Final Internship Report on NBP
Transcript of Final Internship Report on NBP
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Prepared by
Hashim Sanghi
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In The Name Of Allah, The Most Beneficial,
The Most Merciful.
All praise Is For Allah, The Lord Of The Universe.
The Most Beneficial, The Most Merciful.
The Master Of The Day Of Judgment.
( al-Fatiha; verse:1-4 )
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DDEDICATEDEDICATED TTOO MMYY
PPARENTSARENTS
WWHOHOAALWAYSLWAYS CCAREARE MMEE
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ACKNOWLEDGEMENT
I am very grateful to Almighty Allah who enabled me to complete this report
in a very limited time.
My thanks are also due to the young, dynamic, congenial, and qualified staff
of NBP who never let me alone in different situations related to my internship.
Without their humble help, it was not easy.
I cannot forget to pay my special thanks to Mr. Riaz Hussain, Muhammad
Asghar and Hashmat Khan for their cordial cooperation regarding my internship
report and for providing all sorts of information related to banking functions..
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OBJECTIVES OF STUDING THE ORGANIZATION
Objectives for studying the banking organization are,
To get practical knowledge about banking.
To improve my skills
To know how banking support economy.
HISTORY OF BANKING IN PAKISTANHISTORY OF BANKING IN PAKISTAN
The partition plan was announced on June 3, 1947 and August 14, 1947 wasfixed as the date on which independence was to take effect. It was decided that the
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Reserve bank of India should continue to function in the dominion of Pakistan until
September 30, 1948 due to administrative and technical difficulties involved in
immediately establishing and operating a Central Bank.
At the time of partition, total number of banks in Pakistan were 38 out of these
the commercial banks in Pakistan were 2, which were Habib Bank Limited and
Austrasia Bank of India. The total deposits in Pakistani banks stood at Rs.880 million
whereas the advances were Rs.198 million. The Governor General of Pakistan,
Muhammad Ali Jinnah issued the order for the establishment of State Bank of
Pakistan on 1st of July 1948.
In 1949, National Bank of Pakistan was established. It started with six officesin former East Pakistan. There were 14 Pakistani scheduled commercial banks
operating in the country on December 1973, the name of these were:
1. National Bank of Pakistan
2. Habib Bank Limited
3. Habib Bank (Overseas) Limited
4. United Bank Limited
5. Muslim Commercial Bank Limited6. Commerce Bank Limited
7. Australia Bank Limited
8. Standard Bank Limited
9. Bank of Bahawalpur Limited
10. Premier Bank Limited
11. Pak Bank Limited
12. Lahore Commercial Bank Limited
13. Sarhad Bank Limited
14. Punjab Provincial Co-operative Bank Limited
The Pakistan Banking Council prepared banks amalgamation schemes in 1974
for amalgamation of smaller banks with the five bigger banks of the country. These
five banks are as under:
1. National Bank of Pakistan2. Habib Bank Limited
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3. United Bank Limited
4. Muslim Commercial Bank Limited
5. Allied Bank Limited
So, through the Nationalization of Bank Act 1974, the State Bank of Pakistan,
all the commercial banks incorporated in Pakistan and carrying on business in or
outside the country were brought under the government ownership with effect from
Jan. 1, 1974. The ownership, management, and control of all banks in Pakistan stood
transferred to and vested in the Federal Government. The Finance Minister announced
plans to start Islamic Banking system in Pakistan in the budget speech on June 26,
1980, but it could not be possible till August, 2003.
EFFORTS TOWARDS ISLAMIC BANKING INEFFORTS TOWARDS ISLAMIC BANKING IN
PAKISTANPAKISTAN
Pakistan was created in the name of Islam on august 14, 1947. But since then, the
interest is paying the cardinal role in resource allocation of the economy. The banking
system in Pakistan based on interest divergences with Islamic ideology and is
forbidden by Almighty Allah and His Prophet Muhammad (PBUH).
Any government till now in the country except President Zia-ul-Haq did not dare
to change the well-digged system based on interest in banking in Pakistan.
The only step taken under this direction is starting of PLS Deposits from
January 1, 1982. Only PLS saving account and PLS term deposits shall be accepted
on profit and loss sharing basis. The banks were allowed to meet the working capital
requirements of their clients on the basis of Musharika, and Leasing, and Hire
Purchase. Beside it, different efforts are made time by time in this respect but could
not be acted upon at all.
Recently in June 2002, the Shariah Applet Bench of Pakistan issued an order to all
the banks in Pakistan to change the interest-based banking system to Islamic Modes
but the lawyer from the government of Pakistan challenged it by saying that if any
affair is in the favor of the public of the country and is also admired by the public thenit cannot be abandoned by the government. So this issue is still not resolved.
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NATIONAL BANK OF PAKISTANNATIONAL BANK OF PAKISTAN
National Bank of Pakistan (NBP) was established under the National Bank of
Pakistan Ordinance 1949. The primary objective of NBP was to purchase jute from
the growers in the former East Pakistan and also to perform the commercial banking
functions in the country.
National Bank of Pakistan is now the biggest financial institution with assets
totaling over Rs.310 billion with 1428 local and 23 foreign branches. The bank is thehigher financer in agriculture and commodity operation sector.
NATURE OF THE ORGANIZATIONNATURE OF THE ORGANIZATION
National Bank of Pakistan (the bank) was established under the National Bank of
Pakistan Ordinance, 1949 and is listed on all the stock exchanges in Pakistan. Its
registered and Head Office is situated at I.I. Chundrigar Road, Karachi. The bank is
engaged in providing commercial banking and related services in Pakistan and
overseas. The bank also handles treasury transactions for the Government of Pakistan
(GoP) as an agent to the State Bank of Pakistan (SBP). The bank operates
1,261branches in Pakistan and 16 overseas branches (including the Export Processing
Zone branch, Karachi). Under a Trust Deed, the bank also provides services as trustee
to National Investment Trust (NIT) including safe custody of securities on behalf of
NIT .
National Bank of Pakistan acts as a commercial bank and performs the following
functions:
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It acts as the agent of State Bank of Pakistan in handling treasury
functions, receipt of taxes and other revenues.
The places where the State Bank of Pakistan has no branch, it receives
money and makes payments on behalf of State Bank of Pakistan.
It provides credit for State Trading. It deals internal and external bills of
exchange and discounts them.
It keeps deposits of the people and provides lockers and agency services.
It invests in Government securities and bonds.
It provides loans to industry, import and export trade, Agriculture and
Commercial sector.
It handles salaries and pensions of Govt. employees.
Collects utility bills.
Makes Hajj arrangements.
Sale and encashment of Prize Bonds, Defense Saving Certificates.
BUSINESS VOLUMEBUSINESS VOLUME
Year 2007 has been an outstanding year with the bank recording the highest profit in
its history. Our wide range of product offering, large branch network and committed
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workforce are some of our fundamental strengths that enabled us to achieve
exceptional results in a very competitive market.
FIVE YEARS OF NATIONAL BANK OF PAKISTAN
Rs. In Million
YEARS 2003 2004 2005 2006 2007
TOTAL
ASSETS
468,697 553231 577719 635133 762194
DEPOSITS 395492 465572 463427 501872 591907
ADVANCES 161266 220794 268839 316110 340677EQUITY &
REVAUATION
SURPLUS
27584 42936 75818 81954 116338
PRE TAX
PROFIT
9009 11978 19056 26311 28061
AFTER TAX
PROFIT
4198 6195 12709 17022 19034
EARNING
PER SHARE
(Rs.)
8.53 10.48 17.92 24.01 23.34
RETYRN ON
ASSETS(PRE
TAX PROFIT)
2% 2.4% 3.4% 4.3% 4.1%
NUMBER OF
BRANCHES
1199 1226 1242 1250 1261
PROFILE OF EMPLOYEEPROFILE OF EMPLOYEE
PRESIDENTPRESIDENT
EXECUTIVE VICE PRESIDENTEXECUTIVE VICE PRESIDENT
VICE PRESIDENTVICE PRESIDENT
ASSISTANT VICE PRESIDENTASSISTANT VICE PRESIDENT
OFFICER GRADE IOFFICER GRADE I
OFFICER GRADE 2OFFICER GRADE 2
OFFICER GRADE 3OFFICER GRADE 3
MESSENGERMESSENGER
PEONPEON
SWEEPERSWEEPER
BRANCH
HIERARCH
Y
BRANCH
HIERARCH
Y
SENIOR VICE PRESIDENTSENIOR VICE PRESIDENT
MEMBER BOARDMEMBER BOARD
SENIOR EXECTIVE VICE-PRESIDENTSENIOR EXECTIVE VICE-PRESIDENT
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Official set upOfficial set upHead Office
Regional Headquarter
Zonal Office
Branches
General information about
Credit
Processing
Division
Credit
Processing
Division
Special
Assets
Managemen
t Division
Special
Assets
Managemen
t Division
Treasury
Management
Division
Treasury
Management
Division
Management
Support
Division
Management
Support
Division
Inspection
Audit
Division
Inspection
Audit
Division
Credit
Processing
Division
Credit
Processing
Division
Special
Assets
Managemen
t Division
Special
Assets
Managemen
t Division
TreasuryManagement
Division
Treasury
Management
Division
Management
Support
Division
Management
Support
Division
Inspection
Audit
Division
Inspection
Audit
Division
Credit
Processing
Division
Credit
Processing
Division
Special
Assets
Managemen
t Division
Special
Assets
Managemen
t Division
TreasuryManagement
Division
Treasury
Management
Division
Management
Support
Division
Management
Support
Division
Inspection
Audit
Division
Inspection
Audit
Division
Credit
Processing
Division
Credit
Processing
Division
Special
Assets
Managemen
t Division
SpecialAssets
Managemen
t Division
Treasury
Management
Division
Treasury
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Division
Inspection
Audit
Division
Inspection
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INTRODUCTIONINTRODUCTION
A well-developed monetary sector is pre-requisite for the development of any
country. The banking system can contribute greatly to the realization of a nations
potentialities for development by helping to keep aggregate demand in proper balance
with the supply of those resources, which are responsive to monetary demand.
FORMAL DEFINITION of bankFORMAL DEFINITION of bank
Bank is an institution transacting the business of accepting for the purpose of money
from public, repayable on demand or otherwise and withdrawal by cheque, draft,
order and includes any post office saving bank.
Types of bankTypes of bank
These are the following types of banks
Central Bank
Commercial Bank
Exchange Bank
Saving Bank
Industrial Bank
Agriculture Bank
COMMERCIAL BANKSCOMMERCIAL BANKS
The most widely spread banks in any country with an objective to mobilize the saving
of the people and providing finance to the investors. These banks are in the ground for
profit earning motive and in competition with each other. These banks are providingthe basic services to the customers in the form of deposits, advances, remittances and
other.
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COMMERCIAL BANKING SCENARIO INCOMMERCIAL BANKING SCENARIO INPAKISTANPAKISTAN
At the time of independence in 1947, there were 38 scheduled banks with 195 offices
in Pakistan. But by December 31, 1973 there were 14 scheduled Pakistani
Commercial Banks with 3,233 offices all over Pakistan and 74 offices in the foreign
countries.
Nationalization of Banks was not done 1st January 1974 under the Nationalization Act
1974 due to certain objectives. But it had negative effects on the efficiency of the
banking sector. Afterwards, a Privatization Commission was set up on January 22,
1991. The commission transferred many banks to the private sector, i.e., MCB andABL. The government approved and permitted the establishment of 10 new private
banks in August 1991.
Functions of commercial banksFunctions of commercial banks
Borrowing of money from customer in shape of term deposits / PLS savings /
Current Deposits and Notice Deposits.
Lending of money to borrowers in shape of finances short-term finances, long-
term finances under various name, Demand Finance, Small Finance, Cash
Finance, and Running Finance.
Agency services.
Remitting of money.
Foreign exchange business foreign currency deposits, LCs, imports and exports
etc.
Role of commercial Banks in the economicRole of commercial Banks in the economicdevelopment of a country.development of a country.
Banks play an important role in the economic development of a country. If the
banking system is unorganized and inefficient, it creates mal-adjustments and
impediments in the process of development. In Pakistan, the banking system is
organized in a well manner. The State Bank of Pakistan since July 1, 1948 stands at
the apex and is responsible of the operation of the banking system. The other banks,
which form the banking structure in Pakistan, are playing role in the economic
development of the country.
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The role of the commercial bank in the growth and development of the economy on
sound and steady footings is discussed briefly as follows:
Mobilization Of ResourcesThe commercial banks are the most efficient organizations of the economy in the
mobilization the resources and making a profitable pool of these resources. Taking
then money from the savers and lending it to the investors is the most prominent job
of the bank.
Financing Development Projects
The banks and other financial institutions advance loans for the development projects
that enhance the pace of overall development of the country. These advances are
made in both public and private sectors for the purpose of achieving a good and
strong economic field to carry on the other activities of trade and business.
Creating Climate For Capital Formation
Capital formation is done by the act of accepting peoples money and putting into
profitable ventures. This money so accumulated, make possible the availability of the
needed capital by the investors. The investors on the other hand are able to get the
needed funds that shortfall their requirements.
Assisting In Planned Development
With the help of well-organized banking sector the government is able to make good
implementation of its economic planning and can execute the developmental activities
for the welfare of the society.
Promotion Of Saving Habit
There are persons who have money but cannot put them in profitable use. The banks
attract these persons by offering a variety of accounts. They provide them not only the
safety of the funds but also higher returns on them. The banks, in this way, promote
the habit of thrift among the people.
Effective Implementation Of Monetary Policy
With the help of a good banking system in the country the government and the
Central Bank regulate the monetary supply and demand of the money. A good system
helps in the implementation of the policies that are formulated by the government.
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Through these banks using different techniques of credit control makes credit
expansion and contraction.
Narrowing Regional Disparity
The banks help in bridging the regional disparities in the country. The surplus fund of
one region is sent to the centers of deficit. The less developed areas acquire funds, put
them into productive channels and increase production. The banks this help in a
balanced growth the economy.
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Executive summary of NBPExecutive summary of NBP
National bank of Pakistan since its establishment in 1949 is working as a commercial
bank and also providing specialized services to the government and State Bank of
Pakistan. The bank was nationalized with other major banks in early seventies and
since then being a government owned organization it has not been able to gibe a
remarkable performance. Further, the privatization of other banks has also created a
stiff environment in the banking industry.
National Bank of Pakistan, besides providing the general banking services is also
acting as an agent to State Bank of Pakistan, in areas where State Bank of Pakistan
does not has its own branches. National bank of Pakistan is working with the State
Bank of Pakistan in effective implementation of the credit policies that have been
formulated from time to time by the government and State Bank of Pakistan to control
and monitor the fiscal and monetary situation in the country.
National Bank of Pakistan currently has a wide network of branches inside the
country and in all commercial centers of the world as well. Through this huge
network of branches the Bank is providing all sort of services that have become part
of the modern banking. Nation Bank of Pakistan successfully adopts new innovationsand new products, which are rapidly adding up in the product mix of banking
industry.
The Bank is providing deposits facilities to more than five hundred thousand
customers in the country and which is increasing by the time. The bank has been
providing a service to the government of making salary payments to all government
employees on behalf of the government. These payments are sent to the bank for
distribution from the provincial divisions of all concerning departments.In the deposits area the bank is providing special accounts such as PLS Term Deposits
(Monthly Income account), which provides a monthly with draw able return on the
account. And there is a National Income Daily Account, carrying hybrid
characteristics of saving and current accounts, distributes all profits on daily product
basis to the account holders. The bank is trying to revolutionize the services that are
provided over the counter and is working for an early change in all the branches of the
bank.
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In the advances side the bank has been successful in deploying its resources in the
best way in all commercial, industrial and agricultural sectors of the country. These
advances have been increasing with the increasing trade and commerce, and bank has
been able to meet the requirements up to the maximum extent.
The introduction of a new set of services in shape of foreign currency accounts has
further given a sharp rise in the banking field. This has made easy for the foreigners
residing in Pakistan to be encouraged and make the inflow of foreign exchange in the
country more stable. This new service, though shaken its importance after undue
freezing of all accounts in 1998 have spread a situation of non-confidence among the
masses, still these accounts are increasing in number.
The financing process of all international trade, which modern banking made less
complicated and more secure, have increased with the global-village concept in the
world. For banks it is an opportunity to grasp the maximum share as possible through
being more efficient to reach the customer. National Bank of Pakistan has been
providing these financing services with great esteem and devotion to public and
private enterprises. Nation Bank of Pakistan up till 1995 has shown good performance
in the banking field with earning good profits and financing bigger projects. But after
that year with the privatization of three nationalized commercial banks, the bank has
not been able to sustain its good ranking in the industry. Further due to being under
the political influence the bank has been forced to make unprofitable commitments
too.
The management is considering the fact and doing planning for the sake of getting it
through these unjustified pressures but still not been able to implement them in good
manner. This is a further disturbed by the demotivated and unqualified staff that is
working with the bank.
To be able to regain the level of performance and profitability the bank has to take
serious measures to escape from the political influence, build a competent and
qualified pool of employees, make all possible efforts to introduce the modern
technology that is serving the banks in the world and to enhance the confidence of the
customer, are necessary steps be taken by the bank.
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Account opening departmentAccount opening department
Borrowing funds from different sources has become an essential feature of todays
business enterprises. But in the case of a bank borrowing funds from outside parties is
all more vital because the entire banking system is based on it. The borrowed capital
of a bank is much greater their own capital. Banks borrowing is mostly in the form of
deposits. These deposits are lent out to different parties. Such deposit creation is done
through opening an account in the bank.
Types of accountsTypes of accounts
In NBP, there are the following types of accounts: Current Account.
Saving Account.
Term Deposit.
Notice Deposit.
Current accountCurrent account
In current account there is no interest on it. It is for only transaction purposes. They
are paid on demand. When a banker accepts a demand deposit, he incurs the
obligation of the paying all cheques drawn against him to the extent of the balance in
the account. As there is no profit paid on this account it is also called checking
account because cheques can be drawn on it. Current account is mostly opened for
business. The minimum amount for opening the account is Rs.100/-.
Saving accountSaving account
The purpose of this account is to induce the habit of saving individuals in the
neighborhood. The profit on PLS saving Accounts in NBP is checking accounts paid
on the basis of profit and loss calculated after six month. The minimum deposit for
opening the account is Rs.100/-.
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Notice DepositsNotice Deposits
Notice Deposits are kind of fixed deposits. The minimum balance requirement for
opening the account is Rs.5000/- and payment is drawn on maturity of the specific
period. Notice Deposit is of the two kinds:
One for which a prior notice of 7 days is required from the customer before with
drawing deposited amount and for which rate of return (ROR) is the 7 days rate.
Second for which a prior notice of 30 days is required from the customer before
with drawing the deposited amount and for which rate of return (ROR) is the 30
days rate.
These rates are more than the saving rate but less than the rate calculated after six
month. These are one-year deposits and the rate of return (ROR) is supposed 7%. If
person withdraw the amount before maturity, suppose 7th month then we charge him
the saving rate, which is, suppose 4% and the remaining 3% is our recovery.
Term depositsTerm deposits
A term deposit is a deposit that is made for a certain periods of time (not more than 5
years). At the end of the specific period, the customer is allowed to with draw theprinciple amount.
The term deposit account rate varies after six month and rate is depend upon the
period of term deposits, as period is increased the rate is also increased and the
minimum balance requirement is Rs.1000/- but no maximum limit. Prior A/C is not
required for term deposits.
The amount of profit is given to deposits in three ways:
By cash.
By sending a bank draft to depositors home address or office or whichever is
specified as mailing address.
The amount is credited in any one of the checking accounts of the depositor.
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Distribution of profit on pls deposits forDistribution of profit on pls deposits forthe half year ended June, 30, 2001the half year ended June, 30, 2001
Nature of Account Time Period Rates of Profits
PLS Special Notice Account7 to 29 days Notice 4.00%
30 days & over Notice 5.00%
PLS savings On monthly min balance 4.10%
PLS Term Deposits Account
Three months 6.50%
Six months 7.50%
One year 8.00%
Two years 8.50%
Three years 9.00%
Four years 9.20%
Five years & above 9.50%
Account opening procedureAccount opening procedure
For the checking accounts (C/A, S/A), there are different types of account holders are
required. The operation / procedure requirement that is needed for Individual
Account differ from Joint, Proprietorship, Partnership, and Limited Company
A/C as explained below.
Individuals accountIndividuals account
When a single man or woman opens an account in his/her own name and has the right
to operate it is called individual account.
DocumentationDocumentation
All the peoples are required to bring a copy of their NIC and come with the person
who already has an account in the same branch along with the copy of his NIC.
Illiterate persons are required to bring three passport size photos as well.
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OPERATIONOPERATION
The person place a Check Mark in the type of account and type of operation
required.
He/she fills in part-1 of the form, affix his/her either two or four similar signature
(or thumb expression in the signature space and get it introduced and signed by a
person who already has an account with the bank and write his account no in the
specific rows in a specific space.
The person fills Annexure-A (next to kin) form where he/shes father, mother,
husband/wife or any other relatives name, his/her address, phone no and affix
his/her signature to certify this requirement. This requirement is needed because in
his/her absence bank can have correspondence with the specific person.
The person put her/his signature (or thumb expression) on the Signature Specimen
Card (SS CARD) similar in the area on the form.
The person deposits the initial amount for opening account to the cash counter.
The person put his signature on lower part of the form-559 (check book
requisition) on two places in authorized signature and fills in the Title of
Account space by writing his name.
If the person put his signature in Urdu or any language other than English, he
signed a Vernacular Form where he undertakes that affixed signature are
original and his own.
The next day is the opening of account.
Joint accountJoint account
When two or more persons, neither partners, nor trustees, open an account in their
name is called joint account. Husband and wife or two persons of same sex can open
joint account.
DocumentationDocumentation
For joint account copy of N-I-C Card of all the persons is obtained other things
remaining same as in individuals account.
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OPERATIONOPERATION
The person checks the type of account and type of operation required in the
respective box on the form.
The persons fill in the Part-I and Part-II in the form.
Signatures of both persons are obtained on the form in the area specified for
signature and SS Cards.
In the title of account space names of all persons are maintained.
Accounts holder specified in the form that they would operate the account singly
or jointly.
Proprietorship accountProprietorship account
When the owner of the firm operating singly, opens an account in his firm name, this
account is called a proprietorship account proprietor himself liable for all his acts.
DocumentationDocumentation
For this kind of account, an application for opening the account on the firm letter
pad (having the firm name) is required along with the N-I-C Card of proprietor.
OPERTIONOPERTION
All operation remains the same except that the firm name is written in the Title of the
Account area and signature of the proprietor are affixed in the SS Card and the area
specified for signatures on the form.
Partner ship accountPartner ship account
The account is opened in the firm name and all partners designate one or two persons
to act on behalf of the partnership firm all acts on behalf of firm. The partners in the
partnership firm are liable for the acts of the firm jointly and severely.
DocumentationDocumentation
Application to open the account on the firm letter pad.
Copy of N.I.C. Card of all partners.
Partner ship deed in case registered partnership firm.
Letter showing the implied authority of one or more partners to act on behalf of
the firm.
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In case of non-registered partnership firm, undertaking on behalf of the firm to
remain liable for all acts of the firm. Names, addresses of all partners are written on the pad.
OPERATIONOPERATION
All other requirement remain same except that the form is dully signed by all partners
cards are signed by all those partners who will act on behalf of the firm and along
filling Part-I, Part-IV is also filled.
Limited company accountLimited company account
These are normally operating only the current account not saving account.
DocumentationDocumentation
Memorandum of Associations.
Articles of Association.
Resolution of the Board of Directors.
Certificate of Incorporation.
Certificate of Commencement of business.
N.I.C.
OPERATIONOPERATION
The person authorized in the resolution of the Board of Directors put their signature
on SS Cards. Annexure-A (Next to kin) requirement is not need in case of a limited
company. After completing all these formalities, introducers signature is verified.
Customer signatures are admitted by stamping Admitted near signatures and again
signatures on SS card are admitted in the same way. The same process of verification
and admission of signature is repeated on the F-559 and signature on next to kin area.
After completing each and every formality, signatures are taking by all those partners
who will act on behalf of the firm and along filling part-I, part-IV of the form.
Letter of thanksLetter of thanks
At the end, after opening the account, NBP issues letter of thanks to Account
opener and Account introducer for the trust they have on NBP at the same day.
The purpose of this letter is to check the address of both the parties for future contact.
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Stamping PostedStamping Posted
After completing all this process, the forms are signed from managers of the branch
after which these forms are stamped across as POSTED on one corner of the front
side of the form. And these form are sent for posting in the computer, then they are
posted in the respective. Account Opening File.
Procedure for opening other accountProcedure for opening other account
Notice DepositNotice Deposit
The procedure for issuing Notice Deposit in NBP is as follows:
The customer comes to the bank and specifies the number of days for which he
wants to deposit his money in Notice Deposit.
The credit voucher is made for the amount of cash to be deposited the presence of
account is not necessary.
The officer then fills the notice/deposit form. The date of opening, the period, the
name of the customer, the signatures etc. are all written on the form.
The Notice Deposit receipt is filled accordingly. All the requirements are carried
out the signature of the customer and the authorized officer, the stamp of the bank
etc.
The number of the Notice Deposit form and Notice Deposit is noted receipt is then
given to the customer.
The Notice Deposit receipt is then given to the customer.
The number of the Notice Deposit form and Notice Deposit receipt is noted in the
Notice Deposit register.
After completion of the form, it is posted in the Notice Deposit file.
A 0.2% tax on the principal amount is taken while issuing the receipt.
A credit voucher made and the amount is credited to the tax on ND.
Term depositTerm deposit
Any person can open a term deposit. He needs not have an account in the bank. The
procedure is the same as that of the Notice Deposit.
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Other responsibilities of account openingOther responsibilities of account opening
departmentdepartment
Account closingAccount closing
Account is closed on the written request of the customer NBP debits Rs.100/- as
incidental charges for closing the customer account from the bank. The account
holder with draws the amount by writing a cheque and just leaves Rs.100/- in his
account.
Procedure
The customer for individuals account writes an application to the manager of the
bank on a simple paper about the closing of his account with the bank (In case of
proprietor ship partnership and limited company account the application should be
written on firm or company letter-pad).
The individual or in case of other type-proprietor firm and company surrender the
cheque-book to the bank.
The cheque-book is then torn from one side and is attached with the application.
In case of Ltd. Company Account resolution of the board of directors is also
obtained to attach it with the application.
The account opening form of the account holder is taken from the account-
opening file, and the application, cheque-book, and resolution of board of
directors in case of limited company account are attached with the form.
Lastly, it is written in Red Ink on the form that account closed and Date of
account closing.
Then the form is put in the account-closing file.
Receiving inward checksReceiving inward checks
Another responsibility and function of account opening department is to receive
inward cheques for collection from other banks as well as of NBP. Then thesecheques are sent to clearing official who clears these checks at SBP from other banks.
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Cheque-book issuingCheque-book issuing
Check books are issued only for checking account such as current account, saving
account. They are not issued for other fixed and term deposits because of their long-
term accounts nature.
When an account is opened, cheque-book is usually issued the next day, however they
too are issued on the same day of opening the account keeping in view the energy
requirements the account holder.
Cheque-books leaves vary with the nature of the account. For example, 50 leaves and
100 leaves cheque-book are issued for current accounts depending upon the energy of
the account holder. Where as 10 or 25 leaves cheque-book are for saving accounts. 10
leaves cheque-books are handed over to easily individuals account, holder.
There is Rs.2/- excise duty carried on cheque-book leave.
Issuing Procedure
Signatures on cheque-book requisition are verified by matching with signatures on
SS Cards.
Cheque-book leaves number, account number, account holders name are
mentioned in the cheque-book issue register and take the signature of the account
holder.
The name of A/C holder and date of cheque-book issuance is written on cheque-
book requisition and the account opening officer puts his initials on requisition
leave.
A/C number is stamped over the leaves of cheque-book and finally authorized
person affix his signature over the debit voucher of the excise duty and he voucheris attached from the cheque-book and is handed over to the customer.
Everyday postingEveryday posting
At the end of each day, posting of cheque-books is performed, the account department
makes credit vouchers of excise duty on cheque-book leaves, and posts it in the
company.
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LockersLockers
Locker services are provided by the banks in order to provide the customer a safe
place where they can kept their precious documents, things, like jewelry which can be
dangerous for robbery and theft to keep in the house. Against these locker service the
bank take certain charges. NBP also has a great number of lockers in most of its
branches.
NBP has three main types of lockers.
Small Size Lockers.
Medium Size Lockers.
Large Size Lockers.
Locker charges vary with the size of the lockers. Locker charges are half for the
employees of the National Bank to the normal charges charged to the customers.
Recently locker charges have been reduced by 25% as previous.
Govt. collectionsGovt. collections
NBP is also entitled for the govt. collections including the Sales Taxes, Income Taxes,
Property Taxes, Professional Taxes, and WAPDA Bills, PTCL Bills, Sui Gas Bills as
well. All the taxes and bills are collected on the cash counter, cashier count the money
and received the voucher and put the stamp Cash Received and break the voucher in
to two parts and give one portion to the customer and one keep in the counter. Each
types of taxes or bills have a certain lot size when the lot size is completed the cashier
send the lot of bills or taxes to the account opening dept. and now the responsibility of
the account opening officer to prepares the separate Scroll for each categories of
bills or taxes and make correctly the subtotal or grand total. Then after the 1.30PM the
cashier matches the total amount of all the bills and taxes and then account-opening
officer makes the credit vouchers to transfer the amount in to the concerned accounts.
At the end of each week the account opening officer calculate the weekly commission
or exchange on the collection of the bills or taxes and pass the debit voucher to the
concerned accounts.
Other then bills or taxes the NBP is also entitled to pay the Pension to the retired
govt. employees after each month. When a pentionist come to the bank they present
their pension book to the officer, he will check the monthly amount to be paid and
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Then he sees whether the payment is of one month or more. He will writes the amount
to be paid along with the date on the pension form. And also enter in the pension
register, from the register he verify the signature and also the person because the bank
has a photograph of pensioner on the register and put the stamp Signature Verified
branch stamp and the stamp that pay cash. Then the amount is checked an other
officer and counter signs it and then pensioner present the form to the cash counter
and received the cash.
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CREDIT DEPARTMENTCREDIT DEPARTMENT
The earning of a commercial bank are chiefly derived from interest charges on loans
and discounts it. Now loans are recognized as advances or finances. The advances are
made through the deposits that are kept in the bank by the customers. The bank pays
profit on the deposited amount and receives mark up on the advances made of
different amounts. NBP introduced the mark up based advancing in Jan1, 1985 when
the Islamization of the economy was influence under this system of advancing the
bank is entitled to receive a constant sum of money on the amount that is outstanding
on the account of the party.
LENDING POLICYLENDING POLICY
This policy statement sets out the principles for Board of Directors who will
determine credit activity of NBP. The Board of Directors delegates authority to Credit
Committee to approve, to direct, and to review commercial lending of NBP to ensure
its efficiency and effectiveness. The policies are defined under the following
headings.
CREDIT PRINCIPLECREDIT PRINCIPLE
The following principles are to be adopted for lending authority, approval, monitoring
and control on a basis consistent with NBPs operational objectives and business
stages.
Objectives
Providing suitable credit services and products.
Not compromising NBPs standards in extending credit.
Transactions, which dont apparently exhibit adequate commercial consideration,
will not be undertaken accept when authorized by the credit committee/president
Structure
The authority structure should enable effective adoption to changes in the economical,
technological regulatory and competitive environment.
Performance
The education and admission of the loan portfolio should conclude with in defined
and acceptable risk limitation toward attaining satisfactory return on the banks
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capital. Credit advancement shall focus on the development and enhancement of
customer relationship and are measured on the basis of the net yield for each customer
relationship where individual transaction should also be profitable
Administration
The administration of the loan process should insure compliance with all laws and
regulations of regulatory authorities and the credit policy of the NBP. Lending where
repayment and performance on mark up or profit servicing deteriorates are identified
at early stage and closely monitored by the branches to avoid loan losses.
CREDIT PORTFOLIO LIMITSCREDIT PORTFOLIO LIMITS
The nature of the credit portfolio are governed by guidelines set down by the credit
committee from time to time, which are in keeping with local regulatory requirement.
These guidelines are consistent with overall NBPs limits.
Total Facilities
The aggregates of all the facilities shall confirm to regulatory requirement as specified
from time to time.
Term Facilities
Aggregate term facilities for more than one year should not exceed 30% of credit
portfolio. Any facility for more than one year shall require prior approval of the credit
committee.
Unsecured Facilities
The aggregate of all advances to a single person should not exceed than the guidelines
stipulated by the regulatory authorities.
Security
Security accepted as collateral for credit facilities are properly valued by approved
surveyors. Appropriate margins of security are taken in accordance with not only
local regulations and practice but such margins should also reflect disposal costs and
potential price movement of the underlying assets.
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Financing Against Share
Where as credit facility will not be extended towards floatation of share capital of
Public Listed Companies, facilities will not be consider against unlisted shares. Where
facilities are considered against quoted share. Which are freely marketable, suchfinancing are subject to the margin requirement of the regulatory authorities or as
determined by the credit committee whichever being the higher.
Borrower Liquidity/ Leverage Ratios
The branches must also ensure that the current ratio of the borrowers is equal to or
more than one. The debt- equity ratio should not exceed 60:40 except in cases where a
debt- equity ratio has been specified by the regulatory authorities. This condition may
be subject to change by the regulatory authorities.
Credit Reviews
All limits are subject to at least an annual review and where necessary branch
managers will forward half- yearly reviews. This review function is the responsibility
of the branches that will submit periodic reports to the credit division immediately
notifying any change in environmental factors. The changes are assessed on expiry of
limits or reassessed before the scheduled periodic review whenever necessary.
CREDIT APPROVALCREDIT APPROVAL
The primary individual factor determining the quality of the banks credit portfolio is
the ability of each individual, counter party to honor, on a timely basis, all credit
commitments made to the bank. This must be accurately determined by the
authorizing credit personal prior to credit approval.
The credit approval process must be as follows:
Authority
Credit are extended in accordance with the authority levels approved/ delegated by the
Board of Directors from time to time; provided credit approval is required at short
notice rather than that at normal span, the proposal may be referred directly to the
credit division. The credit division has authority with the agreement of a quorum of
the members of with the appropriate credit committee, to extend the loan.
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Documentation
It is the essential that the proposal defines clearly the purpose of the facility, the
source of repayment, the agreed repayment schedule, the value of security and the
customer relationship consideration implicit in the credit division.The security to be accepted as collateral for the facility and all documentation relating
to the security of the facilities must be in the approved form. All approval procedures
and required documentation must be completed and security is perfected, prior to the
disbursement of the facility.
Credit Risk Assessment
It is necessary to have a detail and complete credit risk assessment for each facility.
Customer relationship must not be over emphasized. It is the absolute responsibility
of the proposing officers and the branch managers to ensure that all necessary
proposal documentation is collected before the facility request is sent to the credit
division or committee.
Prevention Of Criminal Use of Banking Channels
The branch manager shall ensure that all credit facilities being proposed, every efforts
has been made to determine the true identity of a customer and in case of each
transaction the source of funds is established. The relevant Prudential Regulations
applicable must be compiled with before forwarding credit applications to the
approved authority.
CREDIT ADMINISTRATIONCREDIT ADMINISTRATION
The principle elements of credit administration are as follows:
Credit File Maintenance
Facility Evidence Maintenance
Credit monitoring and review
Credit File Maintenance
The credit file on each facility must contain all information necessary to facilitate
immediate monitoring of that facility. The primary items will include:
Credit Application is received from the customer and Credit Report is received
from the credit information Bureau of the SBP whenever necessary.
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Credit approval documentation, summarizing the details of the borrower; credit
request, purpose of credit repayment sources, collateral description, valuation and
guarantors.
Evidence of the credit approval and date upon which approval was granted
together with any comment and maintained by the credit division.
Details if all related facilities to the same customer group are to the credit by the
branches and maintained by the credit division.
An assessment of the competence and quality of the borrowers management, the
general economic and competitive environment of the borrowers industry and any
other pertinent factor which may affect the borrowers ability to repay the facility.
All supporting data such as financial statements and analysis therefore references,
credit investigation, results and notes of all discussions with the borrower and
other relevant parties.
Written instructions for the disbursement schedule of funds.
Summary sheet containing information regarding, amount dates for mark up
/profit charges and commitment fees, identification of industry risk and
classification/ rating of the borrower, guarantor and security details of overdue
payments.
Each credit file must be maintained in saved in fireproof location at branches and
access restricted to authorized personal.
Facility Evidence Maintenance
All legal documents and register of security must be maintained at branch such
documents may include:
Signed credit agreement
Signed guarantees or other evidence of credit security or collateral agreements.
All concerned documents are held in the secure location.
Credit Monitoring
Responsibility
Responsibility lies in branch manager to monitor the overall profile and risk aspect of
the credit portfolio in accordance with criteria setout in Banks Credit Policy. This
review is held to judge performance responsibility of the manager to ensure at each
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credit extension the portfolio complies with all limits set. The branch manager must
provide a classification summary to the Credit Division which include following
information:
Total Facilities
Term Facilities
Exposure to customer group
Unsecured facilities
Industry exposures.
He will provide a commentary on any local development, which may impact upon
limit setting and the risk of the credit portfolio.
Assessment
A formal assessment of each customer is carried out on a regular basis. If facilities to
any customer groups are booked in number of locations, a designate officer shall be
responsible for management of the Banks exposure to that customer group. Any
development in the customers circumstances, which may adversely affect the
management of the facility, and in particular the credit rating assigned to the customer
must be documented and advised by the manager.
PRINCIPLES OF LENDINGPRINCIPLES OF LENDING
Once a customer decides to get a loan his interview with banks lending officer is
necessary, because this gives the customer the opportunity to explain his credit needs.
The bank officer can make a guess to assess the customers character.
When a request for finance is received it has to be ascertained:
Borrower has the legal capacity to borrow.
Banker must inquire the purpose of the advance.
Duration of the advances.
Source of repayment of the advances.
Preparation of the credit report.
The banker considers the following points important.
Safety & CharacterSafety & Character
Character, capacity, capital and collateral are the three basic credit factors of the borrower to discharge his obligation in accordance with the term of the loan
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agreement. Integrity is considered of vital importance. Careful observation of business
will assist in evaluating the integrity factor. Assessment of the character is very
important. A banker must have an ability to judge the character and credit worthiness
of the borrower.
Purpose of advancePurpose of advance
It self evident that one needs to know the purpose for which banks money is used i.e.
for increasing fixed assets, current assets or for decreasing liabilities. The banker
needs to examine each of them. It is for branch manager to compile a complete credit
proposal the purpose must be one, which is satisfactory for the banker. The amount is
likely to be sufficient for the given purpose. A banker must ascertain the nature of
borrowers business so as to assess if he is competent person to repay the loan in thiscase of companies it is necessary to check that the purpose is not out side the
objective mentioned in the Memorandum of association.
ProductivityProductivity
As a matter of fact advances must be granted to such trade and industries, which are
capable of meeting the economic objectives of the country. Increasing gross
domestic/national product, encouraging growth of agriculture, cottage industry, small
business, local technology and talent to create more employment opportunities. The
credit repot should also depict that the proposal will be remunerative from bankers
profit point of view.
Security of advancesSecurity of advances
Bankers lend against repayment ability of the borrowers and not merely against
security. A proposal in which repayment is not reasonably demonstrated in not
satisfactory proposal. The security must be easy to evaluate and readily realizable.
The banker accepts securities and keeps sufficient margin to secure the advances.
Securities can be the goods, stocks and shares.
Repayment of advancesRepayment of advances
Source of repayment of the borrower is required to be inquired. A banker must see at
the time of lending that the loan will be liquidated with in time and also without
restoring to a legal action against the borrowers assets. A banker is to see that his
funds are not stuck and this is why he carefully investigates the borrowers assets.
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After the completion of investigation a decision can be made for approving or
declining a loan application.
RemunerationRemuneration
The banker must see that the advances would prove highly remunerative. He must
know that the mark up on advances is the main source of banks earning and he must
ensure that the rate of markup is carefully maintained, recoveries are made from the
borrowers along with incidental charges as well as credited to banks account.
Credit reportCredit report
The report is prepared by bank of the intending borrower with a view to considering
his Credit Worthiness and Eligibility for the Bank Finance. Besides other things it
contains the net worth of the borrower.
TYPES OF FINANCESTYPES OF FINANCES
Finances can be classified into two categories:
Unsecured / Clean Finances.
Secured Finances.
UNSECURED FINANCESUNSECURED FINANCES
Unsecured finances are those finances against which no security has been taken.Unsecured advance include only the Clean Finances.
Clean FinancesClean Finances
Clean Finances are those finances, which are allowed to govt. employees, against
their salaries. The limits of the Clean Finances are up to three basic pay, and are
required to repay within one year.
Legal Documentation
Formal request for grant facility.
Authentic proof from the concerned department about his salary.
N.I.C.
Undertaking from the employee that the salary for the applicant shall be remitted
to the branch and in case of clients inability to repay the finance the same would
be adjusted from his dues.
Sanctioning of the loan.
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SECURED FINANCESSECURED FINANCES
Secured finances are those finances against which security has been pledged. Security
can be the property, stocks, deposits, prize bonds, hypothecation charges, shares,
mortgages on tangible readily reliable unencumbered assets, and govt. securities.
Secured finances are of the following categories:
1. Running Finance.
2. Agri. Finance.
3. Demand Finance (Gold Finance).
4. Cash Finance.
5. Small Finance.
These are also known as the short-term finances.
Running FinanceRunning Finance
Running Finance is a short-term finance, one year of payment, to assist a large-scale
business operator to carry on his day-to-day requirements of liquid funds. This
account is opened to made operations in his favor or course all disbursements are
made under proper consideration of the securities and 4 Cs of the borrower. Bank
retain 25% margin on the Running Finance, means that if security having a value of
Rs.100000 then against it Rs.75000 has been financed by the bank. The mark up rate
on the Running Finance is Rs.0.4384 paisa/1000/day.
Security
Running Finance can be against the following securities:
Banks Deposits.
National Defense Saving Certificate.
National Investment Trust Units.
Life Insurance Policy.
Shares of Joint Stock Companies on Banks approved list.
Prize Bond.
Operation
Formal request for the finance.
N.I.C.
Application form for Running Finance has been properly filled.
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Pledge original certificates of the security.
Sanction for the loan convey to the customer.
Documentation
IB 28 / 31.
Pledge letter.
IB 6 (Revised)
F 200 (Dated)
Security description.
Agreement for the finance.
F 200 (Transfer Deed Dated)
Security delivery letter (F 198).
IB 12 (Demand Promissory Note).
Surrender value certificate from insurance Co.
Then the opening of the Running Finance (F 53).
Life Insurance Policy duly signed in favor of Bank.
Certificate from the Joint Stock Co. confirming Banks lien.
Confirmation of the genuineness of the security instruments.
In of saving deposit, mark up lien of the bank at saving center book.
Authority letter from the Client to debit account for the premium.
A certificate from the Insurance Co. that the age of the insured is admitted.
NIT Units Certificates with its relative surrender and Transfer Letter / Forms.
Letter addressed to the Joint Stock Company to mark lien against Bank Finance.
Under taking that pledge letter is original and that the client has sign it with out
any pressure.
Letter from the client to National Saving Center / Post Office to pay proceeds of
the NDSC to the Bank.
Letter from NSC/PO confirming the instructions of beneficiary with regarding the
payment of proceeds of the National Defense Saving Certificates to the Bank.
Agri. FinanceAgri. Finance
Now a day Agri. Finance has been included under the category of the Running
Finance. Basically there are two types of Agri. Finances:
1. Agri. Finances for Crop.
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2. Agri. Finances for Development.
For the development and expansion of the most participative sector of our economic
prosperity, the National Bank of Pakistan has been providing loans and finances to the
agricultural sector since its establishment. Agri. Finances for crop is called as short
term finance that is provided to carry on the operational requirements of the Agri-
business such as purchase of seeds, fertilizers, pesticides, and other seasonal
requirements of the farmers till the final activities to make the product reach to the
market. This finance is provided to cover a period of less then one year.
The other type is long term, which is provided, or the purchase of Agri-machinery and
other heavy equipment (tractor, harvester) that are used for the reclamation of the
Agri-land. But these equipments have registration joint with the bank. This finance is
provided more than one year.
Security
Personal guarantee (personal identity).
Third party guarantee.
Against third party guarantee.
Mortgage of immovable property.
Against Agri. Pass Book.
Documentation
Formal request
IB 6C / 12 / 21 / 22 / 26 / 29.
F 198 (Security Delivery letter)
Term deposit Receipt duly discharged by the client.
Letter of undertaking. Mark Lien by the Patwari and verified.
Property Valuation Certificate issued by the Bank Engineer.
Copy of extracts of form City Survey or maturation record.
Certificate of Title Clearance issued by the Banks law Officer.
Non-Encumbrance Certificate.
Search Certificate issued by the Registrar Joint Stock Companies.
Insurance Policy Premium paid with Bank Mortgage Clause.
Original sale deed.
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On Objection Certificate issued by form co-operative Society to the effect that the
borrower is not indebted to the society.
Short term Agri. Loans has different financing limit and depend of the nature of the
crop and area covered by the crop. In case if some crop is destroyed by rain or some
other reason then the payment of the loan may post pone and the repayment may be
extended by the concerned authority. Or in some special case the loan may be
forgiven to the farmer.
Demand Finance (Gold Finance)Demand Finance (Gold Finance)
One time disbursement of the whole amount sanctioned, as the limit for the credit
allows. Any person, individual, group, company, firm and all others, can achieve this
mode of financing. The mark-up or interest is calculated on the total amount disbursedand requires to be paid before the date of final adjustment. Demand Finance has 9
15 month duration. The Demand Finance is a one transaction finance, means that once
he withdraw the amount and after when submit the amount then he can never be
withdraw again.
Security
Demand Finance are given against Gold ornaments. Bank make their self secure by
taking 50% margin, because of mark-up (18%), default risk, impurities, and in case of
auction sale of the gold sales tax (18%).
Operation
Request for the loan.
Assessment.
Sanction of the loan.
Documentation
IB 6A / 12 / 26.
Letter of introduction (F 344)
Gold loan insurance letter.
Delivery letter for Gold ornaments cum evaluation certificate (F 205).
Gold smiths weight (net weight) quantity and quality valuation certificate.
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Cash FinanceCash Finance
In this mode of financing the borrower is allowed to make withdrawals of funds as he
requires, but the total amount outstanding cannot exceed the limit sanctioned. The
mark-up / interest is calculated on the amount outstanding on his account. The
calculation of mark-up / interest is based on the number of days a specific amount is
withdrawn. This finance is normally borrowed by small traders or individuals for their
petty matters involving cash transactions up to rupees three hundred thousand
maximum. These are normally for the seasonal business like cotton, which have 6-8
month business.
Security
Pledge of stock.
Third party guarantee and Hypothecation of stock.
Pledge of stock & collaterally secured by third partys guarantee.
Documentation
Formal request for the facility.
Insurance policy.
IB 6 / 12 / 23 / 25 / 26 / 29.
F 53 along with Partnership letter partner deed.
F 219 Letter handling over physical possession of the godown by the borrower.
F 218 Letter acknowledging Banks Lien in the stock stored (taken from
godown owners).
Letter from client authorizing the Bank to Debit salaries of Godown staff to his
account.
F 138 Resolution to be obtained from the limited co. covering operations on an
account.
F 184 Resolution to be obtained from the limited co. covering authority to
Directors to execute documents.
Certified copy of Memorandum and Articles of Association.
Certificate of Incorporation.
Certificate of Commencement of business (in case of public limited).
Resolution passed by the board of Directors for the grant of Cash Finance facility.
Balance sheet (audited).
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Operation
Formal request for the finance.
Assessments.
Sanctioning of the finance.
Small FinanceSmall Finance
Small Finance is normally for the expansion of the business. In Small Finance
Hypothecation is in the custody of the owner. Where as if the security is pledge then it
will in the custody of bank.
Security
Hypothecation. Pledge.
Stock.
Mortgage.
Vehicles.
Documentation
IB 6B / 12 / 25 / 26.
Formal request for the facility.
F 53 along with partnership letter.
Partnership deed.
Letterform client authorizing the bank to debit salaries of Godown staff to his
account.
Letter signed by the client authorizing the bank to debit his for the payment made
in respect of insurance premium.
Insurance policy in favor of bank.
Registration in the Joint names of the bank and the borrower.
Long term financesLong term finances
There are some other categories of the long-term finances:
Local Manufacturing Machinery (LMM).
International Borrowing for Regional Development (IBRD).
IBRD finances are usually granted for the development of the industries. Where as
LMM finances are granted to the person who want to import the machinery from any
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other country and going to use that machinery for local production. In this case the
bank has pledged building or machinery, up till the person to the bank has remitted
the whole amount. After collecting the whole amount the bank will transfer the title of
ownership to the person.
LEVEL OF LENDINGLEVEL OF LENDING
The structure for lending in NBP has three levels:
Credit Committee at Zonal Office.
Credit Committee at Head Office.
Board of Directors.
CREDIT COMMITTEE at Zonal OfficeCREDIT COMMITTEE at Zonal Office
There is no authority to the Branch credit committee, the branch credit committee is
only the responsible to make the case for the loan and forward it to the Zonal Office
for approval. The Credit Committee at Zonal Office gives first approval. It has
discretionary powers with in which it implements Credit Facility decisions. The credit
department in branch prepares credit line proposal (CLP) for each advance along with
other supporting documents. The supporting documents and CLP are presented to the
Credit Committee at Zonal Office for considerations. The credit committee at Zonal
Office exercises judgment individually and judiciously on accordance with Banks
lending criteria.
If the proposal is within the discretional powers of the Credit Committee of Zonal
Office, the proposal may be approved after thorough evaluation of the credit risk. The
approval limit is returned to Credit Department of Branch for post approval
administration.
After that disbursement authorization certificate are obtained from the committee,
which are signed by the Branch Committee and counter signed by the ResidentAuditor to ensure that support is perfected before release of funds.
The Branch Credit Committee shall prepare minutes of its meetings, and send copy of
the minutes, copy of CLP (approved), and security details sheet to Credit Division of
Head Office within 7 days of the sanctioning for post factor review.
In case the CLP is beyond the powers of Branch Committee, the proposal is forward
for approval of the Head Office Credit Division with the recommendation by the
Branch Committee.
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e.g. the lending authority in case of Agri. Loan up to 2500000 or less, Zonal Office
has authority to grant the loan.
HEAD OFFICE CREDIT COMMITTEEHEAD OFFICE CREDIT COMMITTEE
The 2nd approval level in lending organization is Head Office Credit Committee.
When the CLP is beyond the discretionary power of the Branch Credit Committee, the
CLP is sent to Credit Division at Head Office along with all supporting documents
and recommendation of Branch Credit Committee.
The Head Office Credit Division processes the proposal is handed over to Head
Office Credit Committee for their decision. The CLP is reviewed by Head Office
Credit Committee and decided upon as per the policies of the Bank if the proposal is
within its powers. The Head Office Credit Committee conveyed the proposal to theBranch Credit Department, which maintain all relevant records for approval either by
Credit Committee/Executive Committee or the Board.
e.g. the lending authority in case of Agri. Loan up to 2500000 or more, Regional
Head Quarter has authority to grant the loan.
BOARDBOARD
The highest authority of Credit Approval is the Board of Directors. All CLPs beyond
the power of the Executive Committee of Head Office referred to the Board by the
Secretariat Division along with the form.
Borrowers credit worthinessBorrowers credit worthiness
In order to get a complete picture of the borrowers credit worthiness, inquiries will
have to be made about: His business.
Trade experience.
Assets and liabilities.
His account with bank or other banks.
His financial statements and income tax returns.
An interview with him will be necessary to elucidate or supplement the
information that may have been collected.
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There is hardly any credit agencies in Pakistan, which assist banks by giving reports
on parties. Even a report on borrower obtained through banks in Pakistan is usually
brief and does not give sufficient information that could be of practical use. It would
appear that banks could be in better position to serve the business community and
themselves, if they evolve a system by which detailed credit reports on customers are
communicated to each other.
Sources of information on borrowersSources of information on borrowers
Banks get information on borrowers through various sources as ahead as follows:
Loan application / credit proposal / personal investigation.
Bazaar reports through friends or rivals mostly from the borrowers trade or
business line. Borrowers account with the bank or statement of accounts with other banks.
Statement of assets and liabilities. In the case of companies, their balance sheets
and profits and loss accounts for say three years, records of the Registrar of Joint
Stock Companies.
Income tax statements.
Wealth tax statements.
Sales tax statements.
Trade and other reports in the press.
Reports about actions and decrees in Govt. Gazettes.
Registration, revenue, and/ or municipal records.
Other bankers and branches of the bank.
Operations by a customer on his safe custody account or locker
SBP credit information Bureau.
Personal Contacts including personal interviews.
Chamber of commerce / Trade Bodies.
Legal Proceeding in defaultnessLegal Proceeding in defaultness
NBP all limits should be sanctioned / renewed in such a way that expiry date of all
accounts fall either on June 30 or December 31 each year. The banker is required to
calculate the mark up on June 30 or December 31 each year for the purpose of
distribution among the depositors. This is under stood that client is advised to pay
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resale value, which is marked up amount on or before the date of final adjustment and
no withdrawals are allowed after this date. NBP has decided that the date for final
adjustment of the limit in respect of working capital for trade and industry should 30
days after the expiry date. If during this period the person dont adjust the bank issued
one-month notice for adjustment. If there is no response, then another notice has been
send. If still there is no response then the bank will contact to the legal advisor,
(advocate) he will send a legal notice for adjustment within 15 days other wise bank
will register post (A.D). Then after that Bank will suit file proposal to Zonal Office,
which will further forwarded to Regional Head Quarter. After that they will file the
case in the banking court. The banking court makes Decree (degree) in favor of bank,
and stated that if there is no response your property has been auctioned.
Then banking court nominates an auction judge and takes the auction money as
charges. The judge then give the advertisement in the news regarding the auction of
the property along with the terms and conditions of the auction and a written notice to
the borrower and bank as well.
The auction judge will sale the property on maximum prices, and bank has to decide
whether it is enough to collect its amount then auction will be end other wise
objection order is implemented by the court.
If the auction sale price is greater than the dues of the customer towards the bank then
the bank returned the difference to the client but if the auction sale price is less than
the dues of the customer towards the bank then his warrant for arresting him has been
issued and they try to find out his other property to satisfy the bank dues. In case if he
prove himself as insolvent in the court then the loan has been forgive to him.
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Foreign exchange departmentForeign exchange department
To promote flow of foreign exchange in the country, the Government of Pakistan
started a new scheme of opening of bank accounts in foreign currency. These
accounts were entitled to receive profit percentage in shape of the currency in which
the account was kept (Dollar account shall be paid profit in dollars). This has
increased the flow of foreign currency especially from the Pakistani foreign residents,
who used to send money to their families at home. The State Bank of Pakistan was
given special rights to control and monitor the performance of the Authorized
Dealers in foreign exchange accounts.
Authorized Dealer is a person or an institution, which can deal with the foreign
exchange. The authority is given by SBP to all those scheduled Banks who have
adequate trained staff and facilities. These scheduled banks are given license to deal
in foreign currency transactions. The license is of two types.
Limited License
Authority to deal in certain foreign currencies/transactions
General License
Authority to deal in all currencies and transactions
The freezing of foreign currency accounts on May 28, 1998 have shaken the
confidence of the people and it has also put a bad effect on the flow of the foreign
exchange as well.
Functions of Foreign ExchangeFunctions of Foreign Exchange
DepartmentDepartmentForeign exchange department is controlled by OG-III. Different functions are
performed by this department such as:
( Foreign Currency Deposits.
( Imports.
( Exports.
( Foreign Remittance.
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Previously another function was also performed by foreign exchanged department as
Export Finance Part-I and Part-IIbut due to some restrictions by SBP that function
is not performed now.
Foreign Currency DepositsForeign Currency Deposits
To earn foreign exchange NBP offers different types of account such as:
Types of Foreign Currency AccountTypes of Foreign Currency Account
The National Bank of Pakistan is currently providing foreign currency accountsservices in four currencies:
( US Dollars
( Pound Sterling
( Dutch Mark
( Japanese Yen
Foreign currency accounts can be operated by Pakistani residents abroad and residents
at home, plus foreign nationals who are residents in Pakistan.
The opening of foreign currency goes through the same kind of process that is used
for opening of an ordinary deposit account. A prescribed form has to be filled as an
application for opening of account. Personal identification card and introducer is
required who can be an old account holder with the Bank or an officer of the Bank.
Foreign Currency accounts can be opened in following three types.
( Foreign Currency Current Account
( Foreign Currency PLS Account
( Foreign Currency Fixed Deposit Account
Foreign Currency Current Account
Foreign currency current account can be opened with a minimum balance of $500.
This account is not entitled to any profit.
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Foreign Currency PLS Account
Foreign currency PLS account require $100 for opening and this account is eligible to
share the profits and losses at the rate that is prescribed by the Head office from time
to time.
Foreign Currency Fixed Deposit Account
In this type of account the deposits are accepted for a period of minimum 3 months
and maximum up to 3 years. The profits are credited to the accounts after every six
months on a rate that is ascertained by the Treasury Division of the National Bank of
Pakistan Head Office Karachi. The profit is provided on daily product basis, which
means that profit is credited based on the balance in the account and the number of
days it has remained in the account.
Profit On Foreign Currency Accounts
The profit on foreign currency accounts is paid only on the US Dollar account and
Pound Sterling account. The other two currencies are not entitled to receive profit on
the balances. The profit for the half-year ended June 30, 2001 has been declared at the
following rates:
Currency name New Account Old Account
US Dollar @ 1.250% @ 2.2350%
Pound Sterling @ 1.175% @ 1.878%
The Bank maintains separate ledgers for every type of currency account. The most
significant accounts with the Bank, in number and frequency of transactions, are US
Dollar and Pound Sterling. That is the reason these accounts are made eligible to
share the profits.
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FOREIGN REMITTANCESFOREIGN REMITTANCES
Remittance is transfer of funds from one place to the other by way of using an
intermediate dealer. These dealers are authorized agents who provide these services
on commission. Foreign remittances are the most significant type of transaction that is
carried on in case of a foreign currency accounts. The remittance can primarily of two
types.
( Inward Remittances
( Outward Remittances
Inward RemittancesInward Remittances
Funds coming into the country on account. The inward remittances are coming
through either Telegraphic Transfer (T.T) or in form of Demand Draft (D.D). Further
these remittances are coming in either in foreign currency or are in Pak Rupees. The
remittances coming into NBP City Branch, Multan cam be classified into the
following types.
Case 1: Remittances where the beneficiary or the payee is an account holder in
the City Branch.
Case 2: Remittances where the beneficiary or the payee is an account holder of
any NBP branch other than City Br. Multan.
Case 3: Remittances where the beneficiary or the payee is an account holder in a
Bank other than NBP.
All the above-mentioned types of remittances are handled differently and the
reimbursement of the amount is done through separate recordings in the books. The
instruments of inward remittances carry instructions for the proper reimbursement of
the amount to be credited to the account holder on realization. The reimbursement on
TTs is available as follows:
For Pak Rupee: Reimbursement is made from Nadir House Br. Karachi
For Foreign Currency: Reimbursement is made from NBP Head Off. Karachi
All TTs received from foreign bank are initially put on a test to verify the genuineness
of the massage received. This test confirms the amount, the beneficiary, the case and
the sending branch of a bank. There are special codes that are used for testing the
instrument. Once the message is confirmed then its payees status is checked.
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Case 1
If the payee is an account holder of the City Br. then it is recorded as following:
Dr. Account at Nadir House Br. Karachi (if remittance is in Pak Rupees)
ORDr. Account at NBP Head Office, Karachi (if remittance is in foreign currency)
Cr. Payees account
The responding branch is sent a debit advice along with copy of the message received.
Case 2
The case where T.T is addressed to another branch of NBP and has to be credited to
the account of the payee this requires the City Br. personnel, after the conformity of
the message, make a Mail Transfer (M.T) to that very branch. NBP City Br. provides
the service of T.T for its other branches, which do not have the facility of Telex or
Fax.
Case 3
T.T that is addressing a branch other than of NBP, then the payment mode selected is
T.T Payment Order, which is sort of an instrument that is sent to the responding
branch ordering it to pay the beneficiary the sum mentioned on it. The same is
presented for reimbursement through the clearing process from the clearing-house.
Outward RemittancesOutward Remittances
Funds going out of the country on account. Sending amount outside the country is an
outward remittance. Again this remittance can be made by T.T or demand draft. The
condition for these remittances requires the sender to be the account holder of the
Branch. That account holder has to submit a written cheque along with the payees
particulars and responding bank. This procedure has charges that are higher in case of
T.T and comparatively lesser for demand draft. These charges can be deposited in
cash or can be debited from the account of the sender as the case may be.
S.W.I.F.TS.W.I.F.T
The increasing pace of technology has made the communication processes more easy,
faster, and reliable. In case of transfer of funds the introduction of S.W.I.F.T., an
acronym for Society for Worldwide Inter-bank Financial Transactions, has made
remittances faster and secure. The system works like Internet communication
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processes. All the banks in the world are registered for the service, which have the
facility of online computers. The head quarter of S.W.I.F.T. is in Belgium. The
messages sent through this way do not require any code tests to confirm its
authenticity. NBP City Br. Multan has this service that has special access rights with
only one officer who is responsible to check the lists of the sent transfer messages.
The sending process is more secure where two officers make the transmission of the
message, one types the content with his code word and the other executes it with his
password.
There are different types of codes that are used for the messages interchanged on the
basis of the type of the transaction. For example:
19909 for the message that is simply send for T.T
18808 for message that relates with the L.C. functionality
FOREIGN BILLS FOR COLLECTIONFOREIGN BILLS FOR COLLECTION
Demand draft is an instrument for claim of money from any party, in this case is the
issuing bank. These drafts are for collection of foreign currency. When a customer
comes in and presents a Demand Draft (D.D) for collection from a foreign bank, the
entry in the books of accounts is made as following:
Debit. DDP Account (Demand Draft Purchased)
Credit. Payees Account
For collection of the international DDs, NBP has maintained agency relations with
following Banks:
( American Express for Americas, Europe and Asia
( Bank Al-Jazeera or Saudi Arabia
( National Exchange corp. for Emirates
These collections can be in form either Pak Rupees or in foreign currency. For
collection from abroad the cheque/draft is sent to American Express Karachi. On
realization of the amounts the Bank receives a credit advice from the agent bank and
the Bank makes a new entry.
Debit. Account at Nadir House Br. Karachi (if remittance