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CHAPTER NO-4 Departmentalization Of NBP

Bank's Profile

GENERAL BANKING DEPARTMENTS


Dividing an organization into different parts according to the functions is called departmentalization. NBP Circular Road Branch ,D.I.Khan offer a wide range of banking services to public and private sector corporation ,partnership ,individual and others . The National Bank of Pakistan Circular Road Branch, D.I.Khan has following departments. Brief description of all these departments are given here one by one under separate heads for better understanding. The General Banking department consists of the following sections. 1 2 4 3 5 6 Account Opening Section Deposit Section Remittance Section Clearing Section Government/Pension Section Advance Section

1. ACCOUNT OPENING SECTION


Account opening section of the Bank can be considered the most important Section because banking starts with the account opening. Every customer of the bank either he is of credit section or foreign section or any other department must have his account in order to get benefit and transaction with the bank. Therefore it is considered the most important section of the bank. Account opening officer take special consideration for the proper recognition of the customers. This section performs the following functions: 1. Opening of Accounts 2. Issuance of Cheque Books 3. Closing of Accounts

1.

OPENING OF ACCOUNTS

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 customers integrity, respectability, occupation and the nature of business by the introductory references given at the time of account opening. Preliminary investigation is necessary because of the following reasons. Avoiding frauds. Safe guard against unintended over draft.

Negligence. Inquiries about clients.

STEPS FOR OPENING AN ACCOUNT


After entering into bank premises the person goes through the following steps for opening an account in the bank and for becoming a bank customer.

Verification
The first important step to take place in bank is to get satisfactory verification of the person, who wants to become banks customer. This verification is made through the NADRA.

Account Opening Form and Specimen Signature Card


Now the person is provided with an application form known as Account Opening Form (AOF). This form contains: i. Type of Account: NBP offer different types of accounts on AOF. ii. Nature of Account: NBP has the offered services to following types of individuals. Accounts of general customers (Individual accounts) Minor account Illiterate person account Joint account Accounts of special customers Proprietorship account Partnership account (Registered/ Unregistered) Limited companys account (Public/ Private) Accounts of clubs, societies and associations Corporate Body (Incorporated/ Unincorporated ) Trust account Govt Institutions (Federal/ Provincial) iii. Initial Deposit Amount : Deposit can be accepted in the form of: Pak Rs. US $ UK EURO JY

iv. Particulars of customers e.g.: Title of Account Address CNIC Number NTN Number (if available) Profession Telephone number may be of office, mobile or residential v. Next of Kin: (all above mentioned particulars of introducing him) In this customer mention the name and address of person to be contacted for ascertaining his whereabouts after the expiry of three years from the date of last operation in his account or last communication from him to the branch to inform him the existence of account when the customer is not available at the given address. This is simply the reference of the 2nd person if the bank fails to communicate with the customer then bank can contact with the next of kin / the mentioned person to know about its customer. Customers provide in this all the personal details of the next of kin. e.g. Name of person CNIC Number Address Telephone number etc. vi. Operating Instructions: The account can be operated by Singly Jointly Either/ survivor vii. Zakat Deduction Zakat is deducted on each type of account accept current account in the 1st day of the Ramzan at the rate of 2.5%. If customer wants no Zakat deduction then he has to submit affidavit/declaration as per Zakat rules. viii. Signatures of the applicant ix. Service charges deduction: In this category customer authorize the bank to deduct service charges as per bank's tariff. Service charges are exempted for;

Government employee Pensioner Student Widows State Bank of Pakistan now authorize all the banks to deduct service charges on all types of accounts when the balance of the customer become less from 5000/-. Rs. 55/per month is deducted from the customer's account. 5000/- is the minimum amount which should be kept by the customer in his account. Specimen Signature Card (SS card) Specimen of signatures will be obtained from depositor at the time of opening his account. A specially designed card is used for this purpose; the card must be countersigned by an official of the bank not below the rank of an officer. For illiterate person a recent picture of the newly account holder is taken and attached with SS Card. To reduce the risk of frauds and misuse of the cheques of an illiterate person the specimen signature card and account opening form both are stamped by the Personal Visit stamp. Person who use thumb impression as a mean of signature can operate their account only by Personal Visit. Account Opening Register Now the name of the customer is recorded in account opening register, and from here the account no. of the customer will be written on (top most corners) account opening form and on specimen signature card. Letter of Thanks Letter of thanks is the latter issued by the bank to the customer for two purposes: 1st purpose is to say thanks to the customer for opening the account in their bank. 2nd purpose is to confirm the address provided by the customer while opening the account.

2. ISSUANCE OF CHEQUE BOOK & PASS BOOK


The cheque book will ordinarily be issued to all customers desiring to have chequing facility. First Cheque book is issued to the customer after sending the letter of thanks when the customer comes with the latter of thanks and requests for the issuance of the cheque book. A Cheque book consists of PLS 10, 25 leaves or pages per order CD 50 leaves or pages per order 100 leaves or pages per order

CD 50 leaves or pages per bearer 100 leaves or pages per bearer

Order- if a person appears himself for new cheque book or who is the holder of account. Bearer- if the person other than account holder appears then he is bearer.

Rs. 3 per leaf as postage charges is charged to the customer. A special cheque book register is kept to enter the name of the person having cheque book. Customer can withdraw money by signing a cheque and writing the amount he wants to withdraw from his account. Pass Book Pass book is another important type of book handed over to the customer as he opens the account with the bank. The withdrawal and deposit of money is recorded date wise in this book. Recording into General Ledger The concerned officer records the name and amount deposited with the bank in to general ledger. Separate ledgers are maintained for different types of accounts e.g. Current Account Ledger Saving Account Ledger Fixed Deposit Account Ledger Call Deposit Account Ledger As and when customer will deposit the money, amount will be credited in general ledger and the withdrawal will be followed by a debit entry in the ledger. Documents Enclosed by Customer Documents required to be attached by the customer are different for different categories. Documentation In case of Individuals Account

Copy of CNIC Copy of Driving license in case CNIC is without photograph Applicant photograph and NIC copy Copy of service card/ evidence of employment in case of salaried person Photographs in case of illiterate person Copy of CNIC of Next of Kin. Zakat exemption Declaration Evidence for exemption of account from levy of service charges Proof of age in case opening of account with minor
Documentation In case of Private/ Public limited company accounts:

Photocopy of National Identity Card of each director

Application form Copy of companys memorandum and articles of association List of directors Copy of board resolution Certificate of incorporation Their signature cards Certificate to commence business Power of Attorney
Documentation In case of Partnership Account

Application form A copy of partnership deed Signature cards of partners Registration certificate copy A copy of National Identity Card of each partner Authority letter favoring persons authorized to operate the account
Documentation In case of Club, Society, Association or Trust

Application form Copy of rules Certified copy of resolution Signature cards


Documentation in case of agents Account

Copy of power of attorney Id card of each agent


Documentation in case of trust Account

Certificate of registration CNIC of all trustees Copy of instrument of Trust


Stamping and Scrutinizing After the fulfillment of all the necessary terms and conditions and checking of the form the relevant officer of Account Opening then affixed stamps on the AOF for the sake of completion of all the formal rules and regulations. He affixed three types of stamps on the form and two types of documents. Affixed stamps National Bank of Pakistan Stamp

Authorized Stamp Affixed Documents Know Your Customer Form (KYC) Summarizing the context of AOF briefly Signature Card For identification and verification of signatures

3. CLOSING OF ACCOUNTS
Account Closing by Customer The customer can close the account. Customer is required to submit an application for closing the account. Then the account is closed out and his balance is paid to him after deducting the closing charges, i.e., Rs. 200 and the application is filed in Account Closing File. Remaining leaves of cheques will also be collected from the customer. Account Closing by Bank i. Dormant Account All current accounts which have not been operated for six months or all saving accounts which have not been operated upon for one year classify as dormant account. ii. Inoperative Account All the current accounts which have not been operated upon for 2 years or all saving accounts which have not been operated since 3 years are classified under inoperative accounts. Operations in accounts classified as dormant or inoperative will remained suspended unless request in writing for activation or restoration is received from the Account Holder. If the account holder fails to reactive the account despite of bank's notice, the bank will have the right of exercising option of closing of account and in such case will refund the balance to the customer after deducting all applicable charges. iii. Treatment of Deposit declared Unclaimed Deposit A debt payable owing by bank due to the reason of deposit in respect of which no transaction has taken place and no statement of account has been requested by the creditor during a period of ten years are classified under unclaimed deposit. These are simply a debt owned by bank when a customer has not been operating his account during a period of 10 year. The bank serves a 3 month Final Notice in writing to the account holder at his latest known address for his receiving balance lying in account. Upon expiry of such period NBP then surrender the deposit to the SBP.

2. DEPOSIT SECTION

Deposits are the lifeblood of commercial banks. The main function of a commercial bank is to mobilize deposits of money from the savers and lend into for most profitable purposes. The process of collection deposits is Deposits Mobilization. Commercial banks donor receive these deposits for safe keeping purpose only .but they accept deposits as debts. When a bank receives a deposit from a customer becomes a creditor and the bank a debtor. When the bank receives the amount of deposits as a debtor, it becomes the owner of it but there is an implicit agreement that the amount owned would be paid back by the bank to depositor on demand or often at specified time. The classification is based on duration and purpose for which the deposits are to be kept at the bank before the depositor can withdraw them.

TYPES OF ACCOUNT/ DEPOSIT


Following types of accounts are open in NBP 1. Current or Demand Account 2. PLS Saving Account 3. Fixed Account 4. NIDA Account

1. CURRENT ACCOUNT This account is also known as running balance account. Simply we can say A bank account which may be used to lodge payments or to withdraw money on demand.Its main purpose is to serve the businessman. Form number F-53 is provided to the person to open the account. It is a statutory requirement to maintain current account. Its main features are: 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 No limitation to the number of withdrawal No Zakat is deducted on current account.

2. PROFIT & LOSS SHARING /SAVING ACCOUNT In general it is also called saving account .To provide interest free banking facilities in Pakistan, this type of account was introduced in January 1982 after the islamization of banking. The main features of this account are: 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 The bank is authorized to deduct service charges on half yearly basis. Profit on PLS Saving Account is calculated on minimum monthly basis and is paid half yearly basis announced by the Head Office after June 30 and December 31. Zakat at the rate 2.50% is deducted from the PLS Saving Accounts. No limit of withdrawals

3. 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 dont need such funds in nearer future. The rates on this type of deposits are higher than the saving bank accounts. 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 depending upon the nature of scheme offered by bank. The amount can be withdrawn before maturity after surrendering interest.

4. NATIONAL INCOME DAIL ACCOUNT (NIDA) The scheme of NIDA was launched in December 1995 at attract at corporate customers. NIDA are opened for individuals single or joint, Charitable institutions, Provident funds, autonomous bodies, companies, associations, educational institutions, firms etc. the features of this account are same to the features of the saving or PLS account except the following ones: In this account the minimum balance required to acquire the benefits of this account is Rs 2 million, and the maximum limit is 5.0 million. When the above condition is fulfilled, then the bank will pay interest on daily basis, which is that if the deposit is minimum of 2 million than the mark up rate is 5.2%p.a.and if it is at maximum that is 5.0 million than the rate is 7.00 %p.a. In this account the daily balance of account is taken, products are calculated and the interest is calculated on that balance. If the balance on any day comes below the lower limit, which is Rs 2 million then interest will not be given. This scheme did not gain popularity so NBP close this scheme.

3. REMITTANCE SECTION
REMITTANCE
Remittance means a sum of money sent in payment for something. This Section deals with either the transfer of money from one bank to other bank or from one branch to another branch for their customers.

TYPES OF REMITTANCE
Remittance means transfer of money from one place to another place. It is of two kinds. Inland remittance. Home remittance.

INLAND REMITTANCE
An inland remittance means a transfer of money payable at a certain place within the country. Inland remittances can be classified as under:a) Within locality.

b) Out side locality. a) WITHIN LOCALITY When a branch situated in D.I. khan is required to send drafts to any other branch situated in the same city the process is know as within locality. For example N.B.P. Main Branch, D.I. Khan sends any draft to N.B.P. Circular Road Branch, D.I. Khan. b) OUTSIDE LOCALITY Outside locality is an important type of inland remittances, which means the transfer of money payable outside the city. For example, N.B.P. Main Branch D.I. khan sends any draft to a Branch situated at D.I.Khan. NBP Circular Road Branch offers the following forms of remittances. Demand Draft (D.D) Mail Transfer (M.T) Telegraphic Transfer (T.T) Traveler Cheques

DEMAND DRAFT
A method used by individuals to make transfer payments from one bank account to another. Demand drafts are marketed as a relatively secure method for cashing checks. It is made for both account holders and non account holders. Secret test apply on DD. If the amount is less than Rs.5000/- then test will not apply. Types of DD Junior draft Senior draft Junior Draft For 1 to 1000/- Rs. junior draft is made. Senior Draft For 1000 to 10 million Rs. senior drafts is made. Particulars of DD required in the application form Date Name of the office on which it is drawn Name of beneficiary Amount in words and figures Bank exchange rates

Signature and address of the applicant

Issuance of Demand Draft The customer on standard DD application form makes request. All information such as name of beneficiary, place where the DD is drawn, amount mode of payment, cash/cheque/debit authority, signature with name and address is filled. The issuer checks the information. Commission as per schedule of charges is charged. Federal excise duty is charged. After the customer has made payment by cash/cheque, get the voucher from cash department. The DD of required amount is prepared. The DD in NBP is manually prepared.

Issuance of Duplicate DD In case draft is lost or destroyed by mistake, its duplicate can be issued at the request of purchaser after obtaining indemnity bond on stamped paper of appropriate value. This is done to cover the risk of double payment by mistake. Application form received from purchaser and verifies the signature. Informs the drawee branch of the loss of DD and advise them to mark caution against payment if presented. After necessary checking, the drawee branch will inform the branch about the status of DD whether it has been paid or still outstanding. Writes on the face of duplicate DD in red ink duplicate in lien of original DD No--dated ---reported lost. The signing officer must check all the particulars before signing.

MAIL TRANSFER
The same application form is used for draft and mail transfers generally in NBP. The mail transfer is not delivered to purchaser but instead the issuing office to beneficiarys branch on its own risk and responsibility sends it. This type of remittance facility is provided only when the beneficiary happens to be customer of the bank. The amount is directly credited to the beneficiarys account and as such loss of mail transfer has no concern with the applicant. Also the credit balance of customer is transferred from one branch to another branch with the help of this instrument in case the Customer so desire. The applicant desiring to remit the funds by way of mail transfer can either deposit cash or he may ask the bank to debit his account with the cost of mail transfer including bank charges.

An exchange memo is issued to the applicant in case he desires to have some sort of receipt from the bank for his office record. The participants of mail transfer are recorded in mail transfer register just like drafts while at the paying branch instrument is treated as branch voucher for credit into beneficiarys account. If the customer is not he account holder of this bank, then firstly he has to deposit the money and then rest of the procedure will be adopted to transfer his money. Secret test apply on MT. If the amount is less than Rs.5000/- then test will not apply. It is the quick and safe mode of transfer of funds. Application form submission is same as DD. In MT funds are transfer through system within seconds if 2nd branch is online. Funds transfer only same branch of the banks. It is necessary that the customer must have the Branch Code of the host branch, account number of a drawer, name of place, etc. Inter-Branch Clearing Advice is involved.

TELEGRAPHIC TRANSFER
It is the message, which is sent from one branch to another on the order of payer to payee through wire. It is one of the quickest means to transfer fund through the use of Telex/fax/internet or cable. Secret test apply on TT. If the amount is less than Rs.5000/- then test will not apply. It is quickest way of transfer funds from one branch to another of the same bank through telephone, fax/telex. Procedure of application and vouchering is same as a DD. Apply test on the TT message and appropriate codes and instructions such as advice & credit or advice & debit. It is mostly cleared through main branch of the same area. Recovers commission, and other charges as per applicable rate.

The entries at issuing office are recorded in telegraphic transfer issued register while at the other end it is entered in the payable register. Issuance and Payment of Telegraphic Transfer Outgoing Application form is filled by the client in whom the name and account number of the beneficiary, which is to be credited and name of customer, is required. For telegraphic transfer, the payment can be made in case or by cheque or by debiting the customers account if he is the account holder.

The amount of Telegraphic Transfer should be written on the form. application is filled in the record of the bank. Issuance and Payment of Telegraphic Transfer Incoming

The amount is

transferred to beneficiarys account in the other bank. An advice is given to the customer but

When a TT is received then an entry is passed in TT incoming register after verifying the test. When a person comes and wants to encase his TT, bank checks the statements of that person. If the bank finds any account credited to the persons account against TT, bank prepares a voucher for this payment against that TT. The customer then presents that certificate to the cash counter and collects money.

TRAVELER CHEQUES
When a traveler proceeds from one place to another he needs money at different places. The remittances explained so for will be available to the beneficiary only art a particular place, and that too all in one time, where as the requirement of a traveler may be otherwise. N.B.P has designed its own travelers cheques to be used in Pakistan only, for different denominations their colors are different. The denominations of travelers cheques provided by National Bank of Pakistan are: Rs. 5,000/Rs. 10,000/Rs. 50,000/Rs. 100,000/-

The face traveler cheques consist of: Signature of the purchaser Name of the Purchaser Name of issuing office & the Date of issue. On the back of the cheque this can preferably be done by means of small rubber stamp. Application for the purchaser of the cheque application form is taken. The original remains with the issuing office as voucher and the duplicate is passed to the main branch on the bank where account of bank is kept. Recording The issuance of cheque is recorded in the travelers cheque issue register. The total amount of T.C sold is credited to the Main Branch of the Bank and the exchange charged credited to the Branch exchange account. Delivery: The traveler cheques are delivered to the purchaser in thick card boar.

4. CLEARING SECTION

CLEARING SECTION
The major function of Clearing Department is to receive the cheques, which are drawn on some other bank. The customer can get the money in his account at NBP, from the cheques drawn on another bank. The bank accepts these cheques and collects the amount from that bank on which cheque is drawn through the Clearing House. Bank charges some commission for this function.

CLEARING
"The transfer of funds from one branch of bank to the other branch of the same bank or the other bank on which the instrument is drawn, without involving cash through State banks clearing house " We can say that cheques which cannot be cashed at the cash counter of the bank or cross cheques go through the clearing process.

CLARING HOUSE
A clearing house is an association of commercial banks set in State Bank of Pakistan for the purpose of interchange and settlement of credit claims National Institutional Facilitation Technology (NIFT) Pvt. Limited is performing the function of clearing and charges commission against it. Before the NIFT, the State Bank of Pakistan (SBP) with efficient controlling staff performed the process of clearing. If SBP had no office at a place, then NBP, as a representative of SBP acted as a clearinghouse. NIFT is a joint venture between a six major banks and private sector. The clearing operations were commenced by the establishment of first centre at Karachi and now it has been extended to all major cities of Pakistan. At such places where the area is not covered by NIFT the clearing and settlement services are provided by National Bank of Pakistan.

FUNCTIONS OF CLEARING SECTION IN A BRANCH


To accept transfer, transfer delivery and clearing cheques from the customer of the branch and to arrange for their collection. To arrange payment of cheques drawn on the branch and gives for collection to any other branch of N.B.P. or any other member or such member of local clearing house. To collect amounts of cheques drawn on members of the local clearinghouse sent for collection by N.B.P. branches not represented at the local clearinghouse. There are two main types of clearing.

1. Outward clearing. 2. Inward clearing. 1. OUTWARD CLEARING It includes those cheques and other instruments, which are sent by the Bank to the Banks for payment on behalf of its own clients. Cheques are sent to clearing house thorough local main branch. A delivery message from the local main branch comes to every branch at a fixed time to pick its outward clearing or outward returns as the case maybe.

Procedure for Outward Clearing at the Circular Road Branch


Account number of payee/endorsee is written on the backside of the cheques. The instrument and the paying in slips are separated. The instruments are sorted I Bank-wise and branch wise. Schedules are prepared. Jotting of all the schedules are taken in the clearing House statement. Amount After balancing the outward clearing, the pay in slips are released to C.D. After balancing, a transfer debit voucher is prepared. The instrument, schedule. Etc. is delivered to the messenger from the main

of the cheques in written in the "Delivered" and to pay column. department. branch.

2. INWARD CLEARING
The cheques drawn are called inward clearing. Drawn on National Bank through its representatives on the Bank presented by other Banks for payment it includes those cheques and other instruments of Pakistan branches which other Banks present at the clearing house.

Procedure for Inward Clearing at the Circular Road Branch


Number of instruments noted in the schedules is verified immediately. On receipt. The amount's of all the instruments are jotted down and totaled. If should be equal to the amount mentioned in schedule from the local main branch. The amounts are debarred to the relevant accounts if otherwise in order. The IBCO is prepared crediting the amount of the main branch. If there is any return, that is deducted from the total and IBCO prepared for the remaining amount.

TYPES OF CHEQUES COLLECTED BY CLEARING SECTION


1. TRANSFER CHEQUES These are the cheques which are collected and paid by same branch of N.B.P. For example Mr. A is a customer of N.B.P. of Circular Road Brach and draws a cheque in favor of Mr. B who is also the customer of the same branch. 2. TRANSFER DELIVERY CHEQUES The cheques, which are collected and paid by two different branches of a Bank situated in the same city. For example Mr. A draws a cheque on N.B.P. Circular Road Branch, D.I. Khan in favor of Mr. B who maintains an account with N.B.P. Main Branch, D.I. Khan. 3. CLEARING CHEQUES When the payee/endorse and the drawer of cheque maintains account with different Banks, the collection Bank in any one of the following methods: It can collect cash by sending its representative with the cheques to each of the paying Banks. It is not so much appropriate. The Bank maintains an account with the paying Bank. The cheques can be exchanged by representative of the various Banks who meet at a fixed time and at a fixed place. This is the most efficient method of collection and paying cheques.

PROCEDURE FOR CLEARANCE OF CHEQUE


The customers are provided with the copes of pay-in-slip, whenever the customer wants to deposit any cheque, he fills in the pay in slip himself and hands it over the counter along with the instrument.

Procedure for Outward Clearance i. Pay-in Slip- Cheque


The customer fills pay-in slip. This slip is just like deposit slip. The cheque number, date, amount and account number must be written on this slip.

Stamping and Scrutinizing


The officer on receipt of cheques and pay-in slip will stamp the pay-in slip with cheque received and give a portion of slip to customer and the remaining portion is attached with

the original cheque. The original cheque will be marked with two stamps in case of local clearing. Endorsement stamp of NBP Clearing Stamp The original cheque will be marked with three stamps which are called OBC stamps (over branch clearing stamp) in case of intercity clearing. Endorsement stamp of NBP Crossing Stamp Next Date stamp At the end of day, all cheques are counted and then scrutinized in bank-wise and sent to the NIFT for local as well as intercity clearing. Entry is done in daily register.

Procedure for Inward Clearance


All the remittance which are received from other banks then go through the inward clearance which include all the steps for lodging of amount into customer's account.

Fanfold
The drawer bank then verify the payer's account for clearance of the cheque and send back the amount to the presented bank or NBP through the fanfold. In case if the customer account is short of balance then the original cheque is returned back to the presented or collected bank with the reason of returning the cheque on the clearing return form. NBP receive this amount in form of remittance.

Charge Deduction
On receiving the amount through fanfold bank deduct service charges of clearance which are excise duty, commission and postage for the intercity and SC payments. Vouchering is done on four types of fanfold; Debit voucher for---------------- total amount charged for service Credit voucher for--------------- commission Pay-in-slip of cheques for----- Federal excise Pay-in-slip of cheques for------ postage No any charge levy for local clearing so no vouchering is required for this. Customer's account is credited on the next day of clearance.

Credit of the customers account


After deduction of charges the amount is transferred and credited to the customer's account.

5. GOVERNMENT/PESION SECTION
Circular Road Branch carries the responsibility of paying pension to the pensioners. For this purpose pension books are issued to the pensioners. In this book the pensioner has to come personally. Incase he is not able to come line certificate has to be sent.B-143 register is maintained for the record of pensioners. Pension can be refused to a person in following cases: The person himself and his life certificate both are not present. Signature in the payment voucher is not made. He/She has not got pension book. Picture is not preset on the pension book. Loan Application form & Specimen Signature Card:

6. ADVANCE SECTION
Advance means To give loan to the parties amount may be small or big. 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. 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. MAJOR FUNCTION OF ADVANCES To finance the export and import of the country. To finance the industries, trade and agriculture. To give loan to student for higher education. To give loan to the business men. To give loan for house building.

Procedure for Granting of Loan


1. Loan Application Form & Specimen Signature Card

The bank provides a prescribed application form to the borrower. The borrower will fill the form. In that form the borrower will tell about: Type of the loan. Amount of the loan he needs. Period of time. Application will be also being provided a specimen card, which he will fill. 2. Declaration of Properties Form This form will provided a information about the business he involved and also provide the information about his properties in Pakistan. 3. Investigation Now the bank after analyzing his application, investigation about the applicants credit worthiness, and also the informations he provided about his properties. In case of business owners request for loan, investigation will be made on following ways for different business:

Sole Proprietorship: Investigation will be about:


Personal reputation of the borrower Nature of the business Types of properties (Shop, House and Land) their location with their present market value. Cash, Jewelry, Shares, Security, Bonds etc Stock in trade Their Liabilities

Partnership Firm
Name & addresses of the partners Deed of Partnership Branches if they exit Nature of the business Amount invested in the firm Purpose of the loan List of assets and liabilities Import export registration

Private and Public Limited Companies


Name of the Company Address with telephone numbers Wither private or public

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

1.

Granting of Loan

After detailed investigation, and documentation if the finance section finds the party well satisfactory and feasible then they sanction the finance to the party concerned.

TYPES OF SECURTIES
The word security means any thing given to protect or safeguard the repayment of an advance and to justify this term the thing so given should itself be safe, other wise the object for which securities can be made available can be made available in the bank against finances. These types are: Pledge Hypothecation Mortgage

In each case the bank does not become the owner of the, property but the bank has only the right over the property until the borrower makes payment of his debt.

1. Pledge
In a pledge, the possession of the property but not the ownership passes to the creditor. The pledge is entitled to the exclusive possession of the property until the debt is repaid byt the ownership remains in the pledge subject to the pledgees right.

2. Hypothecation
In case of hypothecation, the property in goods is changed as security for a loan from the bank, but the ownership and possession is left with the borrower. In case of hypothecation,

neither the property in goods and nor the possession of property pass to bank. but only the security is granted in a form of letter of hypothecation, which usually gives the bankers charge on the hypothecated goods.

3. Mortgage
In a mortgage, the property in the thing mortgage is conveyed to the mortgagee conditionally. The possession, until default in repaying the loan, generally, remains in the original owner subject to the mortgagees rights.

TYPES OF LOANS
National Bank of Pakistan provides various types of loans depending upon the requirement of the borrowers. Some of the important types of loans are:

1. Demand Finance
Under a demand loan arrangement, a fresh demand account is opened through the borrower may be having other deposit account with the banks. The amount of loan has to be drawn by the borrower in lump sum and is to be repaid in installments or as agreed upon. The borrower can not operate a demand loan account by depositing and with drawing amounts periodically.

2. Demand Finance Gold


Characteristics Security: Gold is used as a security. Recording: Single debt entry is recorded at the time of granting loan. Loan type: Short term loan. Rate of markup: 43.84 pptdp (Paisa per thousand on daily product) Required Documents Application Form Introductory reference sanction advise Valuation certificate by the gold smith Insurance letter IB-12 (Promissory Note) IB-26-(Letter of Pledge) IB-6A (Agreement Form) Delivery Letter (F-205)

NOTE: Only NBP performs the function of advancing of loan against pledging gold.

No other bank advance gold pledged loan.

3. Running Finance
a) Clean Running Finance b) Secured Running Finance a) Clean Running Finance Loan is granted mostly to the employees of the bank without demanding any type of the security from them. Characteristics: Type of loan: Short term loan. Number of transaction: Frequent transactions are made. Payment balance: It will be made in lump sum. Rate of markup: monthly installments Required Documents Account Opening Form Specimen Signature Card IB-12 IB-6 IB-31(Sale and Buy back agreement) b) Secured Running Finance Loan is granted in which some guarantee or security may be obtained from the borrower. Characteristics Rate of return: 43.84 pptdr (Paisa per thousand on daily Return) Type of loan: Short term loan. Payment balance: In installments or lump sum as mentioned in conditions.

4. Cash Finance
Under this type of credit NBP grant loan to its customers in cash. Under the cash credit arrangement a customer is granted an advance up to certain limit, which they cay draw time to time as required by him, In this case, a new cash credit account is opened in the name of customers. These are long term loans. Securities: I. II. Hypothecation Mortgage of properties

III.

Personal guarantees of all the partners of directors.