CHAPTER # 1

INTRODUCTION TO THE REPORT

1.1 INTRODUCTION

As part of the academic requirement for completing MBA (HRM) Master of

Business Administration, the students are required to under go for two (2) months
of internship with an organization. The internship is to serve the purpose of
acquainting the students with the practice of knowledge of the discipline of
banking administration.

This report is about National Bank of Pakistan . NBP was established in 1949 and
since then, it has expended its network, becoming the largest commercial Bank of
the country. It offers different products of services to its customers.

1.2 PURPOSE OF THE STUDY

The main purpose of the study in hand is to gather relevant information to

compile internship report on National Bank of Pakistan .

To observe, analyze and interpret the relevant data competently and in a useful
manner.

1 To work practically in an organization.

2 To develop interpersonal communication.

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1.3 SCOPE OF STUDY

As an internee in National Bank of Pakistan the main focus of my study research

was on general banking procedures in one of the branches of NBP. These
operations include remittances, deposits, advances and foreign exchange.

Similarly different aspects of overall NBP are also covered in this report.

1.4 OBJECTIVES OF STUDY

1 Discuss thorough study of National Bank of Pakistan .

2 To understand the various operations and to equip with practical knowledge

of the National bank of Pakistan .

1.5 LIMITATION OF STUDY

Some thing is better than nothing. No matter how efficiently a study is conducted,
it cannot be perfect in all respects. This study was conducted in accordance with
the objectives of the study. The study may not include broad explanations of facts
and figures due to the nature of the study. Secondly, the limitation, which affects
the study, is the restriction on mentioning every fact of the bank due to the
problem of secrecy of the bank. In addition, the availability of required data was a
problem as all the documents and files are kept strictly under lock and key due to
their strictly confidential nature. Thirdly, the problem of short time period also
makes the analysis restricted as one cannot properly understand and thus analyze
all the operations of a bank just a very short time of eight weeks.

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1.6 BENEFIT OF STUDY

The study done will benefit the finance students in particular and banking students
in general because the financial analysis section of this report comprehensively
encompasses all respects of financial analysis. Furthermore, NBP Main branch
Lakki Marwat may also benefit from the recommendations made at the end of the
report.

1.7 RESEARCH METHODOLOGY

The report is based on my two months internship program in National Bank of

Pakistan . The methodology reported for collection of data is primary as well as
secondary data. The biggest source of information is my personal observation
while working with staff and having discussion with them. Formally arranged
interviews and discussions also helped me in this regards.

1) Primary data:

Primary data include, Personal observation and Interviews of The Staff Members

2) Secondary data:

Secondary data consist of Manuals, Journals, magazines, Annual Reports and

Internet

1.8 SCHEME OF STUDY

The scheme of the study means that in what order is the report written what
comes before and what comes next.

SECTION I

Chapter 1:
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An introductory chapter that discuss the introduction of study of report, its
Background, Purpose, Scope, Methodology, limitations and Scheme of the report.

SECTION II

Chapter 2:

This chapter includes brief history of banking in general, evolution of banking,

History of NBP, mission statement, NBP objectives, functions of National Bank
of Pakistan .

Chapter 3:

It tells us about the Board of Directors, management structure and NBP local and
overseas branches and representative offices.

Chapter 4:

In this chapter the departmentalization of NBP is explained as well as work done

by me at NBP Main branch Lakki Marwat .

SECTION III

Chapter 5:

It tells about Strengths, Weaknesses, Opportunities and Threats of i.e. SWOT

analysis of NBP.

SECTION IV

Chapter 6:
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It covers the critical analysis of the bank. This chapter has been divided into four
parts i.e. Problems at the Branch, Functional analysis, Administrative analysis,
and Personal Management Analysis.

Chapter 7:

In this chapter recommendations for improvement on all aspects of the Bank are
given.

Chapter 8:

Two implementation plans are given in this chapter. “Mare Gare Car Financing
Scheme” and Need for Telephone Operator.

CHAPTER # 2

EVOLUTION OF BANKING IN PAKISTAN

2.1 INTRODUCTION

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There are different opinions that how the word ‘Bank’ originated. Some of the
author’s have the opinion that this word is derived from the word ‘Bancus’ or
Banque’, which means a bench. The explanation of this origin is attributed to the
fact that the Jews in Lombard transacted the business of money exchange on
benches in the market place; and when the business failed, the people destroyed
the ‘bench’. Incidentally the word ‘Bankrupt’s said to have evolved from this
practice.

Some of the authors are of the opinion that the word ‘Bank’ is derived from the
German word Back, which means ‘joint stock fund’. Later on when the German
occupied major parts of the Italy the word ‘Back’ was italicized into ‘Back’.

In fact human felt the need of bank when it begins to realize the importance of
money as a medium of exchange. Perhaps it where the Babylonian who developed
banking system as early as 2000 B.C. At that time temples were used as banks
because of their prevalent respect. During the rule of king Hamurabi (1788 – 1686
BC) the founder of Babylonians Empire, loans were started being granted for
interest. The borrower has to provide guarantee or he had to pledge his goods or
valuables. King Hamurabi drew up a code wherein he laid down standards rules
for procedures for banking operations by temples and great landowners. Also in
Greece , the temples were used as banks, where the people deposited their money
and other valuables for safe custody and security. In Europe with the ‘revival of
civilization’ (Renaissance) in the middle of twelve century, trade and commerce
started expanding and this development compelled the business community to
borrow the money from the Hebrew moneylenders on high rates of interest and
usury. Seeing the great demand, these moneylenders started organizing
themselves and bank started up at the principle seaports of southern Europe . Soon
Venice and Geneva became the most important money markets of the time and
banking though different from its present form, flourished. What we know as
‘modern banking’ originated in the 14th century in Barcelona .

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2.2 DEFINITIONES OF BANK

"A financial institution, which deals with money and credit. It accepts

Deposits from individuals, firms and companies at a lower rate of

Interest and gives at higher rate of interest to those who need them.”

Financial institution which receives money from one party and lends to another
party.

A financial establishment which uses money deposited by customers for

investment, pays it out when required, makes loan at interest, exchanges currency,
etc.

J.W Gilbert in his principles and practice banking defines a banker in these words:

“A banker is dealer in capital or more properly, a dealer in money. He is

intermediate party between the borrower and the lender. He borrows of one and
lends to another”.

“By banking, we mean the business of dealing in credits and by a ‘Bank’

we include every person, firm or company having a place of business where
credits are opened by deposits of collection of money or currency. Subjects to be
paid or remitted on Cheques or order, money is advanced or loaned on stocks,
bonds, bullion, bill of exchange, promissory notes are received for discount or
sale”.

2.3 EVOLUTION OF BANKING IN PAKISTAN

The first phase in evolution of banking in Pakistan seen very hard days for the
whole banking sector. Starting virtually from scratch in 1947, the country today

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possesses a full range of banking and financial institutions to cope with various
needs of the economy.

The area now constituting Pakistan was, relatively speaking, fairly well provided
with banking facilities in undivided India, in March 1947 there were 3496 offices
of Indian scheduled banks out of which as many as 487 were situated in territories
now constituting Pakistan.

The Reserve bank of India was the central banking authority in India . At the time
of partition it was decided that in the interest of smooth transition it should
continue to function in newly emerging state of Pakistan , until 30th Sep.1948.

In 1947 due to uncertainty and unsuitability the banking sector suffer heavy
losses.This resulted in a negative effect on banking service in Pakistan . The
banks, which had their registered offices in Pakistan , transferred them to India .
In an effort to bring about the collapse of the new state by pushing a deliberate
policy of withdrawals the Indian bank offices closed quickly. Those banks, which
stayed, operated only in name pending the winding up of their business. The
number of scheduled banks thus declined form 487 branches before independence
to only 195 branches by 30th June1948.

2.4 HISTORY OF NBP

National Bank of Pakistan (the Bank) 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.
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The Bank commenced its operations from November 20, 1949 at six important
jute centers in the 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:
2.4.1 Formative Phase 1950’s
When NBP was first formed it had authorized capital equivalent to the amount of
Rs.60 million. In 1950 shares of the bank were also floated and taken up and by
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 and by 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 the
meager 17 in 1950.
2.4.2 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.

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By December 1969 NBP had 720 branches, 713 at home and 7 in foreign
countries.
2.4.3 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 at 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.
2.4.4 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.
2.4.5 Challenges and New Initiatives: 1990’s-2008
With the geographical development of its branches, 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 18 overseas branches and 5 representative offices.
In 1995 NBP became the first bank in Pakistan with a deposit base which crossed
the Rs.500 trillion mark to become the largest financial institute in the country.

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Total deposits of the bank have since risen to Rs.518 billion1 by end of Dec 2006.
NBP continues to render active help in provision of services like Hajj services,
collection of utility bills, paying of pension to central/provincial government
pensioners, as well as army personnel.

2.5 MISSION STATEMENT

“To make the Bank complete and competitive with all international standard in
performing, quality of, operations, staff, financial strength, products and
services to develop a culture of excellence in every spare of activity of the
bank.”

2.6 VISION STATEMENT

“To be recognized as a leader and a brand synonymous with trust, highest

standards of service quality, international best practices and social responsibility.”

2.7 GOALS AND OBJECTIVES OF NBP

“To be the pre-eminent financial institution in Pakistan and achieve market

recognition both in the quality and delivery of service as well as the range of
product offerings.”

2.8 ORGANIZATION OBJECTIVE

1
Annual Report, 2006.

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National bank of Pakistan is also a commercial organization and its main
objective is profit maximization. This is achieved in two ways:

1. By increasing deposits.

2. By charging interest on loans provided to the private sector and business

community.

These are explained as:

2.8.1 Increase in deposits

Competition in banking is intense and every bank whether it is Pakistani, foreign,

private or nationalized tries to increase its deposits by providing better facilities to
its customers. By increasing its deposits a bank can extend greater amount of loan
and hence achieves higher profit. NBP is also improving its facilities and services
to attract customers with higher volume of deposits. There are two main factors
involved in increasing the deposits. These factors are improving the services and
courtesy. NBP is continuously working on these two factors to increase its
deposits.

2.8.2 Extentio of loan

The profitability of a bank largely depends on the amount given to people as loan
and the type of people to whom credit is given i.e. the credit worthiness of the
borrowers. This strategy has worked quite well for NBP. Deposits are collected
from the people and invested in different projects. NBP prefers to give loans to
financially sound and reliable parties, after securing the collaterals. NBP has an
extremely well organized section. The staff is adequately trained, and educated
and competent. They carry out extensive financial analysis before deciding on the
loan. Interest charged on the loans potentially contributes to higher profits.

Some of the other objectives of NBP are:

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i. Improve customer services.

ii. Quick disposal of credit cases.

iii. Efficient operation of the branches.

iv. Better Public Relations.

v. Operational and advisory services for foreign exchange accounts activities

2.9 FUNCTIONS OF NBP

Since NBP is a commercial bank, it performs a variety of functions.

Like other commercial banks, NBP is engaged in financing international trade.

Its other major functions include receiving deposits, advancing loans and
discounting of exchange. The functions performed by NBP are:

2.9.1 Accepting Deposits

This function is important because banks largely depend on the funds deposited
with them by its customers. Deposits are of many types:

i. Current Deposits

Current deposits are also called demand liability on current deposits. NBP pays
practically no interest on current deposits. Businessmen usually open current
accounts. In NBP current account can be opened with a minimum amount of
Rs.500/-.

ii. PLS Saving Deposit

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Profit and loss sharing deposits (PLS) are also called checking accounts. One can
deposit and draw money easily. Profit on PLS is calculated every month but paid
after six months. PLS account can be opened with a minimum amount of Rs.500/-

iii. PLS Term Deposits

Fixed term deposits are deposits with the bank for certain fixed period before the
expiry of which they cannot be withdrawn unless giving due notice. In this case
the rates of profit will be different depending upon the time period.

2.9.2 DISCOUNTING BILLS OF EXCHANGE

Discounting of bill is practically speaking lending for exchange at their market

rate i.e. it pays to holder of the bill an amount equal to the face value after
deducting interest at the current market rate for the period. This bill has to be
mature. This is the common way used for keeping a part of assets of the bank in a
liquid form.

2.9.3 AGENCY SERVICE

NBP also provides best and unique service to its valued customers. NBP provide
the following agency services to the customers:

i. Collection of dividends

As NBP deals with the purchase and sale of various types of securities, therefore
NBP also provide dividend or interest earned on share or bonds or invested
money.

ii. Collection of Cheques

In the collection and payment of Cheques, bills and promissory notes etc.
National bank of Pakistan acts as an agent for its customers.

iii. Acting as an agent

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NBP also acts as an agent correspondent or representative for its customer at
home or abroad.

iv. General utility services:

Utilities provided by NBP are as follows:

a. Clearance of utility bills

NBP provides the service of clearing the utility bills i.e. electricity, gas and
telephone bills of its customers. For this purpose it also provides evening banking
services.

b. Lockers facility

National bank of Pakistan also provides locker facilities to its customers to keep
their valuable assets in it. The charges of different size of lockers are different.

c. Acts as a referee

NBP provides useful services to its customers by acting as a referee to their credit
worthiness.

d. Supply of information

NBP provides operational and advisory service for foreign exchange

accounts/activities.

2.9.4 UNMATCHED BANKING FACILITIES

1 Deposit security, Guaranteed by Government of Pakistan.

2 Highest rates of return to attract the savings.

3 Lowest rates on exports and other borrowings.

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4 Largest contribution towards Government and Semi-Government
requirements.

5 Agents of the SBP handling Treasury Functions, receipts of Taxes & other
Revenues.

6 Handling of salaries & pensions of federal/provincial/defense personnel.

7 Utility Bills collections.

8 Hajj arrangements

9 Sale and encashment of prize Bonds.

8 Safe Deposit Lockers for customers.

9 Rational Human Resource Management.

The prestigious periodical “The Banker” UK recognized NBP as the best bank for
2001-2002 and NBP is the bank of the year for 2003-2004 of Pakistan .

i. AAA rating awarded JCR-VIS Credit co. Ltd and affiliated of Japan Credit
Rating Agency for 2001.

ii. AAA+1 rating awarded JCR-VIS Credit Co Ltd and affiliated of Japan Credit
Rating Agency for 2002

SUMMATION

We discussed in this chapter the evolution of banking in Pakistan , banking

reforms 1972, Nationalization of banks, History of NBP, Mission and Vision
Statements of NBP & NBP functions. The next and onward chapter we will
discuss the general banking information and departmentalization of NBP.
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CHAPTER # 3

THE ORGANIZATIONAL STRUCTURE

3.1 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 has constituted 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 9 Regional Headquarters all over the country.

Board of Directors nominates the members of the executive committee and

executive committee nominates divisional Heads. A general view of the structure
is shown in the following organizational chart.

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ORGANIZATIONAL CHART OF NATIONAL BANK OF
PAKISTAN

BOARD OF
DIRECTORS

EXECUTIVE
PRESIDENT/CHAIRMAN
COMMITTEE

REGIONAL CHIEF
EXECUTIVE

CORPORATE BRANCH
MANAGER
REGIONAL CHIEF

BRANCH MANAGER

3.2 BOARD OF DIRECTORS

The members of the Board of Directors of National Bank of Pakistan are as
follows:
i) Syed Ali Raza (Chairman & President)
ii) Dr. Waqar Masood Khan (Director)
iii) Iftikhar Ali Malik (Director)
iv) Mohammad Zubair Motiwala (Director)
v) Sikandar Hayat Jamali (Director)
vi) Azam Faruque (Director)

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3.3 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 Chart

HEAD OFFICE MANAGEMENT

STRUCTURE

I.T. Org.
Corpora Comm Plann Deve
te & Special Strategic -ercial Audit ing lopm Over
Invest. Assets Planning &
Operati- Treasury Risk & Dept. ent -seas
Banking & & Mgt. Retail HRM
ons Mgt. Inspec & & Oper
Group Remedial Economic
Group Bankin Dept. ation
Group Mgt. Research Group -tion Imple Trai
& s
Group Group g Group menta ning
Finance
Group tion Dept
Group
Group .

 Operations Group

 Corporate & Investment Banking Group & Finance Group

 Special Assets & Remedial Mgt Group

 Strategic Planning & Economic Research Group

 Treasury Mgt Group

 Risk Mgt Group

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 Commercial & Retail Banking Group

 Audit & Inspection Group

 I.T. Planning Dept. & Implementation Group

 HRM Dept.

 Org. Development & Training Dept.

 Over-seas Operations

3.4 DOMESTIC NETWORK

The domestic network of NBP consists of 9 Regional Headquarters, 40 Regional

•
Offices, 1,300 branches and 5 subsidiaries. The domestic network of NBP has
been shown below in the map:


Annual Report, 2006.
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3.4.1 Subsidiaries
The five subsidiaries of NBP are as under:

i) National Discounting Services Limited.

ii) Taurus Securities Limited.

iii) NBP Modaraba Management Company Limited.

iv) NBP Capital Limited.

v) NBP Exchange Company Limited.

3.5 OVERSEAS NETWORK

The Overseas network of National Bank of Pakistan consists of 18 overseas
branches, 4 Representative Offices and 1 Subsidiary in Kazakhstan. The overseas
network of NBP is shown below in the map:

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3.5.1 Overseas Branches
The Overseas branches are in the following countries:
i) USA 2
ii) Germany 1
iii) France 1
iv) Hong Kong 2
v) Japan 2
vi) Republic of Korea 1
vii) Bahrain 1
viii) Egypt 1
ix) Bangladesh 2
x) Kyrgyzstan 1
xi) Turkmenistan 1
xii) Pakistan EPZ 1
xiii) Afghanistan 2

3.5.2 Representative Offices

The four Representative offices are situated in USA (Chicago), People’s Republic
of China, Uzbekistan and Canada.

3.6 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
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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. Each individual account will be opened
with a minimum deposit of Rs. 5,000,000.

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CHAPTER # 4

DEPARTMENTATION
4.1 DEPARTMENTATION

Dividing an organization into different parts according to the functions is called

departmentalization..

A)DEPARTMENTATION OF NBP

NBP can be divided into the following main departments.

4.1.1 CASH DEPARTMENT

Cash department performs the following functions

4.1.1.1) Receipt

The money, which either comes or goes out from the bank, its record should be
kept. Cash department performs this function. The deposits of all customers of the
bank are controlled by means of ledger accounts. Every customer has its own
ledger account and has separate ledger cards.

4.1.1.2) payments

It is a banker’s primary contract to repay money received for this customer’s

account usually by honoring his chouse.

4.1.1.3) Cheques and their Payment

The Negotiable Instruments. Act, 1881

“Cheque is a bill of exchange drawn on a specified banker and not expressed to

be payable otherwise than on demand”.

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Since a Cheque has been declared to be a bill of exchange, it must have all its
characteristics as mentioned in Section 5 of the Negotiable Instruments Act, 1881.
Therefore, one can say that a Cheque can be defined as an:

“An unconditional order in writing drawn on a specified banker, signed by the

drawer, requiring the banker to pay on demand a sum certain in money to, or to
the order of, a specified person or to the bearer, and which does not order any
act to be done in addition to the payment of money”.

4.1.1.4) The Requisites of Cheque

There is no prescribed form of words or design of a Cheque, but in order to fulfill

the requirements mentioned in Section 6 above the Cheque must have the
following.

a) It should be in writing

b) The unconditional order

Drawn on specific banker only

c) Payment on Demand

d) Sum Certain in money

e) Payable to a specific person

f) Signed by the drawer

4.1.1.5) Parties to Cheque

The normal Cheque is one in which there is a drawer, a drawee banker and a
payee, or no payee but bearer.

a) The Drawer

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b) The Drawee

c) The Payee

4.1.1.6) Types of Cheques

Bankers in Pakistan deal with three types of cheques

a) Bearer Cheques

Bearer cheques are cashable at the counter of the bank. These can also be
collected through clearing.

b) Order cheque

These types of cheques are also cashable on the counter but its holder must satisfy
the banker that he is the proper man to collect the payment of the cheque and he
has to show his identification. It can also be collected through clearing.

c) Crossed Cheque

These cheques are not payable in cash at the counters of a banker. It can only be
credited to the payee’s account. If there are two persons having accounts at the
same bank, one of the account holder issues a cross-cheque in favor of the other
account holder. Then the cheque will be credited to the account of the person to
whom the cheque was issued and debited from the account of the person who has
actually issued the cheque.

4.1.1.7 Payment of Cheques

It is a banker’s primary contract to repay money received for his customer’s

account usually by honoring his cheques. Payment of money deposited by the
customer is one of the root functions of banking. The acid test of banking is the
receipt of money etc. from the depositors, and repayment to them. This paying
function is one, which is the distinguishing mark of a banker and differentiates
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him from other institutions, which receive money from the public. However the
bankers’ legal protection is only when payment is in ‘Due Course’. The payment
in due course means payment in accordance with the apparent tenor of the
instrument, in good faith and without negligence to any person in possession
thereof under circumstances, which do not afford a reasonable ground of
believing that he is not entitled to receive payment of the amount therein
mentioned. It is a contractual obligation of a banker to honor his customer’s
cheques if the following essentials are fulfilled.

a) Cheque should be in a proper form:

b) Cheque should not be crossed:

c) Cheque should be drawn on the particular bank:

d) Cheque should not mutilated:

e) Funds must be sufficient and available:

f) The Cheque should not be post dated or stale:

g) Cheque should be presented during banking hours:

4.1.2 CLEARANCE DEPARTMENT

A clearinghouse is an association of commercial banks set up in given locality for

the purpose of interchange and settlement of credit claims. The function of
clearinghouse is performed by the central bank of a country by tradition or by
law. In Pakistan , the clearing system is operated by the SBP. If SBP has no office
at a place, then NBP, as a representative of SBP act as a clearinghouse.

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The easy, safe and most efficient way is to offset the reciprocal claims against the
other and receive only the net amount owned by them. This facility of net inter
bank payment is provided by the clearinghouse.

The representatives of the local commercial banks meet at a fixed time on all the
business days of the week. The meeting is held in the office of the bank that
officially performs the duties of clearinghouse. The representatives of the
commercial banks deliver the cheques payable at other local banks and receive the
cheques drawn on their bank. The cheques are then sorted according to the bank
on which they are drawn. A summary sheet is prepared which shows the names of
the banks, the total number of cheques delivered and received by them. Totals are
also made of all the cheques presented by or to each bank. The difference between
the total represents the amount to be paid by a particular bank and the amount to
be received by it. Each bank then receives the net amount due to it or pays the net
amount owed by it.

4.1.2.1) In-Word Clearing Books

The bank uses this book for the purpose of recording all the cheques that are
being received by the bank in the first clearing. All details of the cheques are
recorded in this book.

4.1.2.2) Out-Word Clearing Book:

The bank uses outward clearing register for the purpose of recording all the
details of the cheques that the bank has delivered to other banks.

4.1.3 ADVANCE DEPARTMENT

Advances department is one of the most sensitive and important departments of

the bank. The major portion of the profit is earned through this department. The

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job of this department is to make proposals about the loans. The Credit
Management Division of Head Office directly controls all the advances. As we
know bank is a profit seeking institution. It attracts surplus balances from the
customers at low rate of interest and makes advances at a higher rate of interest to
the individuals and business firms. Credit extensions are the most important
activity of all financial institutions, because it is the main source of earning.
However, at the same time, it is a very risky task and the risk cannot be
completely eliminated but could be minimized largely with certain techniques.

Any individual or company, who wants loan from NBP, first of all has to undergo
the filling of a prescribed form, which provides the following information to the
banker.

4.1.3.1) Name and address of the borrower.

a) Existing financial position of a borrower at a particular branch.

b) Accounts details of other banks (if any).

c) Security against loan.

d) Exiting financial position of the company. (Balance Sheet & Income

Statement).

e) Signing a promissory note is also a requirement of lending, through this

note borrower promise that he will be responsible to pay the certain amount of
money with interest.

4.1.3.2) Principles of Advances

There are five principles, which must be duly observed while advancing money to
the borrowers.

a. Safety

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b. Liquidity

c. Dispersal

d. Remuneration

e. Suitability

f. Safety

Banker’s funds comprise mainly of money borrowed from numerous customers

on various accounts such as Current Account, Savings Bank Account, Call
Deposit Account, Special Notice Account and Fixed Deposit Account. It indicates
that whatever money the banker holds is that of his customers who have entrusted
the banker with it only because they have full confidence in the expert handling of
money by their banker. Therefore, the banker must be very careful and ensure that
his depositor’s money is advanced to safe hands where the risk of loss does not
exist. The elements of character, capacity and capital can help a banker in arriving
at a conclusion regarding the safety of advances allowed by him.

b. Character

It is the most important factor in determining the safety of advance, for there is no
substitute for character. A borrower’s character can indicate his intention to repay
the advance since his honesty and integrity is of primary importance. If the past
record of the borrower shows that his integrity has been questionable, the banker
should avoid him, especially when the securities offered by him are inadequate in
covering the full amount of advance.

It is obligation on the banker to ensure that his borrower is a person of character

and has capacity enough to repay the money borrowed including the interest
thereon.

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c. Capacity

This is the management’s ability factor, which tells how successful a business has
been in the past and what the future possibilities are. A businessman may not have
vast financial resources, but with sound management abilities, including the
insight into a specific business, he may make his business very profitable. On the
other hand if a person has no insight into the particular business for which he
wants to borrow funds from the banker, there are more chances of loss to the
banker.

d. Capital

This is the monetary base because the money invested by the proprietors
represents their faith in the business and its future. The role of commercial banks
is to provide short-term capital for commerce and industry, yet some borrowers
would insist that their bankers provide most of the capital required. This makes
the banker a partner. As such the banker must consider whether the amount
requested for is reasonable to the borrowers own resources or investment.

e. Liquidity

Liquidity means the possibilities of recovering the advances in emergency,

because all the money borrowed by the customer is repayable in lump sum on
demand. Generally the borrowers repay their loans steadily, and the funds thus
released can be used to allow fresh loans to other borrowers. Nevertheless, the
banker must ensure that the money he is lending is not blocked for an undue long
time, and that the borrowers are in such a financial position as to pay back the
entire amount outstanding against them on a short notice. In such a situation, it is
very important for a banker to study his borrower’s assets to liquidity, because he
would prefer to lend only for a short period in order to meet the shortfalls in the
wording capital. If the borrower asks for an advance for the purchase of fixed
assets the banker should refuse because it shall not be possible for him to repay

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when the banker wants his customer to repay the amount. Hence, the baker must
adhere to the consideration of the principles of liquidity very careful.

f. Dispersal

The dispersal of the amount of advance should be broadly based so that large
number of borrowing customer may benefit from the banker’s funds. The banker
must ensure that his funds are not invested in specific sectors like textile industry,
heavy engineering or agriculture. He must see that from his available funds he
advances them to a wide range of sector like commerce, industry, farming,
agriculture, small business, housing projects and various other financial concerns
in order of priorities.

Dispersal of advances is very necessary from the point of security as well,

because it reduces the risk of recovery when something goes wrong in one
particular sector or in one field.

g. Remuneration

A major portion of the banker’s earnings comes form the interest charged on the
money borrowed by the customers. The banker needs sufficient earnings to meet
the following:

a) Interest payable to the money deposited with him.

b) Salaries and fringe benefits payable to the staff members.

c) Overhead expense and depreciation and maintenance of the fixed

assets of the bank.

d) An adequate sum to meet possible losses.

e) Provisions for a reserve fund to meet unforeseen contingencies.

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f) Payment of dividends to the shareholders.

h. Suitability

The word “suitability’ is not to be taken in its usual literary sense but in the
broader sense of purport. It means that advance should be allowed not only to the
carefully selected and suitable borrowers but also in keeping with the overall
national development plans chalked out by the authorities concerned. Before
accommodating a borrower the banker should ensure that the lending is for a
purpose in conformity with the current national credit policy laid down by the
central bank of the country.

4.1.3.3 Forms of Loans

In addition to purchase and discounting of bills, bankers in Pakistan generally

lend in the form of cash finance, overdrafts and loans. NBP provides advances to
different people in different ways as the case demand.

a) Cash Finance

This is a very common form of borrowing by commercial and industrial concerns

and is made available either against pledge or hypothecation of goods, produce or
merchandise. In cash finance a borrower is allowed to borrow money from the
banker up to a certain limit, either at once or as and when required. The borrower
prefers this form of lending due to the facility of paying markup/services charges
only on the amount he actually utilizes.

If the borrower does not utilize the full limit, the banker has to lose return on the
un-utilized amount. In order to offset this loss, the banker may provide for a
suitable clause in the cash finance agreement, according to which the borrower
has to pay markup/service charges on at least on self or one quarter of the amount
of cash finance limit allowed to him even when he does not utilize that amount.

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b) Overdraft/Running Finance

This is the most common form of bank lending. When a borrower requires
temporary accommodation his banker allows withdrawals on his account in
excess of the balance, which the borrowing customer has in credit, and an
overdraft thus occurs. This accommodation is generally allowed against collateral
securities. When it is against collateral securities it is called “Secured Overdraft”
and when the borrowing customer cannot offer any collateral security except his
personal security, the accommodation is called a “Clean Overdraft”. The
borrowing customer is in an advantageous position in an overdraft, because he has
to pay service charges only on the balance outstanding against him. The main
difference between a cash finance and overdraft lies in the fact that cash finance is
a bank finance used for long term by commercial and industrial concern on
regular basis, while an overdraft is a temporary accommodation occasionally
resorted to.

c) Demand Financing/Loans

When a customer borrows from a banker a fixed amount repayable either in

periodic installments or in lump-sum at a fixed future time, it is called a “loan”.
When bankers allow loans to their customers against collateral securities they are
called “secured loans” and when no collateral security is taken they are called
“clean loans”.

The amount of loan is placed at the borrower’s disposal in lump-sum for the
period agreed upon, and the borrowing customer has to pay interest on the entire
amount. Thus the borrower gets a fixed amount of money for his use, while the
banker feels satisfied in lending money in fixed amounts for definite short periods
against a satisfactory security

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4.1.4 REMITTANCE DEPARTMENT

Remittance means a sum of money sent in payment for something. This

department deals with either the transfer of money from one bank to other bank or
from one branch to another branch for their customers. NBP offers the following
forms of remittances.

a) Demand Draft

b) Telegraphic Transfer

c) Pay Order

d) Mail Transfer

4.1.4.1) Demand Draft

Demand draft is a popular mode of transfer. The customer fills the application
form. Application form includes the beneficiary name, account number and a
sender’s name. The customer deposits the amount of DD in the branch. After the
payment the DD is prepared and given to the customer. NBP officials note the
transaction in issuance register on the page of that branch of NBP on which DD is
drawn and will prepare the advice to send to that branch. The account of the
customer is credited when the DD advice from originating branch comes to the
responding branch and the account is debited when DD comes for clearance. DD
are of two types.

a) Open DD: Where direct payment is made.

b) Cross DD: Where payment is made through account.

NBP CHARGES FOR DD

I. Up to Rs. 50,000/- is Rs 50/- only

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II. Over Rs. 50,000/- is 0.1%

4.1.4.2) Pay Order

Pay order is made for local transfer of money. Pay order is the most convenient,
simple and secure way of transfer of money. NBP takes fixed commission of Rs.
25 per pay order from the account holder and Rs. 100 from a non-account holder.

4.1.4.3) Telegraphic Transfer

Telegraphic transfer or cable transfer is the quickest method of making

remittances. Telegraphic transfer is an order by telegram to a bank to pay a
specified sum of money to the specified person. The customer for requesting TT
fills an application form. Vouchers are prepared and sent by ordinary mail to keep
the record. TT charges are taken from the customer. No excise duty is charged on
TT. The TT charges are:

Telegram/ Fax Charges on TT = Actual-minimum Rs.125.

Cable telegram transfer costs more as compared to other title of money. In cable
transfer the bank uses a secret system of private code, which is known to the
person concerned with this department and branch manager.

4.1.4.4) Mail Transfer

When the money is not required immediately, the remittances can also be made
by mail transfer (MT). Here the selling office of the bank sends instructions in
writing by mail to the paying bank for the payment of a specified amount of
money. Debiting to the buyer’s account at the selling office and crediting to the
recipient’s account at the paying bank make the payment under this transfer. NBP
taxes mail charges from the applicant where no excise duty is charged. Postage
charges on mail transfer are actual minimum Rs. 40/- if sent by registered post
locally Rs.40/- if sent by registered post inland on party’s request.

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4.1.5 HUMAN RESOURCE MANAGEMENT

Human Resource plays a vital role in the success of every service organization.
They interact between man and machine. Their attitude can win or loose the
customer. The positive attitude could only be created in a conducive environment,
which can make the staff dedicated towards the organization and its objectives. In
reality the man is more important than machine as it is the human which could get
maximum out of machine to keep a happy customer. However, most
organizations give little importance to this very important asset.

Various aspects related to human resource of National Bank of Pakistan are

critically examined in the following text:

4.1.5.1) Selection & Recruitment

Although the Bank believes in merit but in practice the selection of employees is
not done on merit. Most of the employees are low educated. This shows that
candidates with some strong family background or political pressure are given
preference in recruitment and qualified candidates are sometimes left behind.

4.1.5.2) Job for Life

Like the employee of public sector organizations in Pakistan , the employees of

NBP also enjoy their job for life. Since there is no risk of early retirement or
redundancy in rank, they do not perform with their full potentials. This is one
redundancy in rank, they do not perform with their full potentials, and this is one
of the reasons responsible for the low productivity of the employees of the Bank.

4.1.5.3) Performance Appraisal

The performance of employees of the Bank are appraised though their annual
confidential reports at the end of each year. This has become an outdated method
of performance appraisal and no longer used due to the following reasons:

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1. The performance of employees is evaluated after quite a long time.

2. Element of subjectivity is involved in this method.

3. Employee’s participation is not ensured in the process of evaluation.

4. Objectives of employee’s are not quantified.

4.1.5.4) Inter Personal Relationship

Modern management acknowledges human resources as one ‘of the most

important assets of an organization. But by their very nature, human beings are
also the most unpredictable. Where a number of persons work together,
interactions among them, of necessity, will lead to conflicts and NBP is no
exception. Most interpersonal conflicts in NBP can be traced back to the
following major heads.

Lack of Communication

Lack of communication is the biggest reason for conflicts. Not only it is due to the
failure to send a massage but to an interpretation given to the massage by the
receiver is different from that intended.

4.1.5.5) Diversity in Values

Diversity in values, perceptions, cultural background and life-style is another

reason responsible for inter personal conflicts in NBP. Different values and
perceptions about the same issue, event or personality hinder understanding.
When things come to such a pavement, therefore, interpersonal conflicts are
generated.

The dominant trend in all modern industrial societies of the world is merit and
expertise, which helps promote cohesion and reduce conflicts. But the feudalistic

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mindset is still very strong in our set up and there is no tradition of tolerance for
differing viewpoints. Hence, interpersonal conflicts are generated.

4.1.5.6) Corruption

Our social acceptance of corruption gives rise to corruption at every level of

social and organizational set up. Corruption involves financial embezzlement,
favoritism, nepotism,and other number of such practices. All these cause
resentment that keep building up and lead to conflict sooner or later.

In the past few years, some cases of frauds have happened in different branches.
The reasons can be linked with the employee dissatisfaction of NBP.

4.1.5.7 Discipline & Authority

Maintaining discipline and implementation of authority (tables) in letter and spirit

is the key to success of any organization. In NBP, The authority tables are not
strictly maintained. Line managers are not fully equipped with the authority with
no vertical or horizontal interference.

4.1.6 DEPOSIT DEPARTMENT

It controls the following activities:

a) A/C opening.

b) Issuance of cheque book.

c) Current a/c

d) Saving a/c

e) Cheque cancellation

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f) Cash

4.1.6.1 Account opening

The opening of an account is the establishment of banker customer relationship.

Before a banker opens 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.

i. Avoiding frauds

ii. Safe guard against unintended over draft.

iii. Negligence.

iv. Inquiries about clients.

There are certain formalities, which are to be observed for opening an account
with a bank.

 Formal Application

 Introduction

 Specimen Signature

 Minimum Initial Deposit

 Operating the Account

1. Pay-In-Slip Book

2. Pass Book

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3. Issuing Cheque Book

a) Qualification of Customer

The relation of the banker and the customer is purely a contractual one, however,
he must have the following basic qualifications.

 He must be of the age of majority.

 He must be of sound mind.

 Law must not disqualify him.

 The agreement should be made for lawful object, which create legal
relationship

 Not expressly declared void.

b) Types of Accounts

Following are the main types of accounts

1 Individual Account

2 Joint Account

3 Accounts of Special Types

4 Partnership account

5 Joint stock company account

6 Accounts of clubs, societies and associations

7 Agents account

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8 Trust account

9 Executors and administrators accounts

10 Pak rupee non-resident accounts

11 Foreign currency accounts

4.1.6.2 Issuing of chequebook:

This department issues cheque books to account holders.

Requirements for issuing chequebook

a) The account holder must sign the requisition slip

b) Entry should be made in the chequebook-issuing book

c) Three rupees per cheque should be recovered from a/c holder if not then debit
his/her account.

4.1.6.3 Current account

These are payable to the customer whenever they are demanded. When a banker
accepts a demand deposit, he incurs the obligation of paying all cheques etc.
drawn against him to the extent of the balance in the account. Because of their
nature, these deposits are treated as current liabilities by the banks. Bankers in
Pakistan do not allow any profit on these deposits, and customers are required to
maintain a minimum balance, failing which incidental charges are deducted from
such accounts. This is because the depositors may withdraw Current Account at
any time, and as such the bank is not entirely free to employ such deposits.

Until a few decades back, the proportion of Current Deposits in relation to Fixed
Deposits was very small. In recent years, however, the position has changed
remarkably. Now, the Current Deposits have become more important; but still the
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proportion of Current Deposits and Fixed Deposits varies from bank to bank,
branch to branch, and from time to time.

4.1.6.4 Saving account

Savings Deposits account can be opened with very small amount of money, and
the depositor is issued a chequebook for withdrawals. Profit is paid at a flexible
rate calculated on six-month basis under the Interest-Free Banking System. There
is no restriction on the withdrawals from the deposit accounts but the amount of
money withdrawn is deleted from the amount to be taken for calculation of
products for assessment of profit to be paid to the account holder. It discourages
unnecessary withdrawals from the deposits.

In order to popularize this scheme the State Bank of Pakistan has allowed the
Savings Scheme for school and college students and industrial labor also. The
purpose of these accounts is to inculcate the habit of savings in the constituents.
As such, the initial deposit required for opening these accounts is very nominal.

4.1.6.5 Cheque cancellation:

This department can cancel a cheque on the basis of;

a) Post dated cheque

b) Stale cheque

c) Warn out cheque

d) Wrong sign etc

4.1.6.6 Cash

This department also deals with cash. Payment of cheques, deposits of cheques
etc.

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4.2 DEPARTMENTATION NBP MAIN BRANCH LAKKI
MARWAT WHERE I HAVE WORKED

NBP Main branch Lakki Marwat where I have done my internship is divided into
two main parts.

1. Cash Department

2. General Banking Department.

4.2.1 Cash Department:

Cash department mainly deals in cash.The objective of cash department.

“To facilitate people in the payments of their bills and taxes and repayments of
cash”

There are two main functions of cash department.

i. Payment ii. Receipts

i. Payments are the function that they pay their cheques and pay cash.

ii. Receipts mean collection of utilities bills, taxes etc.

4.2.2 General Banking

In this section of the bank the general banking functions are performed. It
is divided into five departments.

i. Remittances Department.

ii. Computer Department.

iii. Advances Department.

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iv. Clearing Department.

v. Establishment Department.

4.2.2.1 Remittances Department:

. The objective of this department is:-

“To transfer the money of people from one place to another place in safe and
comparable way”

The main functions of this department are:

i. Issuing of demand draft.

ii. Issuing of Mail transfer.

iii. Issuing of Telegraphic transfer.

iv. Issuing of payment order.

v. Issuing of call deposit.

vi. Pension payments.

vii. Closing and scrolling of government collections.

4.2.2.2 Advances department:

Every bank has a department, which advances money to borrowers.The

objective of Advances Department is

“To facilitate people by giving short term and long term loans on easy
terms and conditions and also giving agricultural loan to the formers to enhance
the agriculture side”.

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 The main function of this Department is to take surplus money from the
people at low rates and lend this money to borrowers at high rates to earn profit in
the region of district Lakki.

4.2.2.3 Clearing Department:

A clearinghouse is an association of commercial banks set in State Bank

of Pakistan for the purpose of interchange and settlement of credit claims.

The objective of this department is to

“To facilitate customers for payment of their Cheques of other banks”.

Two types of clearing books are maintained.

i. In word clearing books:

The bank uses this book for the purpose of recording all the cheques that
are being received by the bank in the first clearing. All detail of the cheques are
recorded in this book.

ii. Out word clearing book:

The bank uses outward clearing register for the purpose of recording all the
details of the cheques that the banks have delivered to other banks.

4.2.2.4 Computer Department:

The objective of this Department is to facilitate customers in payment of their

cheques”.

The main functions performed by this department are:

a) Checking balance.

b) Deduction from balance on clearing cheques.

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c) Issuing bank statements..

4.2.2.5 Establishment Department:

This department mainly deals with the branch employees. The main
objective of this department is to

“To regulate bank business”.

Main functions of this department are:

a) Keeps the record of attendance of employees.

b) Employee’s salaries distribution.

c) Employee’s bonuses etc.

SUMMATION

We discussed in this chapter, the General Banking information about NBP i.e the
departmentalization of NBP as well as the departmentalization of NBP Main
branch Lakki Marwat.

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CHAPTER # 5

SWOT ANALYSIS
5.1 INTRODUCTION

SWOT analysis is an acronym that stands for strengths, weakness, opportunities,

and threats SWOT analysis is careful evaluation of an organization’s internal
strengths and weakness as well as its environmental opportunities and threats.

“SWOT analysis is a situational analysis which includes strengths, weaknesses,

opportunities and threats that affect organizational performance.”

“The overall evaluation of a company strengths, weaknesses, opportunities and

threats is called SWOT analysis.”

In SWOT analysis the best strategies accomplish an organization’s mission by:

1. Exploiting an organizations opportunities and strength.

2. Neutralizing its threats.

3. Avoiding or correcting its weakness.

SWOT analysis is one of the most important steps in formulating strategies using
the organization mission as a context; managers assess internal strengths
,distinctive competencies and weaknesses and external opportunities and threats.
The goal is to then develop good strategies and exploit opportunities and strengths
neutralize threats and avoid weaknesses.

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5.2 STRENGTHS:

5.2.1 OLDEST INSTITUTION:

NBP is one of the oldest bank of Pakistan and first nationalized bank Hence its
customer base is strength from this plus point as customers have more confidence
in the bank. The additional value services are the privilege for the bank.

5.2.2 ALTERNATE DUTIES IN SBP ABSENCE

The NBP performs additional services for its customers as well as the other bank
customer in the absence of SBP.

5.2.3 MORE DEPOSITS THAN OTHER BANKS

NBP has the relative competence in having more deposits than any other bank.
This is because of the confidence the customer have in the bank. The bank being
the privileged and oldest bank in banking sector of Pakistan enjoys this edge over
all others, lacking it.

5.2.4 EMPLOYEE BENEFITS

The employers at NBP are offering reasonable monetary benefit. Normally two
bonuses are given Eid-Ul-Fitar & Eid-Ul-Azha. This serves as an additional
benefit and competency for the bank and a source of motivation for the
employees.

5.2.5 BROAD NETWORK

The bank has another competency i.e. it has broad-based network of branches
throughout the country also more than one branches in high productive cities. The
customers are provided services at their nearest possible place to confirm
customer satisfaction.

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5.2.6 STRICTLY FOLLOWED RULES & REGULATION:

The employees at NBP are strict followers of rule & regulation imposed by bank.
The disciplined environment at NBP bolsters its image and also enhances the over
all out put of the organization.

5.2.7 PROFESSIONAL COMPETENCE

The employees at NBP here have a good hold on their descriptions, as they are
highly skilled Professionals with background in business administration, banking,
economics etc. These professional competencies enable the employees to
understand and perform the function and operation in better way.

5.2.8 HEALTHY ENVIROMNMENT

The working condition in the NBP branch here is very conducive and favorable
for better output. The informal environment affects the performance of the
employees in a positive way.

5.2.9 RELATION BETWEEN STAFF AND OTHER EMPLOYESS

The bank enjoys a good plus point when it comes to the employee manager
relationship the hearing as removing of discrepancies if any, between the
employees, and between the manager and employees.

5.3 WEAKNESSES

5.3.1 LACK OF MARKETING EFFORT:

The bank does not promote its corporate image, services, etc on a competitive
way. Hence lags far behind in marketing effort .A need for aggressive marketing
is there in the era where marketing in now becoming a vital part of every
organization.

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5.3.2 NBP UNDER POLITICAL PRESSURE

The strong political hold of some parties and government and their dominance is
affecting the bank in a negative way. They sometimes have to provide loan under
the pressure, which leads to uneven and adjusted feeling in the bank employees.

5.3.3 FAVORITISM AND NEPOTISM

The promotions and bonuses etc in the bank are often powered by senior’s
favoritism or depends upon their wills and decision. This adds to the negative
factors, which denominate the employees thus resulting in affecting their
performance negatively.

5.3.4 LACK OF FINACIAL PRODUCT

The bank falls far behind when the innovative and new schemes are considered. It
has not been involved in the tug of war between the competitors to the accounts
and strengthens the existing customer base. This stands out to be the major
incompetence and weakness of the banks.

5.3.5 INEFFICIENT COUNTER SERVICES IN THE RUSH HOURS

During the rush hours, the bank is founded out to be a total flop to handle the mob
of people peaking from windows and doors. The bank has deficiency to operate in
the stages of rush hours where the people find them services entangled in a
situation of nowhere because they are not well served.

5.3.6 LACK OF COMPUTERIZED NETWORK

The bank lack the strength of being powered by the network of computers, which
have saved time, energy and would have lessened the mental stress, the
employees have currently. This would add to the strength if it were powered by
network of computers.

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5.3.7 LACK OF MODERN EQUIPMENT

The bank lacks the modern Equipment that is note counting machine computers.
Even if there is any equipment they lack to fall in the criteria of being rearmed as
update and upgraded

5.3.8 UNEVEN WORK DISTRIBUTION.

The workload in NBP is not evenly distributed and the workload tends to be more
on some employees while others abscond away from their responsibilities, which
serve as a demotivating factor for employees performing above average work.

5.4 OPPORTUNITIES

5.4.1 ELECTRONIC BANKING

The world today has become a global village because of advancement in the
technologies, especially in communication sector. More emphasis is now given to
avail the modern technologies to enhance the performances. NBP can utilize the
electronic banking opportunity to ensure on line banking 24 hours a day. This
would give a competitive edge over others.

5.4.2 MICRO FINANCING

Because of the need for micro financing in the market, there are lot of
opportunities in this regard. Other banks have already initiated, now the time has
arrived when the NBP must realize it and take on step to cater an ongoing
demand.

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5.5 THREATS

5.5.1 EMERGENCE OF NEW COMPETITORS

The bank is facing threats with the emergence of new competitors especially in
terms of foreign banks. These foreign banks are equipped with heavy financial
power with excellent and innovative ways of promoting and performing their
services. The bank has to take initiative in this regard or will find itself far back in
competition.

5.5.2 POLITICAL PRESSURE BY ELECTED GOVERNMENT

The ongoing shift in power in political arena in the country effects the
performance of the bank has to forward loans to politically powerful persons
which create a sense of insecurity and demoralization in the customer as well as
employees.

5.5.3 DOWNSIZING

The bank is currently acting upon the policy of downsizing which threaten the
environment of the bank Employees feel insecurity in doing their jobs and work,
hence affecting the over all performance of employees negatively.

5.5.4 CUSTOMERS COMPLAINTS

There exists no regular and specific system of the removal of customer

complaints. Now a day a need for total customer satisfaction is emerging and in
their demanding consequences customer's complaints are ignored.

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5.6 COMPETITIVE ANALYSIS

Porter’s five forces model:

This approach is widely used for competitive analysis. It is because of the high
intensity of competition among companies there five main competitive forces

5.6.1 Rivalry among competitive firms:

It is a very powerful force among the competitive forces the strategies pursued by
one firm can be successful only to extent that they provide competitive
advantages over the competitor. These competitive strategies may be lowering
prices, best quality services. The NBP offering very low charges an demand draft,
telegraphic transfer, mail transfer and give other additional services to the
customers and to the Nation. Because NBP is the “Nation’s Bank”.

5.6.2 Potential entry of new competitors:

Whenever new firms can easily enter a particular industry, the competition
increases. The government restrictions, tariffs, patents etc can stop new firms to
enter into the business as per Banking industry is concerned this market is already
very saturated in Pakistan and there are many banks with quality services and low
charges. So there is no threat to NBP from potential entry and NBP is also a
public sector bank because of that no other new bank not takes over it.

5.6.3 Potential Development of substitute products:

This is the third factor affecting the competitions. There may be some other
product that can be substituted the product of that industry. For example banks
offering saving schemes in Pakistan and these schemes are also offered by GPOs
in Pakistan so they must compete them in this field. If they offer low rates than
GPOs so people will go to deposit in GPOs. People concentration high rates so
that’s why saving PLS accounts are more then current accounts. The next
examples will ATM which substitute presenting cheques at counter to encash it.

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The NBP is lacking in this field. It must improve in this field to compete the
competitors.

5.6.4 Bargaining Power of Suppliers:

The bargaining power of suppliers affects the intensity of competition, especially

when there are a large number of suppliers. In case of banks the suppliers are
customers they supply the money to banks. Now they must offer good services,
quality, and safety low charges etc to customers. In this field NBP is very good.
because it offers good quality services to customers. They charge low charges on
remittances. That’s why its more competitive to other banks.

5.6.5 Bargaining Power of Consumers:

When customers are concentrated or large, or buy in volume, their bargaining

power represents a major force affecting intensity of competition. Now the
number of customers in Pakistan for banks are very high. Banks offering variety
of products and services to their customers. NBP have a large number of
customers. Now it must offer good services and products to their customers to
attract them to come to NBP

SUMMATION

The summary of SWOT Analysis of NBP. To know how NBP can compete well
and how to maintain its position in the market as a best services provider
organization

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CHAPTER # 6

FINDINGS AND OFFER CONCLUSIONS

6.1 INTRODUCTION

I have divided this section in four parts. Which are as under. These analysis are
mainly based on my practical experience at the NBP.

• Problems at the branch.

• Functional analysis.

• Administrative analysis.

• Personal management’s analysis.

6.2 PROBLEMS AT THE BRANCH

6.2.1 Customer Satisfaction

In NBP customer dealing is well, but during rush hours the customer has to wait
for a long time for their turn. It’s quite hard for a new customer or potential
customer to get the required information.

6.2.2 Poor record management and filing system

During my internship I observed that filing system of branch is not good. When
certain record is needed the staff has to struggle to find it out and a lot of time is
wasted.

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6.2.3 Unequal distribution of work

Work is not equally distributed. On one hand some employees have to work all
the day without relaxing while some others have nothing to do at all. This not
only creates confusion among employees but also hurting and disturbing for
overall setup of the bank. And above all it results in dissatisfaction among
customers as well.

6.2.4 Marketing visits

A useful mode of contact is through personal marketing visits. Such visits are
important in informing and persuing the existing and potential customers about
the products and creating a sense of belongingness with them.

6.3 FUNCTIONAL ANALYSIS

6.3.1 Formal Organization

Formal organization includes the activities of two or more persons, which are
cautiously determined groups and coordinated towards a given objective. It
provides base when people are able to communicate with others, when they have
common purpose and they are willing to work In this formal organization of NBP
the activities are carried out in a more formal way. In theoretical terms it provides
basis for communication with one another but in practice it is not exercised
because an employee at high level cannot get straight away to manager or SVP
and ask him about his problems faced to him, because first he has to talk to his
immediate boss and follow a proper channel of communication.

6.3.2 Difference between theory and practice

A vast difference exists between theory and practice and NBP has written
procedure but practical work done by employees is a bit different from written
procedures.
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6.3.3 Bank duty to maintain secrecy.

They don’t care about maintaining secrecy, especially during the rush hours. They
speak loudly about the account position and while getting clearance of cheque the
person can easily get the whole information from the ledger. The deposits clerk
must be careful while passing any cheque. In this regard another shortfall is in
giving the information regarding the balance on telephone.

6.3.4 Excessive paper work

It is notified that due to the lengthy procedure of paper work the bank employees
are over burdened. They are unable to give proper attention to the clients and face
difficulties in getting their job done. One reason for lengthy procedures and
excessive paper work in the bank is the lack of computerized technology.

6.3.5 More accounts fewer deposits.

Efficient banking is one, which does not emphasize on number of accounts but on
greater amount of deposits. NBP is more interested in increasing its number of
accounts irrespective to its deposit. The main reason behind this is that bank does
not provide personalize services to all the account holders and does not improve
its quality and services

6.3.6 Delegation of authority

Manager has very limited authority; he has to take the approval from his
management authority i-e. In case of advances he has to take the approval of
general and regional manager. The other problem is created, when the manager is
not present in his office, the customer have to wait for hours. This discourages
both customer and officers because they have suffer a lot.

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6.4 ADMINISTRATIVE ANALYSIS

6.4.1 Job analysis is not effective

Only on the basis of job analysis it can be decided how a right person can be
hired, trained, compensated or promoted. It is very important for an organization
that nature of the job is described and job specifications are mentioned. Most of
the employees are simple graduates and do not have proper background about
their jobs. This creates problems both for organization and for the employees. In
NBP salaries are given according to the seniority and grades. People with simple
or complex responsibilities are getting the same salary and facilities. This creates
dissatisfaction among employees.

6.4.2 Carelessness in opening of account

When customer comes to open an account, the staff does not bother to check
his/her place phone number and permanent address. It is important because in
case of overdraft by mistake or anything which places his accounts in debit it will
be difficult to trace him. On the other hand he may be involved in any fraudulent
activities against the bank. In this case the bank will be in awkward position.

6.4.3 Lack of specialized training

NBP does not provide adequate facility of specialized training to their staff.
Training is generalized rather than specialized. As the worker finishes his
training, he is inducted into a specific field without having great deal of
knowledge about the field.

In the Main branch Lakki Marwat the newly recruited employee training was not
imparted, they all learned things on the job.

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6.4.4 Low Profit Rates

Most of the customers shifted their account to the National Saving Center because
of the low rates of saving deposit discourages the customers. Bank should
increase their profit rates to attract customers.

6.4.5 Poor job rotation.

There is absence of job rotation in NBP Lakki Marwat branch. A person placed in
one-department remains their forever. It reduces career opportunities as well
boredom and in the end results in career plaguing. Job rotation is very important
for employee especially for those who are newly recruited. The newly recruits
should be rated in all departments of the banking in order to get familiar with
working of different departments so that when they get a responsible position they
have know how of the whole system.

6.4.6 Delays in Loan Advancement

It has been observed that there is delays in sanctioning of cases form the head
office, which results in customer dissatisfaction.

6.4.7 Lack of appreciation

Another very important thing which is ignored in the bank is appreciation if the
employee on their good performance. If hard work and performance of employees
is not recognized and appreciated they become dishearten which results in decline
in performance.

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6.5 PERSONNEL MANAGEMENT ANALYSIS

6.5.1 Need for better training program

Need of training is greatly emphasized all around the world. Training of the
personnel is part of human resource management. It has been noticed that the
training program of NBP is not adequate.

Once the candidate is selected and placed on the respective job. It becomes
essential to train him adequately for the task. They should learn new methods for
motivating customers. The training programmed of the bank should include
scientific techniques to improve the decision-making and interpersonal as will
individual needs of the employee both specialized to fresh as well as on job to
maintain the high standards of service.

6.5.2 Developing Managerial Leadership

Leadership is a practical term of visible, clear on objective and communicating

better control on financial and administrative matters. Manager is not only
responsible for their own units in business, but also in people terms i.e. training,
recruiting, grievance handling and taking immediate initiative in crisis situation to
take major decision affection the future of the bank and banking community.

6.5.3 Recruitment policy

Human resources are the lifeblood of the organization. If the personnel are
recruited carefully they can become asset to the organization in the case of
carelessness a liability on the organization. Bank is not following its recruitment
policy properly due to favoritism, nepotism and political pressure. Both the top
authority and staff union tries their best recruit their favorites, indulgence of
political pressure add salt to the wounds. The persons selected through these
channels are infantile and do not work for the betterment for the bank.

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6.5.4 Promotions

Promotion in NBP is purely on the basis of seniority, so the new young person
having high qualification remains behind for quite a lot of time. Top management
and staff union put pressure for the promotion of their favorites, which gives a
sense of deprivation to the deserving employee and their efficiency is affected. As
the concept of promotion is attached with better in terms of greater responsibility,
more prestige, greater skills and increased rate of salary. Thus a better and
impartial policy of promotion needs to be followed.

6.5.5 Transfer

Transfer means when a person is shifted from one place to another place. It is
done either that person is needed more on the other branch or for improving his
skill variety. It is the policy of the Bank to transfer each employee 3 to 4 years.

6.5.6 Marketing at desk

Bank employee come in daily contact with many people who happen to deal with
the casual remittance, travelers cheques, safe custody, pensioners, depositing
license fee and variety of other functions and variety of other people with whom
the Bank has no account or regular business relationship. The Bank employees are
doing very little on their own to explore the possibilities of selling banking
services to them as a marketing contributor. The entire Bank community should
make a conscious effort in addition to their normal work to explore the
possibilities of selling banking services to them. The market opportunities are
hidden in every dealing a banker handles; the question is that if he has the art and
urge to seize such opportunities.

6.5.7 Lack of business communication

There is no proper way to give information to their customer. To avoid this minor
dissatisfaction and tension in the mind of customer, and deficiency of the service,
it is recommended that the bank should provide brochures etc containing
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information in details. Some general information should be placed in information
notice board on the entrance where customer can see it easily or it should be self-
attractive.

SUMMATION

Discussed the review of NBP, Main branch Lakki Marwat. That is mainly
concerned with the problems, needs and requirements, rules and regulations at the
branch. The next chapter is about the recommendation and suggestions to NPB.

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CHAPTER # 7

RECOMMENDATIONS & SUGGETIONS

7.1 INTRODUCTION

NBP is an effectively operating and profit making organization and carrying out
its activities under a specified system of procedure. The main regulatory body is
State Bank of Pakistan , which provides policy guidelines and ensures that the
money market operates on sound professional basis. While the head office
specifies the whole procedure of function and operations. This procedure has been
modernized with the passage of time with a view to streamline the approach and
underlying procedure for effective overhauling of its own capabilities so as to
bring them at par with international practices.

Here I am giving some suggestions, which in my view can add some input for
efficiency and better performance of NBP as an organization in general and City
branch in particular.

The recommendations are as follows:

7.2 PROFESSIONAL TRAINING

NBP staff lacks professionalism. They lack the necessary training to do the job
efficiently and properly. Although staff colleges in all major cities but they are not
performing well. For this purpose these staff colleges should be reorganized and
their syllabus should be made in such a way to help the employee understand the
ever-changing global economic scenario.

Banking council of Pakistan should also initiate some programs to equip the staff
with much needed professional training.

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7.3 DELEGATION OF AUTHORITY

Employees of the bank should be given a task and authority and they should be
asked for their responsibility.

7.4 PERFORMANCE APPRAISAL

The manager should strictly monitor the performance of every staff member. All
of them should be awarded according to their performance and result in the shape
of bonuses to motivated and incite them to work more efficiently.

7.5 TO OVER COME PROBLEM OF SPACE AND

FURNITURE

In the critical analysis this, problem is discussed. To overcome this problem it is

suggested that a special section should be made inside the branch. Which should
only handle the treasury function, salaries and pensions of federal personnel or the
bank should do these functions in the evening time. Also management should
purchase more furniture and arrange them in such a way which provides
maximum space and convenient especially in deposit department and there should
also be convenient sitting place for customers.

7.6 TRANSFER

Transfer is not properly carried out. Some of the employees are continually
serving at the same post. They are simply rotated at the same branch. Therefore it
is recommended that evenly rotation of every employee should take place after
every three years in different braches of the bank.
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7.7 CHANGES IN POLICIES

There should not be any abrupt policies change by the upper management, as this
practice hurts the customer confidences in the bank. Government should make
long-term policies

7.8 NEED OF QUALIFIED STAFF

Required, qualified staff should be provided to branch in order to improve the

functioning of the branch. Especially a telephone operator should be appointed.

7.9 UTILITY BILL CHARGES

Bank gets Rs. 2 to 3 to processes a utility bill, and it is very tired, tough and hard
job despite this working resulting in a loss to then Rs 3 to5 per transaction. These
charges should be increased to RS 10 per bill to enable the branch to cover their
handling costs and make some profit.

7.10 LINK WITH THE HEAD QUARTER

100 major branches of NBP should established a direct link with the, head quarter

In Karachi , through Internet or Intranet. This will make the functions and
decision making of the management easier and convenient.

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7.11 CREDIT CARD

National bank of Pakistan should start its operation in credit card. These cards are
very helpful for the ordinary customer in general and the business people in
particular. To make it mores secure and to eliminate the misuse of it, the
management is required to keep proper security against the card.

7.12 INSTALLING AN ATM

This branch is situated in the City, which is supported to be the hub of business
activates. In this area an auto teller machine (ATM) is the need of the hour
businessmen can easily check their balance in the bank and also with draw their
money conveniently.

7.13 INTEREST ON OVERDRAFT:

Overdraft is a short-term credit facility provided by the bank to its trustworthy

customers free of interest. Only bank commission is charge small amount of
mark-up on the overdraft, which will help the bank to improve its revenue
position.

7. 14 CLEAN LOANS

Clean loan or clean overdraft is the credit facility extended to the customers to the
customers without any security. These types of small term loans should not be
extended to anybody, because sometime these loans are provided to blue-eyed
people of the management and they become a part of bad debts.

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7.15 CASH FINANCING

In this mode of financing the amount of credit not utilized by the borrower is
remained tax-free. It is recommended that a small amount of interest should be
charge on this amount as well because the bank gas kept-aside the amount for that
borrower and can not advance it anywhere.

7.16 DECREASING ADMINISTRATIVE EXPENSES

Bank should decrease their administrative expenses. This was Rs 8 billion in the
year 2000. That can be done by lying off the surplus pool of employee with
golden handshakes scheme. The branches that are not much used could also be
closed. Employee can also be how to control the bank expenses. That will give
positive results in the future.

7.17 NEEDS TO BE FLEXIBLE IN CREDIT POLICY

As mentioned earlier, NBP is very conservative in advances and loans policy. It

reduces the investment opportunities. Also loans should be given to the small
businessmen and the agriculture sector at the low markup rate. It should adopt
flexible credit policy while giving credit to the agriculture sector.

7.18 TECHNOLOGICAL ADVANCEMENT

I would like to suggest that at least all the main branches of NBP should be fully
computerized in order to expedite the dealing process among bankers and their
customers. Every department should be provided a computer with adequate
training (especially Advances, Deposits and Foreign Exchange departments).
Daily records should be entered directly into these computers, (instead entering

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the overall daily transactions after the banking hours). It will not only reduce
transaction time, will increase accuracy but will also be efficient as well.

Not only it will be economical but will also reduce the extra burden of work of the
bank. It will also help in reducing the use of excessive paper work.

7.19 STAFF RELATIONSHIP

Good relationship among staff member leads to the peak performances in any
organization. I observed that the staff relationship was normal other wise but
some time I noticed that there existed a little conformity among the staff
members. Another syndrome from which the staff suffered was that all of them
considered themselves more important than others. Some of the officers used to
say that if I am absent for a day the bank would stop working. So this sort of
attitude is not good because it mars bank image and juniors’ willingness learn and
work hard and in the end will hurt the whole team.

7.20 IMPROPER DISTRIBUTION OF WORK

Proper distribution work leads to success in every organization. Proper

distribution of work prevents the employee from over and under work situation.
So for a smooth running of an organization proper distribution of work is the hint
to be followed.

During my internship I observed that there was no proper distribution of work in

the bank. I saw that some of the employee worked like ants other sat idle starting
here and there. So this created a lot of over work situation for while relaxation for
other.

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7.21 FAVORITISM AND NEPOTISM

In the City branch during my internship I obsered that when some of the
employees are transfer to other places, due to their relation with influential people
and with top management they can cancel their transfer in few weeks, when they
are unsatisfied at that place.

So I suggest that in the organization there should be no favoritism, nepotism and

politics and their transfer and promotion should be made on merit and according
to the rules and regulations of the bank and provided favorable environment to the
employee to show their performances.

7.22 INTER DEPARTMENTAL TRANSFER

I watched during my internship that, there is number of employee who have

worked on one seat for many a year. It can have negative effects motivation of
employee who is hard working and intelligent. Take the example of advances
section. In advance section if the employee is transfer after sixth month or seven
month, how can he be able to show his performances and how can he be able to
know the bank customer in a short period of time.

7.23 FOREIGN CURRENCY ACCOUNT

For the internship the place I have selected was City branch, which is my
forefather land and I know that from area many people have traveled to other
country for different kind of jobs, and I have heard personal complaint about the
unavailability of foreign currency account in banks. So I thick it is wonderful
opportunity for the bank to open foreign currency account.

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7.24 MARKETING POLICY

The branch should adopt various marketing strategy and promotion strategy to
promote the bank and its product.

The most important in my opinion is personal marketing; it is the most effective

of all when you think in term of branch level. But on the whole organization level,
they should arrange the seminar with in the bank and outside the bank. They
should introduce various prizing schemes just like Allied Bank. Karamad Scheme,
Bank Al-Falah (monthly income earning scheme) and various others.

They should do more advertising through newspaper and media and through
channel of personal contacts.

7.25 COMPLAINTS OF CUSTOMER

There should be an information desk to provide the information and to receive the
complaints of the customer in the bank.

There is no complaint box available in the branch and not any person appointed to
hear the complaints. Every person cannot go to the manager for the complaint
because most of the people are hesitant. So I suggest management to install a
compliant box in the branch, and recruit a special person for that guidance of the
customer when they are unable to manage some difficulties in banking matters.

7.26 ANALYSIS OF THE BUSINESS

Proper analysis of the business reports should be conducted before extending any
type of loan. For this purpose professional training of the stuff member is
required.

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7.27 ORGANIZATIONAL COMMITMENT

It is suggested that employees working on daily wages basis should be given

some benefits, which the other employees are getting. Their salaries must increase
according to efficiency, performance and service.

7.28 MANAGERIAL LEADERSHIP

In the analysis, we have discussed the difficulties of the assistant in taking any
initiative; therefore it is recommended that the assistants should he given special
training to make them ready for the leadership.

7.29 CREDIT MONITORING

The credit department of the bank should carry out vigilant credit monitoring. It
should ensure the proper payment of installments and the mark-up by the
borrower.

The staff members who have done all the paper work of the loan extension should
perform the monitoring, as he/she will be having more information about the
borrower.

7.30 EXTENDED BANKING HOURS

The banking hours may be extended up to six, as being practiced by HBL.

Some of the business communities due to law and order situation are now
reluctant to keep the fund in their premises and would want to depart with it.
Therefore, City Branch may extend the night banking to cater to demand of this

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business community. The branch could also be opened to cater the requirements
of this business community Limited staff:

7.31 HOUSING AND HOUSE HOLD GOODS LOANS

Bank should initiate these loans because most of bank’s customers are middle
class and they cannot afford to buy house or household goods at once by their
own

7.32 AVOIDING BAD DEBTS

Great care should be taken while extending the loan. Loans should be awarded
against reasonable securities, where market value should be equal to the loan
granted.

Policies should be crafted in a way to ensure that no loan is extended on political

pressure. SBP regulations for loan approval should be strictly followed.
According to which the current ratio of borrower’s business must be 1:1 and the
debt to equity ratio should be 60:40, means the liquidity position of business
should be healthy.

7.33 CAR FINANCING SCHEME

Another financing scheme with the name of “MARE GARE CAR FINANCING
SCHEME” should be initiated This finance scheme will help the general public to
buy the car of their choice in easy quarterly installments The bank monitors will
do strict monitoring and the car will be hypothecated with the bank against the car
loan.Scheme’s implementation plan is give in the next chapter.

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SUMMATION

We discussed in this chapter about the recommendations and suggestions for NBP
as an organization in general and NBP,Lakki Marwat in particular. The next
chapter is about the implementation plan in the view of recommendation and
suggestion.

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 CONCLUSION
During my stay of two months at NBP Main branch Lakki Marwat
while doing my internship, a pre-requisite for MBA degree I learned and
performed various tasks performed at the branch. I learned and performed on
following desks of general banking:

• Account opening
• Current Account
• PLS saving Account
• Remittance & Bills Section
• Advance Section
• Clearing
• Establishment

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 BIBLIOGRAPHY
1. www.nbp.com.pk

2. Sir, Paged John. The law of Banking.. McGraw Hill

Publication: page 51-58

3. Nasir, Saeed H.(2001). Money and Banking. Pakistan , Kitab

Markaz: Page.105-106

4. Israr, Siddiqui H. (1998). Practice and Law of banking in

Pakistan . Karachi : Decent Print Enterprises. Page 15-17

5. Bank Nationalization act 1974.

6. www.google.com.pk

7. President Office, July, 2008, Circular No. 13, 2007 Head Office
National Bank of Pakistan, Karachi

8. Annual reports of the bank.

9. Discussions and Interview with the bank staff .
10. Economic bulletin of the bank. Published by the economic and
business research wing of the bank.
11. The Bank Book of Instructions for the National Bank of Pakistan
(B.B.I).
12. Interviews of Branch Manager, Manager
Operations

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