History of NBP

HISTORY OF NATIONAL BANK OF PAKISTAN

The normal procedure of establishing a banking company under the Companies Law was set aside and the Bank was established through the promulgation of an Ordinance due to the crisis situation that had developed with regard to financing of jute Trade. The Bank commenced its operations from November 20, 1949 at six important jute centers in the East Pakistan and directed its resources in financing of jute crop. The Bank’s Karachi and Lahore offices were subsequently opened in December 1949.

State bank of Pakistan after its formation demanded from the Indian Reserve Bank the assets against the Indian currency retired from Pakistan territory.  Government of India refused to hand over the assets worth about five hundred million rupees. The dispute is still unsettled and these assets are still not delivered to Pakistan. Until June 1950, the Bank was engaged exclusively on jute operation. Thereafter, it was felt that it could expand its business to include other commodities as well. Bank took a big stride in 1952, when it replaced the Imperial Bank of India, as an agent of State Bank of Pakistan.

With the passage of time its functioning diversified as they take over the function of different institution with the passage of time like in past they took over the function of Imperial bank of India and now of NDFC (national development finance corporation).

It is working as the agent of the state bank of Pakistan and performs its functions wherever state bank of Pakistan is not present.

The government floated its 10 % of the shares in the open market in past and the ratio became 60: 40 and in future they trying to make it 55: 45.

In 1999 national bank celebrated its golden jubilee during the last fifty years bank has made substantial strides in the financial services industry in Pakistan.

In 1999 its market share was around 22% and it remains the largest financial institution in Pakistan.

Account Opening Department

National Bank of Pakistan accepts / collects deposits from their account holders. For this purpose account opening from is provided to the potential customers. At the same time introduction of the customer is done before the manager by existing account holder or officer of the bank who knows the depositor very well. Manager takes the depositor’s signatures on signature specimen card in order to avoid from discrepancy. Accountant compares the signature of check with signatures of the card before passing the check. All the rules and regulation of opening of account can be changed at any time by the Bank.

Depositor can open following types of accounts with the National Bank of Pakistan: -

      Current / Demand Account

      PLS (profit and loss scheme) Account

      Fixed Deposit Account.

Current / Demand Account

From this account depositors can draw amount at any time by presenting the checks in the Bank. People deposit their money in this account because there is no restriction of heavy withdrawals. The Bank neither pays interest nor deducts the Zakat from the deposits of this account. The Bank also does not take any service charges up to the minimum balance of account from the depositors.

Its main purpose is to serve the businessman. Form number F-53 is provided to the person to open the account. It is a statutory requirement to maintain current account.

Its main features are: -

      Minimum amount for opening this account is Rs.500

      Any person can open the account with the bank

      According to inter banks agreement interest is not paid on current account.

      Bank act as custodian of money

      Over draft facility is provided to the customers

      Customer can withdraw money through cheque supplied by bank

Profit & Loss Scheme (PLS) Account

In fact these types of deposits are designed to encourage the saving habits of nation. The minimum amount requires to open the account is Rs. 100/-. The account holder gets the profit at the rate of 7% annually expected (subjected to the bank’s profit) which is calculated and announced on the half yearly basis. Now the Bank has introduced the change in this scheme that account holder can draw the required amount at any time. This deposit carries a small portion of the bank’s total deposits.

The main features of this account are: -

      Instead of having fixed return in the form of interest the deposited money will be shared in profit and loss of the bank.

      One can open the account by depositing minimum Rs.100

      To withdraw a large amount a notice of 7 days to the bank is necessary.

      There is not any kind of interest is provided on money deposited.

      Rate of profit is declared at the close of each half-year.

FIXED DEPOSIT ACCOUNT

This account is the major source of funds for the banks. This account is best for people who have surplus money and don’t need such funds in nearer future.

The money is deposited for a fixed period of time. Main features of this account are: -

      Fixed amount is deposited for fixed period.

      Amount of profit can be obtained after each six months.

      Higher will be the time period, higher will be the rate of profit, and vice versa.

      A receipt is used for the amount deposited called fixed deposit receipt.

      Period of deposit can vary from 3 months to 5 years.

The amount can be withdrawn before maturity after surrendering interest.

Procedure of account opening

A form is being filled by the account opening officer in centralized account opening portal. This form is called Account Opening Form. This form is having following elements:

Following things are needed for opening of account:

      Account opening form

      Signature card

      Letter of kinship

      Letter of thanks

      Issuances of cheque book

When the data is put in the CAOP the system allotted a special number to that particular account which is name as CIF (customer information foliou). CIF is being created for once and if CIF is created then it data will be saved for ever and he can be open the account anywhere in the country in national bank.   Every officer of national bank as its own log in identity through which it can operate CAOP.

Account opening form:
Account opening form consist of

      Category of account

      Currency

      Title of account

      Account number

      Customer information

      Initial deposit

      Authorized person in case of customer death

Signature card:

The signature card included the name and specimen signature of the customer
Letter of kinship:

In the latter of kinship the customer authorized the bank to pay the proceedings of his/her PLS/Current foreign currency account to the related person by describing the relationship of the person with the customer after the death of the customer.

Letter of thanks:

Letter of thanks is the latter issued by the bank to the customer for two purposes

1) 1st purpose is to say thanks to the customer for opening the account in their bank

2) 2nd purpose is to confirm the address provided by the customer while opening the account.

Automatic Teller Machine (ATM):

ATM linked with head office in Karachi. Cash can be withdrawal up to Rs. 20,000/- per day. If there is:

Green lightà ATM online

Yellow lightà cash is not available in ATM.

Red lightà system is offline, either from head office or some other branch.

There are following parts in ATM:

ü  Card holder:

If card of a customer is stuck in machine, actually this card is stuck in this holder. Technicians open machine’s door and take card from there.

ü  Receipt box:

Receipt box is for customers.

ü  Receipt register:

This register is having receipts and issued to the customer. If card is stuck in the machine and customer could not take cash, then through this receipt register bank come to know that cash is issued to the customer or not.

ü  Mini laptop:

Mini laptop is installed in it. It acts like a laptop.

Remittance Department:

Remittance department provides services to the customers of the bank. The main function of this department is transfer of funds. There are following modes of remittance:

    Demand draft:

This is also known as D.D. This is an instrument which draws on customer’s request to a specific branch, person, amount and particular date. After filling this instrument, it hand over to customer. In DD, a person fill DD application form and pay the transfer amount and service charges at cash counter. Then he will submit this form in remittance. This will enter in the book keeping records then remittance officer prepare a demand draft and give to the customer.

    Government draft:

It draws to specified branch. This is the same as demand draft but the difference is, here customer is government. Drawer and drawee is government. No service charges apply on G.D. But SBP pay commission annually.

    Mail transfer (off-line):

First of all a person fill MT application form and pay the transfer amount and service charges at cash counter. Then he will submit this form in remittance. This will enter in the book keeping records then remittance officer prepare a draft in the name of specified person which mention in the form. It draws to specified person, amount and particular date. This type of remittance facility is provided only when the beneficiary is the customer of the bank. If other branch is not on-line, then money can’t transfer on-line.

Mail transfer (on-line):

It draws to specified person, branch, amount, date and account. D.D can submit anywhere else but M.T is specified to the same bank. If it is online then a message will be sent through fax to the receiving bank and at end of day authority will send a MT confirmation to that bank.

    Telegraphic transfer:

If a person wants to transfer money and branch is not on line, then send money through T.T.  Person fill TT application form and pay the transfer amount and service charges at cash counter. Then he will submit this form in remittance. It should be the same bank because, NBP uses code system and only the same bank can decode the message. Branches of the same bank only know the procedure.

    T.T payment order:

When bank receives TT and account no of the applicant then bank send it to that person’s address. That person come to the bank and submits in his account.

    Payment order:

This is drawing on person’s request. This is local and not outward. On the presentation of pay order, the bank is liable to pay the amount to the customer. Bank can be any other else because ultimately this instrument will be in that branch to pass.

    Call deposit receipt (CDR):

This is a guarantee voucher. It draws on guarantee of the institution. For example if govt institution need computers in bulk, contractor will say them make 5% payment in advance. If that contractor will be select through tender then make the rest of the payment otherwise return the previous payment.

    Inter branch transaction (IBT):

This is purely on line system. Online à online not offline. If a person has to deposit money in any other city then he will make payment in bank that is in his own city. Transactions will be online.

    Pak rps traveler cheque (PRTC):

These are of fix amount 10000. Earlier there were cheques of more than this worth but there was a problem, these cheques could not complete their circle. They just passed from one person to another person and less often return to the bank. As these were issued by NBP, so they were trust worthy every one accept it and pass forward in their dealings. No one come to bank to cash the money. Even after one year of the issuance of that cheque

 

Electronics remittance:

    Western union:

This is international software. This is highly expensive. There is 10 digit code used. There is one word password in software. Different Government and private organizations are dealing with WUMT. It just need identification, no need of a/c, it's a counter payment. Procedure of payment is that the customer comes to specific officer who is dealing with Western union and tell him:

      MTC NO

      Receiver name

      Sender name

           Telephone no

           Photo copy of ID card

      Expected amount (10% margin is acceptable)

    Express money:

With a vast presence in 5 continents and 150 countries, Xpress Money is one of the most dependable money transfer brands globally. This is 16 digit code through which money is safely transferred through one country to other country.

Advances / Credit Department

It may be defined as “The sale of goods and services and money claims in the present in exchange for a promise to pay in the future.

It may be defined as

" The sale of goods and services and money claims in the present in exchange for a promise to pay in future. "

The most important activity of the bank is the granting of credit to the customers. NBP provides short term long terms financing for domestic and international trade. The policies made by central office of the cash can be amended on the basis of the rules and regulation, economic risk of each country board of directors and committee of the NBP made this type of decisions and informed about these decisions to the branch managers.

The following elements are used for credit selection.

Character
It is based on the borrower willingness to repay the obligation. The loan officer sees the family background mode of living, business nature, habits, moral reputation and etc. before giving the loan.
Capacity
The ability of borrower to repay the loan when due. The borrower ability to repay the loan is assessed by the office so that he will be able to repay the loan in future.

Capital
The officer assesses the capital of the borrower. If assets held by the borrower are liquid, they can be easily convertible in cash; but if non liquid is used then it is risky to given loan.

Collateral
It is collateral security. It may consists of stocks bonds, bill of exchange, bills of lading, etc. the bank has protect himself from any discrepancy in the future. They increase the ability of the borrower to obtain the funds from the bank

Condition
The economic condition of the borrower is determined. The economic conditions of the borrower in and outside the country effects the repayment of loan. If condition is favorable then loan is given otherwise vice versa.

Functions

Credit department has performed following functions.

Advances
Advance provided by the bank are of the following two types.

      Funded

      Non-funded

Funded
In fund based bank contributes a large amount of the fund based on clarified as follows