INTRODUCTION OF STUDYIntroduction As part of the academic requirement for completing MBA (Human Resource) Master of Business Administration. The students are required to undergo for six weeks 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. Purpose of the Study The main purpose of the study in hand is together 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. • • To work practically in an organization. To develop interpersonal communication. 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 of NBP are also covered in this report. Objectives of the Study Discuss thorough study of National Bank of Pakistan. Internship Report on NBP. To understand the various operations and to equip with practical knowledge of the National bank of Pakistan. Limitation of the 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 six weeks. Benefit of the 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 Tech Society Branch, Lahore may also benefit from the recommendations made at the end of the report. 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. • • Primary data: Secondary data: Primary data include, Personal observation and Interviews of The Staff Members Secondary data consist of Manuals, Journals, magazines, Annual Reports and Internet 2 Internship Report on NBP. EVOLUTION OF BANKS IN PAKISTAN INTRODUCTION There are different opinions that how the word ‘Bank’ originated. Some of the author’s 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 opinion that the word ‘Bank’ is derived from the German word back, which means ‘joint stock fund’. Later on when the German occupied major part of the Italy the word ‘Back’ was italicized into ‘Back’. In fact human left 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 3 Internship Report on NBP. time and banking though different from its present form, flourished. What we know as ‘modern banking’ originated in the 14th century in Barcelona. Definitions 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.” 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”. Sir John Paged defines banker in these terms: “That no person or body, corporate or otherwise, can be a banker who does not Take deposits accounts. Take current accounts, Issue and pay Cheques and Collect Cheques crossed and uncrossed for his customers” The American defined the term banker in a very broad sense as under: “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”. Evolution of Banking in Pakistan The first phase in evolution of banking in Pakistan sees very hard days for the whole banking sector. Starting virtually from scratch in 1947, the country today possesses a full range of banking and financial institutions to cope with various needs of the economy. 4 Internship Report on NBP. 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 baking 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. Banking Growth during (1948-1970) In this tense situation, a committee was immediately setup to formulate a scheme of central banking legislation for Pakistan. Many specialists were of the opinion that in view of the acute shortage of trained staff, any idea of establishing a central bank was I impractical and the best that could be attempted was the setting up of a currency board until such times as sufficient staff could be organize to operate a central bank. The questions as to whether the institution should be only a currency board or a full-fledged central bank had exercised the mind of the Pakistan government since independence. Through, it was realized that the shortage of trained personal to run the central bank would present serious difficulty in view of the tangible advantages that a central bank enjoyed over currency board, the government ultimately decided to take the bold step of setting up a full fledged central banking authority. Among other factors, which led to this decision, there was the fact the banking facilities in the country had been totally disrupted and there was an urgent need for their rehabilitation, which a central bank alone could meet. As there was hardly any time to pass as Act, an order was drafted, known as the state bank of Pakistan 5 Internship Report on NBP. order, which was promulgated by the government of Pakistan on 12 th may 1948. The state bank declared open on July 1, 1948 by the father of the nation. One of the first tasks of the state bank was to arrange for the replacement of the Reserve bank of India notes, which had continued to circulate in Pakistan during the transitional period, by Pakistan currency. The first Pakistan notes were issued in October 1948 in the denominations of Rs. 5, 10 & 100. An equally urgent task, which the new central bank had to address itself, was the creation of a national banking system. To this end, while extending every help and encouragement to Habib Bank to expand its organization, the state bank recommended the setting up of a new banking institution to serve both as an agent to the state bank recommended the setting up of a new banking institution to serve both as an agent of the state bank as well as the spearhead of its credit polices. Accordingly the NATIONAL BANK OF PAKITSN was setup under an ordinance in November 1949. It started with six offices in the former East Pakistan. In view of the special role assigned to the new institution, contrary to traditional practices the Governor of the state bank was appointed to head its Board of Director in 1950. Under the fostering care of the state bank and the support of the government, the new institution developed rapidly. By using its special powers, the state bank made liberal advances to the new bank to help it expand credit facilities in the country. By 1952, the National bank of India shortly, afterwards, in November 1952, the governor of the state bank ceased to function as the president of National bank of Pakistan. With a view to broadening the institutional framework of the financial system, the state bank also sponsored the establishment of specialized credit institutions in the filed of agriculture and industry. Banking companies (control) act was passed in December 1948 specifically empowering the state bank to control the operations of banking companies in Pakistan. Moreover realizing that the most serious limitation on the expansion of banking services in Pakistan was the lack of trained personal, the state bank sponsored a banking training scheme, which was repeated after year and turned out a large number of bankers. As the Commercial Banking facilities continued to expand, a new Pakistani bank, the National Commercial Bank was established and registered as a scheduled bank. In the filed 6 Internship Report on NBP. of industrial finance a new institution known as the industrial credit and investment cooperation was set up. The year 1958 marked the completion of the first decade of the working of the State Bank of Pakistan. When it was established there were only 195 bank offices in existence. At the end of June 1958 their number had increased to 307, of which Pakistani banks accounted for 232 against 25 in mid 1948. Moreover at the end of June 1958, Pakistani banks held 60% of the total banks deposits, and were responsible for 65 of total bank credit. When the Ayub Khan Government took over in 1958, the banking and monetary scene was significantly affected by developments such as the liberalization of imports, transfer of business in food grains to the private sector, and the firming up of commodity markets. The demand of funds picked up and there was a substantial expansion of bank credit to the private sector. The pace of expansion in the institutional frameworks of the country’s banking system quickened and a new Pakistani, bank, namely the United Bank Limited was established. Owning the five years 1960-65, the credit structure in Pakistan made rapid progress. The bank extended its network by opening six new offices located at Chitagong, Peshawar, Quetta, Khulna, Layallpur and Rawalpindi. The number of scheduled bank offices rose from 430 at the end of June 1960 to 1591 in June 1965. Several new banks were added to the list of scheduled banks. Two principal additions were the commerce bank, and the standard bank. The number of scheduled banks, which stood at 29 in June 1960 rose to 36 by June 1965. Under the impact of economic growth and dear scope of private enterprises, bank credit to the private sector rose from Rs. 1,458 millions to Rs. 5759 million. Thus the total expansion in bank credit to the private sector during this period amounted to Rs. 4300 million, which gave a annual expansion of Rs. 860 million compared to the annual average increase of Rs. 144 million over the preceding five years. Banks deposits increased from Rs. 2,493 million to Rs. 6883 million during the five years period ended June 1965 compared to Rs. 231 million in the proceeding five years. Time deposits during this period increased from Rs. 946 million to Rs. 3228 million, where demand deposits rose from Rs. 1997 million to Rs 3655 million. The increase in time deposits was particularly rapid. The ratio of time deposits to total deposits in June 1965 stood 7 Internship Report on NBP. at 49.6 percentage as against 32.01 percentage five years earlier. Another salient feature of banking development during this period was that since the rate of increase in bank deposits lagged behind the rate of expansion in bank credit, the banked has to depend increasingly on central bank finance. They borrowing from the state bank rose from Rs. 11 million in June 1960 to Rs. 1688 million in June 1965. Owing keen demand for bank credit, bank’s investments could not increase as rapidly as their advances. Their investments totaled to Rs. 1,874 million at the end of June 1965 compared to Rs. 1,231 million in June 1960. Investments, which were almost equal to their advances in June 1960, were only about one third of the advances in June 1965.The third plane period witnessed a further expansion of banking facilities in the country the total number of scheduled banked offices increased from 1,591 at the end of June 1965 to 3133 at the close of June 1970. During the same bank credit to the private sector rose from Rs. 5,789 million to Rs. 9492 million. There was also a substantial growth in the bank deposits, which increased from Rs. 6883 million June 1965 to Rs. 13147 million at the end of June 1970. A remarkable change occurred during this period related to the composition of deposits. Time deposit becomes greater than demand deposits forming about 54 percent age of the total deposits. As oppose to what happened in the previous period, banks were able to finance a mush higher level of credit expansion without having to increase their borrowings from the central bank. Banking Reforms 1972 After the assumption of office by a new government in 1971, may 1972 different reforms were introduced to make the banks more responsive to the requirements of economics growth with social justice. The reforms aimed at bringing about a more purposeful and equitable distribution of bank credit, improving the soundness and efficiency of the banks, and securing greater social accountability of the banking system as a whole. The role of the banking system had been truly spectacular in mobilizing savings of the community and meeting the credit needs of the economy. But at the same time, the banks had generally neglected their role in promoting social justice and had failed to play an effective role in ensuring a wider and more equitable dispersal of the benefits of economic growth. In particular 8 Internship Report on NBP. The inter locking of ownership with commercial and industrial interests had led to the misuse of bank resources. There was a heavy concentration of credit in big accounts and in urban area. Credit facilities for agriculture, small business, newly emerging exports and housing had remained obviously inadequate while the banks indulged in capital financing in few selected business sectors and issued guarantees on behalf of favored clients, term clients, term financing facilities for industry were wholly absent. Under the banking reforms introduced in May 1972 the state bank of Pakistan was accorded wider powers. It was authorized to remove directors or managerial personnel, if necessary and supersede the board of directors of a banking company and appoint administrators during the period of such super session. It was also empowered to nominate directors on the board of every bank. As regard bank directors, it was provided that anyone defaulting in meeting his obligations to bank would forfeit his directorship. Moreover, it was laid down that no person could serve as director of a bank for more than six years continuously. Each bank was required to have a paid up capital of not less than 5 percent age of its deposits to be progressively build up to 10 percent age over a period of time. The banks were also required to transfer 10 percentage of their profit their reserves every years after the reserve became equal to the paid up capital. With a view to diversity the ownership of the banks, the banks were required to raise new capital from the market. Unsecured loans to directors, their families or firms and companies, were totally prohibited. The bank reforms also brought about the establishment of new institutions to achieve new objectives.A national credit consultative was setup under the supervision of the state bank with representation form the government and the private sector. It was assigned the task of determining of economy’s annual credit needs within the safe limits of monetary and credit expansion with reference to the annual development plan. Such a credit plan was to cover the public and private sectors. Alongside the National credit council and Agricultural Advisory Committee was formed to allocate agriculture credit for various purposes, to coordinate the operation or the agriculture credit agencies and to oversee the flow of credit to the designated targets. A standing committee on exports in general and the new emerging exports in particular, was also established. With a view to encourage the banks to extend credit to small borrowers, a credit guarantee scheme was introduced under which the state bank under took 9 Internship Report on NBP. to share any bonfire losses incurred by the commercial banks in case of small loans of advances to agriculture. At the same time two financing institutions were established. The people’s Finance Corporation was designed to provide finance to people of small means while the National Development Finance Corporation was set up of finance public sector owned and managed industries and enterprises. Nationalization of Banks (1974) In Pakistan The banking reforms turned to be transitional and interim step and when they were hardly eighteen months old the government nationalized the banking systems, with the following main objectives. To enable the government to use the capital concentrated in the hands of a few rich bankers for the rapid economic development of the country and the more urgent social welfare objectives. To distribute equitably credit too different classes sectors and regions. To coordinate the banking policies in various area of feasible joint activity without eliminating healthy competition among banks. The act passed for the nationalization of banks is known as the banks Nationalization Act 1974. Thus under this act the state bank of Pakistan and all the commercial banks incorporated in Pakistan and carrying business in or outside the country were brought under government ownership with effect from Jan 1, 1974. The ownership, management and control of all Pakistani banks stood transferred to and vested in the Federal government. The shareholders were provided compensation in the form of federal government bonds redeemable at par anytime within the period of fifteen years. Under the Nationalization act, the Chairman, Directors and Executives of various banks, other than those appointed by federal government were removed from their offices and the central boards of the banks and all local bodies were dissolved. Pakistan banking council was established to coordinate the activities of the Nationalized Commercial banks. At the time of Nationalization on December31, 1973 there 10 Internship Report on NBP. were following 14 Pakistani commercial banks with 3323 offices allover Pakistan and 74 offices in foreign countries: National banks of Pakistan Habib bank limited Habib bank (overseas) limited United bank limited Muslim commercial bank limited Commerce bank limited Standard bank limited Australia bank limited Bank of Bahawalpur limited Premium bank limited Pak Bank limited Sarhad bank limited Lahore commercial limited Punjab provincial co-operative bank limited The Pakistan banking council prepared a scheme for the recognition of banks. The bank (amalgamation) scheme 1974 was notified in April, providing for the amalgamation of the smaller banks with bigger ones and following the five units in there phases: National bank limited Habib bank limited United bank limited Muslim commercial bank limited Allied bank of Pakistan limited The first phase was completed on 30th June. 1974. When the bank Bahawalpur was merged with the National Bank of Pakistan. The premier Bank Limited with Muslim Commercial Bank limited and Sarhad Bank Limited and Pak bank limited and renamed as Allied Bank of Pakistan limited. The second phase was completed on 31st Dec.1974, when the commerce bank limited merged with the United Bank limited. 11 Internship Report on NBP. The third and the final phase were completed on 30 th June 1975 when the standard bank limited was merged with Habib Bank limited. The nationalization was very smooth and gave very positive results. The number of branches, which stood at 3397 on Dec31, 1973, reached on 7661 by end June 1992. The bank deposits, which stood at Rs. 1925 corers at the end 1973, reached the highest, mark about 323 corers. Islamization of Banking Another major development in the history of Pakistan Banking System was the introduced of interest free banking in selected Commercial Banks with effect form Jan1, 1981. This followed the effort to eliminated interest from the operation of Nation investment trust, the House Building Finance Corporation of Pakistan. Certain amendments were made in banking and other laws with the object of ushering in a new system of banking, which would confirm of Sharia. A new law Modaraba Companies Ordinance 1980 was promulgated. Separate interest free counters began to operate in all the nationalized commercial banks free counters began to operate in all the nationalized commercial banks. The state bank provides finance against participation term certificate and also against promissory notes supported by Modaraba certificate. In order to cover interest free transactions certain banking definitions such as creditors, debtor, and advances credits and deposits were revised. Stipulations concerning form of business in which banking companies may engage may also have been modified schemes were introduced to provide interest free loans to formers and deserving students. A private Limited Company named as Bankers Equity limited was incorporated in 1979 to provide financial assistance to the industrial sector primarily on interest free basis. A scheme to extend interest free productive loans to farmers and fisherman has also been introduced. Instead of interest, a system based on mark-up in price, exchange rate differential, and profit and loss sharing accounts were introduced. Different financial schemes introduced in the Islamization process are: 12 Internship Report on NBP. ♦ Musharika Financing. ♦ Hire Purchase Financing. ♦ Modaraba Financing. ♦ Specific Purpose Modaraba. Dis-investments and Deregulation of Banking – 1991 When it was realized that the role of public sector in the economy is over extended and the banking sector has more earning potential in the private sector the process of privatization banking sector restarted in 1991 by the Muslim League Government. Muslim Commercial Bank was Dis-invested in to two phases while ABL was sold to its employees. Since then allot of investment is being made in the banking sector and several new banks were established and still the process is going on. Now only NBP is government bank other than SBP. The performance of this bank will be analyzed and judged in the following chapters. Interest Free Banking A new concept of interest free banking was introduced in 1981 and by now it has been established on sound footing and new trends and techniques are being implemented to make this system result oriented. New products and their systematic consumption are making Pakistani banking comparable to their several modern counterparts anywhere in the developed world. HISTORY OF NBP: The NBP was established vide NBP Ordinance No. XIX of November 9. 1949. British Govt. devalued its currency in September 1949, India devalued its rupees but Pakistan did not. It led to a crisis in trading between the two countries and India refused to lift the Pakistan Jute. To solve this problem i.e. to export jute NBP was established through an Ordinance of GOP. National Bank of Pakistan maintains its position as Pakistan's premier bank determined to set higher standards of achievements. It is the major business partner for the Government of Pakistan with special emphasis on fostering Pakistan's economic growth through aggressive and balanced lending policies, technologically oriented products and 13 Internship Report on NBP. services offered through its large network of branches locally, internationally and representative offices. The Bank in 1950 had one subsidiary ‘The Bank of Bahawalpur’ on December4, 1947 by the former Bahawalpur State. NBP was undertaking Treasury Operations and Managing Currency Chests or Sub Chests at 57 of its offices where the turnover of the business under the head amounted to Rs.2460 million. i) ii) Deposits held by NBP constituted about 3.1% of total deposits of all Growth in Deposits was accompanied by increase in Bank portfolio in advances. Pakistani Banks in 1949, which rose to 38% in 1952. NBP lent out to Textile, Yarn, Iron and Steel and played a pioneer role in support of agriculture and commerce. iii) NBP advances reached Rs.554.4 million by December 1959, which was one third of the total schedule bank credit. MISSION STATEMENT “To make the Bank complete and competitive with all international Standard in performing, quality of, operations, staff, financial strength. And products and services to develop a culture of excellence in every spare of activity of the bank”. GOALS AND OBJECTIVES “An organizational objective is the intended goal that prescribes definite scope and suggests direction to the panning efforts of an organization.” GOALS AND OBJECTIVES 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.” 14 Internship Report on NBP. MANAGEMENT Management is a distinct process consisting of activities of planning, organizing, actuating and controlling performed to determine and accomplish stated objectives with the use of human being and other resources. The management has two types. 1. Centralized. 2. Decentralized. Centralized Management tends to concentrate decision making at the top of the Organization. Decentralized disperses decision-making and authority throughout and further down the organizational hierarchy. NBP have a centralized type of management because the top management takes all the decisions. Net Work of Branches: NBP have wide range of branches inside the country and outside the country. In Pakistan it has 29 regional offices, 1189 Branches and 4 Subsidiaries. In overseas it has 16 overseas branches, 6 other branches. Objectives of NBP National bank of Pakistan is also a commercial organization and its main objective is profit maximization. This is achieved in two ways: 15 Internship Report on NBP. 1. by increasing deposits. 2. By charging interest on loans provided to the private sector and business community. These are explained as: 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. Extension of loans: 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 collators. 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: 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 Functions of NBP Since NBP is a commercial bank, it performs a variety of functions. 16 Internship Report on NBP. Like other commercial banks, NBP is engaged in financing international trade. The functions performed by NBP are: Its other major functions include receiving deposits, advancing loans and discounting of exchange. 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 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. 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. 17 Internship Report on NBP. 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 NBP also acts as an agent correspondent or representative for its customer at home or abroad. iv. a. General utility services: Clearance of utility bills Utilities provided by NBP are as follows: 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. Unmatched Banking Facilities Deposit security, Guaranteed by Government of Pakistan. Highest rates of return to attract the savings. 18 Internship Report on NBP. Lowest rates on exports and other borrowings. Largest contribution towards Government and Semi-Government requirements. Agents of the SBP handling Treasury Functions, receipts of Taxes & other Revenues. Handling of salaries & pensions of federal/provincial/defense personnel. Utility Bills collections. Hajj arrangements. Sale and encashment of prize Bonds. Sale and encashment of Defense Savings and Special Savings Certificates. Safe Deposit Lockers for customers. 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 2004-2004 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 NBP at the forefront of Pak-Afghan trade i. Booth at dry port Peshawar ii. Booth at Pak Afghan border (Torkham) NWFP iii. Booth at Pak Afghan border (Chamman). Baluchistan. iv. Establishing branch at Kabul. Summation We discussed in this chapter the evaluation of banking in Pakistan, banking reforms 1972, Nationalization of banks, History of NBP, Mission Statement of NBP. The next and onward chapter we will discuss the general banking information and departmentalization of NBP. 19 Internship Report on NBP. INFORMATION & DEPARTMENTALIZATION OF NBP INTRODUCTION This chapter presents the services and departmentalization of NBP. Services are outputs of the firm, which are in intangible form. Which are the backbones of any organization to earn profit? NBP offers the following services to the people. DEMAND DRAFTS If you are looking for a safe, speedy and reliable way to transfer money, you can now purchase NBP’s Demand Drafts at very reasonable rates. Any person whether an account holder of the bank or not, can purchase a Demand Draft from a bank branch. SWIFT SYSTEM The SWIFT system (Society for Worldwide Inter bank Financial Telecommunication) has been introduced for speedy services in the area of home remittances. The system has built-in features of computerized test keys, which eliminates the manual application of tests that often cause delay in the payment of home remittances. The SWIFT Center is operational at National Bank of Pakistan with a universal access number NBP-APKKA. All NBP overseas branches and overseas correspondents (over 450) are drawing remittances through SWIFT. 20 Internship Report on NBP. Using the NBP network of branches, you can safely and speedily transfer money for our business and personal needs. LETTERS OF CREDIT NBP is committed to offering its business customers the widest range of options in the area of money transfer. If you are a commercial enterprise then our Letter of Credit service is just what You are looking for. With competitive rates, security, and ease of transaction, NBP Letters of Credit are the best way to do your business transactions. TRAVELER'S CHEQUES Traveler’s cheques are negotiable instruments, and there is no restriction on the period of validity of the cheques. Rupee traveler’s cheque is available at all 700 branches of NBP. This can be encashed in all 400 branches of NBP. There is no limit on purchase of this cheque. It is one of the safest ways for carrying money. PAY ORDER NBP provides another reason to transfer your money using our facilities. NBP pay orders are a secure and easy way to move your money from one place to another. And, as usual, NBP charges for this service are extremely competitive. The charges of NBP are very low all over the Pakistan. It charges Rs 50/- for NBP account holders on issuing one payment order. And charges Rs 100/- for NBP non-account holders on issuing one payment order. It charges Rs 25/- for students on payment of fees of educational institutions. If some one want a duplicate of payment order they charges Rs 100/- for NBP account holders and Rs 150/- for non account holders. AIL TRANSFERS 21 Internship Report on NBP. Move your money safely and quickly using NBP Mail Transfer service. And NBP also offers the most competitive rates in the market. They charges Rs 50/- exchange rate and RS 75/- postage charges on issuing mail transfer. FOREIGN REMITTANCES: To facilitate its customers in the area of Home Remittances, National Bank of Pakistan has taken a number of measures to: • • Increase home remittances through the banking system Meet the SBP directives/instructions for timely and prompt delivery of remittances to the beneficiaries New Features: The existing system of home remittances has been revised/significantly improved and welltrained field functionaries are posted to provide efficient and reliable home remittance services to nonresident Pakistanis at 15 overseas branches of the Bank besides Pakistan International Bank (UK) Ltd., and Bank Al-Jazira, Saudi Arabia. • • • Zero Tariffs: NBP is providing home remittance services without any charges. Strict monitoring of the system is done to ensure the highest possible security. Special courier services are hired for expeditious delivery of home remittances to the beneficiaries. SHORT TERM INVESTMENTS NBP now offers excellent rates of profit on all its short-term investment accounts. Whether you are looking to invest for 3 months or 1 year, NBP’s rates of profit are extremely attractive, along with the security and service only NBP can provide. National Income Daily Account (NIDA) 22 Internship Report on NBP. The scheme was launched in December 1995 to attract corporate customers. It is a current account scheme and is part of the profit and loss system of accounts in operation throughout the country. Salient Features: • • • • Rs 2-million are required to open an account and there is no maximum limit. Profit is paid on half yearly basis on monthly balances. The rates of profit vary according to the slabs of deposit. On Deposits of Rs.2 million to 2,000 million, the rate fluctuates from 1.4 to 1.75 It is a checking account and there is no limit of withdrawals. Rates on NIDA • • • • From Rs 2/- million to Rs 50/- the rate is 1.4%. From Rs50/- million but less than Rs 500/-million, the rate is 1.5%. From Rs 500/- million but below Rs 1000/- the rate is 1.6%. From Rs 1000/- and above the rate is 1.75%. EQUITY INVESTMENTS NBP has accelerated its activities in the stock market to improve its economic base and restore investor confidence. The bank is now regarded as the most active and dominant player in the development of the stock market. NBP is involved in the following: • • Investment into the capital market Introduction of capital market accounts (under process) NBP’s involvement in capital markets is expected to increase its earnings, which would result in better returns offered to account holders 23 Internship Report on NBP. COMMERCIAL FINANCE NBP dedicated team of professionals truly understands the needs of professionals, agriculturists, large and small business and other segments of the economy. They are the customer’s best resource in making NBP’s products and services work for them. TRADE FINANCE OTHER BUSINESS LOANS There are two types of trade finance. AGRICULTURAL FINANCE NBP provides Agricultural Finance to solidify faith, commitment and pride of farmers who produce some of the best agricultural products in the World. Agricultural Finance Services: “I Feed the World” program, a new product, is introduced by NBP with the aim to help farmers maximize the per acre production with minimum of required input. Select farms will be made role models for other farms and farmers to follow, thus helping farmers across Pakistan to increase production. Agricultural Credit: The agricultural financing strategy of NBP is aimed at three main objectives:• • • Providing reliable infrastructure for agricultural customers Help farmers utilize funds efficiently to further develop and achieve better production Provide farmers an integrated package of credit with supplies of essential inputs, technical knowledge, and supervision of farming. Agricultural Credit (Medium Term): • • • Production and development Watercourse improvement Wells 24 Internship Report on NBP. • • • • • Farm power Development loans for tea plantation Fencing Solar energy Equipment for sprinklers Farm Credit: NBP also provides the following subsidized with ranges of 3 months to 1 year on a renewal basis. • • • Operating loans Land improvement loans Equipment loans for purchase of tractors, farm implements or any other equipment Livestock loans for the purchase, care, and feeding of livestock. Production Loans: Production loans are meant for basic inputs of the farm and are short term in nature. Seeds, fertilizers, sprayers, etc are all covered under this scheme. If you require any further information, please do not hesitate to e-mail us. CORPORATE FINANCE Working Capital and Short Term Loans: NBP specializes in providing Project Finance – Export Refinance to exporters – Preshipment and Post-shipment financing to exporters – Running finance – Cash Finance – Small Finance – Discounting & Bills Purchased – Export Bills Purchased / Pre-shipment / Post Shipment Agricultural Production Loans Medium term loans and Capital Expenditure Financing: NBP provides financing for its clients’ capital expenditure and other long-term investment needs. By sharing the risk associated with such long-term investments, NBP expedites clients’ attempt to upgrade and expand their operation thereby making possible the 25 Internship Report on NBP. fulfillment of our clients’ vision. This type of long term financing proves the bank’s belief in its client's capabilities, and its commitment to the country. Loan Structuring and Syndication: National Bank’s leadership in loan syndicating stems from ability to forge strong relationships not only with borrowers but also with bank investors. Because we understand our syndicate partners’ asset criteria, we help borrowers meet substantial financing needs by enabling them to reach the banks most interested in lending to their particular industry, geographic location and structure through syndicated debt offerings. Our syndication capabilities are complemented by our own capital strength and by industry teams, who bring specialized knowledge to the structure of a transaction. Cash Management Services: With National Bank’s Cash Management Services (in process of being set up), the customer’s sales collection will be channeled through vast network of NBP branched spread across the country. This will enable the customer to manage their company’s total financial position right from your desktop computer. They will also be able to take advantage of our outstanding range of payment, ejection, liquidity and investment services. In fact, with NBP, you’ll be provided everything, which takes to manage your cash flow more accurately INTERNATIONAL BANKING National Bank of Pakistan is at the forefront of international banking in Pakistan, which is proven by the fact that NBP has its branches in all of the major financial capitals of the world. Additionally, NBP have recently set up the Financial Institution Wing, which is placed under the Risk Management Group. The role of the Financial Institution Wing is: • To effectively manage NBP’s exposure to foreign and domestic correspondence 26 Internship Report on NBP. • Manage the monetary aspect of NBP’s relationship with the correspondents to support trade, treasury and other key business areas, thereby contributing to the bank’s profitability • Generation of incremental trade-finance business and revenues NBP offers: • • The lowest rates on exports and other international banking products Access to different local commercial banks in international banking Cash and Gold Finance. Cash and Gold finance means that loan is given against the gold. The gold is mortgaged with the bank and loan is taken. It is the area of consumer finance. And borrower can take loan for common use. Advance salary loan: This loan is given to those people who are govt servants. They can get a loan up to the salary of fifteen months. DEPARTMENTALIZATION Dividing an organization into different parts according to the functions is called departmentation. So NBP can be divided into the following main departments. A) DEPARTMENTATION OF NBP CASH DEPARTMENT Cash department performs the following functions Receipt 27 Internship Report on NBP. 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. Payments It is a banker’s primary contract to repay money received for this customer’s account usually by honoring his cheques. 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”. 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”. 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) b) c) d) e) f) g) It should be in writing The unconditional order Drawn on specific banker only Payment on Demand Sum Certain in money Payable to a specific person Signed by the drawer 28 Internship Report on NBP. 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) b) c) The Drawer The Drawee The Payee 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 favour 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. 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 29 Internship Report on NBP. 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 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) b) c) d) e) f) g) Cheques should be in a proper form: Cheque should not be crossed: Cheque should be drawn on the particular bank: Cheque should not mutilated: Funds must be sufficient and available: The Cheque should not be post dated or stale: Cheque should be presented during banking hours: 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. After the World War II, a rapid growth in banking institutions has taken place. The use of cheques in making payments has also widely increased. The collection as settlement of mutual obligations in the form of cheques is now a big task for all the commercial bank. When Cheque is drawn on one bank and the holder (payee) deposits the same in his account at the bank of the drawer, the mutual obligation are settled by the internal bank administration and there arises no inter bank debits from the use of cheques. The total assets and total liabilities of the bank remain unchanged. 30 Internship Report on NBP. In practice, the person receiving a Cheque as rarely a depositor of the cheque at the same bank as the drawer. He deposits the cheque with his bank other than of payer for the collection of the amount. Now the bank in which the cheque has been deposited becomes a creditor of the drawer’s bank. The depositor bank will pay his amount of the cheque by transferring it from cash reserves if there are no offsetting transactions. The banks on which the cheques are drawn become in debt to the bank in which the cheques are deposited. At the same time, the creditors’ banks receive large amounts of cheques drawn on other banks giving claims of payment by them. 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. 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. 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. ADVANCES DEPARTMENT 31 Internship Report on NBP. 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 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 known 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. Name and address of the borrower. a) b) c) d) e) Existing financial position of a borrower at a particular branch. Accounts details of other banks (if any). Security against loan. Exiting financial position of the company. (Balance Sheet & Income Statement). 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. Principles of Advances There are five principles, which must be duly observed while advancing money to the borrowers. a. b. c. d. e. Safety Liquidity Dispersal Remuneration Suitability a. Safety 32 Internship Report on NBP. 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. c. Capacity This is the management 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 33 Internship Report on NBP. 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 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) b) c) d) Interest payable to the money deposited with him. Salaries and fringe benefits payable to the staff members. Overhead expense and depreciation and maintenance of the fixed assets of the bank. An adequate sum to meet possible losses. 34 Internship Report on NBP. e) f) h. Provisions for a reserve fund to meet unforeseen contingencies. Payment of dividends to the shareholders. 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. 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. 35 Internship Report on NBP. 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 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) b) c) d) Demand Draft Telegraphic Transfer Pay Order Mail Transfer 36 Internship Report on NBP. 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) b) Open DD: Cross DD: Where direct payment is made. Where payment is made though account. NBP CHARGES FOR DD I. II. Up to Rs. 50,000/- is Rs 50/- only Over Rs. 50,000/- is 0.1% 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. 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. 37 Internship Report on NBP. 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. 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. DEPOSIT DEPARTMENT It controls the following activities: a) b) c) d) e) f) A/C opening. Issuance of chequebook. Current a/c Saving a/c Cheque cancellation Cash 38 Internship Report on NBP. 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. ii. iii. iv. Avoiding frauds Safe guard against unintended over draft. Negligence. Inquiries about clients. There are certain formalities, which are to be observed for opening an account with a bank. • • • • • 1. 2. 3. Formal Application Introduction Specimen Signature Minimum Initial Deposit Operating the Account Pay-In-Slip Book Pass Book Issuing Cheque Book a) Qualification of Customer 39 Internship Report on NBP. 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) 2) 3) Individual Account Joint Account Accounts of Special Types Partnership account Joint stock company account Accounts of clubs, societies and associations Agents account Trust account Executors and administrators accounts Pak rupee non-resident accounts Foreign currency accounts 40 Internship Report on NBP. Issuing of chequebook: This deptt issue 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 d) Three rupees per cheque should be recovered from a/c holder if not then debit his/her account. 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 proportion of Current Deposits and Fixed Deposits varies from bank to bank, branch to branch, and from time to time. Saving account 41 Internship Report on NBP. 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 sixmonth 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. Cheque Cancellation: This deptt can cancel a cheque on the basis of; a) Post dated cheque b) Stale cheque c) Warn out cheque d) Wrong sign etc 42 Internship Report on NBP. Cash This deptt also deals with cash. Payment of cheques, deposits of cheques etc. FOREIGN EXCHANGE/DEPARTMENT: This deptt mainly deals with the foreign business. The main functions of this deptt are: a) L/C dealing. b) Foreign currency accounts dealing. c) Foreign Remittance dealing. L/C dealing NBP is committed to offering its business customers the widest range of options in the area of money transfer. If you are a commercial enterprise then our Letter of Credit service is just what you are looking for. With competitive rates, security, and ease of transaction, NBP Letters of Credit are the best way to do your business transactions. Foreign currency account dealing: This deptt deals with the foreign currency accounts which mainly include dollar account, euro account etc. Foreign Remittance dealing This is very important function of this deptt. 43 Internship Report on NBP. PRODUCT LINES There are three types of product lines, which are as under:a) b) c) Retail Products Advances Deposits (a) RETAIL PRODUCTS PRODUCT LINES RETAIL PRODUCTS 44 Internship Report on NBP. Unprecedented Safety - Unprecedented Return Premium Aamdani Unprecedented Safety - Unprecedented Return Premium Saver President's Rozgar Scheme - Easy financing for self employment Karobar Affordable, Flexible & Convenient home financing for all Saibaan Take upto 20 Advance Salaries - Affordable Installations from 1 - 60 months Advance Salary One Card does it all - ATM plus Debit Card in one Cash Card Invest with Confidence - Marginal Finance Facility Investor Advantage Meet your need for ready cash against your idle gold jewelry with no minimum limits Cash n Gold 45 Internship Report on NBP. NBP KISAN Taqat Kisan Taqat NBP's affordable agricultural program offers you a wide range of financing Kisan Dost Knitting Links – AASAN Banking Online Facility (b) ADVANCES Small finance/working capital for small enterprises. Cash Finance/working capital for medium enterprises Demand finance/Term Finance Running Finance for personal use against DSCs/SSCs Syndicate Finance/Consortium Financing (c) DEPOSITS Profit & Loss Saving Account Profit and Loss Term Deposits Account NBP Plus Term Deposits Account NBP Premium Saver Account NBP Premium Amadni Certificate RECOGNITION & AWARDS TO NBP: On the basis of performance the NBP get the following award Bank of the year awards for the years 2007 & 2002 by the world renowned magazine the Banker. 46 Internship Report on NBP. One of the best bank in emerging markets by global finance. Bank with the highest return on capital in the Asia and No. 08 in the world 2003. Ranked among top 100 banks of Asia –Euro money. Kisan time award 2005- 2006. The strongest bank in Pakistan-Asian Banker. Best bank – Pakistan 2005-Global Finance. Best emerging market bank from Pakistan for the year 2006 – Global finance. “The Banker” Magazine in its July 2007 Issue announced that NBP has the best return on capital of any bank in Asia, In July 2007 NBP’s standalone rating were upgraded to AAA/A-one plus from AA+/A-1+by JCR-VIS credit Rating Agency. ORGANIZATION HIERARCHY OF NBP President Board of Directors Senior Executive Vice President Executive Vice President Senior Vice President Vice President 47 Internship Report on NBP. Assistant Vice President Officer Grade I, II, III Clerical Staff Non Clerical Staff Human Resource Management NBP an organization that provides opportunities for its staff to have a challenging and rewarding long-term career. To this end the Human Resource Group (HRG) encourages and motivates its employees to excel in the responsibility that they have in the organization .It believes that creativity and innovation comes from talent, knowledge and experience and it is NBP’s endeavor to provide and maintain an environment which not only nourishes these strengths but also provides opportunities for the staff to have a career which has multidimensional growth opportunities. In doing so, HRG has been restructuring and redesigning the overall structure of the organization, which includes rationalization, cutting down the decision layers, improvement in staff training and hiring professionals and MBAs at entry-level management. 48 Internship Report on NBP. The overall direction of HRG has been towards nurturing the strengths of the human capital to its maximum with a defining principal to help create a progressive environment and sustain a thorough commitment of our staff towards focused customer service. HRG therefore recognizes the need to proactively invest in staff training and develop courses on a regular basis. Under the umbrella of its Management and Organization Development Division (MODD) its Management Development Institute (MDI) with its three fully equipped chapters at Karachi, Lahore & Islamabad regularly conducts and outsource technical and personal development courses for its all level of staff enabling them to meet the challenges of the ever-changing business requirements and customer needs. During 2008, 529 courses, workshops, skill development clinics and seminars in the disciplines of Service & Attitude, Market Research & Selling, Management & Communication, Credit & Finance, I.T. & e-Banking, Treasury & Trade Finance, Global/ Domestic Banking Operations and on other diverse subjects were conducted by In / Ex-House professionally skilled, qualified and certified faculty and industry experts for 10233 people of senior / middle line management & staff carving 1334 days training days. There is no budget limit for Training and Education at National Bank. HR Group aims to maintain and further improve the service-oriented culture and to make employment not only satisfying but also enjoyable. 49 Internship Report on NBP. President Commercial & Retail Banking Group Chief ORGANIZATIONAL STRUCTURE Corporate & Regional Business Chief Investment Regional Marketing Manages Banking Group Chief Operations Group Chief Regional Compliance Chief Risk Management Group Chief Regional Operations Chief Branch Manager Corporate Head North & Corporate Head South Operations Departments of The Region Branch Operations Manager Corporate Regional Risk Management Chief Branches Credit Department of The Region Branch Credit Officers 50 Internship Report on NBP. Organizational structure of the Human Resource Management (HRM) SEVP / Group Chief, HRM & AG, NBP Head Office Karachi SVP PSO to Regional HR Chief / Regional HR Chief, Regional Office, AJK No.2 in HRM Department Incharg e Discipli nary Cases Incharge Staff Benefit Incharge Staff Loan Incharge Accounts of R.O. Incharge Litigation & Ind. Relations Incharg e Inward / 51 Outwar d Mail Internship Report on NBP. HRM PROCESS IN THE ORGANIZATION HUMAN RESOURCE PLANNING AND FORECASTING The processes by which management ensures that it has the right personnel, who are capable of completing those tasks that help the organization, reach its objectives. Another part of the current assessment is the job analysis. Human resource planning can be condensed into three steps. 1. Assessing current human resources. 2. Assessing future human resource needs. 3. Developing a program to meet future. HRP PROCESS Major steps in the Human resource planning process are to ascertain:- 52 Internship Report on NBP. 1. Goals and plans of organization 2. Current human resources situation 3. Human resource forecast 4. Implementation programs 5. Audit and adjustment At National bank of Pakistan this process of planning is done at Head Office Karachi and Regional Offices implement all these strategies which are determined during the planning at Head Office. FORECASTING HR REQUIREMENTS Forecasting of HR requirements, at NBP is made on the following parameters: Staffing Level Number of employees needed to meet the strategic plans of the bank. Staffing Mix There are following categories of working staff in NBP as mentioned below:o o o o Executives Officers Clerical staff Non-clerical staff Organization and Job Design 53 Internship Report on NBP. Proposed projects for launching as per the future requirements. Available / projected sources As per following method e.g.:Projected employees Available employees 125 100 _____ Net requirements __25_ Action Plans Staffing authorizations The Regional office is authorized to hire employees by outsourced company’s e.g. Security guards, Janitorial services, Sales & Marketing staff. Recruitment All the new recruitments on permanent basis is made according to the laid down procedure and policies at Head Office Level. So, all the major decisions are taken by the Senior Executive management of the bank regarding recruitment of permanent staff. However, recommendations / suggestions are taken by the Head Office from Regional Offices time to time. Promotion & Transfer 54 Internship Report on NBP. Normally after every 03 years Promotion / Move-over is given to the employees on the basis of their ACRs (Annual Confidential Reports), performance reports, recommendations, seniority and so on Organizational changes As per the requirement of the bank, organizational changes are also taken whenever bank management feels the changes necessary for the bank. METHODS TO FORECAST HR NEEDS At NBP, HR forecasting is being done according to the following model:Forecasting Model Current Strength Losses / Withdrawal Back-up In Future Requirements Surplus / Shortage Plans of NBP may include the following course of actions:Inauguration of new branches. No. of pensioners. 55 Internship Report on NBP. - No. of utility bills No. of A/c holders New products to go launching in future EMPLOYEE RECRUITMENT AND SELECTION v a c a n c y p u b l i s h e d i n nA ep wp sl i p a tpi oe nr ss r e c e i v e d a n c E lig ib le c a n d id a t e s a r e c a lle d f o r w r it t e G r o u p D i s c u s s i o n F i n a l I n d i v i d u a l I56 t e r v i e n Internship Report on NBP. Employee Recruitment & Selection Process The start of the recruitment process gives the business time to reassess the nature of people’s jobs and consider future requirements. The recruitment and selection process will be: 1. Vacancy arises 2. Job analysis 3. Job description 4. Job specification 5. Job advertised in appropriate media 6. Application forms and short listing 57 Internship Report on NBP. 7. Interviews and selection 8. Vacancy filled Steps Job Analysis Job analysis is the foundation for forecasting the need for human resources. Supply Analysis Supply Analysis focuses on identifying organizational competencies, analyzing staff demographics, and identifying employment trends. Demand Analysis Demand Analysis deals with measures of future activities and workloads, and describing the competency set needed by the workforce of the future. Gap Analysis Gap analysis is the process of comparing information from the supply analysis and demand analysis to identify the differences, the gaps, between the current organizational competencies and the competency set needed in the future workforce. Action Plan Action Plan is the process of developing strategies for closing gaps in competencies and reducing surplus competencies. 58 Internship Report on NBP. HR Planning HRP is becoming more important in bank as a result of globalization, new technologies, organizational restructuring and workforce diversity. “The right number of people with the right skills, experiences, and competencies in the right jobs at the right time”. HR Process: a. Determine the organizational mission: It states NBP’s overall purpose and basic business scope and operations it provides information. b. Scan the organization environment: This is known as SWOT analysis through this process NBP’s HR department identify opportunity, threat, strength and weakness that can be faced by the NBP. c. Set strategic goals: Set specific long term and short term goals and objectives. These goals are specific, challenging and measureable. d. Formulate a strategic plan: Course of action is designed to meet strategic goals and departmental goals are selected at this step. 59 Internship Report on NBP. These are steps of HRP process. Determining the objectives. Defining skills required to meet objectives Determine additional human resources requirements in light of current HR. Develop action to meet the anticipated HR needs. Recruitment Recruitment starts with the objectives of bank and the specification of HR requirements. Initial Screening Initial screening is the basic step of employee recruitment. Here the separation down of the qualified and un-qualified candidates. Selection Selection of New employees by the bank through written tests, & interview process. Orientation Orientation is particularly important for familiarization visual, presentation, briefing about the NBP policy, procedures and benefits. 60 Internship Report on NBP. Placement After completion of recruitment process, the employees are posted at needy positions / branches. Training According to job descriptions and specifications training programmers are arranged in NBP. 61 Internship Report on NBP. Structure of Pres id en t Department HRM D r. M irza A b rar Baig SE V P/G ro u p Ch ief Secretary In s titu tio nal D is cip lin e W in g L egal A ffair W in g OD & T rain in g W in g Sp o rts W in g In d u s trial Relatio n s D iv is io n Pers o n nel A d m in is tration W in g Recru itm en t and Co m p en sation W in g Staff L o an s an d W elfare W in g H R Po licies an d Pro jects w in g Regio n al H R ch ief at regio n al O ffices 62 Internship Report on NBP. Training and Development: Training is the process of teaching new employees the basic skills they need to perform their jobs and development is result of that training. For training and developing NBP follows five steps process of training and development Needs analysis: Identify job performance skills needed, assess prospective trainee’s skills, and develop objectives. Instructional design: Produce the training program content, including workbooks, exercises, and activities. Validation: Presenting (trying out) the training to a small representative audience. Implement the program: Actually training the targeted employee group. Evaluation: Assesses the program’s successes or failures. 63 Internship Report on NBP. • Task analysis: In this area a detailed study of a job to identify the specific skills required, especially for new employees are analyzed. • Performance analysis: After analyze the main tasks required in performing jobs it is verified that there is a performance deficiency and determining whether that deficiency should be corrected through training or through some other means (such as transferring the employee). If there is found some deficiency in performing job then training is highly recommended to recover deficiencies. Training methods used by NBP: • • • • • On-the-job Training Off-the-job Training Apprenticeship Training Informal learning Effective lectures On-the-job Training: Having a person learn a job by actually doing the job is OJT. Methods of OJT are – Coaching or understudy – Job rotation – Special assignments 64 Internship Report on NBP. – Action Learning Coaching or understudy: It is the OJT method in which employee is coached and taught by profession that how to do the job in order to meet NBP’s goals and objectives. At managerial level the trainee works directly with a senior manager or with the person he or she is to replace; the latter is responsible for the trainee’s coaching. It is done at all levels of job. New employees are trained through coaching and old employees are also trained through this method like when some new innovation is introduced old employees are trained in order to handle that new innovation. In 2008 all managers have been trained to operate Misys Software (Automation of service provision and book management). Job Rotation: Moving a trainee from department to department to broaden his or her experience and identify strong and weak points. Job rotation is usually done at managerial level. NBP’s Manager Associate (MA) program is used for job rotation training. Special Assignments: Special assignments are also given to employees for special training. These assignments are actually related to tasks within the branch by achieving those tasks assigned by trainer, employee get training. 65 Internship Report on NBP. Action Learning: Management trainees are allowed to work full-time analyzing and solving problems in other departments. This OJT method is just for managerial level employees. Off-the-job Training: It is the method which is opposite to the OJT. In this method employee does not get training at his/her work place. This method of training is only for managerial level employees. Offthe-job training methods are • • Case study method Outside seminars Case study methods: Special case studies are given to employees which contains some dilemma about banking sector. By solving those case study problems employee gets training to take bold and effective decision in crucial situations. Outside seminars: NBP encourages its employees to participate in the seminars arranged by banking sectors not just in the Pakistan but also beyond the boarders. By participating in outside seminars employee gets authentic knowledge about the new horizons of banking sector which is useful for HBL and makes it leading bank in Pakistan Training need assessment: 66 Internship Report on NBP. In training need assessment following sources help HR department. New technology Customer complains Interview with managers Customer satisfaction survey Employee complaint Company records Observation etc Self assessments Month Training for Selected Candidates: 1 month at IBP( Institute of Bankers Pakistan) 1.5 month at Staff College The staff college obtains low-ranking bank officers for more preparation in banking sector with the course duration from six to nine weeks having 25 students in each course. The bank also employs officers to attend banking tutorial both in Pakistan and out of the country and it adds immense significance to the flow of thoughts, information and facts which can be helpfully add to from these get-togethers. National Bank of Pakistan has two essential training methods: 67 Internship Report on NBP. 1. It is associated with the training and development of mid term plans, concerning new customers & middle level staff. 2. Training & development for long-standing plans, concerning the job development of senior level staff. National Bank of Pakistan implements off-job and on-job policies to educate middle and higher level its workers. National Bank of Pakistan training & development school counsels Job rotation to make sure and make easy the creating of all rounder. National Bank of Pakistan has faith in pre-post training test for on hand staff and post training test for new human resources. Apprenticeship Training: A structured process by which employees become skilled workers through a combination of classroom instruction and on-the-job training,It is actually combination of OJT and lectures delivered to employees. It may be for both levels of managerial and fresh employee. In this method employee is first given the lecture about his/her job and after that implementation of lecture in practical field is observed. Informal Learning: The majority of what employees learn on the job they learn through informal means of performing their jobs on a daily basis. 68 Internship Report on NBP. Effective Lectures: Lectures about jobs are also delivered. These lectures are delivered to new employees as well as senior level employees and managerial level too. In these lectures employees are prepared for facing new challenges in the banking sectors and also told them how to achieve those challenges. Succession Planning: It is actually management developing program. Management development is attempt to improve current or future management performance by imparting knowledge, changing attitudes, or increasing skills. In order to achieve management development, succession planning is done. Succession planning is a process through which senior-level openings are planned for and eventually filled. The main purposes of succession planning are Anticipate management needs, Review firm’s management skills inventory, Create replacement charts, Begin management development. NBP’s Management Trainee (MT) program deals with succession planning. MT is defined in the following section of Training and developing methods. Performance Appraisal Annual Performance Appraisal is made after 31st Dec of every year. It’s not kept a confidential. All points discussed with the Appraisee by the Appraiser. Following are the Parts & Sections contained in National Bank of Pakistan in Annual Performance Appraisal. 69 Internship Report on NBP. Section-I Name (To be filled by the concerned Branch / Region) Father’s Name Designation Grade Basic Pay Regular / Contractual Current Posting Reporting to Date of Joining NBP Date of Last Promotion Academic Qualification Professional Qualifications Status of Disciplinary actions, if any Section-II (To be filled by the Appraisee) Mention most important achievements during the year Section-III (To be filled by the Appraisee) What Training would you like to undertake to benefit you Part-B Section-I Performance, Achievement against job objectives (Already agreed) 70 Internship Report on NBP. Rate the performance against objectives: (1=poor, 2=Satisfactory3=Good4=Very Good 5=Excellent) Five Objectives 1. 2. 3. 4. 5. Deposit Advances Profit Reduction of Bad debts Reduction of Complaints Score (1 to 5) Total score / No. of objectives x 0.7 (Score of Section-I) Section-II Behavioral Skills 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Job Knowledge Communication Skills Attitude, Behaviour & Response to Controlling Offices Initiative Attendance & Punctuality Commitment to Job & Organization Team Work Analytical Ability Development of subordinates Personal appearance and grooming 71 Internship Report on NBP. Total score / No. of objectives x 0.3 (Score of Section-II) Grand Total:_________________ Section-III Signature of Appraisee & Date (with comments, if any) Signature of Appraiser & Date (with comments, if any) (Immediate Supervisor) Countersigned by the Appraiser’s Supervisor & Date Performance Management “Performance hopes/expectations”. Here are eight (8) situations to think when setting Performance standards: Standards of performance are: 1. Achievable 2. Let for review and modify 3. understood by the worker when performing job 4. Based on the job and not on the individual doing the job 5. As measurable and specific as possible 6. Should be time-oriented 7. Always in writing management is the setting performance standards and 72 Internship Report on NBP. 8. Settled by both the supervisor and employee Human Resource Development section, all the time, takes chance to assess the performance of human resources. The appraisal system also helps the management of the NBP to help the managers with placement, pay, and other HR decisions. The HRD section of the NBP carries out the appraisal for the following uses: It allows the employee, the Manager to take necessary about the improvement of the performance. The system also assists in promotion, increment in salary of the deserving employees after their assessment and also gets ready for the next person for the succession plan. Sources of Candidates Basically two type of source of candidates, internal and external. Internal are within the national bank and external that are out side the national bank. a. Internal sources: In this type of source vacancies in upper level management can be filled either by hiring people from out side the national bank or by promoting lower level managers. These are major forms of the internal recruiting in NBP. o Promotion from within. o Job posting. 73 Internship Report on NBP. o Contacts and referrals. b. External sources: There are some employee’s needs that a firm must fill through external recruitment. Among them are, filling entry-level jobs, acquiring skills not possessed by current employees and obtaining employees with different backgrounds to provide new ideas. These are external source. High schools and vocational schools Community colleges Colleges and universities Competitors and other firms Unemployed Older individuals Military personnel Self-employed workers 74 Internship Report on NBP. Compensation: The salaries, rewards, bonuses, and incentives on the basis of job and performances are compensations. Compensation at NBP: NBP’s focus is on attracting, developing and retaining the best in the business by offering market driven compensation and benefits packages. NBP’s compensation and benefits strategy combines the need to maintain a high performance culture along with market competitiveness. Annual benchmarking exercises are conducted to stay abreast with industry standards. According to performance each employ gets benefits and compensation. Time does not matter only performance matters at NBP. Employees are paid in two forms • Direct payments 75 Internship Report on NBP. • Indirect payments Direct financial payments: Pay in the form of wages, salaries, incentives, commissions, and bonuses. Indirect financial payments: This mode of payment is not related to cash payments like medical, insurance, residence, car, car fuel etc. Employee relation: Employee Relations involves the body of work concerned with maintaining employeremployee relationships that contribute to satisfactory productivity, motivation, and morale. Essentially, Employee Relations is concerned with preventing and resolving problems involving individuals which arise out of or affect work situations. The environment at NBP is cultural, ethical and challenging that that encourages creativity and commitment among employees. NBP fosters a work environment where employees can realize their potential whether locally or in the international arena. Thus, NBP enables its employees to achieve their professional goals while keeping in synch with the bank’s overall objectives. NBP believes in two skills for employee relation Interpersonal communication Conflict management Interpersonal communication skill: 76 Internship Report on NBP. At NBP the first skill for managers to understand and practice is interpersonal communications, because it is the foundation for all actions in the workplace and it allows the manager an opportunity to build relationships with the overall workgroup without alienating anyone in the work environment. Working with diverse groups of people requires a tremendous amount of interaction. If these interactions are positive, they can help create the right workplace climate, attitudes, beliefs and behaviors. Keeping in view these all points interpersonal NBP emphasizes on strong interpersonal communication skill for effective accomplishment of goals. Conflict management: In NBP the second skill for managers to leverage, is conflict management. It is actually conflict resolving approach. Learning to leverage this skill helps in resolving employee relations issues quickly and effectively, and creates greater satisfaction with the workgroup. In this skill manager let his/her subordinates to speak and say whatever they feel during working with manager. Manager cares employees emotions and feelings. 77 Internship Report on NBP. ORGANIZATIONAL CAREER MANAGEMENT o Employee Job Changes Job Changes within the organization o Promotion o Transfer o Demotion Separations o Layoff o Termination o Resignation 78 Internship Report on NBP. o Retirement Promotions Transfers / Relocations Layoffs Retirements Resignations Demotions There are four broad types of internal moves:Up, down, over & out. These moves correspond to Promotions, Demotions, Transfers and layoffs. Promotion Promoted employees feel greater responsibility and authority in return for higher pay, benefits and privileges. Promoted individuals tend to increase their commitment, more output, zeal and zest in his work / assignments:- Transfers 79 Internship Report on NBP. Transfer / Relocation means increased prestige and income. However, costs of moving, up setting routines are the main hurdles. In NBP, transfer of the employees continuously done within a Region according the policy and when bank feels. However, status of the employees remain same. Job rotation also done within the branch. Usually the staff is rotated after every three years. Demotions Employee demotions means to cut in pay, status, privilege or opportunity i.e increments, grade etc. Disciplinary action are executed only when someone shows inability to handle the requirements of a higher level job / health suffers problems or changing interests. Separations Lay off Involuntary layoff is never pleasant. Layoffs are intended to reduce costs, some costs may in fact increase i.e. recruiting, training and retaining pension, severance pay etc. In NBP a good number of employees have been layed off in 1998 & 2002, but their separation was under Golden Hand Shake Schemes and very handsome amount was paid to employees, who opted to separate from service under Golden Hand Shake Scheme. Retirement Procedure: 80 Internship Report on NBP. 1) Human Resource Management Department notes down the employee CC line manager direct leaving date. 2) Line manager organizes casual gathering with member of staff to talk about the procedure and verifies right to ask for continuous working. 3) Line manager writes to member of staff verifying meeting CC to Human Resource Department 4) Employee decides to give up work in the form of retirement at the age of 65. 5) Normal retirement process applies. Labor Management Relations There is a harmony among labor and management relations in National Bank of Pakistan. Both cooperate with one another. Human Resource Management Department takes care of the opinions of union. NBP always shows an affectionate and supportive mind-set towards fresh employees and greets these employees. Society for labor welfare is structured inside National Bank of Pakistan, which operates with the aid of National Bank of Pakistan. A good affiliation is formed and it provides; 1) Arrange variety shows for the employee’s families 2) educational funds or benefits for the employees 81 Internship Report on NBP. 3) Instant aid to any accident. 4) incentives to on the job deceased PERFORMANCE MANAGEMENT Setting performance standards & expectations Standards of performance provide the basis against which the individual can be effectively appraised. There are eight conditions to consider when setting standards of performance: 1. Standards of performance are based on the job and not on the person doing the job. 2. Standards of performance are achievable. 3. Standards of performance are understood by the employee performing the job. 4. Standards of performance are agreed upon by both the employee and supervisor. 82 Internship Report on NBP. 5. Standards of performance are as specific and measurable as possible. 6. Standards of performance should be time-oriented. 7. Standards of performance are always in writing. 8. Standards of performance allow for revision and change. The system by which organizations evaluate individual job performance. More over it is about the employee performance and the accountability. As the world is now global village and your competitor is watching you, so the organizations need high performance. So the output of the organization depends upon the feedback provided to the employee timely. Especially the newcomer to the organization needs to understand their jobs and their work setting. The longer-service employees also want positive feedback on the good things they do. So the NBP is an organization where the management feels about the employees. The employees feel sense of belongingness in return. HRD section always takes this opportunity to evaluate the performance of the employees. The appraisal system also helps the management of the NBP to help the managers with placement, pay, and other HR decisions. The HRD section of the NBP carries out the appraisal for the following uses; It allows the employee, the Manager to take necessary about the improvement of the performance. The system also helps in promotion and pays increase of the deserving employees after their evaluation and also prepares the next person for the succession plan. 83 Internship Report on NBP. 1. How performance reports are written PERFORMANCE REPORT—WRITTEN Employee: _______________ Date Hired: _______________ Job Title: _________________ Salary: __________ Date of Review: ___________ 1. PERFORMANCE EVALUATION—INTERACTION WITH CO-WORKERS ___________________________ _________________________________ ___________________________ _________________________________ 2. PERFORMANCE EVALUATION—PROFESSIONAL ATTRIBUTES __________________________ _________________________________ __________________________ _________________________________ 3. PERFORMANCE EVALUATION—QUALITY OF WORK _________________________ _________________________________ ________________________ _________________________________ 84 Internship Report on NBP. 4. PERFORMANCE EVALUATION—EMPLOYEE OBLIGATIONS ________________________ _________________________________ _________________________ _________________________________ 5. PERFORMANCE EVALUATION—ADDITIONAL COMMENTS ________________________ _________________________________ _________________________ _________________________________ Date of Next Evaluation: _____________________________________________ Employee Interviewer Result Oriented Rating Method Main process is goal setting to establish objectives for the organization as a whole, for each department for each manager within each branch and for each employee. Three things involved to establish objectives:1. To agree on the major objectives i.e Deposit, Advances, Profit etc for given period of time 01 year in NBP. 2. 3. Develop plans for how & when the objectives will be accomplished. Agree on the yardsticks for determining whether the objectives have been met. Progress reviews are held regularly in the bank until the end of the period for which the objectives were established. 85 Internship Report on NBP. MBO (Management by Objectives) is a complete system of planning and control in the bank. It promotes success of each employee, employee’s Manager, the department and the bank. Graphic Rating Scale Level of Performance 1 Unsatisfactory 2 Conditional Points 3 Satisfactory 4 Above Satisfactory 5 Outstanding 86 Rating Factors Attendance & Punctuality Job Knowledge Attitude, Behaviour & Response To controlling offices / branches Personal Appearance & grooming Quality of work Commitment to job & Organization / bank / branch Communication skills Internship Report on NBP. Performance Evaluation 1. 2. 3. 4. 5. 6. Immediate Supervisor Peers Subordinates Self Appraisal Customers served Computers In NBP performance of employees is assessed by their immediate supervisors. Staff Motivation to improve performance in NBP 1. 2. 3. 4. Communicate Frequently Encourage subordinates to learn about modern technologies Encourage participation Judge performance, Not Personality 87 Internship Report on NBP. 5. 6. 7. 8. 9. Avoid destructive criticism Set mutually agreeable goals Be specific & be an active listener Continue to communicate and Assess progress toward goal regularly Make organizational rewards contingent on performance Performance Management requires willingness and a commitment to focus on improving performance at the level of the individual every day. Broad Process of Performance Management 1. Define Performance Ensure that an employee individually and the department as a whole know what is expected to them. i. Goal setting is a vital role in improving performance and success. So, improvement and productivity increase by using goal setting. ii. iii. To measure the extent to which goals have been accomplished. Regular assessment of progress toward goals focuses the attention and efforts of an employee. 2. Facilitate Performance Managers who are committed to managing for maximum performance recognize that one their major responsibilities is to eliminate roadblocks to successful performance. 88 Internship Report on NBP. Outdated or poorly maintained equipment, delays in receiving supplies, inefficient design of work spaces and ineffective work methods are the obstacles that inhibit maximum performance. Once roadblocks to successful performance have been eliminated the next step is to provide adequate resources i.e capital resources, material resources or human resources. ‘Its immoral not to give people tools to meet tough goals.’ Final aspect of performance facilitation is the careful selection of employees. Therefore, top management at Head Office, Karachi involved in selecting new employees. 3. Encourage Performance To encourage performance, especially repeated good performance managers must provide a sufficient number of rewards that employees really value in a timely and fair manner, Pay, benefits, free time, special privilege etc. 89 Internship Report on NBP. SWOT ANALYSIS INTRODUCTION To carryout the SWOT and Financial Analysis of NBP through the help of calculating necessary ratios in this section. 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 environment opportunities and threats. “SWOT analysis is a situational 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 it threats. 3. Avoiding or correcting its weakness. SWOT analysis is one of the most important steps in formulating strategy using the organization mission as a context; managers assess internal strengths distinctive competencies and weakness and external opportunities and threats. The goal is to then 90 Internship Report on NBP. develop good strategies and exploit opportunities and strengths neutralize threats and avoid weaknesses. STRENGTHS 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 as the privilege for the bank. 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. MORE DEPOSITS THAN OTHER BANKS NBP has the relative competence in having more deposits than the 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. EMPLOYEE BENEFITS The employers at NBP are offered 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. BROAD NETWORK The bank has another competency i.e. it has broad-basses network of branches throughout the country also more than one branch in high productive cities. The customers are provided services at their nearest possible place to confirm customer satisfied. 91 Internship Report on NBP. 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. 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. HEALTHY ENVIRONMENT The working condition in the NBP branch here is very conductive and favorable for better output. The informal environment affects the performance of the employees in a positive way. 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. WEAKNESSES LACK OF MARKETING EFFORT: The bank does not promote its corporate image, services, etc on a competitive way. Hence lacks far behind in marketing effort .A need for aggressive marketing in there in the era marketing in now becoming a part of every organization. 92 Internship Report on NBP. 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 sometime have to provide loan under the pressure, which leads to uneven and adjusted feeling in the bank employees.4.3.3 FAVORITISM The promotions and bonuses etc in the bank are often Powered by senior’s favoritism or depend upon their wills and decision. This adds to the negative factors, which denominate the employees thus resulting in affecting their performance negatively. LACK OF FINANCIAL 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. 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. 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. LACK OF MODERN EQUIPMENT 93 Internship Report on NBP. 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 UNEVEN WORK DISTIBUTION. 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 server as a demotivation factor for employees performing above average work. OPPORTUNITIES 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 better 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. 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. THREATS 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. POLITICAL PRESSURE BY ELECTED GOVERNMENT 94 Internship Report on NBP. 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. 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. 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. COMPETITIVE ANALYSIS Askari Bank Habib Bank Limited United Bank Limited First Woman Bank Muslim Commercial Bank PICIC Commercial Bank Bank of Punjab 95 Internship Report on NBP. Dubai Islamic Bank National Savings Allied Bank Limited Saudi Pak Commercial Bank Ltd Union Bank Limited Faysal Bank Standard Charter Prime Bank Bank Al- Falah My bank Silk Bank Sonehri Bank Metropolitan Bank Arif Habib Bank The Bank of Khaibar Bolan Bank Limited Platinum Commercial Bank Ltd Mashreq Bank 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. 96 Internship Report on NBP. 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 series. The NBP offering very low charges an demand draft, telegraphy transfer, mail transfer and give other additional services to the customers and to the Nation. Because NBP is a “Nation’s Bank”. Potential entry of new competitors: Whenever new firms ca easily enters a particular industry, the competition increases. The gout restriction, tariffs, patents etc can stop new firm to enter into the business as per Banking industry is concerned this market is already very situated in Pakistan and there are 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. Potential Development of substitute products: This is the third factor affecting the competitions. There may be some other product can be substitute the product of that industry. For example banks offering sawing 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 sawing PLS accounts are more then current 97 Internship Report on NBP. accounts. The next examples will ATM which substitute presenting cheques at counter and encash it. The NBP is lacking in this field. It must improve in this field to compete the competitors. Bargaining Power of Suppliers: The bargaining power of supplier 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. B/C at offers good quality services to customers. They charge low charges on remittances. So that’s it is a competition to other banks. 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 customers in Pakistan for banks are very high. Banks offering variety of products and services to their customers. NBP have a large number of customs. Now it must offer good services and products to their customers to attract them to come to NBP. Summation 98 Internship Report on NBP. The summary of is SWOT Analysis of NBP. To know how NBP can compete well and how to maintain its position in the market as a best services organization. FINDING AND OFFER CONCLUSION 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. Function analysis. Administrative analysis. Personal management’s analysis. 99 Internship Report on NBP. PROBLEMS AT THE BRANCH Customer Satisfaction In NBP customer dealing is will, but during rush hour 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. 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. Unequal distribution of work Work is not equally distributed. On one hand some employee have to work all 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. Marketing visits A useful mode of contact is through personal marketing visits. Such visits are important in informing and perusing the existing and potential customers about the products and creating a sense of belongingness with them. FUNCTIONAL ANALYSIS 100 Internship Report on NBP. Formal Organization Formal organization includes the activities of two or more person, which are cautiously determined groups and coordinated towards a given objective. It provides base when people are able to communicate with other, when they have common purpose and they are willing to work. In NBP, we find a formal organization. Bernard referred to an organization as a formal when the activities of two or more persons are coordinated towards a given objective. The formal organization comes into being when people are able to communicate with one another or willing to act and share a purpose. 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 of his problem faced by him, because first he has to talk to his immediate superior and follow a proper channel of communication. 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. 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 ledge. The deposit clerk must be careful while passing 101 Internship Report on NBP. any cheque. In this regard another shortfall is in giving the information about the balance on telephone. Excessive paper work It is notified that due to the lengthy procedure of paper work the bank employee 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 procedure and excessive paper work in the bank is the lack of computerized technology. 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 account irrespective to its deposit. The main reason behind it is that bank does not provide personalize service to all the account holders and does not improve its quality and services Delegation of authority Manager has very limited authority; he has to take the approval from his management authority i-e. In case of advance 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 having to wait for hours. This discourages both customer and officers because they have to suffer a lot ADMINISTRATIVE ANALYSIS 102 Internship Report on NBP. 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 graduate and do not have proper background about their job. 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 responsibility are getting the same salary and facilities. This creates dissatisfaction among employees. 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. 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 Balakot Branch, Balakot the newly recruited employee training was not imparted, they all learned things on the job. 103 Internship Report on NBP. 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. Poor job rotation. There is absence of job rotation in NBP Balakot Branch, Balakot. A person placed in onedepartment 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 recruit should be rated in all department 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. 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. 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. 104 Internship Report on NBP. PERSONAL MANAGEMENT ANALYSIS 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. 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. Recruitment policy 105 Internship Report on NBP. 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. Promotions Promotions 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. 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. 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 106 Internship Report on NBP. 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. 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 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, District Court Branch, Multan. That is mainly concern with the problems, needs and requirements, rules and regulations at the branch. The next chapter is about the recommendation and suggestion of NPB. 107 Internship Report on NBP. RECOMMENDATIONS & SUGGESTIONS 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. 108 Internship Report on NBP. 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: 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. Delegation of authority Employees of the bank should be given a task and authority and they should be asked for their responsibility. 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. 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 109 Internship Report on NBP. 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. 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. 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 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. Utility Bill Charges Bank gets Rs. 2 to 3 to processes a utility bill, and it is very tire, 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. 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. 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 110 Internship Report on NBP. mores secure and to eliminate the misuse of it, the management is required to keep proper security against the card. Installing Validator and ATM Validator machine is used to count the currency notes and its installation will help to eliminate to counting errors and will save time. 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. 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. 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. Cash Financing In this mode of financing the amount of credit not utilized by the borrower is remained taxfree. 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. Decreasing Administrative Expenses Bank should 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 111 Internship Report on NBP. 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. 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. 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 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. 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. 112 Internship Report on NBP. 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. Favoritism and nepotism In the City branch during my internship I saw 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. 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. 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. Marketing Policy 113 Internship Report on NBP. 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. 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. 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. 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. 114 Internship Report on NBP. 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. Credit Monitoring The credit department of the bank should carries out vigilant credit monitoring. They 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. Extended Banking Hours The banking hours may be extended up to six, as being practiced by HBL opposite to it. Some of the business community 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 business community. The branch could also be opened to cater the requirements of this business community Limited staff: 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 Avoiding Bad Debts Great care should be taking 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 regulation for loan approval should be strictly followed. According to which the current 115 Internship Report on NBP. ration 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. 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. Summation We discussed in this chapter about the recommendation and suggestion for NBP as an organization in general and NBP, District Court Branch Multan in particular. The next chapter is about the implementation plan in the view of recommendation and suggestion. IMPLEMENTATION PLAN INTRODUCTION From the recommendation that were discussed in previous chapter, two recommendations are selected for implantation plan. IMPLEMENTATION PLAN FOR “MARE GARE CAR FINANCING SCHEME” Implementation of this financing scheme is initiated to provide long-term loans to the general public for buying their own car in easy installments. This financing scheme will help bank to increase its revenue immensely 116 Internship Report on NBP. Rules and regulations Name of finance Minimum amount of finance Maximum amount of finance Rate of Mark up (on daily product basis) Period of finance Repayment to Bank Mare Gare Car Financing Rs. 300000 Rs. 1500000 Rs. 0.43 per Rs. 1000 3 or 5 years Quarterly (12 or 20 equal installments) Documents required for extension for loan Documents required for the title of car. Bank monitoring team approval certificate. Car dealer certificate of authentication. Insurance. Securities Required for Extension of Loan To ensure the safe recovery of loan the car will be hypothecated. Guarantee of two 17th grade government or semi government officer. Personal liability of the borrower. Finding out Quarterly Installments Mark up will be calculated for the whole time period and will be added to the principle amount. The total of that will be divided by number of installments to get the amount for each installment The formula for extracting mark up is Mark up =F*R(1+N) 2M Where F = Total amount of financing R = Rate of mark up for one year N = Total number of installments 117 Internship Report on NBP. M = Number of installments in one year Case study Amount of finance Rate of mark up Total number of installments Number of installments in one year Rs. 200000 Rs. 0.43 per 1000 20 (5 years) 4 =. 157 Mark up for the whole financing will be Mark up = 200000 * 0.157*(1+20) 2*4 = Rs. 82425 Now the quarterly installments will be Quarterly installment = principal amount + total markup Total installments =200000 + 82425 / 20 = Rs. 14121/The borrower will pay Quarterly installment of Rs. 14121/- Rate of mark up for one year ® = .43 * 365/1000 Implementation plan for NBP District Court Branch, Telephone Operator” The ingredients of the implementation plan are. • • • • • Need/problem at the branch. Qualities of a telephone operator Benefits of a telephone operator. How the need created and bank’s staff decision. The cost of the implementation plan. Benefits of the telephone operator • • It saves precious time of the manager and staff members. It saves the time of the customers. 118 Internship Report on NBP. • • • Creates good impression on the customer. Communication within the bank improves. Communication of Bank with outside enhances. How the need was created The need for telephone operator was created because the staff members would have to leave their work and attend the telephone but some times it would be a wrong call, other’s call or the calls which they wanted to avoid this would not only waste their time but also affect their performance a great deal. Therefore they think it’s useful to have a spare person for this facility. ACTION/IMPLEMENTATION PLAN COST 1Cost of HRM department Advertisement in newspaper cost Selection cost Training cost Total HRM cost 4000 10000 12000 26000 2- Telephone networking Additional telephone sets Cable (Rs. 5/ foot, 5*800) Telephone mechanic Labor Separate cell cost Other expenses Total networking Total action plan cost 2500 4000 2000 2000 5000 2000 17500 435000 Summation 119 Internship Report on NBP. We discussed in the chapter about the two-implementation plan. This two-implementation plan will save the time and will bring speed in tackling the customers. REFERENCES 1). 2). 3). 4). 5). http// www.nbp.com.pk .services Department. July 20th, 2009. NBP District Court Branch Multan President Office, June 21, 2004, Circular No. 13, 2002. Head Office National Bank of Pakistan Karachi Israr, Siddiqi H. (1998). Practice and Law of banking in Pakistan. Karachi: Decent Print Enterprises. Page 15-17 Sir, Paged John. The law of Banking. The Law of Banking. McGraw Hill Publication: page 51-58 120 Internship Report on NBP. 6). 106 7). 8). 9). 10). 11). 12). 13). Nasir, Saeed H.(2001). Money and Banking. Pakistan, Kitab Markaz: Page.105www.nbp.com.pk Bank Nationalization act 1974. www.google.com.pk National Bank of Pakistan (2000, 2009) Annual Report. Van Horne James C and JR Wachowicz John M. (1998). Financial management. Prentice Hall Publication. Page 126-150 Block, Stanley B and Hirt Geoffrey A (1994). Foundations Of Financial Management. Page 121-148 www.onlinewbc.gov/docs/finance/fs.ratio/. Html 121