Thursday, 15 March 2012
National Bank of Pakistan MBA Final Report
ORIGIN OF BANKING[1]
There are different opinions about the origin of the word
“Bank”. According to some authors, the word “Bank” is derived from the “Banco”
or “Bancus” which means a bench. It was because Jews merchants in Lombardy transacted their business of money exchange on
benches. If the business of any merchant failed, his “Banco” was destroyed by
the people. From this practice, the word “bankrupt” is evolved. According to
another opinion, this word “bank” is derived from the German word “Back” which means
joint stock fund. Later on, this word “back” was Italianized into “Bank” or
“Banke”.
HISTORICAL BACKGROUND OF BANKING IN PAKISTAN
The history of banking system in Pakistan
dates back to independence of Pakistan
in August 1947 when various banks transferred their Head Quarters and funds to
areas likely to fall in India.
According to various books there were 3106 branches of
Indian scheduled banks in the undivided sub continent as on 1st March 1947 out of which
only 487 branches were located in areas presently constituting Pakistan.
However, the number of scheduled banks drastically declined to 195 from 487 by 30th June 1948.
At the time of partition there were only two banks having
the honor to be the first commercial banks of Pakistan, namely Habib Bank Ltd,
which was set up in 1941 with its Head Office in India and the Australasia Bank
Ltd, which was established in 1944 with its Head Office in Pakistan.
After the partition, an expert
committee was set up and this committee recommended that the Reserve Bank of
India being the central Bank of the undivided India should continue to function
as Central Bank of Pakistan and the Indian currency notes would continue to be
legal tender in Pakistan till 30th September 1948. Subsequently it
was set up and started functioning from 1st July 1948.
Thus the history of Banking system in Pakistan started with the establishment of the
State Bank of Pakistan
which was inaugurated by Quaid-e-Azam Mohammad Ali Jinnah on 1st
July, 1948. Consequently three banks were established which include Muslim Commercial
Bank Ltd., Bank of Bahawalpur in October 1948, and National Bank of Pakistan in
1949.
HISTORY OF NATIONAL BANK OF PAKISTAN[2]
National Bank of Pakistan was established on
November 9, 1949 under the National Bank of Pakistan Ordinance, 1949 in
order to cope with the crisis conditions which were developed after trade
deadlock with India
and devaluation of Indian Rupee in 1949. Initially the Bank
was established with the objective to extend credit to the agriculture sector.
The normal procedure of establishing a banking company under the Companies Law
was set aside and the Bank was established
through the promulgation of an Ordinance due to the crisis situation that had
developed with regard to financing of jute trade.
The Bank commenced its
operations from November
20, 1949 at six important jute centers in the then East Pakistan
and directed its resources in financing of jute crop. The Bank's
Karachi and Lahore offices were subsequently opened in
December 1949. The nature of responsibilities of the Bank
is different and unique from other banks/financial institutions. The Bank acts as the agent to the State Bank of Pakistan
for handling Provincial/Federal Government Receipts and Payments on their
behalf. The Bank has also played an important
role in financing the country's growing trade, which has expanded through the
years as diversification took place. The various phases through which the bank
went have been discussed in a sequence below:
Formative Phase 1950’s
When NBP was first formed it had authorized capital of Rs.
60 million. In 1950 shares of the bank
were also floated and taken up. In 1951 NBP had started foreign exchange
business. The ordinance that was passed
at the time of inception of NBP was amended to include ordinary commercial
banking business as well. In 1952 it was felt that the development of NBP was
so immense that it should be considered as the agent of State Bank of Pakistan. Thus by May of 1952 NBP had taken over the
Government treasury work from the former agent, Imperial Bank. The expansion of NBP was quite apparent by
1959 when it had 129 fully functioning branches as compared to only 17 branches
in 1950.
Period of Expansion 1960’s
After the quick growth of the 50’s, NBP worked to establish
itself as a sound and stable bank in the 60’s.
The expansion efforts were put into force during these years and
marketing efforts were made to target specific market segments. For example NBP directed its attention
towards popularizing schemes among school and college students, industrial
workers, and ladies. Under the School
and College Banking scheme introduced in 1962, all branches of NBP performed
School Banking in the premises of selected schools of the country. By December
1969 NBP had 720 branches, 713 at home and 7 in foreign countries.
Period of Organizational Development: 1970’s
The 1970’s witnessed the nationalization of Pakistani
commercial banks operating in the country.
On January 1, 1974
National Bank of Pakistan
along with 13 other scheduled Pakistani banks was nationalized by the
promulgation of the Banks Nationalization Ordinance 1974. Shares not formerly held by the Government
were acquired from the private holders after compensating them.
The decade of the 70’s saw major changes in NBP. In 1972 there was reorganization in the top
management structure of the bank. This
structure had remained unchanged since the inception of the bank and had
originally been inherited from the old Imperial Bank of India.
Period of Consolidation: 1980’s
On February
10, 1980 the Government of Pakistan announced a three year plan for
the implementation of an Islamic Economic System. The institutionalization of Zakat and
introduction of interest free banking were the two most important measures directed
to Islamize the economy. The system was introduced by the nationalized
commercial banks with effect from January 1, 1981.
National Bank of Pakistan
evolved and introduced a wholly separate and comprehensive procedure for
banking under this system from branch level to Head office.
Along with development activities of the bank, consolidation
of branch network was pursued. NBP
decided to delegate administrative and financial powers to Principal Offices
and Zonal Offices.
Challenges and New Initiatives: 1990’s-2003:
Due to the expansion in branch network, NBP has been able to
take services to a much larger number of Pakistani’s all over the country. Today it has more than 6 million accounts. It
maintains a presence in all the major financial centers of the world through
its 23 overseas branches and 5 representative offices.
In 1995 NBP became the first bank in Pakistan with a deposit base which
crossed the Rs. 200 billion mark to become the largest financial institution in
the country. Total deposits of the bank
have risen to Rs. 362 billion by end December 2002.
NBP continues to render active help in the provision of
services like Hajj services, collection of utility bills, paying of pension to
central/provincial government pensioners, as well as to civilian military
pensioners and retired army personnel.
Vision Statement[3]
Human Capital – The Way Forward
Mission Statement
“To be recognized in the
market place by Institutionalizing a merit & performance culture, Creating
a powerful & distinctive brand identity, Achieving top-tier financial
performance, and Adopting & living out our core values”.
ORGANIZATIONAL
OBJECTIVES:
All the objectives of the National Bank of Pakistan
are compatible with the mission statement of the bank. As a business
organization its main objective is profit maximization, the only yard stick
used for measuring performance. NBP tries to maximize its profits by concentrating
on two activities i.e. enhancing customers’ deposits, and increasing advances
to the borrowers.
To Increase Deposits
Presently tough competition is experienced in every field,
and the banking sector is no exemption to the rule. Whether the bank is
Pakistani, Private, Foreign or Nationalized, competition is there. In the
competition NBP has the goal to achieve the greatest possible amount of
deposits. The tool used by the bank in order to increase its deposits was to
provide the best of facilities to their customers.
Extension of Loans
The profitability of a bank greatly depends upon the amount
of credit extended to the people. The loans provided by NBP accounts for the
major source of its profit. The mark
up charged by the bank varies with the type of loan issued
to the customer; the terms and conditions of the loans are negotiable depending
upon the relationship between the customer and the bank, the purchase for which
the facility is offered, and of course on the security offered for acquiring
it.
THE INSTITUTIONAL APPROACH
The unique role of NBP in Pakistan’s financial sector confers
on the institution a dual responsibility to be a commercial bank in its own
right and at the same time, as a trustee of public finances, to act as a
custodian of the public interest. The continuing validity of this role means
that the kind of responsibility assumed by the National Bank of Pakistan
is unlike any other financial institution. As the only institution of its kind,
its performance and operational direction need to be reflected in an ethos of
productivity, efficiency, flexibility and quality of service both to the
individual customer and to the nation as a whole.
CORPORATE CULTURE
National Bank of Pakistan, after its pure
commercialization, focused its eyes on the corporate sector and initiated an
ambitious and farsighted Corporate Culture Change Program in collaboration with
Price Water House (U.K.) and AF Ferguson & Co. in 1995. In order to change
the bank’s posture from reactive to proactive, four major areas had been
highlighted for concerted plans of actions.
Personnel-Human Resource Management Plan.
Operations and Strategic Management Plan.
Marketing.
Technology-Information Technologies Acquisition Plan.
REFERENCES
National bank of Pakistan, (2002). Annual Report.
Karachi.
http:// www.nbp.com.pk
Siddiqi, Asrar.H. (1998). Practice & Law of banking
in Pakistan.
6th edition. Karachi:
Royal Book Company.P-1.
GENERAL OUTLOOK
After the elimination of Pakistan Banking Council, each bank
was put under the supervision of an independent board of directors. Since the
new organizational structure of the bank, National Bank of Pakistan constitutes a board of directors
and an executive committee as the governing bodies. The Head office is
operationally in charge of central affairs including the delegation of powers
and authority to 29 Regional offices all over the country. These Regional
Headquarters direct the functions of the Regional branches and 12 Corporate
Branches.
Board of Directors nominates the members of the executive
committee which designates the Regional Heads. A general view of the structure
is shown in the organizational chart on the following page.
BOARD OF DIRECTORS[4]
The members of the Board of Directors of National Bank of Pakistan
are as follows:
Syed Ali Raza (Chairman & President)
Dr. Waqar Masood Khan
Kamran Y. Mirza
A. Razzak Tabba
Rizwan A. Kehar
Qazi Faiz Isa
Sheikh Humayun Sayeed
ORGANIZATIONAL CHART OF NATIONAL BANK OF PAKISTAN
HEAD OFFICE
Head Office of the National Bank of Pakistan is situated at Karachi,
the industrial capital of Pakistan,
from where it controls all the affairs of the bank. The President of the bank
chairs Head Office. A secretariat is also working at the Head Office level for
the assistance of the president. The secretariat includes one Senior Executive
Vice President as Advisor to the president.
Head Office is rather a big body with a huge task. For
smooth functioning of these matters, the whole head office is divided into twelve
Departments & Groups. Each Department or group is under the control of a
Senior Executive Vice President and Group Chief. The various departments/groups
coming under the Head Office Management are illustrated in the chart below.
HEAD OFFICE MANAGEMENT STRUCTURE
DOMESTIC NETWORK[5]
The domestic network of NBP consists of 29 Regional Offices,
1,189[6]
branches and 4 subsidiaries. The domestic network of NBP has been shown in the
map:
NBP’s DOMESTIC OPERATIONS
Subsidiaries
The four subsidiaries of NBP are as under:
National Discounting Services Ltd.
Taurus Securities Ltd.
National Bank Modaraba Management Company Ltd.
National Agriculture & Storage Company Ltd.
OVERSEAS NETWORK[7]
The Overseas network of National Bank of Pakistan consists of 15 Overseas branches, 4
Representative Offices and 1 Subsidiary in Kazakhstan. The overseas network of
NBP is shown below in the map:
NBP’s OVERSEAS NETWORK
Overseas Branches
The Overseas branches are situated in the following
countries:
i) USA 2
ii) Germany 1
iii) France 1
iv) Hong Kong 2
v) Japan 2
vi) South Korea 1
vii) Bahrain 1
viii) Egypt 1
ix) Bangladesh 1
x) Kyrgyzstan 1
xi) Turkmenistan 1
xii) Pakistan EPZ 1
Representative Offices
The four Representative offices are situated in USA, People’s Republic of China, Uzbekistan
and Azerbaijan.
CORPORATE BRANCHES
Despite being the premier commercial bank of the country the
impact of NBP on the corporate banking sector has been marginal. The concept of
corporate branches has now been made an integral part of the bank’s operational
thrust. It aims at providing optimum performance and ‘one-stop shop’ service to
the bank’s corporate and high network
clients. The concept of corporate branch is based on a
package of services aimed at full customer satisfaction across the entire
spectrum of banking and financial service needs.
The client is enabled to accomplish all his banking and
financial requirements under one roof and with one contact. In this regard the
functions of the corporate branch will revolve around an account/relationship
officer.
REFERENCES
Basit, Abdul. (2002). An Internship Report on NBP City
Branch.
http:// www.nbp.com.pk
National bank of Pakistan, (2002). Annual Report.
Karachi.
INTRODUCTION
The progress of a countries performance, especially a
developing country is heavily dependent upon the dynamic growth of its
industries, trade and commerce, as well as agriculture. NBP plays a pivotal
role in ensuring the proper employment and distribution of funds for rapid,
sustained growth in all these sectors of vital importance. Also, the indicators
which mainly reflect the high quality of NBP’s management are its prudent
financing decisions, proper control of financing and prompt recovery of bank’s
dues, as per borrower’s commitment / repayment schedule.
Keeping in view all these factors, SBP lays down the regulation
/ guidelines of credit policy and within this broad framework, NBP develops its
own individual financing strategies and policies.
Principles
of Financing
Basically,
there are six principles, which must be duly observed while advancing money to
borrowers.
Safety:
It covers
the elements of character, capacity, capital, collateral and condition. It
means taking all the risky factors into consideration and trying to hedge the
bank from any possible financial loss.
Liquidity:
Covering
the element of capability to liquidate or repay on maturity and also prior to
the maturity, in case of need. It is an utmost important duty of a banker to
assess the financial position of the burrower i.e. if the party/client is
financially sound or will be completely dependant on the finances of the bank
because a party/client with a shaky financial position can be a greater risk to
the bank.
Term or
Period of the Finance:
The
facilities granted should be for a predetermined period of time, which would
depend on whether the bank is offering short, medium, or long term facility
depending upon the purpose of financing.
Dispersal:
The
lending portfolio should be as wide-based and diversified as possible in order
to spread the risk.
Remuneration:
Pricing
the loan according to the risk undertaken and the ancillary business income
committed is very important in order to ensure that optimum revenue is
generated from the advances.
Suitability:
Purpose
for which credit is extended should be lawful, and conform to the policies and
imperatives of the bank, as outlined in its credit policy guidelines.
The
5c’s that are a must to be assessed before considering a customer are explained
as follows:
CHARACTER
The loan
officer must be convinced that the customer has a well defined purpose for
requesting the bank credit, and has a serious intention to repay.
In
character the banker looks for the Customer’s Integrity, Purpose of loan,
Customer’s obedience to law, Credit rating, his loyalty to nation, his
environment, Intention to repay, Customer’s personal habits, Customer’s
business code of ethics, his keeping of words. When a loan officer is satisfied
with these above conditions, he recommends the loan after giving due
consideration to certain other factors addressed below.
CAPACITY
The loan
officer must be sure that the customer requesting credit has the authority to
request a loan and the legal standing to sign a binding agreement. The customer
characteristic is known as the capacity (authority) to borrow money. The banker
here checks the customer’s past payment record, experience of other lenders
with this customer, purpose of loan, customer’s track record in forecasting,
credit rating, presence of consignors or guarantors of the proposed loan.
CAPITAL
Does the
borrower have enough available cash (capital) to repay the loan? The loan
officer satisfies himself in respect of the loan applicant’s past earnings,
dividends and sales record, Adequacy of projected cash flow, Availability of
liquid reserves, Turnover of payables, receivables and inventory, Capital
structure and leverage, Expense controls, Coverage ratios, Recent performance
of borrower’s stock and P/E ratio, Management quality, Content of auditor’s
report and statement footnotes, Recent accounting changes
COLLATERAL
In
assessing the Collateral aspect of a loan request, the loan officer must ask
about the ownership of assets, age of assets, vulnerability of assets to
obsolescence, liquidation value, degree of specialization in assets, liens,
encumbrances, and restrictions, leases and mortgages issued, Insurance
coverage, Guarantees and warranties issued, Bank’s relative position as
creditor, Lawsuits and tax situation, Probable future financing needs.
CONDITION
The loan
officer while assessing a loan request must also take into account those
aspects which come under the environmental conditions head like Customer’s
position in industry and expected market share, Customer’s performance
vis-Ã -vis comparable firms in the
industry, Competitive climate for customer’s products, Sensitivity of customer
and industry to business cycles and changes in technology, Labor market
conditions, Impact of inflation on customer’s balance sheet and cash flow, Long
run industry outlook, Regulations, political and environmental factors.
TYPES OF
CREDIT
On the
basis of funds involved credit can be categorized as fund, and non-fund based.
Fund based financing involves immediate disbursement and out flow of funds.
Here the funds are provided to the customers upon sanction of the respective
credit lines by the bank and fulfilment of bank’s conditional ties and
formalities, while the non-fund based
facilities are contingent facilities such as letter of credits, and letter of guarantee. Credits extended to the clients are also
classified on the basis of duration of facility as follows[8]
Short
term – Up to 1 year duration.
Medium
Term – Up to 3 years
Long
Term – Above 3 years
Types
of Advances
LOANS, ADVANCES & FINANCES
Fund Based
Finances
 |
 |
Non-Fund
Based Finances
 |
|
Running
finance Letter of Credits
Demand
finance Letter of Guarantees
Cash
finance
TYPES OF
ADVANCES OFFERED BY NATIONAL BANK OF PAKISTAN
NBP Credit
department deals with all the advances, which are made to the customers.
Advances are important for the banking business because it gives the bank
interest on the amount loaned. NBP is also very active in advancing loans to
customers, thus helping the economy of the country in its development. It
provides the following finances:
Running
Finance
This is a
type of Finance which meets the day to day financial requirements of the
business. The amount is transferred to the debtor’s current account and can be
withdrawn through cheques. The limit for this type of finance is Rs. 35,000 and
the maximum period which it is extended is one year, and can be renewed by a
new sanction. Repayment is on discretion of the customer to repay in lump sum
or in periodic instalments.
Secured
Running Finance
It is also
called overdraft. In such type of finance a customer is authorized to borrow up
to an agreed amount in excess of his bank balance. The NBP usually provides
this facility to its customers. The time period for this type of finance is
less than one year. The mark up is paid on monthly basis and the principal
amount is repaid at an agreed date(s).
Cash
Finance
Cash
finance is also called working capital finance. It is a short-term credit
facility. Probably the most popular form of providing funds to the clients in
the banking sector is the Cash Finance
system or traditionally known as Cash Credit.
In this, the bank lends money to borrowers against tangible security. The total
amount of loan, which is granted, is not paid in one instalment. The borrowers
have to pay mark-up on the amount borrowed. Cash finance is obtained either by
Hypothecation of stock: When goods are not physically
handed over to the bank as security for loan advanced, but the bank has a lien
over the goods through the letter of hypothecation.
Pledge: When goods are physically handed over to the
bank as security for loan advanced.
Borrowers
prefer this type of facility because they have to pay on amounts actually
utilized. The time period for this type of finance is normally one year but
also depends on the manufacturing cycle of the organization.
DOCUMENTS
REQUIRED UNDER CASH FINANCE
Against
Pledge
Application/agreement
with the customer for opening cash finance account.
IB 6
(revised)
IB 26
IB 12 (Appendix )
Letter from
customer authorizing the bank to debit salaries of godown staff, insurance premium and other incidental
charges to his account.
Insurance
cover together with premium paid receipt.
Against
Hypothecation and Third Party Guarantee
Application/agreement
with the customer for opening cash finance
account.
IB 6
(revised)
IB 12
IB 29
Letter from
customer authorizing the bank to debit salaries of godown staff, insurance
premium and other incidental charges to his account.
Insurance
cover together with receipt of premium paid.
Letter of
hypothecation
The
controlling officer may also require the client to submit other documents.
DEMAND
FINANCE
Initially they were called “Loan ordinary”. When a
customer borrows from a banker a fixed amount repayable either in periodic
installments or in lumps sum at a fixed future times, the amount of loan is
placed at the borrower disposal in lump sum for the period agreed upon, and the
borrowing customer has to pay interest on the entire amount. The borrower gets
a fixed amount of money for his use, while the banker feel satisfied in lending
money in fixed amounts for definite short period against a satisfactory
security.
Demand
Financing Against Gold Ornaments
Gold
finance/loan is a type of demand finance being offered by NBP to a large number
of customers. Demand financing against the security of gold ornaments under
State Bank of Pakistan scheme for Financing Small Business/Industry or
otherwise may be made to borrowers known or introduced to the Bank by
constituents, in multiples of Rs. 100/- with a minimum of Rs. 1000/-.reference The
rate of valuation of gold and the gold ornaments will be advised to the
branches by Head Office from time to time keeping in view the rise or fall in
the market price of gold after providing for the necessary margin. The
valuation of the gold ornaments must be based on the weight and fineness of the
gold contents only. The rate per 10 grams will be regulated by the fineness of
the gold and will be expressed to the nearest rupee. It must not exceed the
maximum rates laid down from time to time by the Head Office.
Documentation
for Financing against Gold Ornaments:
IB 6A
IB 12
IB 26
Industrial
Small Finance
This Type
of Finance is for industrial owners only, and is usually for expansion purpose.
The limit of this type of finance is up to 3,000,000/- Securities demanded
against this type of finance are immovable properties or against stock of raw
material and finished goods. The time period for this type of finance is up to
five years. This amount is repaid in instalments determined by the bank. High
rate of mark up is charged against this type of finance.
Agricultural
Credit:
The
agricultural financing strategy of NBP is aimed at three main objectives:-
Providing
reliable infrastructure for agricultural customers
Help
farmers utilize funds efficiently to further develop and achieve better production
Provide
farmers an integrated package of credit with supplies of essential inputs,
technical knowledge, and supervision of farming.
Agricultural
Credit (Medium Term):
Production
and development
Watercourse
improvement
Wells
Farm power
Development
loans for tea plantation
Fencing
Solar
energy
Equipment
for sprinklers
Farm
Credit:
NBP also
provides the following subsidized loans for a period ranging from 3 months to 1
year on a renewal basis.
Operating
loans
Land
improvement loans
Equipment loans
for purchase of tractors, farm implements or any other equipment
Livestock
loans for the purchase, care, and feeding of livestock
In case of
Farm Credit NBP charges 14% to 16% Mark-up on both Short Term and Medium/Long
Term credit. While for Non-Farm Credit the rate of Mark up is 16% p.a.
Production
Loans:
Production
loans are meant for basic inputs of the farm and are short term in
nature. Seeds, fertilizers, sprayers, etc are all covered under this
scheme.
NBP has launched a scheme in collaboration with
LG Electronics. The Scheme is known as “Ghar Ka TV” it is specifically for
Televisions. Customer will get a TV set and will have to pay monthly
instalments to the bank.
Export Finance Scheme
This facility is provided under the
rules & regulations issued by SBP. The bank may provide facility against
pre/post-shipment exports at agreed rate of interest. SBP then reimburses the
rebate given by the commercial banks to the Exporters, under this scheme.
Foreign Bills Purchased (FBP) (Documentary /
Clean)
This is a post-shipment finance
facility provided within the sanction limit and is provided against export
documents under collection. Banks normally prefer holding collateral security
in such cases.
Foreign Bills Purchased – against L/C (FBP)
Under this arrangement foreign
documentary bills are negotiated / discounted at prevailing exchange rate. The
Bank ensures that documents are compliant with the L/C terms, and reimbursement
instructions are carefully studied.
Payment against Documents – Under Sight L/C
Import documents if compliant are
lodged in PAD and released upon payment from the party. The amount of bill plus
charges, if any, claimed by the negotiating bank would be converted into Pak
Rupees at the exchange rate prevailing on the date of lodgement or at the
booked rate where forward booking was done at the time of opening of L/C.
Inward Foreign Documentary Bills for Collection
under Usance LC
Such documents are lodged in IFDBC
and are released against acceptance or trust Receipt or pledge of imported
goods. In the later case goods are cleared through the bank’s approved clearing
and forwarding agents and delivery orders issued against cash receipts.
Finance against Trust Receipt (FATR)
This facility is extended to
valuable customers to enable them to obtain delivery of the goods received
under L/C or against bills under collection and shall retire the documents out
of the sale proceeds of goods or from other sources. The borrower will sign a
standard Trust Receipt form and related security documents covering
hypothecation of goods.
Finance against Imported Merchandise (FIM)
Under the import L/C either at
party’s request, or due to the importer’s inability to discharge liability
immediately FIM facility for a period not exceeding 90 days against pledge of
the imported goods on mark- up basis is extended.
Inland Bills Purchased (Documentary / Clean)
This facility is allowed to
customers against documentary bills and other negotiable
instruments. In case of dishonour the related party’s a/c is debited, and the
drawer is asked to arrange for sufficient funds in his a/c for adjustment
thereafter. Besides the above mentioned products NBP is providing various fund
/ non–fund based facilities such as, overdrafts, loan against salary, LMM etc.
Amongst these facilities which are governed under the rules/.regulations of SBP,
are allowed by NBP if clients fulfil the
criteria determined by the SBP.
Staff Finance
NBP is also serving its employees along with
its customers. It gives loans to its employees for the purchase of a car,
house, and motorcycle and for the marriage ceremonies of their sons/daughters.
NBP provides the following loans to its staff:
House Building Finance
The employee having served for 5 years or more
in the bank, either in the capacity of a clerk or an officer will be granted 80
basic pays as a loan for building a house. If the loan availed exceeds Rs.
160,000, then 10% interest rate will be charged on the amount exceeding Rs.
160,000/-.
Motor Cycle, Car, and Personal Vehicle Finance
The car loan may be granted to those employees
whose minimum basic pay is at least Rs. 10,000 and have served for at least 3
years. The employee will be granted 18 basic pays as loan. If the amount is
exceeding Rs. 160,000 the 10% interest rate will be charged. The maximum Motor
Cycle Loan is 56,000.
Procedure for Applying for Finance
Any
customer who applies for finance should have an account (usually current
account) with the concerned NBP branch, which should be in a running position.
First of
all the customer or company has to submit a feasibility report which is sent to
the higher authorities for recommendation. Following this, the recommending
authority prepares its own feasibility report of the customer/company’s project
and then hands over these to the sanctioning authority which finally approves
whether finances should be released or not.
Sanction or
approval is granted by the bank by specifying the terms and conditions of the credit
to the party concerned. The bank does not advance 100% finance, rather a 30%
margin is deducted from all finances.
A charge
form is signed by the party before receiving the credit facility. If the
borrower becomes insolvent, the bank can use it for recovering the amount
advanced through the court of law.
LOAN PROCESS
Pakistani
banks nave similar procedure for advancing loans. The process for granting
loans to the clients is described in detail:
Establishment of Relationship:
The opening
of a current or saving account by the customer with the bank results in the
establishment of banker-customer relationship between the two. This
relationship enables the banker to develop understanding of the customer’s
corporate status, nature and place of his business, age, major stakeholders,
and ultimately the genuineness of the customer.
Credit Investigation:
It involves
the following steps:
Preliminary
enquiries:
The banker
approaches other banks functioning in the same area and gathers information
about the track record and creditworthiness of its specific customer. Bank can
also take information from the SBP credit information bureau or credit rating
agencies where available.
Credit Analysis: WHAT MAKES A GOOD LOAN?
Credit
analysis refers to the process through which qualitative and quantitative
factors having direct bearing on the business of the customer are analyzed.
This effort can help in making a lending decision, positive or negative. The
analysis must be based on facts and should encompass all the relevant aspects
of the credit deal. Findings of the analysis must be logically drawn and
supported by relevant documents and reports. The
division of the bank responsible for analyzing and making recommendations on
the fate of most loan applications is the Credit Department. Experience has
shown that this department must ask and satisfactorily answer the following
question regarding each loan application:
Is the
Borrower Creditworthy?
The
question that must be dealt with before any other is whether or not the customer
can service the loan i.e. repay the credit when due, with a comfortable margin
for error. This usually involves a detailed study of five aspects of the loan
application known as 5 Cs-Character, Capacity, Capital, Collateral, and
Conditions. All must be satisfactory for the loan to be good one from the
lender’s point of view.
Qualitative Analysis:
It is
carried out to ensure that the credit is extended to a genuine borrower who has
the capacity to borrow and good intention to repay. Following points are taken
into consideration like:
Ownership
of business, track record, market reputation etc.
Personal
traits of owner and qualification.
Experience
and management qualities.
Quantitative Analysis:
For
qualitative analysis, financial statements provided by the borrower are
thoroughly examined. The focus of financial analysis is on key figures in the
financial statements and the significant relationship that exist between them.
Ratio
analysis enables the analyst to carry out comparison of the following:
Trend
Ratios: Involve the
comparison of ratios of a firm over a period of time i.e. present ratios are
compared with past ratios for the same firm.
Inter firms
Comparison: Involve
comparison of the ratios of a firm with those in the same line of business for
the industry as a whole reflecting its performance in relation to its
competitors.
Market Appraisal:
Market
appraisal becomes imperative when credit facilities are desired by a customer
desirous to establish a new manufacturing unit. In order to determine the
extent of demand for the products of the proposed industrial unit, the banker
must apprise himself of the ground situation with regard to the following:
Demand and
supply situation.
Major
producers and local distribution channels.
Price and
credit terms availed by the retailers.
Evaluation
of Feasibility Reports:
The
projections and forecasting contained in the feasibility reports need to be
checked and adjusted by using varied standards. As a result of this exercise,
the banker is in a position to determine the break-even quantities, revenues
and profit and loss of the firm at different operating capacities.
Credit
Reports:
Credit
reports obtained from other banks and the CIB report provide a base for the
lending decision of a banker.
Problem Identification:
The main
objective of credit analysis is to avoid problems that may crop up due to lack
of good judgment with regard to the following:
Negative
Macro Indicators Including:
Unfavourable
change in the government policies.
Excessive
and negative competition.
Change in
consumer’s tastes, fashion, income and spending.
Labour
unrest or deteriorating law and order situation.
Negative
Business Factors Including:
Inconsistent
business structure and Ineffective business plan.
Inadequate
market share and unplanned expansion.
Plant and
machinery obsolescence and loss of stakeholders’ confidence.
III. Negative Management Factors
Including:
Change in
ownership and unnecessary centralization.
Evasive
style and lavish spending behaviour.
Unsatisfactory
past performance.
IV. Negative Financial Indicators
Including:
Change in
auditors, and accounting policy.
Late
submission of statements.
Climbing up
debt-equity ratio and abnormal reduction in fixed assets.
Processing of Credit Proposal:
Normally standard
formats designed by the banks are used for this purpose wherein all relevant
information and recommendations for grant of credit are recorded. Necessary
documents are attached with proposal like request letter, financial statements,
resolution of the Board of directors, letter of partnership etc.
Sanction of Credit:
Credits are
sanctioned either at the branch level or by the competent authority at the
controlling offices. At the controlling office the credit proposal are assessed
and approved on the basis of accuracy of credit analysis and other
considerations as recommended by the branch management. Sanction advice is
issued which is important and essential to ensure proper record of the terms
and conditions of a credit, for legal purpose, execution of the required
security documents, monitoring recoveries, timely renewal, and audit purpose.
Security Documentation:
After
sanction but before disbursement of a loan, the credit administration
department must ensure that charge documents are obtained from the borrower in
accordance with the nature of credit facility, terms of credit and nature of
approved security. The charge documents must be properly filled in, signed by
the customer and designated officer and two witnesses where required. In case
of mortgage registration is effected by the Registrar of Assurances before
disbursement is done. In case of a limited company, charge is to be created on
the assets of limited company with the Securities & Exchange Commission
within 21 days. In case of partnership firm, authorized officials of the
borrowing firm must sign the documents in their official capacity and affix
their stamp thereon. In the meanwhile facility letter is issued wherein the
terms and conditions of the loan are intimated to seek his acceptance thereto.
Disbursement:
Disbursement
of the credit facility is made through either of the following method i.e.
Running finance/Cash finance/Term finance.
Monitoring
and Periodic Evaluation:
The credit
administration department is responsible to ensure that the borrowing
customers:
Maintain
their accounts regularly with the bank and pay amounts due in time.
Pay the
mark up accrued on their accounts within a reasonable period.
Pay
instalments on due date.
Adjust
their liability accounts as per stipulation of the loan agreement.
Recovery and Follow Up of Advances
This is the
most critical activity of the credit administration department. Default puts a bank
in an embarrassing situation as not only its funds are tied up for indefinite
period, but in most of the cases involve it in circuitous litigation entailing
high cost. The following steps are involved in the recovery process:
Verbal and
written reminders to the customer for the payment of overdue amounts.
To serve of
legal notice, in case of ignoring reminders issued.
Making
preparations for taking legal action.
Filing of
recovery suit and follow up of legal process.
Tracing out
the assets of the defaulters and putting the same to auction through the court,
and making efforts to make recovery from the proceeds of assets auctioned.
LIST OF ACRONYMS
|
NBP
|
National Bank of Pakistan
|
|
SBP
|
State Bank of Pakistan
|
|
PLS
|
Profit & Loss Sharing
|
|
CF
|
Cash Finance
|
|
L/Gs
|
Letter of Guarantee
|
|
IB
|
Interest Free Banking
|
|
FBP
|
Foreign Bills Purchased
|
|
L/C
|
Letter of Credit
|
|
PAD
|
Payment Against Documents
|
|
IFDC
|
Inward Foreign Documentary Bills for Collection
|
|
FATR
|
Finance Against Trust Receipt
|
|
FIM
|
Finance against Imported Merchandise
|
|
A/C
|
Account
|
|
BOD
|
Board of Directors
|
|
CIB
|
Central Information Bureau
|
|
D/A
|
Documents against Acceptance
|
|
D/P
|
Documents against Payment
|
|
RF
|
Running Finance
|
Annexure 1
IB Documents under Non Interest Modes of Finance
IB 1- Demand Promissory Note to be executed by
Commercial Bank in favor of SBP in case of Commodity Operation
IB 2- \form of Certificate to be executed by the
borrower in favor of Commercial Bank authorizing it to negotiate the promissory
note/bill to SBP- Commodity Operations
IB 3- Guarantee of Federal/Provincial Government
in favor of Commercial Bank for Commodity Operations
IB 4- Agreement for Agriculture Financing for
government commodity operations financed by Commercial Bank to be executed by
the respective Bank, the agency availing the facility and the government
IB 5- Agreement for Agriculture financing for
Trading Operations of government owned agencies to be executed by the
government corporation and the commercial bank
IB 6A- Agreement for financing for short/medium/long
term on mark up basis to be executed by the customer and the bank where the
customer desires the bank to honor cheques in excess of their drawing
power/limit without prior arrangement
IB 6B- Agreement for financing for short/medium/long
term on mark up basis where goods to be sold to the bank are not in existence
on the date of the agreement and advance payment of sale price is intended by
the bank on the basis of Bai-Salaam
IB 6C- Agreement for financing for short term on mark
up basis (where facility is extended to a fixed income person)
IB 7- Undertaking & guarantee to be signed by
the purchases (customer) and guarantor in case of agriculture
production/development
IB 8- Application & agreement for Irrevocable
Documentary Credit freely negotiable in beneficiary’s country top be signed by
the applicant and his guarantor
IB 8A- Irrevocable Documentary credit advising form
providing for shipment of goods by sea
IB 8B- Irrevocable Documentary Credit advising form
providing for dispatch of goods by air
IB 9- Letter of buy back cum indemnity for export
and inland bills to be signed by the customer
IB 10- Undertaking under Part! Of the SBP Export
Finance Scheme to be signed by the exporter
IB 10A- -do-
IB 11- Undertaking to be signed by the exporter under
SBP Export Finance Scheme Part 2
IB 11A- -do-
IB 12- Promissory Note to be made by the customer in
favor of commercial bank
IB 13- Application to be submitted by commercial;
bank to SBP for obtaining refinance under SBP Export Refinance Scheme Part ½
IB 14- Certificate to be submitted by commercial bank
to SBP to the effect that finance provided is for export of eligible
commodities
IB 15- Application form to be submitted by scheduled
bank to SBP to obtain Refinance under Export Finance Scheme Part 1
IB 16- Form of agreement to be obtained by SBP from
principal office of scheduled bank in case where refinance is obtained against
finance made by scheduled banks to exporters of locally manufactured machinery
IB 17- Form of application to be submitted by the
scheduled bank to SBP to obtain refinance from SBP against loans provided to
exporters by way of preshipment/postshipment financed under the scheme for
financing locally manufactured machinery
IB 18- Form of schedule of finance made to exporter,
Appendix A to from LMM
IB 19- Statement showing the particulars of finance
account against which refinance is required under the scheme for financing
export of locally manufactured machinery
IB 20- Agreement for discount/purchase of bills to be
signed by the customer
IB 21- Agreement for financing purchase of a
completed house/plot on mark up basis to be signed by the customer and the bank
IB 22- Mortgage Deed
IB 23- Collateral Mortgage Deed
IB 24- Memorandum of Deposit of title deeds of
Immovable property with intention to create equitable mortgage thereon
IB 25- Letter of Hypothecation
IB 26- Letter of Pledge
IB 27- Trust Receipt
IB 28- Letter of lien on marketable securities
accepted as collateral
IB 29- Guarantee
IB 30- counter guarantee to be obtained by the bank
against guarantee issued
IB 31- Agreement for sale and buy back of marketable
securities
IB 32 Musharika Investment Agreement to be executed
by the customer and the bank
INTRODUCTION
Deposits are the foundation out of which the bank grows and
thrives. They are unique items on a bank’s balance sheet that certainly
distinguishes it from other types of business firms. Deposits provide the means
for bank loans and thus, represent the ultimate source of bank profits and
growth. Bankers who fail to stay abreast of changes in their competitors’
deposit pricing and marketing programs stand to lose both customers and
profits.
Deposits/Products offered by National Bank of Pakistan[9]
National Bank of Pakistan
maintains its position as Pakistan’s
premier Bank determined to set higher standards of achievements. It is the
major business partner for the Government of Pakistan with special emphasis on
fostering Pakistan’s
economic growth through aggressive and balanced lending policies,
technologically oriented products and services offered through its large
network of 1,189[10]
branches.
National Bank classifies deposits on the basis of duration
and purpose for which these are kept with the bank. They are as follows:
PLS (Saving Deposits)
PLS means Profit and
Loss sharing Account. Here the bank shares with the customer the profit or loss
resulting from investment of customer’s funds along with the bank’s pool of
funds.
Salient Features
This account can be opened with Rs.100/-
Profit is declared by the head office of NBP at the end of
each half year accounting period, and the profit is distributed through all the
branches.
Profit is calculated @ 4.10% p.a.
For profit the minimum balance is Rs.5,000.
Profit or return is paid bi-annually on minimum monthly
balance (Jan-June & July-Dec.) which is announced in July and January
respectively.
Generally withdrawals from PLS saving accounts are allowed
on demand, i.e. without any prior notice of withdrawal.
All cheques and other instruments should be crossed, before
they are
deposited for credit into account.
Zakat @2.5% is deducted from the balance outstanding on the
first day of every valuation date i.e. 1st Ramadan.
Overdraft/CF is not allowed in PLS saving accounts.
Withholding tax @ 10% on the profit amount is to be
recovered whenever profit is paid on deposit account.
National Income Daily Account (NIDA)
The scheme was launched in December 1995 to attract
corporate customers. It is a current account scheme and is part of the
profit and loss system of accounts in operation throughout the country. Rs. 2
Million is needed to open the account with no maximum limit. Profit is paid on
a half-yearly basis on a monthly average balance. The rates of profit vary
according to the slabs of deposit. On Deposits of Rs.2 million Rs.2,000
million, the rate fluctuates from 7.50% to 8.75%. It is a checking account and
there is no limit of withdrawals.
PLS (Term Deposits)
The PLS Term Deposit is non-interest bearing account. It is
also called time liability because it is kept for a certain period of time by
the bank. Initially this type of deposit
was called as fixed deposits but after the islamization of banking system in
1985, its name has been changed from fixed to PLS Term Deposit.
Salient Features
The minimum deposits accepted by the bank for PLS Term
Deposit is Rs.1000/-
There is no maximum limit on the amount of deposit in this
account.
The deposits are accepted for a minimum duration of three
months.
The maturity dates are 5 years, 4 years, 3, 2, 1 year, 6
months and 3 months.
Every six months the profit rates are changed.
The PLS term depositors are eligible for sharing
profit/loses with the bank at the rate determined by the bank.
The profits and losses are distributed on half yearly basis.
On the maturity, the depositor has the option to withdraw
the deposit along with his profit share if any, or renew the deposit.
PLS Special Notice Deposits
NBP opens profit and loss special Notice Deposits of 30 days
and 7 days maturity. This is a special type of Term deposit being offered by
NBP. Profit @ 4.0% on 7 days deposit and @ 5.0% on 30 days deposit is given to
the deposit holders.
Current Deposits
A current account is that account which is payable on
demand. A holder can withdraw the money on any working day during working hours
of the bank without giving any prior notice. That is why the bank has to keep
sufficient funds to meet the withdrawals of the current account holders.
Salient Features
The account holder is expected to maintain a minimum balance
of Rs.500/- in his account or whatever the minimum amount is prescribed for the
purpose.
No profit or return is paid on current accounts.
The deposits and withdrawals can be made through cheques,
demand drafts, pay orders etc. drawn on the branch.
These accounts are completely exempted from withholding tax
and Zakat deduction.
Call Deposit Account
A Call Deposit Receipt is issued by the bank for the
amount received from the customer. The amount can be withdrawn at any time by
presenting the receipt issued by the bank. The purpose of these deposits is to
serve as a guarantee provided by bank to any department either public or
private in taking or giving tenders. This type of account is to participate in
tender bid; contractors are required to deposit a certain amount or percentage
of the tender amount along with the tender documents for which Call Deposit
Receipt are issued by Banks. Call deposit does not bear or earn any interest.
When a contractor requires such a receipt, he has to
approach the bank for the issuance of Call Deposit Receipt.
Foreign Currency Term Deposits
All individuals
including resident citizens and corporate bodies are entitled to get term
deposits. Foreign currency accounts are opened on proper
introduction and submission of required documents along with an initial deposit
prescribed from time to time. Banks are allowed by SBP to fix their own rates
of interest for term deposits of 3 months, 6 months, 12 months, 2 years and 3
years provided they do not exceed the Euro-Dollar Bid rates of Barclays Bank, London, plus the margins
prescribed by SBP from time to time. The
Barclays Bank Bid rates and the maximum rates for payment
of interest including margins allowed by State Bank are published daily by
Foreign Exchange Rates Committee.
Salient Features
Interest on term deposits of 2 years and 3 years will be
paid on yearly basis.
The return on foreign currency account will be paid on six
monthly basis after June & December.
The return on term deposits will be paid on maturity or as
prescribed by the state bank of Pakistan.
iv) Term deposits will be automatically renewed
for a like period and amount including or excluding return on TDR as per
instruction by the depositor.
ACCOUNT OPENING PROCEDURE
The opening of an account is the establishment of banker
customer relationship. Before a banker open a new account, the banker should
determine the prospective customer’s integrity, respectability, occupation and
the nature of business by the introductory references given at the time of
account opening. Preliminary investigation is necessary because of the
following reasons.
Avoiding frauds
Safeguard against unintended overdraft.
Negligence.
Inquiries about clients.
FORMAL APPLICATION:
The customers are to fill in an account opening form. It
is a formal request by a customer to the bank to allow him to have and operate
upon the account.
OBTAINING INTRODUCTION:
Before opening an account the banker requires
introduction of the customer from an old customer.
SPECIMEN SIGNATURE:
The customer gives the banker specimen signatures
generally taken on a card supplied by the bank which is specially designed for
the purpose. Operating instructions from the customer, title of account, and
account number are entered on it. It expresses customers’ authority for the
payment of cheques drawn on his banker.
MINIMUM INITIAL DEPOSIT:
The customer must have to maintain at all times not less
than the minimum required balance according to the requirements by the bank.
OPERATING THE ACCOUNT:
After opening an account the banker gives to the
customer
Pay-in-slip book
Pass book
Cheque book, with the account number assigned to the customer.
QUALIFICATIONS OF A CUSTOMER:
The relation of the banker and the customer is purely a
contractual one. For keeping an account he/she must have the following basic
qualifications
He must not be a minor.
He must be of sound mind.
He must not be disqualified by law to open an account..
The agreement should be made for lawful object, which create
legal relationship.
Not expressly declared void.
NATURE OF ACCOUNTS
The different types of accounts being generally opened by a
bank are as follows:
Individual Accounts
The accounts opened in the name of persons are called
individual or personal accounts. While opening the individual account, the
details about following columns should be taken carefully:
Occupation
Address
Special instructions
Next of kin
Copy of N.I.C.
Partnership Firms Account[11]
As per section 4 of the Partnership Act, 1932: “Partnership
is the relation between persons who have agreed to share the profits of the
business, carried on by all or any of them acting for all”.
A partner is the agent of the firm having powers to
execute transactions for the purpose of the business of the firm. A retiring
partner has no liability so far as the transactions after his/her retirement
are concerned, if a notice of such retirement has been given to the bank.
Otherwise, the retiring partner continues to be liable, even for finances made
after his/her retirement.
In case of the death of a partner, the firm will be
dissolved. The account should therefore, be closed and a new account will be
opened with the remaining partners.
The following procedure and documents should be obtained:
The names of all partners should be written in the AOF.
Specimen signatures of all partners.
On SS card & on form “A” only authorized person(s)
will sign.
Letter of partnership should be obtained.
If the firm wants to authorize manager to operate the
account then they will sign the “Form CD 55” and the bank will send “Form 62”
to all partners for confirmation.
Partnership deed is to be obtained (but it is not
necessary).
JOINT ACCOUNTS
“The account in the name of more than one person is called
joint account”.
The account shall be operated on by:
Any one singly or survivor or either or survivor(s).
Any two or jointly or survivor(s).
All jointly or survivor(s).
The survivorship mandate should be taken.
Signature of all partners should be obtained at the
specified places.
JOINT STOCK COMPANIES ACCOUNT
Accounts opened by organizations formed by incorporation
under Companies Ordinance, 1984 are called Companies Accounts.
[12]A
company is an artificial person created by law and the assent of this
artificial person is signified by means of a common seal and perpetual
succession. Just like an individual, it can hold property and incur liabilities.
It can sue and can be sued in the same way as that of an individual. Bank is a
joint stock company registered under Companies Ordinance, 1984.
While opening the account of the company the following
documents should be taken:
Attested copy of the N.I.C of each Director.
Copy of the Certificate of Incorporation.
Copy of Memorandum and Articles of Association.
Copy of the Resolution of the Board of Directors to open
an account with the bank.
List containing the names and signatures of the Directors.
Copy of the Certificate of Commencement of Business (in case
of public limited company).
Audited Balance Sheet.
ASSOCIATIONS, SOCIETIES & CLUBS ACCOUNTS
Accounts are often opened in the names of non-trading
institutions such as Clubs, associations, schools, committees, funds and
Unions.
The following documents should be taken:
Attested copies of N.I.C of all the office bearers.
Certified Copy of the bye-laws or rules & regulations.
Copy of the Resolution of the Governing Body/Managing
Committee for opening an account with the bank..
Account opening form duly signed by the authorized
persons.
List containing the names, addresses and signatures of the
Directors.
PROPRIETARY FIRMS’ ACCOUNT
A firm owned by one person is called proprietary firm or
sole proprietorship.
The following procedure should be followed:
Take the sole proprietorship form from the customer.
The signature of the sole proprietor is obtained in his/
her personal capacity under the declaration.
If he wants to give authority to some other person to
operate the account he has to sign the “Form CD 55”.
In case of death of the proprietor, any authority given to
any one will be ceased.
TRUST ACCOUNT
A ‘Trust’ has been defined in section 3 of Trust Act,
1882, in the following terms:
“A Trust is an obligation annexed to the ownership of
property and arising out of a confidence proposed in and accepted by him for
the benefit of another, or of another and the owner”.
Any person who is competent to contract may create a Trust
which must be for a property transferable to the beneficiary. The account
should be opened in the name of Trust and all the trustees should sign the
account-opening form. The banker should examine the Instrument of Trust (Trust
Deed) very carefully, and a copy of it should be kept on record.
REFERENCES
Basit, Abdul. (2002). An Internship Report on NBP City
Branch.
http:// www.nbp.com.pk
Nasir, Saeed. (1993). Banking Currency & Finance.
Lahore: Salman
Publisher 1993.P-13
Negotiable Instrument Act 1881. Section 5.
Partnership Act 1932.
Siddiqi, Asrar.H. (1998). Practice & Law of banking
in Pakistan.
6th edition. Karachi:
Royal Book Company.P-1.
Human resource management[13]
Human resource management is the set of activities directed
at attracting, developing and maintaining an effective workforce. Human
resources are vital for effective organizational functioning.
Personnel department of national bank of Pakistan is establishes in the head office Karachi. This department
controls all the staff of national bank of Pakistan. The human resource
management office of NBP performs the following functions:
Recruitment
Recruiting is the process of attracting qualified persons to
apply for the jobs that are open. As the national bank of Pakistan is a nationalized bank, it
advertises the vacancies available to be filled through newspapers. The
requirements for selection depend upon the post to be filled. The qualification
and age required are specified in the advertisements. Experience is considered
necessary for post like computer programmer and typist etc.
Selection process
Selection process is divided into following steps:
Short listing of the applicants
The management of the bank scrutinizes application of the
candidates who fulfill the requirements are sent the test calls. In the first
step thousands of candidates apply for the limited posts available. The calls
are sent by head office to only those candidates who fulfill the requirements
of the job advertised.
Tests
Test is conducted by Pakistan
banking counsel under the supervision of Pakistan banking and finance
service commission. In the tests the applicants are further short-listed.
Interviews
For the interviews only those candidates are called who
qualify the written test. Different types of questions are asked from the
candidate by the interviewing board such as
Questions about the personal background, extra curricular
activities during education and about the personal contacts.
Questions about the subjects or courses studied by the
candidate.
Questions about the current events of national and international
importance.
Role of banking in the current situation of economy.
Apart from these questions the candidate’s personal
interests are also discussed and an effort is made to have understanding of the
individuals.
Merit list
After the final result, the successful candidates are sent
the appointment letters and they are asked to sign the agreements with the
bank.
Training
Training is a vital and necessary and necessary activity in
all organizations. It plays a large part in determining the effectiveness and
efficiency of the establishment. Training is the organized procedure by which
people gain knowledge and skills for a definite purpose. The objective of
training is to achieve a change in the behavior of that trained.
After candidates are recruited and inducted, they are
trained and developed to be best fit for the job and the organization. The
staff college receives junior bank officers for further training in banking.
The courses last from six to nine weeks with about twenty five students in each
course. The college is residential one and provides a collegiate atmosphere,
which helps to impart a sense of camaraderie, which in itself is of great
value. It is also of interest to record that the staff college receives
trainees from abroad as well as domestic, which helps to create worthwhile
reference to banking business.
The staff college courses are designed not only to impart
technical studies but also to develop qualities of decision making. The college
is one of the most important institutions setup by the bank because it grooms
students for future when they will shoulder heavy responsibilities and assume
higher positions in their careers ahead.
The bank encourages its officers to attend banking seminars
both in Pakistan
and abroad and attaches great importance to imbibing new concepts and their
application in our environment.
Transfer policy
Transfer is a change in the job of an employee from one job
to another or from one branch to another. It may involve a promotion, demotion
or no change in job status other than moving from one job to another. It may
also be possible at the request of the employees. In NBP there are two types of
transfers
Inter branch transfer policy
The management of NBP frequently transfers its workers from
one station to another. Usually managers are transferred to enhance their
managerial skills. Sometimes the efficient workers are sent to stations where
there is heavy load of work or performance of the existing employees is not up
to the mark.
Inter department transfer policy
Inter departmental transfer is related to the transfer from
one department to another department or one section to another section in a
branch. The purpose of this is to broaden the horizons of experience of the
staff and make them all-rounder in all aspects and departments of the bank.
Promotion Policy
Promotion cannot be claimed as a matter of right on the
basis of seniority but on the basis of performance. Main criteria for promotion
are the performance and skills of an individual. Seniority is also taken into
consideration but it is of secondary importance.
A person’s career is an extremely important element his
life. Both productivity and morale are facilitated if these personal decisions
are based on objective assessment of present and potential capability.
Promotion is a term which covers a change, calls for greater
responsibilities and usually involves higher pay and better terms and
conditions of service and before a higher status.
The purpose of promotion is:
To provide satisfaction to the employee who deserves
promotion.
To enhance experience and ability.
To provide an organization with competent workers.
To fill the vacant posts with able and skilled people.
Criteria
In NBP the following criteria is laid down:
Seniority list
Seniority at different levels is maintained by NBP as
follows:
For OG2, separately at circle level.
For OG1 and up to SVP level at Head office.
For EVPs and SEVPs the list on the integrated basis by PBC.
Annual appraisal
Performance of an officer is recorded in the annual
confidential report at the end of the calendar year by the immediate supervisor
of the officer concerned.
Sanctioned strength
After considering the operational requirements of the bank,
the board of directors determines the strength in each cadre.
Process of appraisal
In order to make the appraisal objective, the following
factors are taken into account:
The appraisal of overall performance comprises of the
following elements
Educational qualification
Professional qualification
Service in grade
ACRs of previous 3 years
Operating performance
Experience in different disciplines
Postings
Factors to be considered by the promotion committee:
Administrative ability and effectiveness at supervisory
level.
Leadership qualities and initiative
The ability to create a sense of discipline among the staff
Self confidence
Commitment and motivation to achieve the organizational
goals
Ability to take prompt decisions and accept responsibility
Reputation of integrity and moral rectitude, this includes
living within known sources of income and non involvement in any business
dealings directly or indirectly.
Non involvement directly or indirectly in any fraud or
forgery case
Promotion committees
The promotion committees exist at the following levels:
Committee at regional office level
Committee at provincial head quarter
Committee at head office
Inter banking promotion committee
Salary administration
Compensation is the financial remuneration given by the
organization to its employees in exchange for their work. Compensation is an
important and complex part of the organization-employee relationship. Basic
compensation is necessary to provide employees with the means to maintain a
reasonable standard of living. NBP understands clearly its responsibilities and
wants to earn a good name in term of pay scale, staff benefits, pensions and
other fringe benefits. The bank also provides its employees the most needed job
security and offers a conducive and congenial career to its employees. The
salaries of the employees are quite adequate and they are adjusted periodically
to the inflationary pressure.
Benefit packages for the employees
Some of the benefits are discussed below:
Leaves
At NBP following types of leaves are granted to its
employees:
Privilege leaves
Privilege leave for 30 days is granted per calendar year.
Privilege leave will not be granted in excess of the number of days to the
credit of an employee. Privilege may not be taken more than three times a year.
Basic pay is granted in this case.
Casual leaves
Maximum 11 days per calendar year can be granted to an
employee but not more than three days at a time. During this leave an employee
gets his full pay.
Medical leaves
The annual entitlement is 30 days per calendar year on full
pay. The bank may grant additional one month in the same year on half pay.
Pilgrimage leave
Special leave with full pay for 40 days will be granted for
performing Hajj. 7 days before the departure and 7 days after the arrival are
allowed to the staff with full pay. This leave is allowed only once in the
entire service.
Compensation
payment or remuneration for work performed, injuries
received, loss of employment, or other considerations
Bonus
It is determined on the basis of profit earned by the bank
every year and disbursed in the manner as approved by the board. The bonuses
paid to the staff are regular feature of the bank policy. The bonuses do help
to motivate the staff members.
Provident fund
All the staff members are required to contribute 7.5% of
their salaries to their provident fund. These funds are pension able.
Allowances
The grant of payer allowance to the holder of a post or to
any other employee shall require the sanction of competent authority.
Allowances for employees are:
Medical allowance
The bank will reimburse the cost of medical attendants and
medicines claimed by the employees incurred on himself and his dependants,
subject to providing of actual bills on reimbursement basis.
House rent allowance
The bank has constructed many colonies at different places
to provide housing facility for the employees. The rents are paid to the staff
members who could not be accommodated in the residential areas constructed by
the bank. Thee rent on the house is at very reasonable terms
Staff loan
The bank according to the length of service and eligibility
of employees provide staff loans. NBP offers two types of loans
House building loans
It is provided to the employees basically for the
construction of houses. Only a part of their salary is deducted, when they
complete the installments then they become owner of the houses. \The loan can
easily be acquired.
Conveyance loans
The bank provides loans to its staff members on very easy
and convenient terms and conditions. The staff members are granted loans to buy
vehicles. The repayment procedure of these loans is very simple.
Computer Loans
The bank provide loans to its permanent employees for the
acquisition of Computers for there personal use. This loan is offered to them
on easy terms and conditions and is for a specific period of time.
References
Annual Report of NBP 2002.
Interview Conducted with RASHID SETHI (Principal NBP’s Staff
College Peshawar)
REMITTANCES[14]
Remittances are “act of paying, which means the sending of money to pay for
merchandise or services[15]”
Along with other services, NBP is also providing the
facility of transfer of funds from one bank to another bank and from one place
to another place. The transfer of funds is the main responsibility of the
remittances department. As an act of paying or transferring money the following
means of remittances are used in NBP.
Mail Transfer (MT)
It is a mode of transferring money from one branch to
another branch within the city or outside the city or outside the country. It
is an order by a bank to its branch, agent or correspondent in a foreign
center. It is an order to pay a specified sum of money to the person named in
the mode of transfer. It is sent by sea or airmail.
If the customer is an account holder of the bank, then the
bank will debit his account. The concerned officer will fill three forms to
make the mail transfer complete. The forms used for this purpose are listed
below
Debit Voucher
Credit Voucher
Mail Transfer Register Entry
If the customer is not an account holder of the bank,
firstly, he/she has to deposit money and then the above said procedure will be
adopted to transfer his/her money.
Telegraphic Transfer (TT)
With the changing requirements of today, NBP has introduced
a faster mode of transfer of money, i.e. Telegraphic Transfer. This service may
be provided to the public on their written request and against the value
received.
In case of telegraphic transfer, instructions regarding
payment are sent to the drawee branch telegraphically i.e. the order to pay is
sent by cable. These telegrams, which authorize payment to the payee, should be
sent to the drawee branch in a coded language and under a confidential number
known as a “test number” The rate of TT is always higher than the rate of MT.
Demand Draft (DD)
Demand draft (DD) is another way of transfer of money from
one bank to another bank. It is a written order, drawn by one branch of a bank
upon another branch of the same bank, to pay a certain sum of money to or to
the order of a specific person. Drafts are not issued, or drawn on branches
situated within the same city.
If you are looking for a safe, speedy and reliable way to
transfer money, you can now purchase NBP’s Demand Drafts at very reasonable
rates. Any person whether an account holder of the bank or not, can purchase a
Demand Draft from a bank branch.
Types of Demand Drafts
NBP deals in two types of DDs.
Open DD
It is one which is payable directly at the counter and there
is no need of crediting it to the account.
Crossed DD
Incase of crossed DD payment is made through the account. The amount of DD is credited to
the favoring account and then the amount can be withdrawn through cheque.
Payment Order (PO)
Payment order (PO) is the
most convenient, simple and secure way of transferring money. It is used for local transfer only. A
pay order is a written order issued by a bank or its branch, drawn upon and
payable by itself. It is an order to pay a specified sum of money to or to the
order of a specific person. For the issuance of Pay Order NBP charges Rs.50
(flat) and for the Cancellation/Issuance of Duplicate NBP charges Rs.50 (flat)
again.
Traveler’s Cheque
Traveler’s cheque is an order drawn by a bank upon itself to
pay a specified sum of money on demand to the purchaser of the cheques. The
paying bank after comparing and verifying the signature of purchaser which he
had signed at the time of the purchase of cheques makes the payment.
Salient Features
Negotiability: Pak
Rupees Traveler’s Cheques are negotiable instruments.
Validity: There is no restriction on the period of
validity.
Availability: Are
available at 700 branches of NBP all over the country.
Encashment: At 400 authorized branches of NBP.
Denomination: Rs.5000, 10000, 50000.100,000.
Limitation: No limit on purchase.
COLLECTION
CELL/CLEARING DEPARTMENT[16]
The main function of the clearing department is the
interchange and settlement of credit claims. This is usually done through a
“clearing house”.
A Clearing House is an association of commercial banks setup
in a given locality, for the purpose of interchange and settlement of credit
claims of scheduled banks. The function of a Clearing House is performed by the
central bank of a country by tradition or by law. In Pakistan,
the clearing system is operated by the State Bank of Pakistan. If SBP has no office at a
place, then the NBP, as a representative of SBP, acts as a Clearing House.
The mechanism whereby cheques are exchanged in bulk and the
cross obligations of banks are offset is explained in brief as follows.
In practice the person receiving a cheque as payment
deposits the cheque at the bank where he/she has an account. The cheque is
deposited for collection purposes. The bank stamps the cheque which states that
the payee’s account will be credited on realization from the other bank i.e.
the bank on which the cheque is drawn.
Now the bank in which the cheque has been deposited becomes
creditor of the drawee (other) bank. The debtor bank will pay the amount of
cheque by transferring it from cash reserve, if there are no offsetting
transactions. At the same time, the creditor bank receives large amounts of
cheques drawn on it by other banks giving claims of payments by them. It will
be most uneconomical and cumbersome if the bank had to transfer cash for
meeting each liability. The easiest and safest way is to offset the reciprocal
claims against one another and receive only the net amount owned. This facility
is provided by the clearing house i.e. SBP.
In Peshawar,
the cheques of the clearing department are sent to the NBP City Branch (Main
Branch) for clearing at clearinghouse. The official of the clearing department
make entry of Cheque coming form each branch in a register, which is called
Transfer Delivery Register. Then they arrange the entire cheques bank wise. The
representative of all commercial banks meets at a fixed time on all the
business days of the week in the morning at the clearing house where the representative
of NBP hands over the cheques drawn on other banks to the representative of the
bank and collects the cheques drawn on NBP. A summary sheet is prepared which
shows the amount and name of the Branch and bank on which the cheque are drawn;
the total number of cheques delivered and received by them and the total amount
is calculated.
After this process the officials of clearing department
separates cheques of each branch of NBP, which are then sent to the respective
branches via peon for clearing. Then three copies of Inter Office Advice
Clearing are prepared. This shows the net amount credited or debited.
The branches of NBP receive the cheques, DDs RTC for
clearing. They check all them and if some cheques can not be honored, they are
returned to City Branch by attaching a memo with every cheque indicating the
reason of dishonor. The branches retain the honored cheques. The peon collects
the remaining cheques form branches and submits these to the City Branch. The
officials at the clearing department makes required adjustments in the Transfer
Delivery Register, in case some cheques are returned from branches.
In the second session of the clearinghouse, representatives
of the banks meet again to exchange the dishonored cheques. The net amounts
owed or payable are settled by debiting/crediting the bank account by the SBP
official.
The functions of the clearing department are very technical
and require accuracy and quick response. Delay or negligence in the clearing
department is very costly to the bank.
REFERENCES
Basit, Abdul. (2002). An Internship Report on NBP City
Branch.
http:// www.nbp.com.pk
Nasir, Saeed. (1993). Banking Currency & Finance. Lahore: Salman Publisher
1993.P-13
Siddiqi, Asrar.H. (1998). Practice & Law of banking in Pakistan.
6th edition. Karachi:
Royal Book Company.P-1.
[1]
Siddiqi, Asrar.H. (1998). Practice & Law of banking in Pakistan. 6th
edition. Karachi:
Royal Book Company.P-1.
[2]
Basit, Abdul. (2002). An Internship Report on NBP City
Branch
[3]
www.NBP.com.pk
[4]
Annual Report of NBP 2002.
[5]
www.NBP.com.pk
[6]
NBP annual report 2002
[7]
www.NBP.com.pk
[8]
NBP’s Advances Manual.
[9]
www.NBP.com.pk
[10]
NBP annual report 2002
[11] Partnership
Act 1932.
[12]
Company ordinance 1984
[13]
Interview conducted with RASHID SETHI (Principal NBP’s Staff College
)
[14]
www.NBP.com.pk
[15]Encarta®
World English Dictionary © & (P) 1999 Microsoft Corporation.
[16] Basit,
Abdul. (2002). An Internship Report on NBP City
Branch.
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