Internship Report

On

NATIONAL BANK OF
PAKISTAN
Main Branch, Khanewal

Presented By:
Muhammad Usman
MBA(IT) Roll No. 41
Session: 2001 – 2003
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 )

2
 D EDICATED TO M Y
P ARENTS
W HO A LWAYS C ARE M E

3
 Page #

1. Preface … … … … … … … … … … … … 10

2. Acknowledgement … … … … … … ... … … 14

4
 Section 1: INTRODUCTION TO BANKING SYSTEM

3. What is Commercial Bank? … … … … … 16

4. Banker and Customer Relationship … … … … 18

Section 2: HISTORY OF BANKING & NBP

5. History of Banking in Pakistan … … … … … 23

6. Efforts towards Islamic Banking in Pakistan … … 26

7. National Bank of Pakistan … … … … ... … … 28

Section 3: ORGANIZATIONAL STRUCTURE

8. Management and Organization of a Commercial

Bank … … … … … … … … … … … … … 30

9. Board of Directors … … … … … … … … … … 35

10. Senior Management … … … … … … … … … 36

11. Regional Structure … … … … … … … … … 37

12. Branch Structure … … … … … … … … … 38

Section 4: MAJOR OPERATIONS OF NBP

13. Functions of National Bank of Pakistan … … … … 40

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14. Cash Department … … … … … … … … … … 42

15. Deposit Department … … … … … … … … … 44

16. Different Types of Deposits … … … … … … … 44

16.1 Current Account … … … … … … … … 45

16.2 PLS Saving Bank Account … … … … … 46

16.3 Fixed Deposits … … … … … … … … … 46

16.4 Short Notice Term Deposit … … … … … 47

16.5 Call Deposit … … … … … … … … … 47

16.6 Cumulative Deposit Certificate … … … … 47

16.7 Monthly Income Scheme … … … … … 48

16.b Ledgers of Deposit Department … … … … 48

17. Clearing Department … … … … … … … … … 49

18. Types of Cheques Collected … … … … … … … 50

18.1 Transfer Cheques … … … … … … … 50

18.2 Clearing Cheques … … … … … … … 50

18.3 Collection Cheques … … … … … … … 50

19. Advances and Credit Department … … … … … 51

20. Securities … … … … … … … … … … … … 51

20.1 Bankers’ Lien … … … … … … … … … 51

20.2 Guarantees … … … … … … … … … 52

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 20.3 Mortgage … … … … … … … … … … 52

20.4 Hypothecation … … … … … … … … … 53

20.5 Pledge … … … … … … … … … … 53

21. Types of Advances … … … … … … … … … 54

21.1 Demand Finance (Ordinary Loans) … … … 54

21.2 Running Finance (Overdraft) … … … … … 54

21.3 Cash Finance … … … … … … … … … 55

21.4 Small Finance … … … … … … … … … 56

21.5 Finance against Bills … … … … … … … 56

21.6 Agriculture Loans … … … … … … … … 56

22. Other Services … … … … … … … … … … … 58

22.1 Utility Bills Collection … … … … … … … 58

22.2 NBP Pak Rupee Traveler Cheque … … … 58

22.3 Foreign Currency Accounts … … … … … 58

23. Different schemes conducted by NBP … … … … 59

23.1 Hajj Mubarak Scheme … … … … … … 59

23.2 NBP Advance Salary Scheme … … … … … 60

23.3 Fund Management Scheme … … … … … 60

23.4 LG TV Scheme … … … … … … … … 61

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 Section 5: TRAINING SUBSTANCE

24. Work performed by me … … … … … … … … … 63

a. General Banking … … … … … … … … … 63

b. Cheque at Counter … … … … … … … … … 64

c. Cheque Payment procedure … … … … … … 64

d. Issuance of Demand Draft … … … … … … 65

e. Bills Collections Department … … … … … 65

f. Bill Remittance Department … … … … … 66

g. Deposit Department … … … … … … … … 66

Section 6: FINANCIAL ANALYSIS

25. Profit and Loss Account … … … … … … … … 69

26. Balance Sheet … … … … … … … … … … 70

27. Cash Flow Statement … … … … … … … … … 71

28. Financial Position … … … … … … … … … … 72

29. Five Years Performance at a Glance … … … … … 74

Section 7: SWOT ANALYSIS

30. Strengths … … … … … … … … … … … … 77

31. Weaknesses … … … … … … … … … … … 80

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32. Opportunities … … … … … … … … … … … 83

33. Threats … … … … … … … … … … … … 85

Section 8: RECOMMENDATIONS

34. Recommendations … … … … … … … … … 87

PREFACE
Banking sector owes a pivotal importance in

the economy of any country through its vibrant

functions. This is the deep seated motivator that

9
geared up me to join any bank for internship.

Moreover, the practice and familiarity learned

during this tenure would also attest very helpful

and alleviating in the awaiting proficient life.

This report is an upshot of my six weeks

internship in National Bank of Pakistan, Main

Branch, Ghallamandi, Khanewal. National Bank of

Pakistan posses an imperative and historical

importance in the banking sector of Pakistan. It

always remains the center of hustles in business

activities. It always endows with great covenant

of rally round in terms of funds and services at all

epochs of its dynamism.

Although, a derisory period of six weeks is

not enough to learn the complex operations of

National Bank of Pakistan yet I made industrious

efforts to converse them comprehensively in this

report. Particularly, I have remunerated more

accents on study of distinguishing features and

services of National Bank of Pakistan. I have

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made maximum venture to elaborate this report

with the material read, listened and observed.

I have strong belief that this report will guide

and ease the readers to understand the

operations of banking system and more

prominently have good knowledge about National

Bank of Pakistan, one of the most trusty and

leading banks in Pakistan.

Dear readers, I hope that you will appreciate

my report and sense that reading my report is not

like to waste the time in any respect because of

the four principal reasons as under:

1 ... ... A conscientious attempt is made to

provide 100 % realistic knowledge of

the real world organization, National

Bank of Pakistan.

2 ... ... Almost all the terms are first

explained themselves in a simple and

comprehensive way used in this

organization before bringing them into

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 play in different dealings so the reader

may soundly familiar to the operations

performed in the banks.

3 ... ... No Gup is made from beginning to end

in the report not even of a single

word.

4 ... ... Although, it is not a titanic sized

report but the material provided is not

a bogus. Also, this report is wholly up

to date, equipping the information

about currently prevailing functioning

and services of the Banking System of

National Bank of Pakistan.

If any reader likes my report and he want to

get a soft copy of the report, so don’t worry. You

can get the soft copy of my report very easily.

What you have to do to get a soft copy of the

report? You have to do only one thing for this

cause. Please address me your request in my

email and I will send a soft copy of my report to

12
the calling ID or otherwise mentioned. I check my

email account after 10 days. My email address is

as under :

usmanvoice@hotmal.com

M. Usman Khan

MBA (IT)

Roll No. 41

Session: 2001-2003

A CKNO WLE DGEMENT

I am very gratifying to Almighty Allah who

permitted me to be trained in a real world

13
organization, NBP, as well as 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. Afzaal, Vice President and In charge of

Advances, NBP Regional Office Multan, who

managed the internship permission for me from

the Head Office of NBP Karachi to depute my

internship in NBP Main Branch, Khanewal.

M. Usman Khan

S ection

1
14
 INTRODUCTION TO
BANKING SYSTEM
In this section two topics are discussed. They are as
under:

• What is Commercial Bank?

• Banker and Customer Relationship

WHAT IS A
COMMERCIAL BANK?

15
 A bank is a financial institution which deals with money
and credit. It accepts deposits from individuals, firms, and
companies at a lower rate of interest and gives at a higher rate
of interest to those who apply for loan. The difference
between the terms at which it borrows and those at which it
lends from the source of its profit. A bank, thus, is a profit
earning institute. Any bank that performs this functioning is
called the commercial bank.

According to Crowther:
“A bank is a firm which collects money from those who
have it spare. It lends money to those who require it.”

According to Banking Ordinance

1962:
According to Section 5(b) of Banking Ordinance 1962,
meaning of banking is as under:

“ Banking company is a company which transacts the

business of banking in Pakistan, mainly of accepting, for the
purpose of lending and and investments of deposits of money
from the public, repayable on demand or otherwise and
withdraw able by cheque, draft, order, or otherwise ”

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 BANKER AND CUSTOMER
RELATIONSHIP
The relationship between the banker and the customer
are of utmost importance. Both serve the society and the
economy to expand. Before we discuss the relationships

17
between the banker and the customer, it seems necessary that
the two terms banker and customer are made clear.

* Banker
A banker is a dealer in capital or more properly a dealer
in money. He is an intermediate party between the lender and
the borrower and charges a definite amount of money which
is the profit of his.

* Customer
A customer is a person who maintains a regular account
with the bank, without taking into consideration the duration
and frequency of operation of his account.

The relations between the banker and the customer are

generally studied as under:

*Debtor and Creditor

The general relationship between banker and customer
is primarily that of a debtor and creditor. When customer
deposits money with a bank, the bank then is the debtor and
the customer is the creditor. The customer expects from the

18
bank that (I) his money will be kept safe by the bank, (II) it
will be returned on demand within business hours. The
position is reverse if the customer is advanced loan i.e. the
banker becomes the creditor and the customer is the debtor.

*Principal and Agent

The special relationship between the customer and the
banker is that of principal and agent. The customer (principal)
deposits cheques, drafts, dividends etc. are for collection with
the bank. He also gives written instruments to the bank to
purchase securities, pay insurance premium, installments of
loans etc on his behalf. When the bank performs such agency
services, he becomes an agent of his customer.

*Bailer and Bailment

Relationship
A bailment is the delivery of goods in trust. A banker
may accept the valuables of his customers such as jewellery,
documents, securities etc. for safe custody. In such a case the
customer is the bailer and the bank is the bailee. It charges a
very small amount of money as service charges for safe
custody of valuables.

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 *Pledger and Pledgee
When a customer pledges goods and documents with
the bank as security for an advance, he then becomes the
pledger and the bank becomes the pledgee. The pledged
goods are to be returned intact to the pledger after the debt is
repaid by him.

*Mortgager and Mortgagee

Mortgage is the transfer of an interest in specific
immoveable property for the purpose of securing the payment
of money advanced or to be advanced by way of loan. When a
customer pledges specific immoveable property with the bank
as security for an advance, the customer becomes the
mortgager and the bank becomes the mortgagee.

*Bank as a Trustee
The bank acts as a trustee for his customers in those
cases where he accepts other valuables for safe custody. In
such case, the customer continues to be the owner of the
valuables deposited with the bank.

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 *Executor, Attorney, Guarantor
The bank also acts as executor, attorney, and generator
for his customers.

S ectio

n 2

21
 HISTORY OF
BANKING AND NBP

In this section three topics are discussed. The major topic of

this section is:

• History of Banking in Pakistan

• Efforts towards Islamic Banking in Pakistan
• National Bank of Pakistan

HISTORY OF BANKING
IN PAKISTAN
The partition plan was announced on June 3, 1947 and
August 15, 1949 was fixed as the date on which independence
was to take effect. It was decided that the Reserve bank of

22
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
Australia 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 offices in 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 Limited
6. Commerce Bank Limited
7. Australia Bank Limited

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 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 Pakistan

2. Habib Bank Limited
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

24
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 IN PAKISTAN
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

25
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 then it cannot be
abandoned by the government. So this issue is still not
resolved.

26
 NATIONAL BANK OF
PAKISTAN
National Bank of Pakistan,
…the Nation’s Bank.

27
 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 the higher financer
in agriculture and commodity operation sector.

S ectio

n 3
28
 ORGANIZATIONAL
STRUCTURE

In this section five topics are discussed. The major

topics of this section are:

• Management and Organization of a

Commercial Bank
• Board of Directors
• Senior Management
• Regional Structure
• Branch Structure

MANAGEMENT
AND
ORGANIZATION
29
OF A COMMERCIAL BANK
The ownership, management, and control of all the
commercial banks were taken over by the Government of
Pakistan on January 1st, 1974.

A banking council was formed under the

Nationalization Act 1974. The banking council was set up for
making policy recommendations to the Federal Government,
formulating policy guidelines for the banks and their
reorganization.

The management and organizational structure of the

nationalized banks have uniformity. This management and
organizational structure is briefly described as under:

1 ... ... Board of Directors

2 ... ... Executive Board
3 ... ... Chief Executive
4 ... ... Divisional Chiefs
5 ... ... Provisional Chiefs

30
 6 ... ... Circle Executive
7 ... ... Zonal Heads
8 ... ... Branch Managers

1. Board of Directors
In the management of the banks, the board of directors is
at the top of the controlling body. Since there are no private
share holders now, so there is no general meeting of the share
holders and no elected directors. The BOD consists of a

31
nominated President, a Secretary, and 9 other members. The
board has limited administrative powers because after the
Nationalization Act 1974, most of powers are transferred to
the Banking Council and Executive Board.

2. Executive Board
The general direction and supervision of the affairs of
commercial banks lies in their respective Executive Boards.
An EB also consists of a President, a Secretary, and 9 other
members, appointed by the Federal Government.

3. Chief Executive
The President of the Executive Board is the Chief
Executive. He is the administrative head of a bank and
presides over the meetings of Executive Board.

4. Divisional Chiefs
In order to improve the management and operation of a
bank, it has been split up into a numbers of divisions. Each
division of a bank is placed under the supervision and control

32
of Divisional Chief (also called the Senior Executive Vice
President or Executive Vice President)

5. Provisional Chiefs
In order to improve the performance of banking system,
each bank has a Provisional Chief. PC has the powers for
sanctioning finance and other credit facilities. Each
headquarter is situated in each province e.g. in Lahore,
Peshawar, Quetta, and Karachi.

6. Circle Executive
Each commercial bank has a number of circles placed
directly under the control and supervision of Chief Executive.

7. Zonal Heads
Each circle is divided into a number of zones. These
zones are administered by Zonal Heads who hold the posts of
Vice President or Assistant Vice President.

8. Branch Managers

33
Each zone of commercial bank is divided into several
branches. The control and supervision of each branch is
mostly entrusted to Assistant Vice President or Officer G-II.

34
35
 SENIOR MANAGEMENT
R. A. Kaleemi SEVP & Group Chief, Operational Group

Masood Karim SEVP & Grp Chf, Co. & Invst Banking Grp & Chf
Fncl Officer

S. M. Rafique SEVP & Secretary Board of Directors

Derrick Cyprian SEVP & Group Chief, Special Assets & Remedial
Mngt Group

Amin Akhtar EVP & PSO to the President

Farooqul Hassan EVP & Chief President’s Implementation Secretariat

Shahid Anwar EVP & Group Chief, Commercial & Retail

Banking Group

Safdar Khawaja EVP & Group Chief, Audit & Inspection Group

Asif A. Brohi EVP & Group Chief, Strategic Planning & Eco Research
Group

Javed Mehmood EVP & Group Chief, Risk Management Group

M. Nusrat Vohra EVP & Group Chief, Treasury Management Group

Nadeem Dogar EVP & Group Chief, IT Planning &

Implementation Group

Dr. Abrar Baig Head of Human Resources Management

Department

36
 Uzma Bashir Head of Organization Development & Training
Department

REGIONAL
STRUCTURE

REGIONAL CHIEF
EXECUTIVE

GENERAL GENERAL GENERAL

MANAGER MANAGER MANAGER
Advances, Legal Planning, Business Administrative
and Recovery Wing Development Wing
Customer Services
and Implementation
of Audit

37
BRANCH STRUCTURE
MANAGER OG-I ADVANCE

OG-II ADMIN

OG-II OG-II OG-II OG-III

SERVICES CASHIER ACCOUNTS

ASSISTANT ASSISTANT ASSISTANT

ASSISTANT

GODOWN GODOWN GODOWN GODOWN

KEEPER KEEPER KEEPER KEEPER

HEAD MESSANGER

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 MESSANGER

S ectio

n 4
MAJOROPERATIONS
OF THE NBP
In this section a number of topics are discussed. The
major topics of this section are:

• Functions of National Bank of Pakistan

• Cash Department
• Deposit Department
• Different Types Deposit Department
• Clearing Department
• Advances and Credit Department
• Securities Types of Advances
• Other Services

39
 • Different schemes conducted by NBP

FUNCTIONS OF NATIONAL
BANK OF PAKISTAN
National Bank of Pakistan is a commercial bank, in modern
time it plays a very vital role and its functions are manifold.
The main functions are as under:

(1) Accepting various types of deposits.

(2) Granting loans and advances.
(3) Undertaking of agency services and also general utility
functions, few of these are as under:-

a ... ... Collecting cheques and bills of exchange for

the customers.
b ... ... Collecting interest due, dividend, pensions,
and other sum due to customers.
c ... ... Providing safe custody and facilities to keep
jewellery, documents, and securities etc.
d ... ... Transfer of money from place to place.
e ... ... Acting an executor, trustee or attorney for the
customers.

40
 f ... ... Issuing of travelers’ cheques and letters of
credit to give credit facilities to travel.
g ... ... Accepting bills of exchange on behalf of
customers.
h ... ... Purchasing shares for the customers.
i ... ... Undertaking foreign exchange business.
j ... ... Furnishing trade information and tendering
advice to customers.

For proper functioning of all these activities, the bank

has divided its operations into different departments that
would be discussed next. These departments are as under:

(1) Cash Department

(2) Deposit Department
(3) Clearing Department
(4) Advances and Credit Department
(5) Remittance Department
(6) Foreign Exchange Department

41
* CASH DEPARTMENT
The following books are maintained in the cash
department:-

1 ... ... Receiving Cashier Books

2 ... ... Token Book
3 ... ... Paying Cashier Book
4 ... ... Scroll Books
5 ... ... Cash Balance Book

When cash is received in counter, it is entered in the Scroll

Book and Receiving Cashier Book. At the close of the day,
these are balanced with each other. When the cheque or any
negotiable instrument is presented at counter for payment, it
is entered in the Token Book and Token is issued to the
customer. The Token and the cashier make entry in the
Payment Book and the payment is made to payee. At the close
of the day, the Token Book and paying Cashier Book is
balanced. The consolidated figure of receipt and payment of
cash is entered in the Balance Book and drawn closing balance
of cash.

42
 OPENING BALANCE + RECEIPT – PAYMENT =
CLOSING BALANCE

This is very important department because cash is the

most liquid asset and mostly frauds are made in this
department, therefore, extra care sis taken in this department
and no body is allowed to enter or leave the area freely.
Mostly, cash area is grilled and its door is under the
supervision of head of that department. Officer checks the
books maintained in this department.

43
* DEPOSIT DEPARTMET

IMPORTANCE
Bank deals in money and they are merely mobilizing
funds within the economy. They borrow from one person and
lend to another, the difference between the rates borrowed
and lend from their spread or gross profit. Therefore, we can
rightly state that deposits are the blood of the banks which
cause the body of an institution to get to work. These deposits
are liability of the bank so from the viewpoint of bank we can
refer to them as liabilities.

TYPES OF DEPOSITS
Deposits can be segregated on two bases, one is the
duration in which these funds are expected to be with the
bank, and second is the cost of getting these funds. So we can
divide deposits into two classes according to duration:

1 ... ... Time Deposits

2 ... ... Demand Deposits

44
 And on the basis of the cost of acquire these funds, a
deposit can be classified as any one of the following four:

a ... ... High Cost

b ... ... Medium Cost
c ... ... Low Cost
d ... ... No Cost

Bank has different kind of deposit schemes in order to

induce deposits. These schemes are a mixture of the above
mentioned two types of deposits with and addition of
different services and requirements, mode of transactions,
basis for calculation of profit, deduction, additional benefits,
and eligibility for different groups. In the similar fashion,
national Bank of Pakistan has large variety of deposit schemes
and some of these are as follows:

(1) CURRENT ACCOUNT

In this type of accounts, the client is allowed to deposit or
withdraw money as and when he likes, but there is
requirement of maintaining the minimum balance of
Rs.5000/- other wise Rs.50/- will be deducted every month.
Usually the businessmen open this type of account and the
bank pays no profit on it. These types of deposits are also
exempt from compulsory deduction of Zakat.

45
 (2) PLS SAVING BANK ACCOUNT
This type of account is for those persons who want to make
small savings. This type of account is opened with a minimum
deposit if Rs.200/- If the balance in the account falls below the
minimum requirement then a flat charge of Rs.150/- is made
in the account once in a half year. Zakat and other
withholding taxes are deducted as per rules of the
government.

(3) FIXED DEPOSITS

In this type of account a certain amount is deposited for a
certain period such as six months, one year, two year or
longer. A fixed deposit receipt is issued in the name of the
depositor. The receipt is signed by the officer in charge and
the bank manager. A notice is given to the depositor on a
prescribed from two weeks before the Fixed Deposit Receipt
(FDR) falls due, requesting the depositor to withdraw his
money or to renew his deposits. The interest is allowed on
fixed deposit varies with the period for which the deposit is
made.

46
 (4) SHORT NOTICE TERM DEPOSIT
This kind of deposit is for a short period as the name
indicates. The depositor may withdraw his deposit at any time
by giving seven days notice to the banker. This type of deposit
facilitates the trader to withdraw his amount with interest of
the deposited period.

(5) CALL DEPOSIT

Call Deposits are the sorts of deposits, which are deposited
with the banker against any tender. This is with out interest
deposit, this may be with interest provided with the depositor
has agreed to keep this amount with the banker for some fixed
period.

(6) CUMULATIVE DEPOSIT

CERTIFICATE
This is just like of fixed deposit. In this kind of deposit, the
rate of interest is higher as compared to other kind of
deposits, which are mentioned previously. The rate of interest
rises gradually as the period extends. Its period ranges from
three month to twenty years.

47
 (7) MONTHLY INCOME SCHEME
National Bank of Pakistan has also introduced Monthly
Income Scheme for the benefits of its customers. An
individual or institution, company, corporation etc. can take
the advantage of this scheme.

LEDGERS OF DEPOSIT
DEPARTMENT
The following types of ledgers are concerned with deposit
department:

1 ... ... Saving Ledgers

2 ... ... Current Ledgers
3 ... ... Profit and Loss Sharing Ledgers
4 ... ... Fixed Deposit Register
5 ... ... Cumulative Deposit Certificate Register
6 ... ... Cash Book
7 ... ... Daily Profit and Loss Summary Book
8 ... ... Voucher Register

48
 * CLEARING
DEPARTMENT
Every banker acts both as a paying as well as a collecting
banker. It is however an important function of crossed
cheques. A large part of this work is carried out through the
bankers clearing house. A clearing house is a place where
representatives of all the banks of a city get together and settle
the receipts and payments of cheques drawn on each other
bank. As the collecting banker runs the certain risks in receipt
of their ownership, the law has provided certain protections to
the banks.

49
 TYPES OF CHEQUES
COLLECTED

(1) TRANSFER CHEQUES

Transfer cheques are those cheques which are collected
and paid by two different branches of the same bank situated
in the same city.

(2) CLEARING CHEQUES

Clearing Cheques are those cheques which are drawn on
the branches of some other bank of the same city or of the
same area which covers a particular clearing house.

(3) COLLECTION CHEQUES

Collection Cheques are those cheques which are drawn
on the branches of either the same bank or of another bank,
but branches are not in the same city or they are not the
members of clearing house.

50
 * ADVANCES AND
CREDIT DEPARTMENT
The function of Advances and Credit Department is to
lend money in the form of clean advances, against the
promissory note, as well as secured advances against tangible
and marketable securities. The bankers prefer such securities,
which do not run the risk of general depreciation due to
market fluctuations. Common securities for the banker’s
advances are as under:

SECURITIES
(1) BANKERS’ LIEN
(Moveable property possessed to the lender cannot be sold
in case of default)
Lien is the bankers’ right to hold the property until
the claim on the property is paid. The bankers look at their
lien as a protection against loss on loan or overdraft or any

51
other credit facility. In ordinary lien, the borrower remains
the owner if the property, but the actual or constructive
possession remains with the creditors, though he has no
right to sell it.

(2) GUARANTEES
When an application for an advance can offer any
tangible security, the banker may rely on personal
guarantees to protect himself against loss on advances or
overdraft to the applicant.

(3) MORTGAGE
(Immoveable property possessed to the lender can be sold in case
of default)
A mortgage is the transfer of an interest in specific
immoveable property for the purpose of securing the
payment of money advanced or to be advanced by way of
loan, and existing of future debt, or the performance of an
engagement, which may rise to a particular liability. The
person in whose interest the property is transfer is called
mortgagee.

52
(4) HYPOTHICATION
(Immoveable property possessed to the borrower can be
sold in case of default)
When property in the shape of goods is charged as
security for a loan from the bank, the ownership and
possession is with the borrower, the goods are said to be
hypothecated. The essence of hypothecation is that neither
the property in goods nor the possession of them passes to
the lender, but the security is granted by means of letter of
hypothecation which usually provides for a banker’s
charge on the hypothecated goods.

(5) PLEDGE
(Moveable property possessed to the lender can be sold in
case of default)
In a pledge, the ownership remains with pledger
(borrower), but the pledgee has the possession of property
until the advance is repaid in full. While in case of
defaulter, the pledge has the right of sale after giving due
notice.

53
 TYPES OF
ADVANCES
1 ... ... Demand Finance(Ordinary Loans)
2 ... ... Running Finance(Overdraft)
3 ... ... Cash Finance
4 ... ... Small Finance
5 ... ... Finance against Bills
6 ... ... Agriculture Loans

(1) DEMAND FINANCE (ORDINARY

LOANS)
These are those advances which are allowed in lump sum
for a fixed period and are repayable in lump sum or gradually
in installments.

(2) RUNNING FINANCE

Running finance are advances, which are gradually given
to meet temporary requirements of the customers. A good
customer uses the banks running finance limit, as a mean of

54
protecting his credit in the market and as a line of second
defense to meet his commitments. There are two types of
running finance:

1) UN-SECURED
Under this type of overdraft, the bank relies upon the
personal security of the customer or customer’s account.

2) SECURED
Under this type of overdraft, the bank allows his customer
to withdraw more than his deposit after giving security
against the amount overdrawn. The securities against which
they are given are as under:

a ... ... Share Certificates

b ... ... Savings Certificates
c ... ... Deposits
d ... ... Mortgage Property
e ... ... Guarantee of a person

(3) CASH FINANCE

These types of loans are given against the following:

1 ... ... Against locally manufactured goods

55
 2 ... ... Cash finance against rice and paddy
3 ... ... Against pledge
4 ... ... Against commodities
5 ... ... Besides advances against the above commodities
bank may be approached by parties for advances
against other commodities like tobacco, oil, etc.
6 ... ... Against Trust Receipts

(4) SMALL LOANS

Loans are allowed to contractors’ clearing and forwarding
agents. These loans are repayable within a year.

(5) FINANCE AGAINST BILLS

The advances are allowed both on local and foreign bills
such as:

a ... ... Bill of Exchange and Invoices

b ... ... Bill of Landing

(6) AGRICULTURE LOANS

Agriculture loans are given to the farmers with holding up
to 25 acres for meeting their short medium and long term
production requirements such as:

56
a ... ... Agriculture inputs
b ... ... Tractors instruments
c ... ... Tube wells
d ... ... Live stock farming
e ... ... Land Improvements

57
 (7)OTHER SERVICES
* UTILITY BILLS COLLECTION
For the convenience of the customer, National Bank of
Pakistan also collects different kinds of utility bills such as:
Electricity Bills, Sui-Gas Bills, Telephone Bills etc.

* NBP PAK RUPEE TRAVELER

CHEQUE
NBP Pak Rupee traveler Cheque is better than cash,
because you get the power to purchase as well as your
money can be refunded in case you would loss your
cheque. It is a safe and convenient way of purchase.

* FOREIGN CURRENCY ACCOUNTS

Launched to attract deposits in foreign currencies like
US Dollars, Pound Sterling, Dutch Mark, and Japanese Yen.
Whether you are a resident or a non-resident of Pakistan,
NBP invites all to operate in a foreign currency account.

58
 DIFFERENT SCHEMES
CONDUCTED BY NBP
National Bank of Pakistan always makes efforts to
improve its goodwill in the general public. It introduces
different kind of schemes time to time.

The most popular schemes conducted by NBP are as

under:

1 ... ... Hajj Mubarak Scheme

2 ... ... NBP Advance Salary Scheme
3 ... ... Fund Management Scheme
4 ... ... LG TV Scheme

(1) HAJJ MUBARAK SCHEME

For the convenience of a person with a limited income who
desire to perform Hajj, Hajj Mubarak Scheme is introduced.
Moreover, National Bank of Pakistan process the Hajj

59
applications of thousands of people successfully more than
any other bank in Pakistan.

(2) NBP ADVANCE SALARY

SCHEME
Do you need urgent funds? If yes then head to National
Bank of Pakistan and avail “NBP Advance Salary Scheme”,
which allow you to draw three months salary in one go. This
facility is available to permanent employees of the:-

1 ... ... Federal and Provincial governments

2 ... ... Semi-governments, autonomous, semi-
autonomous, local bodies, and government
corporations
3 ... ... Other corporations approved by NBP

No guarantee, collaterals, or insurance is required to avail

this scheme. NBP gives the facility to repay the excessive
amount within 1 to 36 months. The procedure is very easy,
just fill the application form and choice between 1 to 36
months and take your NBP Advance Salary within 3 days
after submitting your form.

(3) FUND MANAGEMENT SCHEME

60
 This scheme is offered to corporate under customer and is
aimed at providing better rate of return up to 15% per annum.
One of the objectives of the scheme is to develop the
secondary market for government securities.

(4) LG TV SCHEME
It is the most popular of NBP schemes for the year 2003.
NBP incorporates with LG Appliances Corporation. If you
want a TV set but have not enough money to purchase it then
head to NBP, fill an application form of LG TV Scheme. NBP
gives you the facility to pay for the TV set in smaller
installments during a time period of 2 years.
Any one can avail this scheme. Two government
employees are required to present the witness to repay the
loan if the applicant is unable to repay the loan or the
applicant should have the Fixed Term Deposit in NBP more
worthily than the amount advanced to the applicant and it
should have the duration of more than two years.

61
 S ectio

n 5

TRAINING
SUBSTANCE

In this section topic discussed is as under:

• Work performed by me

62
 WORK PERORMED
BY ME
I joined National Bank of Pakistan, Main Branch
Khanewal on 9th June, 2003. First day, the manager introduced
me about the functioning of the branch and the staff. The
manager told me that Counter is the most important place of
the bank. During the six weeks of my internship, I worked in
different sections of the branch and did the maximum practice
of banking system details of which is as under:

GENERAL BANKING
First of all, I was asked to work in different sections of
general banking. I was attached to Counter with Mr. Mumtaz
who has good command on this section. Here we dealt with
new customer who wanted to get information and to deal
with the branch. This is a very interesting department because

63
here we met people of different types and deal with them
accordingly. In this section, I observed the following
functions:

CHEQUE AT COUNTER
A cheque to withdraw the amount is presented on the
counter with the following requisites:

1 ... ... Name of the Account Holder

2 ... ... Current or previous date
3 ... ... Amount in figures
4 ... ... Amount in wording
5 ... ... One signature of the account holder in the right
bottom corner of the cheque and two signature of
the bearer on the back
6 ... ... Branch Stamp in front of the cheque
7 ... ... If the Account Holder uses thumb instead of
signature then the Pass Book is necessary with the
cheque

Operation’s officer checks and verifies all these requisites.

If it fulfills all the requisites, it is forwarded for payment after
a certain procedure.

64
 CHEQUE PAYMENT PROCEDURE
After all the requisites are verified and then the excessive
balance is checked and prescribed amount is deducted
narrated on the cheque, then SIGNATURE VERIFIED stamp
(in case of signature only) on the signature and a PAY CASH
stamp are fixed and a Token is given to the cheque bearer
after writing Token No. on the specified cheque. Then the
Officer G-II verified the cheque and forwarded it to the
cashier where the cheque bearer receives the amount from the
account.

ISSUANCE OF DEMAND DRAFT

A Demand Draft is provided to the client in which he
has to specify that bank it is drawn. The amount both in
words and figures is written on Demand Draft.

BILLS COLLECTIONS
DEPARTMENT
I spent second week of my training in bills collection
department. Mr. Afzal is the in charge of this section. Here we

65
collected utility bills like electricity bills, gas bills, and
telephone bills.

BILL REMITTANCE DEPARTMENT

This is very important and interesting department. This
section deals with the transfer of money from one branch to
another branch. Nearly four drafts are issued daily from this
department. Here I know how the amount is transferred and
what the procedure is. This department also deals with TT
transfer of money. I worked nearly two weeks in this
department.

DEPOSIT DEPARTMENT
Deposit department deals with Current, Savings, and
Fixed Accounts. In current account the bank does not give any
interest and you can deposit the whole amount in lump sum
in business hours.

However in PLS savings account we can only withdraw

up to Rs.25000/- without any notice otherwise a prior

66
notification of a weak is required to the bank if the amount to
be withdrawn is more than Rs.25000/-

Old ages are interested in Fixed Account usually. The

rate of interest is higher more than that of in Current and PLS
savings Account but the amount cannot be withdrawn before
a specific time fixed by the client.
To open the account customer have to fulfill an
application form and submit to the concerning authority. In
Current and PLS saving Account, a Cheque Book is issued to
the client and he becomes the Account Holder of NBP. I
worked in this department for one and a half week.

67
 S ectio

n 6

FINANCIAL
ANALYSIS

In this section two topics are discussed. Two major

topics of this section are:

• Profit and Loss Account

68
• Balance Sheet
• Cash Flow Statement
• Financial Position
• Five Years Performance at a Glance

69
70
71
 FINANCIAL
POSITION
Different facts and figures of opening balances of the
year 2003 about National bank of Pakistan which show the
financial position are as under:

CAPITAL STRUCTURE
National bank of Pakistan was incorporated with an
issued capital of Rs. 15 million.

AUTHORIZED CAPITAL
The bank has now the Authorized Capital of Rs. 25
billion.

SUBSCRIBED AND PAID-UP CAPITAL

72
 The Subscribed and Paid-up Capital is Rs. 1.46 billion.

TOTAL DEPOSITS
National bank of Pakistan is the largest commercial bank
of the country and has Total Deposits of Rs. 362.87
billion.

ADVANCES
The total Advances stood at Rs. 140.55 billion made by
NBP in the form of money at call and short notices, cash
credit, loans for short and long periods.

INVESTMENTS
The total Investment rose to Rs. 143.53 billion. This total
Investment includes PTC, TFC, and securities of
Provincial of Federal Government.

PRE-TAX PROFIT
The pre-tax profits of NBP have gone up to Rs. 6.05
billion.

AFTER-TAX PROFIT
The after-tax profits of NBP have been Rs. 2.26 billion.

73
TOTAL ASSETS
The Total Assets of NBP are Rs. 432.81 billion which is a
great achievement.

TOTAL EXPENDITURES
The Total Assets of NBP are Rs. 26.30 billion which are
very less as compared to previous years’ expenditures.

74
75
 S ectio

n 7

SWOT ANALYSIS

In this section four topics are discussed. They are as

under:

• Strengths

76
 • Weaknesses
• Opportunities
• Threats

SWOT ANALYSIS

STRENGTHS

National Bank the Nation’s

Bank
State Bank of Pakistan is government owned bank that is
why Pakistani nation has a trust on the bank that their

77
deposits are secured. Due to this reason the deposits of the
banks are increasing with the passage of time.

Agent of State Bank of Pakistan

National Bank of Pakistan also works as an agent of State
bank of Pakistan in those cities where SBP branches are not
working.

Agency Arrangements
National Bank of Pakistan is enjoying with deposit of
different Govt. organization like Pakistan Railways, PIA,
WAPDA, Sui-gas due to agency arrangements.

Deposits
National bank of Pakistan is the largest commercial bank
of the country and has Total Deposits of Rs. 362.87 billion and
becomes the first bank to cross the deposit of Rs. 350 billion.

Profitability
The pre-tax profits of NBP have gone up to Rs. 6.05
billion.

Corporate Branches
78
 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 the higher financer
in agriculture and commodity operation sector.

Collection of Cash from Shrines

Cash collected from different shrines is also deposited in
National Bank of Pakistan.

Comprehensive Range of
Financial Products
In order to facilitate the customers, NBP is offering the
comprehensive range of financial products which are as
follows:

 Credit Cards
 Foreign Exchange Bearer Certificates
 National Bank Daily Accounts
 Travelers Cheques etc.

Investing in Capital Market

79
 NBP has decided to diversify the fund base by investing in
capital markets not only in Pakistan but also in the foreign
countries.

WEAKNESSES

Lack of Implementation of
Rules and Regulations
Because NBP is a govt. owned organization so there is a
lack of implementation of rules and regulations.

Poor Working Conditions

Despite, cultural change program the working condition
of the NBP is not up to standard.

80
 Recruitment Policy
In NBP, employees are recruited on the basis of favoritism or
through other tools of corruption.

Incompetent Staff
Due to wrong recruitment policy staff of NBP is not
proficient in their work.

Irregularities in Promotion
In NBP there is no smooth and continuous promotion
system. Unfair means are used in order to get the promotion
especially the promotion of the managers.

Individual Difference
In NBP the individual difference have strong impact on
the organization’s performance due to the wrong criteria of
selection of the employee. So with the passage of time
individual differences are increasing which are undermining
the good will of the organization.

No Major Use of Computer

81
 In NBP there is no major use of computer for
maintaining the records of branches as compared to other
banks of the country.

Strong Union
Union has strong impact on performance of NBP. So the
top management is unable to punish the violators and shrieks.

Organizational Structure
In this organizational the organizational structure is
bureaucratic which is a barrier in rapid and effective decision
making.

82
OPPRTUNITIES

Consumer Banking
The basis need of the consumer such as housing,
transportation and other durable goods are not adequately
financed by the banks. So by initiating these services, the bank
can enjoy with more funds.

Investing in the Foreign Capital

Market
NBP can enjoy handsome return its funding base by
investing in capital markets in the foreign countries.

83
 Investment Banking
Until recently the bank perceived as purely commercial
banking entity so in order to expand its business the bank
may start investment banking by investing in the portfolio of
handsome return.

New Branches
NBP by establishing new branches in foreign countries
can expand its business and can enjoy with the profit.

Issuance of Bonds
To enjoy with large amount, NBP can introduce a
comprehensive range of bonds.

Night Banking
Despite of poor customer service of NBP, people still
come to NBP because of its Govt. ownership as they feel it
secure therefore bank improve its deposit by giving facility of
night banking and also can compete its competitors with
positive steps.

84
 Advisory Services
It can establish advisory services in order to facilitate the
customers in investing in the securities.

THREATS

Competition
The no. of banks in Pakistan is increasing with the
passage of time. So due to poor working condition and poor
customer service it may be possible NBP will lose its market
share in future.

Inflation
In our country, the rate of inflation is increasing along
with the unemployment. So due to the increase in price of the
products, the savings of the nation is decreasing with the
passage of time. So it is the threat for the banking sector. In
the future, the deposits of the bank will decrease.

85
 Government Policy
On NBP Govt. policies have strong impact. A slight
change in Govt. policies may affect the performance of the
bank. The bank has to work with in the regulation frame
work.

S ectio

n 8

RECOMMENDATIONS

In this section only one topic is discussed that is:

• Recommendations

86
 RECOMMENDATIONS

PROPER PLANNING
Bank should make a plan to gear up its recovery efforts on
war footing and reorganize the recovery function of global
bases. In addition, bank should tighten up control on
expenditure

USE OF COMPUTERS
To save the time of the customers and other clients, bank
should adopt computerized system for book keeping and
other filling systems. It will increase the efficiency of the bank.
I know that there are some branches which are computerized
but most of the branches in various cities of the country are

87
not computerized. So the bank should mechanize all its
branches in the country.

ADOPTION OF ADVERTISING
Bank should launch advertising campaigns through out
the year to promote the habits of savings in the people. Bank
should open more branches in the remote areas of the country
to get deposits and idle resources. Bank should provide
similar facilities to all its branches in big cities. The standard
of service and other facilities are far better as compared to
smaller cities.

PROPER GUIDANCE
Bank should adopt such an induction plan that when a
customer opens his account with the bank, he should be
supplied with a booklet which enables him to know the
procedure of filling the cheques and pay-in-slip etc. It will
save a lot of time of the bank staff afterward during of the
conduct of the account of that customer.

DIVISION OF WORK
The billing system of national bank of Pakistan must be
improved to facilitate the customers and workers. The work

88
should be divided among the staff e.g. collection of bills,
countering of cash and then entry of these.

CHECK ON EXPENDITURES
Expenditures must be controlled which are very high and
unnecessary.

BORROWING AT LOW COST

Deposits must be taken at a lower cost and given at higher
interest rate.

89