and spend or invest money. But this area is extremely important in context of the banking concerns.

Body of information describing even the smallest firm is enormous, spanning the company’s internal operations and its relations with the outside world. Financial statement analysis is very helpful in this respect because it highlights company’s strengths and weaknesses.

Compliance With The Laws Applicable

All the financial statements have been prepared in accordance with the laws applicable in Pakistan;

Companies Ordinances 1984 International Accounting Standards

As per circular No. 36, dated October 1, 2001 by BSD, State Bank Of Pakistan, all the financial statements have been reclassified.

All the figures presented in the financial statements are comparable.



I am presenting trend analysis of a few selected items from balance sheet on account of non-availability of the required financial information

TREND ANALYSISBANK OF PUNJABBALANCE SHEET2005-2007

Particulars 2005 2006 2007



Assets

Cash

Balances with other banks

Money at call & short notice

Investments

Advances- net of provision

Opening fixed assets

Other assets

Total Assets

Liabilities

Deposits & other accounts

Borrowing from other banks, agents etc.

Bills payable

Other liabilities

Deferred liabilities

Total liabilities

Net Assets

%

52.09

536.93

(38.11)

1.68

59.98

50.40

26.21

34.81

31.71

144.01

(19.81)

5.69

(24.49)

37.20

20.38

%

133.84

200.69

59.70

46.28

33.11

337.26

3.84

46.79

33.22

120.02

133.64

111.09

(6.90)

43.31

101.01

%

21.20

54.88

789.96

(40.02)

4.91

6.96

(12.51)

31.21

29.50

56.21

(12.01)

67.70

(2.87)

34.06

(0.46)



Particulars

Presented by

Share capital

Reserve fund, other reserves

Unappropriated profit

Shareholder’s equity

Total

1998

-

130.11

53.39

20.38

20.38

1999

-

12.31

140.60

4.25

101.01

2000

-

4.54

(86.44)

0.60

(0.46)

RATIOS CALCULATION:

1. Current ratio : 2007 2006Current assets 51,855,289 Current liabilities 58,422,188 =0.89 =0.99Analysis/comment: Good but same as last year.

2. Quick Ratio:Current assets – (stock+ prepaid expenses)Current liabilities 2007 2006 51,855,289 58,422,188 =0.89 =0.99Analysis/comment: Good but same as last year.

3. Gross Profit Ratio: 2007 2006Gross profit*100 1,788,904*100 Net sales 2,555,039 =70% =70.4%Analysis/comment: Good but same as last year. Hailey College of Commerce 71


5. Net Profit Ratio: 2007 2006Net Profit*100 1,368,174*100 Interest earned 2,555,039 =53.55% =41.41%Analysis/comment: Good but highly improved as compared to last year.

6. Return on Equity: 2007 2006Net Profit*100 1,368,174*100 Common Equity 7,839,083 =17.45% =13.23%Analysis/comment: Good but highly improved as compared to last year.

7. Earning per Share: 2007 2006Net Profit available for ordinary shares 1,368,174 Total # of outstanding shares 150,623 =Rs.9.08 =Rs.4.58Analysis/comment: Good but highly improved as compared to last year.

9. Debt Equity Ratio: 2007 2006Total long term Debt 519,140 Shareholders equity 7,839,083 =0.0075 =0.0067 Analysis/comment: Increased as compared to last year.

15. Total Assets Turnover: 2007 2006Total Income 2,555,039 Total Assets 66,320,411 =0.039 times =0.039 timesAnalysis/comment: Good and highly improved as compared to last year due to increments both in total assets and total income as well.

18. Net Working Capital: 2007 2006Current Assets – Current Liabilities 51,855,289-58,422,188 =Rs. (6,566,899) =Rs.(201,118)Analysis/comment: Increased and better as compared to last year.

21. Return on Total Assets: 2007 2006

Net profit after Tax 1,368,174*100

Total Assets 66,320,411

=2.06 = 1.58



Analysis/comment: Increased and better as compared to last year.

22. Debt Ratio: 2007 2006

Total liabilities 5,8481,328

Total Assets 66,320,411

=0.88 =0.88

Analysis/comment: Increased and not so much better as compared to last year.

COMMENTS

ASSETS

1. The level of cash has increased by 53% in 1998, 134% in 2006, and 21.2% in 2007 and the reasons behind increase in cash in 2005 were the opening of five new branches in Karachi, Lahore & Sialkot, and the recovery of non-performing loans. he placement and the cash in hand in local currency increase, and took the level of cash up with them. In 2007, there is a normal increase in cash, which is because of expansion in branch network of the bank.

2. Balances with other banks have increased by 53.7% in 2005, 200.7% in 2006and 54.9% in 2007. Bank balances have increased drastically in 2006, due to the drastic increase in bank balances outside Pakistan.

3. Money at call has decreased in 2005 by 36%, increased by 59.7% in 2006 and has increased tremendously by 79% in 2007. Call money is a highly valuable account and its increase or decrease does not signify much. According to balance sheet, call money increased to 38% in 2005 and increased by 79% in 2007. This does not portray the true picture as the level of call money at the date of preparation of the statements might be zero but that situation could have changed ever in the next day.

4. Investment has increased in 2005 by 1.7%, in 2006 increase is 46.3% and in 2007 it has decreased to 40%. The increase in 2006 by 46.3% is due to the heavy investment in Federal Investment Bureau and Treasury Bills of Government.



5. Advances have increased to 60% in 2005, 33.1% in 2006 and 4.91% in 2007. Some negotiations have been held with almost all the borrowers and number of accounts has been revived for non-performing loans converted into profit generating assets. So increase in advances in 2005& 06 is mainly due to this reason.

6. Total Assets increase by 35.99% in 2005, 46.79% in 2006, which signifies a tremendous increase in business of bank.

LIABILITIES

1. Deposits have increased in 2005 by 31.7%, in 2006 increase is 33.2% and in 2007 the increase is 29.5%. This increase is due to the expansion of branch network of the bank and this increasing trend is very encouraging for the bank.2. Borrowing from other banks is increasing but following a decreasing trend, which shows that the bank is gaining control over its borrowings and is emphasizing more on deposits. This shows better management policies of bank in order to decrease cost of funds.3. Although the bank is on its way to expansion and for the purpose of expansion it needs to have borrowing. Therefore increase in total liabilities is not that much alarming.



TREND ANALYSISBANK OF PUNJABINCOME STATEMENT2005-2007Particulars 2005 2006 2007

Markup/interest & discount earned

Less: cost/return on deposits etc.

Fees, commissions & brokerage

Profit from investment securities

Other operating income

Total

Net Revenue

Operating expenses:

Administration expenses

Provisions against non-performing advances – net

Total operating expenses

Operating profit

Other income

Profit before tax

Profit after tax

%

53.8

40.6

154.9

(19.9)

100

(4.8)

(7.11)

59.1

44.7

27.2

46.5

633.7

57.3

910.1

-

%

17.2

12.2

38.6

47.2

(97.1)

(36.0)

(8.98)

22.02

19.3

(243.6)

(38.3)

613.4

68.6

423.5

7.63

%

18.5

16.9

23.8

78.8

43.1

21.6

45.8

30.5

25.0

(23.6)

52.6

13.7

(60.1)

12.97

37.58



COMMENTS

1. Mark-Up

There is a continuous increase in mark up because the bank has increase its advances due to which mark up recovered have increased. Also there is an expansion in business.

2. Cost /Return on Deposits

Cost on deposits is continuously increasing because the bank deposits are increasing. The increase in revenue has been in higher percentage as compared to cost, which is encouraging feature.

3. Administrative Expenses

The administrative expenses have been on a consistent rise. This is not a bad sign and shows the expansion in the business, but only if the deposits have also been increasing along with expanses, which is true in case of BOP.

4. Total Operating Expenses

Total operating expenses increase by 40.5% in 2005, but decrease in 2006 by 38.3% and again increase in 2007 by 32.6%. The decrease in 2006 is due to recovery of loans, which has resulted in decrease in provisions against non-performing advances.

5. Profit Before Tax

The bank was going in loss in 2004 in respect of operating profit, which was in negative figures, but the whole situation changed in 2005 and BAL recovered its profitability.

In 2006, operating expanses have decreased tremendously which has resulted in increase in profit before tax.

6. Total Equity

Total equity has increased in 2005-06 from 20.38% to 114.98%, which is a tremendous increase. This increase is due to the increase profitability of the bank and surplus on revaluation of fixes assets but in 2007 a small decrease has been observed, which is only due to the deficit in revaluation of fixed assets.



SWOT ANALYSIS

An analysis indicating towards the organizations strengths, weaknesses, opportunities and threat is termed as SWOT Analysis. Such an analysis is very important for the management in retaining the strength, overcoming the weaknesses, capitalizing over the emerging market opportunities, and carving ways to successfully tackle with the threats and ultimately converting them in the strengths for the organization.

During EIGHT weeks of my stay, I have come across the following SWOT analysis of the bank.

STRENGTHS

Leading semi-Government Bank

The bank of Punjab commercial bank is the leading private sector bank. In the banking network in Pakistan with many of them online branches in major cities of the country

AUTOMATIC OPERATIONS:

The operations performed by the bank are highly automated that result in assurance for the customers that their transactions are completed reliably, efficiently and securely.

FULL DAY BANKING

One can avail the benefit of the services provided at the bank till 5:00 P.m. which is highly useful for those customers who find it difficult to leave their officers in the morning..

ATM NETWORK

The bank has the largest ATM Network cross the country. The customers of BOP withdraw access their funds any time at all the ATM Sites with BOPCASH Logo.

CUSTOMIZED SOLUTIONS

The management of the bank believes in customer focused banking rather than the product oriented banking. The products and services designed by the bank are specifically tailored to the individual needs of its customers.

CUSTOMER ORIENTED BANKING

The priority banking centers of the bank offer an unmatched where the customer receives highly privileged services in a highly elegant environment. It gives the chance of experiencing new standards in banking. Designed specially for those who appreciate only Hailey College of Commerce 77


the finest things in life, Priority Banking offers the very highest levels of personalized banking to match customer’s unique status.

ELECTRONIC BANKING

The revolution in the banking in the form of electronic banking operations have opened avenues of excellent, efficient and quick services saving the time and costs of the customers and fortunately BOP is among those few banks who are already reaping the benefits of electronic transactions.

ELECTRONIC FUNDS TRANSFER

BOP management is quite prepared to adopt the latest advancements in technology resulting in revolution in the banking operations such as check clearing process, computer based teller equipment, automatic teller machines, and electronic funds transfers among the others.

ETHICAL CONCERNS AND PUBLIC IMAGE

The organizations showing concern for the people, ethics, and environment enjoy good public reputation and are able to reap the benefits in the long run. ACBL management is quite sensitive to this issue.

WEAKNESSES

NOT HIGHLY AUTOMATED

The bank has still some of the traditional ways of operations in this advanced technological environment.

MANUAL BOOKKEEPING

Although the bank has computerized accounting system but, still the bankers use to make their entries in the accounting register.

LOW JOB SATISFACTION

Understanding and the effective management of the human resources is the most difficult challenge faced not only by the bank but by all the organizations. Even though the people have been sacrificed in the new organizational developments, it is becoming clear that the true lasting competitive advantage comes through human resources and how they are managed. BOP seems to not focusing on this highly critical issue, as the job satisfaction level of the employees working at BOP, was quite low.



LACK OF SPECIALISATION

This famous and useful concept given by Adam Smith in 1776 seems to be missing in the bank. The employees are constantly rotated from one job to another job of totally different characteristic in the view of giving them the know-how of the working in all the departments. But I think this is not a very good tactics used by the management. Otherwise the situation might be like this ‘Jack of all and master of none.’

CENTRALIZATION

There is a high degree of centralization in the bank. Almost all the decision-making is in the hands of the upper management. But centralization is effective up to a certain level otherwise it becomes inefficient and at times costly too. I personally observed that delay occurred in the operations of the employees only due to the fact that they had not got any instructions from the head office.

LACK OF TRAINING FACILITIES

Presently there is no specific training program arranged for the new recruiters. They have to learn based on their observations and also their mistakes. It takes a bit time for the fresh one to learn the banking the result is huge amount of blunders, mistakes etc. resulting in monetary and non-monetary losses for the bank. There is pressure not only on the new learner but also on the person placed upon with this responsibility.

OPPORTUNITIES

SUPPORT FROM GOVT OF PUNJAB

The bank has the support from the Govt of Punjab and has good financial position in the market therefore having a good position to expand their business.

THREATS

HIGH EMPLOYEES TURNOVER

As discussed above, the job satisfaction level of the employee is very low resulting in high turnover which is bad for any organization as there are huge monetary and non-monetary costs involved in the fresh recruitments.

HIGH CHARGES

The schedules of charges indicate that the fees charged by the bank on the various services it provides are extremely high. It may result in decrease in the number of its exiting customers. Further more, this could be very alarming situation for the bank in case some of the competitors grasped the opportunity and lowered its rates. The result Hailey College of Commerce 79


would be either the lost of market share or decrease in the charges resulting in lowering the bank’s income.

LESS ATTRACTIVE RATE OF RETURN

Commercial banks face considerable competition in attracting deposits from individuals or small investors. In contrast, the Govt. of Pakistan national saving scheme offers attractive rates of return (approx. 16 to 18 percent annually) on 10-15 year fixed accounts, which banks find difficult to match.

COMPETITION

BOP is currently facing strict competition from the other banks.

LESS EXPERIENCED STAFF

Owing to huge turnover of the employees, the no. of experienced and well trained staff is very low. Majority of the staff working in the bank branches is quite young and inexperienced. If the bank failed to bring down its high employees turnover, then it would be lacking the most important resources of any organization i.e. the experienced staff.



PROBLEMS

There are some discrepancies due to which the name of the bank of Punjab is not taken as a leading bank in Pakistan. If this discrepancies are removed one day the bank become the leading bank in Pakistan..

Branches have limited functional operations. Branches are not properly maintained.

More employees in a branch than required in a department. No proper advertisements. Bonuses to the employees is once a year. No ATM’s facilities at all branches. No lockers facility at all branches. No proper rotation of the employees from department to

department. Discouraging behavior of the seniors with their subordinates Token system is still working in some of the branches. It take lot of time of customer when payment of cheque. Business promotional scheme are not good. There are no women branches in different regions so that the females

easily participate and solve the problem of those female workers who feel themselves misfit by working in an environment with the males.

There is no participation in social welfare activities with in the country for the public in order to build public relations.

Employees are not satisfied with the performance appraisal, feedback, transfer and promotion policies of the bank.

Over burdens on a single employee. Promotion is very slow.



RECOMMENDATIONS

Following are the recommendations to overcome the weaknesses of The Bank of Punjab

Customer appealing and attracting strategies should be formulated. A pleased employee work more for the betterment of the organization. The Bank of Punjab should conduct its financial analysis and compare it with that

of other banks for improvement. BOP also introduces the simplest and flexible method of granting loans for small

businesses rather than a complicated process. so, it become very easy to start & enhance the new business for a common person.

The bank must also provide pleasant response to fresh graduates and internees as well, which is personally observed by me as not satisfactory.

They must appoint and increase the number of those who possess degrees in business fields specially.

BOP should keep up the consistency by providing same working environment in the busy branches at different regions through the employment of technology and resources properly.

BOP must continue to establish and introduce new schemes in shape of different products/accounts with good incentives to the customers in order to compete efficiently and improve its position.

BOP must increase and improve its ATM network by expending 24 hours cash facilities to other cities of the country.

The research cell should continuously try to gather information about the present actions of its competitors and the expected future actions. So in this way more effective strategies can be formulated.

No one can deny the importance of advertisement; so The Bank of Punjab should start more advertisement on electronic media.

More commitment toward the employees is necessary because they are the most reliable assets of a company.

By realizing the need and potential of leasing in Pakistan, BOP is suggested to diversify its attention towards the leasing business.

BOP should open its women branches in different regions to provide the females to participate easily and also to solve the problem of those female workers who feel themselves misfit by working in an environment with the males.

This in turn will also increase job opportunities for females. Overseas prospects should be targeted well through improving the domestic as

well as the foreign operation and must be provided with security and incentives in order to maintain their confidence on bank.



CONCLUSION

Bank of Punjab should adopt the characteristics of the organization who can work under fast changing environment, because the bank is so wide branches. The bank should improve the service like they introduced like e-banking, online and other facilities which is a good sign and there is visible improvement in customer satisfaction they must take care of their employees and should be clear on that human capital is very much important than the other capital. Adoption of new strategies to satisfy their customer, Bank of Punjab keeping this view is also working for a customer satisfaction. There are some discrepancies in BOP but management are now removing those discrepancies to make the BOP one of the leading bank in Pakistan .In other words Bank of Punjab is going towards a road of success.


Bank Punjab Final

Documents

Transcript of Bank Punjab Final