DEVELOPMENT OF BANKING IN PAKISTAN

B
efore partition of the subcontinent, the entire banking system was almost in the hands
of non-Muslims. When Hindu capitalists become sure of the division of the sub
continent, they transferred their fund to India in safe places. There was also a mass
scale migration of non-Muslims from Pakistan to India, which also caused a reduction
in the bank deposits.
At the time of independence in 1947 Pakistan's Commercial banking facilities were
almost jammed according to a plan. The following lines will give us a fair view of the
situations, which were prevailing at that time.
INDUSTRIAL SECTOR
Pakistan had practically no industries except a few textile mills and only produced
food grains and agricultural raw materials most of the industries were situated in the
areas, which now constitute India.
LACK OF BANKING FACILITIES
A number of banks closed their branches with the result that only 81 branches
remained open on 30th June 1948 out of 487 in 5947. As their head offices were in
India and most of their Hindu staff fled to India. Imperial Bank of India, which was
conducting government, receipts and payments work closed down most of its
branches thus blocking the funds needed most by the government.
HABIB BANK LIMITED
The country being in infancy, needed most of the general commercial banking and
credit facilities. And this need was a little bit satisfied with the transferring of the head
office of the H.B.L. to Karachi on 7th August 1947. This bank played a great role in the
next many years of the economic development of Pakistan. As the Habib / Bank was
also new in the newly born country .It was asked to open more branches at new
places.

Imperial Bank of India, which was conducting government, receipts and payments
work closed down most of its branches thus blocking the funds needed most by the
government.
Formation of The State Bank of Pakistan:
In view of the above mentioned circumstances and in order to rehabilitate the banking
in Pakistan without further delay, on the recommendations of an expert committee it
was decided to establish as early as possible a Central Bank to control the banking and
currency in Pakistan. Accordingly State Bank of Pakistan was inaugurated by Quaide-Aznm Muhammad All Jinnah on 1st July 1948.This bank lost no time in meeting the
national requirement of banking currency and took following remedial measures:Requested Government to start a new bank for nation wide service. Accordingly
National Bank of Pakistan was formed in 1949, which opened numerous branches. It
also took over government agency work from Imperial Bank of India in 1952.
With Drawl of the Indian Currency
It withdrew Indian currency notes ofRs.125 crore from general circulation and sent
these for recovery to Reserve Bank of India.
1.
In order to help the growth of foreign trade foreign exchange
department was setup in State Bank of Pakistan.
2.
Banking Companies (control) Act 1949 empowering State Bank of
Pakistan was passed The following banks were also opened:AGRICULTURE DEVELOPMENT BANK
Agricultural Development Bank was set up to finance agriculture production in order
to overcome food shortage.
PICIC
Pakistan Industrial Credit and Investment Corporation (PICIC), was acted to finance
industrial projects.
UBL
United Bank Limited was established to meet the increasing demand for funds
consequent upon the commodity market having become firm. The following banks
and other financial institutions were also formed with the passage of time.
1. Commerce Bank Limited.

2. Standard Bank Limited.

3. Muslim Commercial Bank Limited.
4. Australasia Bank Limited
HISTORY & PROSPECTS OF NATIONAL BANK
The national bank was established on November 9,1949 under N.B.P ordinance 1949.
In order to cope with the crises condition which was developed after trade deadlock
with India and the devaluation of Indian rupee in 1949. Initially the bank was
developed to finance the agriculture sector. The Normal procedure for the establishing
of the banking was set aside and the bank was developed through the promulgation of
an ordinance due to the crises situation developed due to the financing of jute trade.
The bank commenced its operation on November 20,1949 at six centers of jute in the
then East Pakistan. Lahore and Karachi offices were opened subsequently on
December 1949. The nature and responsibilities of the bank differ from other banks
and financial institutions. The bank acts as an agent to the state bank of Pakistan for
making payments and the collection of receipts on their behalf. The bank was
incorporated with authorized capital of 60 millions. In 1960 this amounts was reduced
to the 30 millions. Bank issued 15 millions of which 25% was subscribed by the
government and the balance was offered to the general public. Shares to the public
were issued in 1950 and were promptly taken up. In 1950 banks ordinance was
amended so that it could take up ordinary commercial banking business. On January
1,1974 national bank along with thirteen other commercial banks were nationalized
under the promulgation of bank (NATIONALIZATION) act 1974 and the shares not
held by the government were reacquired after compensating them. The period of 1990
witnessed financial reforms and the national bank also incorporated the changes in its
working and offered new services and product to its clients.
At presents the bank is playing very impotent role in the financing of trade,
commerce, agriculture and important concerns and contributing the best toward
making the country prosperous.
ESTABLISHMENT
National Bank of Pakistan was established under the National Bank of Pakistan
ordinance 1949 and it came into existence on November 20; 1949.1ts main aim was to
provide all types of banking services to the government and private sector. The bank
also handles treasury transactions for the Govt. of Pakistan as agent, to State Bank of
Pakistan.

SHARECAPITAL
Issued Capital
The bank was initially setup with an issued capital of Rs.15 million.
Authorized Capital
Authorized capital of National Bank of Pakistan in 2002-03 was Rs. 5,000,000,000
Issued, Subscribed, and Paid-up Capital
Issued, subscribed and paid-up capital in year 2002-03 was Rs.4,103,421,850
MANAGEMENT
Board of Directors
An executive board composed of six senior executives of the bank and the president
who is also the chief executive supervises the affairs and business of the bank, called
the Board of Directors.
Management Committee
Also there is a Management Committee consisting of nine senior executives of the
bank, called the members and the president who is also the chairman of the
committee.
Branches
Presently the bank is divided into 10 groups headed by leading professionals. Its fields
operations are controlled by 29 regions reporting to Regional Business Chief,
Regional Business Chief, Regional Risk Management Chief and 1196 domestic
branches headed by Branch Managers. The bank has 15 overseas branches. The bank
has one joint venture in UK and one wholly owned subsidiary in Kazakhstan.
UK operation of the bank was merged with UBL to form Joint venture v bank
named as United National Bank Limited (UNB).
Training and Management Development Wing
National bank of Pakistan has its national and development centers and 4 staff
collages at:1. Karachi
2. Lahore

3. Peshawar
4. Islamabad
In these centers and staff colleges, the banking training is provided to the officers,
managers, and to potential managers. It arranges courses and seminars for middle and
higher management in all. Each year almost 1500 persons receive training over there.
Objectives of National Bank of Pakistan
National Bank of Pakistan's primary objectives is:
1. To earn the profit
2. To develop the economy
3. To provide the latest banking facilities to its customers
4. To improve customer service
5. To offer specialized services to major corporate
6. To reduce the size of non performing loans (NPL'S)
FUNCTIONS PERFORMED BY NATIONAL BANK OF PAKISTAN
To fulfill the basic objectives of socio-economic nature the bank perform following
important functions
Accepting of deposits
This function is performed by the bank by opening of the different type of accounts
which are as follows:
Saving Account Current Account Fixed Deposits NJ.D.A. account
Advancing of loans
Different types of loans are granted to different type of people and industries these
include:
Running Finance Over Draft Demand Finance Gold
Payment of cheques
Cheques drawn against various deposits are honored and paid in cash
Payment of pensions
This function is performed by N.B.P. as a govt. treasurer all the pensions of federal
govt. provincial govt and semi govt. employees is paid by NBP
Salary management of different governmental institutions
The salary of govt. and semi govt. employees is first credited to the account of NBP
and is then credited to there personnel accounts.
Issuing of traveler's cheques

The traveler's cheques are issued by NBP for secure transfer of money from one place
to another, without charging any commission.
Collection and sale of prize bonds
The national prize bonds are purchased and sold at the branches of the NBP according
to the rules formulated by the SBP.

Collection of fees and money from people proceeding on Haii pilgrimage

National Bank collects the fee from the people proceeding for hajj and act as there
agent.

Transfer of funds from one place to another

Money is transferred from one place to another by different means like
Bank Draft Mail Transfer Telegraphic or Telephonic Transfer Travelers Cheques

Collection of chalans
Various Govt. revenues are collected by NBP in the form of chalans

Issue Guarantee And Indemnity

Collection Of Negotiable Instruments
Act As Income Tax Advisor
Act As An Agent Or Representative Of His Customer

PROGRESS MADE BY BANK IN CRITICAL AREAS

Brief views on the progress made by the National Bank Of Pakistan in certain critical
regions are discussed as under.
1.
CORPORATE AND INVESTMENT BANKING
Corporate banking is a dedicated business and is being very well received by the
corporate sector. The bank was mandated as a lead manager in significant capital
market transactions. Through a combination of large direct equity portfolio as well as
25% holdings in NIT, the Pakistan's largest mutual fund, the NBP has a largest
portfolio in the country.
2.
OPERATIONS
The N.B.P has redefined its monitoring system to collect and utilized feed back from
branches within the country and abroad. In this regard, the concept of compliance
officers has been introduced.

3.
RETAIL BANKING
To positions the bank for capitalizing on the requirement of the relatively lower
banned sector, a dedicated Commercial and Retail Banking Group was created. Within
a short span of time a number of retail products has been launched and the response of
the customers in this regard is very encouraging. New retail banking product is going
to be introduced to cater to large diversified customer base of over 9 millions, the
largest in the country. The success of the retail banking is critical to maintain interest
revenue and enhanced fee income. With large customer base and delivery capabilities,
the bank will emerge as a market leader in the retail/consumer business in very near
future.
4.
TREASURY/INTERNATIONAL BANKING
The bank is focusing on expanding its market share in trade finance, home remittances
and foreign investment related forex-denominated flows. For overseas operation,
focus continued to be on trade financing activity to take the advantage of bank
presence in most countries (16 countries, 20 branches/offices), which are Pakistan's
major trading partners. In 2003, the also established wholly owned subsidiary in
Almaty. Presently the bank is present in four of the Central Asian countries and its
unique representation should provide the bank with major competitive edge in the
coming years as the Central Asian countries will realize their economic potential.
5.
HUMAN RESQURSE FUNCTION
To meet the challenges of positioning the N.B.P as a market leader, training of
personnel is considered as a critical factor for success. Training has been restructured
to make it more need based and aligned with corporate vision of inculcating customer
focus and developing core competencies under a programme "Gearing Up For
Excellence." A strategic training management plan was developed keeping in view
stakeholders expectation. While training is a continuous process of improvement. The
bank has received significant results thus far. Furthermore to boost the staff staff
motivation level and to ensure that they are showing a marked improvements in
performance are adequately rewarded for their efforts, a merit-based culture is being
promoted through revamping manpower recruitment, retention and performance
appraisal system.
6.
NON PERFORMANCE LOANS
Special Assets Management Group (SAMG) at the head office with full. coordination
between the field functionaries and the head office is performing Non Performing
Loan (NPLs) and deals with classified portfolio of bank along with remedial
management, legal framework, statistical analysis of classified accounts, revival of

sick industrial units, consortium financing and Ex Mehran Bank Limited affairs, etc.
at the end of June 30,2003, total NPLs were RS41378 millions which is 26%ofthe
total advances.
7.
RISK FACTORS
Major risk factors that may affect the profitability of the bank are summarized as
under.
A.
LIQUIDITY RISK
Assets And Liability Committee (ALCO) through Treasury Management Group
(TMG) manages the bank liquidity position. ALCO/TMG monitors the maintenance
of balance sheet liquidity ratio, depositor's concentration in both overall funding mix
and avoidance of undue reliance on large individual deposits and liquidity
contingency plan.
B.
YIELD/INTEREST RATE RISK
Interest rate risk is the risk that the value of the financial instrument fluctuates due to
changes in the market interest rate. The bank is exposed to markup/interest rate risk as
results of mismatch or gaps in the amount of interest/mark-up based assets and
liability that matures or re-price in a given period. The bank manages this risk by
matching/re-pricing of assets and liability. The bank is not excessively exposed to
interest/mark-up rate risk as its assets and liabilities are re-priced frequently. The
ALCO of the NBP manages the interest rate risk with the objective of limiting the
potential adverse effects on the profitability of the bank.
C.
CURRENCY RISK
Currency risk arises where the prices of the financial instruments changes due to the
change in the foreign exchange currency rates. In order to manage the currency risk
exposure, the bank enters into ready, spot forward and swaps transactions with SBP
and inters bank market. The bank's foreign exchange exposure comprises of foreign
contracts, purchase of foreign bills, foreign currency in hand, balances with bank
abroad, foreign placement with SBP and foreign currency assets and liability. The net
open position is managed within the statuary limits, as fixed by SBP. Counter parties
limits are also fixed to limit risk concentration. Appropriate segregation of duties exits
between the front and back office function while compliance with net open position
the limit is independently monitored on an ongoing basis.
D.
CREDIT RISK &CONCENTRATION OF CREDIT RISK
Credit risk exposure in respect of earning asset and off-balance sheet financial
instruments represents carrying value of assets and contingencies which could be
impacted as a result of failure by the bank's counter-parties to discharge their
obligation under financial instruments and cause the bank to incur financial loss.

Concentration of credit risk arises from exposure to customers having similar

characteristics in term of industry in which they are engaged and geographical
location in which they operate such that their liability to discharge contractual
obligation may be similarly affected by change in political, economical and other
orders. Credit risk is managed in term of lending policy, approved by board of
directors and other laid down procedures outlined in the Standard Procedures Manuals
and related circulars. Credits limits are established for all counter parties after a
careful assessment of their credit worthiness. An effective credit granting procedure,
which requires pre-sanctions evaluation of credit proposal, adequacy of security and
pre-disbursement of examination of charge documents has been established and
management by Risk Management Group(RMG) at head office. Where possible loans
and credits are backed by collateral to mitigate credit risk. RMG is also responsible
for continuing review and monitoring of borrowers accounts and effective compliance
of Prudential Regulations.
The bank maintains a sound portfolio of advances which are diversified in order to
minimize the risk. Assets are also diversified not only industrially but also
geographically. Cross border exposure are managed by the bank by considering
country/sovereign risk and these are updated on regular basis. SA &RMG of bank are
responsible for monitoring the stuck up advances. It negotiates with borrowers and
takes legal actions against delinquent borrowers.

ORGANIZATIONAL CHART OF N.B.P

CHAIRMAN
Board of Directors
Executive Committee
President
Regional Headquarter
Regional Manager
Regions
Branch Managers

Banking Deptt: Officer

Admn. Deptt: Officer
Cash Deptt: Officer
Finance Deptt: Officer

MANAGEMENT AND ORGANIZATION OF BANK

Board of Directors
In the management of the bank the board of directors is at the top of the controlling
bodies. Since there are no private shareholders, so there is no general meeting of
shareholders and no directors are elected. The board consists of a nominated
president, a secretary and 6 other members.
After nationalization in 1974 most of the powers have been transferred to the
executive board.
Executive Board
It is also called the management committee. The general direction and supervision of
the affairs of the bank lies in their respective executive boards. The president,
secretary and 6 other members of the board are appointed by the federal govt. The
president being the chief executive controls the affairs of the bank.
Chief Executive
The president is the administrative head of the bank. He manages and controls fie
affairs of the bank. The president holds the office at the pleasure of the federal
government.
Regional Manager
In order to improve the performance of the banking system, the bank has appointed
regional managers also. The regional chief has the powers of sanctioning finance and
other credit facilities.

NO OF DIRECTORS

and presides Pursuant to the section 11 of the bank (Nationalization) act 1974 no of
directors of bank shall not be less than the 5 and will not be more than 7, excluding
the president. The Federal Government may, if it deems necessary, appoint the
chairman of the board in respect of the bank. At present, board consists of 6 directors
and a presedent who is the chief executive of the bank over the meeting of the board.
Voting right
Upon the show of hand every member present in person or by proxy shall have one
vote for every 10 shares held by him subjects to the maximum of the 10 votes. The
Federal Government being a shareholder may also appoint a person to vote on his
behalf.

HIERARCHY OF MANAGEMENT OF
N.B.P (MAIN BRANCH)
2 CASHIERS
3 ARMED GUARDS
2 ASSISTANTS
2 CASHIERS
3 SECOND OFFICERS
BRANCH MANAGER
DEPOSIT SECTION

D
eposits are important to the bank as a backbone is to the body of a man. They are the
lifeblood of the bank. National Bank of Pakistan and all other commercial banks
perform the function of deposit accepting from the general public by offering suitable
rates of interest on them, or on simply a promise to repay on demand
OPENING OF ACCOUNT BY AN INDIVIDUAL
After entering into bank premises the person goes through the following steps for
opening an account in the bank and for becoming a bank customer.
1.
An Introduction

The first important step to take place in bank is to get satisfactory introduction of the
person, who wants to become bank's customer.
This introduction is made from the person /party who are respectable and honorable
and have an account with the bank.
In N.B.P (Main Branch) the concerned officer takes great care of this step and gets
introduced with the person himself. His main intention is to determine the
prospective customer's integrity, respectability, occupation, and nature of business he
is doing at the time of opening an account.
2.
Account Opening Form and Specimen Signature Card
Now the person is provided with an application form known as Account Opening
Form.
This form contains:i.
Title of account
ii.
Address
iii.
I.D.Card number
iv.
Telephone No. (Office and Residence)
v.
Introductory reference (all above mentioned particulars of introducing
him )
vi.
Signatures of the applicant
vii.
Amount deposited
viii.
Check book series No.
The customer will attach a copy of National Identity Card with the form.
Specimen Signature Card
Specimen of signatures will be obtained from depositor at the time of opening his
account. A specially designed card is used for this purpose; the card must be
countersigned by an official of the bank not below the rank of an officer.
3.
Account Opening Register
Now the name of the customer will be recorded in account opening register, and from
here the account no. of the customer will be written on (top most corners) account
opening form and on specimen signature card.
4.
Issuance Of Cheque Book And Pass Book
The cheque book will ordinarily be issued to all customers desiring to have chequing
facility.
Cheque book consists of 10, 25, 50, or 100.00 leaves depending upon customer
requirement.

Customer can withdraw money by signing a cheque and writing the amount he wants
to withdraw from his account.
A special cheque book register is kept to enter the name of the person having cheque
book.
5.
PASS BOOK
PASSBOOK is another important type of book handed over to the customer as he
opens the account with the bank. The withdrawal and deposit of money is recorded
date wise in this book.
6.
Recording into General Ledger
The concerned officer records the name and amount deposited with the bank in to
general ledger. Separate ledgers are maintained for different types of accounts e.g.
i.
Current Account Ledger
ii.
Saving Account Ledger
iii.
Fixed Deposit Account Ledger
iv.
Call Deposit Account Ledger As and when customer will deposit
the money, amount will be credited in general ledger and the withdrawal will
be followed by a debit entry in the ledger.
TYPES OF ACCOUNTS MAINTAINED BY NATIONAL BANK OF
PAKISTAN (MAIN BRANCH)
NATIONAL BANK OF PAKISTAN maintain following types of accounts:
1.
Current accounts.
2.
Profit and loss sharing account.
3.
Fixed deposit account.
4.
N.I.D.A. Account
Current account
This account is also known as running balance account-simply we can say "A bank
account which may be used to lodge payments or to withdraw money on demand. Its
main purpose is to serve the businessman. Form number F-53 is provided to the
person to open the account.
It is a statutory requirement to maintain current account.
Its main features are:1.
Minimum amount for opening this account is Rs.500
2.
Any person can open the account with the bank
3.
According to inter banks agreement interest is not paid on
current account.
4.
Bank act as custodian of money
5.
Over draft facility is provided to t\e customers

6.
Customer can withdraw money through cheque supplied by bank
Number of depositors in current account in National Bank of Pakistan up to 31-82001 was 900 approximately.
PROFIT AND LOSS SHARING ACCOUNT
In general it is also called saving account .To provide interest free banking facilities in
Pakistan, this type of account was introduced in January 1982 after the islamization of
banking. The main features of this account are:1.
Instead of having fixed return in the form of interest the deposited
money will be shared in profit and loss of the bank.
2.
One can open the account by depositing minimum Rs. 100
3.
Withdrawal is allowed 8 times in the month total not
exceeding Rs. 15000.
4.
To Withdraw a large amount a notice of 7 days to the bank is
necessary.
5.
There is not any kind of interest is provided on money
deposited.
6.
Rate of profit is declared at the close of each half-year.
Number of depositors in PLS account in National Bank of Pakistan up to 31-8-2001
were 4000 approximately.
FIXED DEPOSIT ACCOUNT
This account is the major source of funds for the banks. This account is best for
people who have surplus money and don't need such funds in nearer future. The
money is deposited for a fixed period of time. Main features of this account are:1.
Fixed amount is deposited for fixed period.
2.
Amount of profit can be obtained after each six months.
3.
Higher will be the time period, higher will be the rate of profit, and
vice versa.
4.
A receipt is used for the amount deposited called fixed deposit receipt.
5.
Period of deposit can vary from 3 months to 5 years.
The amount can be withdrawn before maturity after surrendering interest
N.I.D.A. Account

The NIDA Account can be opened in N.B-P. N.LD.A. stands for National Income
Daily account the features of this account are same to the features of the saving or
PLS account except the following ones:
1.
In this account the minimum balance required to acquire the
benefits of this account is Rs 2 million, and the maximum limit is 5.0
million.
2.
When the above condition is fulfilled, then the bank will pay
interest on daily .' basis, which is that if the deposit is minimum of 2
million than the mark up rate is 5.2%p.a.and if it is at maximum that is
5.0 million than the rate is 7.00 %p.a.
3.
In this account the daily balance of account is taken,
products are calculated and the interest is calculated on that
balance.
4.
If the balance on any day comes below the lower limit which
is Rs 2 million then interest will not be given.

N
ational bank of Pakistan maintains a separate finance section. Its purpose is to grant
loans to the needy people, small & large business concerns, and to industries.
Advances in the form of money are the most remunerative use of bank resources. The
management of the bank will be very careful while granting the loans.
The person/proprietor of the business will go through a long process of application,
documentation, securitization etc. while requesting for loan. After proper satisfaction
from the party concerned the bank will grant loan to the party Under the Islamic
modes of financing from 1982 onwards. National bank of Pakistan gives loans on the
basis of "Mark-up" instead of interest. Mark-up rate is different depending upon the
type loan.
Procedure For Granting Of Loans
The following procedure is maintained by National bank while granting loan to any
person:1.
Loan Application Form & Specimen Signature Card
The bank provides a prescribed application form to the borrower. The borrower will
fill the form. In that form the borrower will tell about: Type of the loan.
Amount of the loan he needs.
Period of time.

Applicant will also be provided a specimen signature card, which he will fill.
2.
Declaration Of Properties Form
This form will provide the information about the business he is involved, and also
provide the information about his properties in Pakistan.
3.
Investigation
Now the bank after analyzing his application, investigate about the applicant's credit
worthiness, and also the information's he provided about his properties. In case of
business owner's request for loan, investigation will be made on following ways for
different businesses:Sole Proprietorship
Investigation will be about:

Personal reputation of the borrower

Nature of the business
Types of properties (shop, houses, and land) their locations with their present
market value.
Cash, jewelry, shares, security, bonds etc.
Stock in trade
Their liabilities

Partnership Firm

Name and addresses of the partners

Partnership deed
Branches if they exist
Nature of the business
Amount invested in the firm
Purpose of the loan
List of assets and liabilities
Import export registration

Private and Public Ltd. Companies

Name of the company

Addresses with telephone numbers

Whether private or public

Date of incorporation
Nature of the business
Branches if any
Authorized capital
Paid-up capital
Financial highlights of the company
Details of security offered to other banks under each head and charges created
against fixed assets.
Certificate copy of memorandum of association
Copies of certificates of incorporation
Certificate of commencement of business
Auditor's certificate regarding paid-up capital

4.
Granting Of Loan
After detailed investigation, and documentation if the finance section finds the party
well satisfactory and feasible then they sanction the finance to the party concerned.
TYPES OF SECURITIES:
The word security means any thing given to protect or safeguard the repayment of an
advance and to justify this term the thing so given should it self be safe; otherwise the
object for which it is given is defeated.
The National Bank of Pakistan usually has three ways in which securities can be made
available in the bank against finances.
These types are:1.
Pledge
2.
Hypothecation
3.
Mortgage
In each case the bank does not become the owner of the, property but the bank has
only the right over the property until the borrower makes payment of his debt.
1.
Pledge
In a pledge, the possession of the property but not the ownership passes to the
creditor. The pledgee is entitled to the exclusive possession of the property until the
debt is repaid but the ownership remains in the pledgor subject to the pledgee's right.
2.
Hypothecation
In case of hypothecation, the property in goods is charged as security for a loan from
the bank. But the ownership and possession is left with the borrower. In case of
hypothecation, neither the property in goods and nor the possession of property pass

to bank, but only the security is granted in a form of letter of hypothecation, which
usually gives the banker" charge on the hypothecated goods.
3.
Mortgage
In a mortgage, the property in the thing mortgage is conveyed to the mortgagee
conditionally. The possession, until default in repaying the loan, generally, remains in
the original owner subject to the mortgagee's rights.
TYPES OF LOANS
National Bank of Pakistan provides various types of loans depending upon the
requirement of the borrowers. Some of the important types of loans are: 1.
Demand Finance
Under a demand loan arrangement, a fresh demand loan account is opened through the
borrower may be having other deposit accounts with the banks. The amount of loan
has to be drawn by the borrower in lump sum and is to be repaid in installments or as
agreed upon. The borrower can not operate a demand loan account by depositing and
withdrawing amounts periodically.
Demand Finance Gold
Characteristics:
Security
Gold is used as a security.
Recording
Single debit entry is recorded at the time of granting loan.
Loan type
Short term loan.
Rate of markup
43.84 pptdr (paisa per thousand on daily product)
Required Documents
1.
Application form
2.
Introductory reference sanction advice
3.
Valuation certificate by gold smith

4.
5.
6.
7.
8.

Insurance letter
IB-12 (Promissory Note)
IB-26 (Letter of Pledge)
IB-6A (Agreement Form)
Delivery letter (f.205)

NOTE
Only N.B.P, performs the function of advancing of loan against pledging gold. No
other bank advance gold pledged loan.
2.

Running Finance
1.
Clean Running Finance
2. Secured Running Finance

Clean Running Finance

Loan is granted mostly to the employees of the bank without demanding any type of
security from them.
Type of loan Short term loan
Characteristics:
Number of transactions
Frequent transactions are made.
Rate of markup
43.84
PPTDR
Repayment
Monthly installments
Payment of balance
It will be made in lump sum.
Documents
1.
2.
3.

Account Opening Form

Specimen Signature Card
IB-12

4.
5.

IB-6
IB31 (sale and buy back agreement)

3.
SECURED RUNNING FINANCE
Secured running finance is the type of loan in which some guarantee or security may
be obtained from the borrower.
Characteristics
Rate of return:
43.84
PPTDR
Type of loan
Short term loan.
Payment
In installment or lump sum as mentioned in conditions.
4.
Cash Finances
Under this type of credit N.B.P grant loan to its customers in cash. Under the cash
credit arrangement a customer is granted an advance up to certain limit, which he can
draw time to time as required by him. In this case, a new cash credit account is opened
in the name of customers. These are long term loans.
Securities
1.
Hypothecation of stock
2.
Mortgage of properties
3.
Personnel guarantees of all the partners of directors.
REMITTANCES SECTION

M
oney or some thing equivalent to money sent by any person to another on another
station, either in cash, money order, postal order, bill of exchange, cheque, bank draft,
etc is known as a REMITTANCE. The National Bank of Pakistan, now-a-days
provides this facility to its customers and to the general public in general in the
following modes:Bank drafts.
Mail transfer.

Telegraphic transfer.
Traveler's cheques.
Now I will explain the procedure and importance of each type of remittance.
Bank Draft
Bank draft can be defined as:
"An un-conditional instrument in writing drawn by a hank in favor of any person on a
branch of its own bank or any other bank to pay a certain sum of money to his order,
for value received".
From the definition it is clear that the draft is payable to the beneficiary himself or to
his order. The beneficiary or payee has to prove his identification at the paying office
of the bank, which sometimes causes inconvenience to the public. Draft is the most
popular and common form of remitting funds from one place to another.
Drafts can be purchased by any person who may or may not happen to be the bank's
customer against payment of bank charges. It is considered to be a source of income
for the bank.
Procedure
In National Bank of Pakistan the drafts are issued on submission of application form
(always printed) filled in and signed by the purchaser with his full name and address.
The following particulars are generally required in the application form:1.
Date
2.
The Name of the Office on Which It Is Drawn
3.
The name of the beneficiary
4.
Amount in words and figures
5.
Bank exchange rates
6.
The signature and address of the applicant
The draft is issued after the applicant tenders the money. Draft is always signed by
two authorized signatories of the bank.
A separate book "Draft issued register" is kept to record the particulars of the draft
issued. The drawing branch of the bank will give credit to the drawee branch on the
same date the draft is issued; through their account for settling inter branch
transactions.
Usually all the banks insert special code number known as CHECK SIGNAL on the
relative draft advices for all the drafts for more than Rs.5000/-.
National bank of Pakistan does not pay the drafts before the receipt of relative advice.
On receipt of relative advice the drawee branch will credit the amount into their "draft
payable account" and each time a draft is paid this account will be debited with the
amount of the draft paid.

In case the draft advice is not received, the draft will be paid "ex advice" duly entered
in the "ex-advice register" and the entry in the said register will be marked off on
receipt of the relative advice.
Issue of Duplicate Draft
In case a draft is lost or destroyed by mistake, its duplicate can be issued at the request
of the purchaser after obtaining indemnity bond on "stamped" paper of appropriate
value. This is done to cover the risk of double payment by mistake. Drafts of most
banks in Pakistan are valid for a period of six months only. After the expiry of this
period the draft will have to be revalidated from the issuing branch of the bank.
Mail Transfer
The same application form is used for drafts and mail transfers generally in
National Bank of Pakistan. The mail transfer instrument is not delivered to the
purchaser but instead it is sent by the issuing office to the beneficiary's branch on
its own risk and responsibility.
This type of remittance facility is provided only when the beneficiary happens to be
the customer of the bank.
The amount is directly credited to the beneficiary's account and as such loss of mail
transfer has no concern with the applicant. A bank customer can very conveniently
remit the funds from one place to another regularly if he so desires by giving standing
instructions to his bank.
Also the credit balance of a customer's account is transferred from one branch to
another branch with the help of this instrument in case the customer so desire.
The applicant desiring to remit the funds by way of mail transfer can either deposit
cash or he may ask the bank to debit his account with the cost of mail transfer
including bank charges.
An exchange memo is issued to the applicant in case he desires to have some sort of
receipt from the bank for his office record.
The participants of mail transfer are recorded in the mail transfer issue register just
like drafts while at the paying branch the instrument is treated as branch voucher for
credit into the beneficiary's account.
Telegraphic Transfer
The money sent by mail has been described as "mail transfer" which takes three to
four days, or more depending upon the distance between the two branches. When the

applicant wants to save the time wasted in transit of the instrument, he can request for
transfer of funds by means of a telegraphic transfer.
In this case he will have to bear the telegram charges in addition to usual bank
exchange.
The amount so remitted will reach its destination within 24 hours.
Business community generally avails of this facility in order to save time in their
business dealings. The funds so remitted are either credited directly into the account
of the beneficiary or paid by means of pay order in case he is not keeping his account
at the paying office of the bank. It should be noted that such remittances are affected
between two stations having telegraph office.
The remitting office sends the message by telegram in code language instructing
"check signal" number at both ends of the message for security purpose. As check
signal books are supplied to all the branches of the bank in order to verify the
genuineness of the message. All banks have their separate "check signal" apparatuses.
The entries at issuing office are recorded in the telegraphic transfer issued register
while at the other end it is entered in the T.T. Payable register.
The papers pertaining to such transfer are properly kept in separate files "telegraphic
transfer issued and paid files" and kept in the custody of an officer
(Accountant/Manager). In case "check signal" number turns out to be incorrect at the
paying office, the message is got repeated till such time it is found correct. It is
therefore, necessary to be vigilant at the time of calculating the "special numbers"
otherwise the very purpose of urgency is defeated and the bank will be responsible for
the delay.
Travelers Cheques
When a traveler proceeds from one place to another he needs money at different
places. The remittances explained so far will be available to the beneficiary only at a
particular place, and that too all in one time; where as the requirement of a traveler
may be otherwise.
National Bank of Pakistan has designed its own traveler's cheques to be used in
Pakistan only. For different denominations their colors are different.
The denominations of travelers cheques provided by National Bank of Pakistan are:Rs.5, 000/Rs.10,000/Rs.50, 000/Rs.100,000/The face of Traveler Cheque consists of:Signature of the purchaser
Name of the purchaser
Name of issuing office and the date of issue

On the back of the cheque this can preferably be done by means of small rubber
stamp.
Application for the purchase of the cheque application forms is taken. The original
remains with the issuing office as voucher and the duplicate is passed to the main
branch of the bank where account of bank is kept.
Recording
The issuance of cheque is recorded in the travelers cheque issue register. The
total amount of T.C. sold is credited to the main branch of the bank and the exchange
charged credited to the branch exchange account.
Delivery
The travelers cheques are delivered to the purchaser in thick cardboard cover
for their safety.
PROBLEMS AND SUGGESTIONS

D
uring my internship period at National Bank of Pakistan .1 found out certain
problems, which are written below along with their solutions, which need proper
attention of the top management:
These are given below:
1.
Information technology.
2.
Evening Banking Services
3.
Staff Shortage
4.
Dealing With Women
5.
Frequent Transfers
6.
Promotion
7.
Locker Services
8.
Standard Of Education
1.
INFORMATION TECHNOLOGY
This age is the age of information technology. Today the world has become a global
village and the fastest mediums of communication are adopted all over the world. And
it is a fact that more the latest technology and methods of work are adopted more will
be the productivity.
In the National Bank of Pakistan (circular road branch) there is only one computer
available for carrying on the business of the bank.

I suggest that the computer should be on every counter of the bank and they should
be interlinked together (NETWORKING) so that various services provided by the
bank can be provided in a more efficient and fast way.
2.
EVENING BANKING
I observed that the bank is closed for public dealing in after 12:30PM and then the
staff do their own banking jobs.
I suggest that at least one counter should be specified for the customer services till
evening. In this way, the people having jobs in other offices can get benefit from this
counter.
3.
STAFF SHORTAGE
I discussed with bank personnel and they gave their views about staff shortage. They
told me that staff is very short and all the staff is overloaded with work. That's why
the staff posted in the branch has to face many problems to finish its daily work.
I suggest that number of staff in the branch should be increased so that they can meet
their customers* requirements quickly and efficiently.
4.
COUNTER FOR FEMALES
The women in D.I.KHAN are very reserve in nature and are also pardah observing
that's why they hesitate to come in the bank and those who come hesitate to talk with
male staff.
I suggest that in order to deal with women there should be a Lady Officer or Lady
Clerk in the bank and there should be a separate cabin for them.
5.
TRANSFERS
I observed that staff members of the Bank are frequently transferred not only from one
branch to another but from one city to another and sometimes from one province to
another.
I suggest that no one is to be transferred to another city or province without the
consent and will of the employee and if transferred, the facilities like residence etc
should be provided to them.
6.
PROMOTION
I observed those employees; particularly officers are not satisfied with promotion
policies. There is no clear-cut promotion policy of National Bank. I suggest that there
should be a clear-cut policy about the promotion of employees, particularly for the
officers and they must aware of it that is polices must be communicated. When
policies are communicated to the employees then they can perform their task more
efficiently and will utilize their full efforts.

7.
LOCKER SERVICES
The area of circular road branch is full of business activities. The businessmen also
have some important documents, papers and valuable things to deposit for safe
custody.
In order to provide these facilities, locker services must be provided in this Branch.
8.
STANDARD OF EDUCATION
The standard of education for recruitment of clerical staff should at least be
graduation. Because in this way efficiency of work will increase and their dealing
with public will be better.

BIBLIOGRAPHY

3.
4.

1.
The first important thing is the discussions with the staff of the bank
especially with the manager of the branch.
2.
The Bank Book of Instructions for the National Bank of Pakistan
called B.B.I
Surfing the website of the National Bank of Pakistan
Reading the annual reports of the bank.
5.
Reading the economic bulletin of the bank which is published by
the economic and business research wing of the bank.

CONTENTS
PREFACE
ACKNOWLEDGEMENT
CHAPTER # 1:

INTRODUCTION
Development Of Bank In Pakistan
National Bank Of Pakistan
History & Prospects
Establishments & Managements Of NBP
Objectives Of NBP
Progress In Critical Areas By NBP
Financial Highlights

CHAPTER # 2:
MANAGEMENTS OF NBP

Organizational Chart
Managements & Organization of NBP

CHAPTER # 3:
DEPOSITS SECTION

Opening Of Account
Types of Account In NBP
Current Account
Profit And Loss Sharing Account
Fixed Deposits Accounts
N.I.D.A Account

CHAPTER # 4:

FINANCE SECTIONS
Procedure For Granting Loan
Securities Held By NBP
Types Of Loan
Demand Finance
Running Finance
Cash Finances
Secured Running Finance

CHAPTER # 5:
REMITTANCES SECTION

Bank Draft
Mail Transfore

Telegraphic Transfore
Travellers Cheque

CHAPTER # 6:
PROBLEMS & SUGGESTIONS

PREFACE
It is the job of high priority and deep contemplation to qualify the
qualification of M.B.A that during the course of study every student to inculcate all
the details of management, administration, organization and the organizational
behavior as well as undergo a practical of a field called Internship. In this respect I
was send to well-established and highly reputed organization of Pakistan, National
Bank of Pakistan (Main Branch, Dera Ismail Khan). As an internee, I was advised to
have a close observation regarding organizational practices, organizational hierarchy,
planning network, methods and procedures, office layout and running of transactions
in a manner that a clear and lucid linkage is developed between the theory which we
have studied during M.B.A course and the actions we are looking during internship.
During my internship, I got an opportunity to have a comprehensive analysis
of administration in action both in letter and spirit. Almost all of the institutional
matters were made open to my critical studies and practical involvement. I also
studied the accounting system of the bank. Since every student is required to presents
the data that he collects during the training period, so I have attempted to bring my
observation in written form. In order to make the report easy for those who read and
consult it, the topic has been broken into synopsis.
I am sure that this report will be a treasure for my practical life to come and a
beacon light for the proceeding students.
SYED SADAQAT HUSSAIN
M.B.A (Final)
Roll #: 191
Session: 2004-2006

ACKNOWLEDGEMENT
During course of my internship, I was fortunate enough for the guidance and
assistance to which I owe my thoughtful gratitude. I am thankful to the bank staff and
the who have provided me an ample opportunity to collect information I needed.

I would also like to pay my special thanks to chairman of the department:

Nazaqat Ali Imrani, the Chairman of the Department and the placement officer
Professor Ch: Toufail whose guidance and technical expertise let me to complete this
report.
SYED SADAQAT HUSSAIN
M.B.A (Final)
Roll #: 191
Session: 2004-2006

Dedication
I dedicate this internship report to my parents who have been a constant
source of inspiration, for me, throughout my life. Also because their timely guidance
and help enabled me to complete this report well in time.

Chapter # 1
INTRODUCTION

Development Of Bank In Pakistan

National Bank Of Pakistan
History & Prospects
Establishments & Managements Of NBP
Objectives Of NBP
Progress In Critical Areas By NBP
Financial Highlights

Chapter # 2
MANAGEMENTS OF MBP

Organizational Chart
Managements & Organization of NBP

Chapter # 3
DEPOSITS SECTION

Opening Of Account
Types of Account In NBP
Current Account
Profit And Loss Sharing Account
Fixed Deposits Accounts
N.I.D.A Account

Chapter # 4
FINANCE SECTIONS

Procedure For Granting Loan

Securities Held By NBP
Types Of Loan
Demand Finance
Running Finance
Cash Finances
Secured Running Finance

Chapter # 5
REMITTANCES SECTION

Bank Draft

Mail Transfore
Telegraphic Transfore
Travellers Cheque

Chapter # 6
PROBLEMS &
SUGGESTIONS