Prospects of implementation of E-banking tools for automation of

Govt. receipts and payments/prize bond

Internship Report

Summer Internship Program at State Bank of Pakistan SBP BSC

(Bank) Faisalabad
This report is submitted as a partial fulfillment of internship
program

Submitted To: Zahid Iqbal

ACM at SBP BSC
Faisalabad
Submitted By: Talha Ijaz (GCUF)
Anam Maqbool (GCWUF)

AUGUST 2017

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 Acknowledgment

The internship opportunity we had with State Bank of Pakistan (Banking Services Corporation) was a great

chance for learning and professional development. Therefore, we consider ourselves as very lucky

individuals as we were provided with an opportunity to be a part of it. We are also grateful for having a

chance to meet so many wonderful people and professionals who led us through this Internship period.

Bearing in mind previous we are using this opportunity to express our deepest gratitude and special thanks to

Mr. Zahid Iqbal, who in spite of being extraordinarily busy with his duties, took time out to hear, guide and

keep us on the correct path and allowing us to carry out our project at their esteemed organization and

extending during the training. We express our deepest thanks to the other officer of the division for taking

part in useful decision & giving necessary advices and guidance and arranged all facilities to make life easier.

We chose this moment to acknowledge his contribution gratefully.

We perceive this opportunity as a milestone in our career development. We will strive to use gained skills

and knowledge in the best possible way, and we will continue to work on their improvement, in order to

attain desired career objectives. Hope to continue cooperation with all of you in the future, sincerely.

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Contents
1. Introduction ................................................................................................................................. 4

2. Public account unit (PAU) ........................................................Error! Bookmark not defined.

2.1Current practice in PAU: from payment perspective ............................................................. 7

2.2Current practice in PAU: from receipt perspective................................................................ 8

3. Issues in current practice:.......................................................................................................... 10

4. Proposed process ....................................................................................................................... 11

4.1Payment perspective ............................................................................................................ 11

4.2Receipt perspective .............................................................................................................. 12

5. Proposed processs benefit ........................................................................................................ 13

6. Obstacles in the implementation of E-banking ......................................................................... 13

7. Prize bond ................................................................................................................................. 14

7.1Proposed Process ................................................................................................................. 16

7.2Analysis of current Process and E-banking Prize Bond System.......................................... 17

8. Conclusion ................................................................................................................................ 17

9. Recommendation ...................................................................................................................... 18

10. Reference .................................................................................Error! Bookmark not defined.

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Introduction
The purpose of this report is to reduce paper work and induce automation in the banking division
operations of SBP-BSC Faisalabad.

E-banking is the abbreviation of electronic banking. Electronic banking is also sometimes

referred to as online banking, virtual banking and electronic fund transfer (EFT). Electronic
banking is not only the ATM facility but it provides all other services like payments, purchase
and sale without physically visiting the bank.
Scope
In this modern age the entire banking structure has been changed due to universal internet
technology. Now all the business like commerce, trade purchase and sale of goods is relying
upon electronic banking. Banking services becomes more fast and economical. E-banking is a
saving of time. If any country wants to work in the world market, it will have to improve the
banking services according to international standard, because traditional banking is not
acceptable in the changing global economy. Today a large number of commercial banks have
been provided online banking services to their customers
Background
E-banking initiative was taken in early nineties in USA and UK but with the passage of time it
has become more advanced. Since the early 1980s, innovations in online banking have made it
easier for people to manage their money. Online banking during the formative years included
usage at terminal, keyboard and TV (or monitor) with an intention to approach the banking
system using a phone line. In the year 1981, New York started online banking services with four
of its major city banks..
In Pakistan, electronic banking introduced in late 1980s when first automated teller machine
(ATM) was installed in 1987.Foreign banks is initiator of introducing E-banking in Pakistan.
However, the real growth in ATM machine and ATM cards issuance were seen in 1999 after
establishment of national switches links and accelerated the issuance of ATM cards with the SBP
Circular 2002.
During 2016, Payment Systems in Pakistan have shown significant growth in key performance
indicators. It is encouraging to witness consistent upward trend in volume and value of payments
through digital/electronic channels which compliment the SBP vision to promote digital
payments in the country (The Nation).

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Objective:
To reduce manual work
Induce automation via E-banking
Importance
Electronic banking has attracted interest from policy makers, researchers and bankers. Retail
payments have assumed importance in the arrangement of rapid technological changes, influence
of market forces and regulatory developments. Hussain, et al.(2017) investigated E-banking
challenges in Pakistan. Authors added that no doubt E-banking made transaction easy and
fastest, but on the other hand non technical banking staff and securities issues reduce the
customer trust and level of satisfaction.
Tahir and Waheed (2017) examined E-banking challenges in Pakistan. Authors adopted both
primary and secondary data in which they used challenges of E-banking as a dependent variable
and safety, lack of awareness and high cost of implementation as independent variables. Authors
applied regression and correlation analysis. The result revealed that all variables have positive
and statistically significant impact on E-banking challenges. Ali and Hashim (2015) conducted
E-banking in Pakistan: issues and challenges. Authors used secondary data that have been
collected from various sources. Authors appointed that telecommunication, security and trust
level are major issues in the adoption of E-banking.
Rusu and Shen (2012) examined an empirical study on E-banking acceptance in the United Arab
Emirates. They added that the Internet has been used to support many traditional banking
services, such as managing an account and transferring funds among different accounts. It also
enabled some new services, such as electronic bill payments and online investment. Gupta
(2008) examined internet banking in India-consumer concern and bank strategies. He found
internet banking to be very easier and speedier than the conventional banking. The trust was
found as most important factor followed by accuracy and confidentiality.

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Banking division
Banking division performs one of the core functions of SBPBSC (State Bank of Pakistan-
Banking Services Corporation). This division is divided into two units.

Banking
Division

Deposit Account Unit Public Account Unit

1. Deposit account unit (DAU)

DAU provides services to the commercial banks as well as government departments. It
maintains current accounts, handles local remittance and performs other miscellaneous tasks
such as safe custody and reconciliation of internal accounts.
2. Public account unit (PAU)
PAU provides services to the government departments. Being banker to the government,
it plays a key role to collect and pay moneys on behalf of government.
Detailed working of the PAU
PAU maintains three different types of government accounts while dealing with the receipts and
payments of government sector. The government accounts and modes through which such
payments are processed are as below:
Type of accounts:
i. Drawing Account
An authorized officer of a department can draw funds from the bank without limit.
ii. Assignment Account
It is a separate bank account opened in a favor of deputed authority into which funds are
released for specific purpose.
iii. Personal Ledger Account (PLA)
These accounts are maintained with government treasury office while concerned drawer
draws cheques on treasury office. Treasury officer affixes his pay order on cheque to be
payable at bank.

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Modes of government payments and receipt:
Cash
Clearing
Transfer
Current practice in PAU: from payment perspective
In PAU, payments are made against federal and provisional government cheques via all three
aforementioned modes of payment.
CASH:

DDO /cashier or any other authorized person present cheque on PAU CASH Payment
counter.
Counter officer of banking unit verifies signatures and issues a token after scrutiny of
Cheque, Schedule marking and inputting in Globus (system).
Schedule is a detailed list of cheques issued by District Accounts Office and it is receive
in a physical paper form.
Authorizer again verifies sign of DDO/DO and authorizes cheque for payment after
scrutiny.
Banking counter from Issue & Treasury unit gives the payment to relative person after
taking respective token and verifying payees signatures on the back of cheque.
In evening banking and currency unites tally figures of payments.
PAU Payment section prepares vouchers and send to DAU
Cash payment procedure:

Schedule
Presenting
marking(from Signature Receive money Tallying with a Preparation of
cheque at PAU Token issued
the list of verification & from cash systematic vouchers and
Banking after scrutiny
relative Authorization counter report deliver to DAU
Counter
department)

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DDO registration
Drawing and Disbursement Officer (DDO) or its representative specimen is already kept by
PAU. If new DDO is appointed than following document along with its specimen signature card
(SSC) has to provide to PAU.
3 Signatures on SS Card
Cover letter
Attested photocopy of staff order
Attested photocopy of charge report
Attested photocopy of relieving report
Attested photocopy of CNIC of DDO
After that a manual card issued to the DDO/cashier. PAU counter officer marked a number on
this card and date of issuance.
Current practice in PAU: from receipt perspective
Government receipt has different forms like Tax receipt, receipt credit to provincial and federal
Government head accounts and receipt from National Bank of Pakistan (NBP) or Bank of Punjab
(BOP) on stamp duty and traffic challan.
According to accessible practice, registered institutions, commercial banks and other private
institutes deposit withholding tax via cheques and other instruments (manually) to SBP. A PSID
must be attached with a cheque/payment order or cash for further clearance by direct credit (only
on cash basis) or laundering the same through NIFT for clearness.
Cash receipt procedure:

Directly cash Ticking with

Transfer of
accept along Cash Input/authoriz systematic preparation of
challans to
with challan department ation report with vouchers
treasury
form PAU

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Clearing from payment & receipt side:
The transfers of fund from a branch of a bank to the other bank on which instrument is drawn
without involving cash through NIFT (National Institutional Facilitation Technology). Transfer
instruments are presented at SBP field office in clearing by NIFT for payment.
NIFT:
NIFT was incorporated in September 1995 as a joint collaborate between six banks and private
sector entrepreneur. All commercial banks and their branches avail NIFTs services.
Role of NIFT:
NIFT inaugurate its ACH (Automated Clearing House) operations in 1996, after signing
an agreement with the SBP.
ACH is computer based clearing and settlement facility for interchange of electronic
debit and credit among financial institution.
NIFT provides quality services and solutions to its entire client.

Modes of Clearing:
Inward clearing
Inward clearing mean cheque received by the bank from other bank. This process decreases the
deposit of a bank.
Outward clearing
Outward clearing means cheque or other instruments sent for collection. It increases the deposit
of a bank.
Current practice/process
DAO issues a Cheque/PO to payee
Payee deposits the Cheque/PO in his bank account which is then presented on SBP for
clearance via NIFT.
Concerned officials responsible for payment side clearing then scrutinize the cheques and
mark them against the advices received from District accounts office. After due diligence,
cheques good for clearance are posted in the system where as the objectionable cheque
are returned to NIFT.
At day end, credit is given to NIFT for the payment made which is then passed on to
respective commercial banks.

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 Scrutiny of Cheque Stamping and
Cheque deposited
and Challan/PSID Posting

Prepare bundle
cover for
Send to NIFT normal/intercity
clearing

Transfer:
Same day credit/debit transactions, involving funds transfer between two account heads,
exclusively for Govt. drawn instruments and SBP issued cheques
Current practice:
Paid department present a cheque after issuing the DAO
Present it on counter for fund transfer
After scrutinized process at the end of day funds are transferred.
Issues in current practice
Cash transactions require manual counting, verification of notes and storage arrangements,
which increases the transaction time and cost. This current practice shows a prominent contrast
with the fact that todays modern world has been implemented by internet based transactions, be
it of financial or commercial nature. Mostly transactions are performing by means of electronic
and internet banking.
Time consuming -customer shift three counters for the disbursement of funds each
counter verifies signature and mark scrutiny.
Mostly task perform manually like cheque scrutiny and schedule marking.
Engage risk-as counter one PAU officer verify the payee, it issue a token to him and
marked token number in the system. While moving other counters token can be lost.
Inefficiency
More manpower required to perform task
Lack of computerized system/IT

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To remove all these limitations and make the working more perfectly the system needs to
be computerized.
Proposed process
Payment perspective
Most of Federal/Provincial government institutes present their bills to the DAO for
disbursement of funds to meet their needs and expenditures.
DAO prepare the list of those departments whose bill has been passed for disbursement.
In this list all significant details should be included like payee name, amount, electronic
cheque number, bank name, account branch code etc.
DAO will upload these data to SBP.
SBP will import this data in to its own system and run process on it.
SBP will classify these data according to banks. For example how many accounts have to
be maintained in ABL, HBL, and MCB etc.
SBP will forward these classified data to the commercial bank district main branches,
whose accounts are maintained in SBP, via credited to banks account and debited to
Government accounts.
Head branches give instructions/send data to the concerned branches, that maintains
department account, by giving credit to concerned account.
Both accounts (government or commercial bank) maintained SBP , so it reconciled the
accounts at the end of day.
Second
A special bar code will be print on cheques.
SBP and DAO should have same data system.
DAO will send an electronic schedule marking to PAU in which all important details
should be included.
All cheques presented for disbursement of funds should be printed not hand written.
When DDO/Cashier will present cheque on counter, PAU payment officer scan the
cheque bar code via bar code reader then all details of cheque occur on computer screen.
Officer will scrutinize the cheque and authorized it in the system for disbursement of
funds.

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DDO/Cashier registration
For registration/to acquire registration card DDO/Cashier should come to SBP
To prepare digital card, both will put their thumb impressions
This thumb impression and personal information will be put in the system by the PAU
officer
Then a digital card will be issue to the authorized person
For cash payment, DDO/Cashier will come to SBP along with Government draw
instruments
PAU payment counter officer will swipe the digital card in machine and mark his thumb
impression in a system as a digital signature verification
After marking entry in the system, authorized person will move to cash counter to receive
payment
Second:
For registration DDO/cashier should come to SBP. Both will put their thumb impressions and
DDO also signed on digital scan machine with a touch pen. It is much stronger than the hand
written form one. System will store this signature and thumb impressions. When any one of them
will come for funds collection, he will put their thumb impression. All his information will occur
on screen. PAU counter officer verify the concerned person and authorized it. Then he will move
for payment.
Receipt perspective
It is proposed that for the enforcement of electronic and online banking a website may be
launched where customers or tax payers simply log in and submit their taxes or challan fees via
internet banking by use of direct debit/credit government facility.
Tax Payment
On this webpage FBR (Federal Board of Revenue) upload the PSIDs (Payment Slip ID)
Performa of taxpayers along with their tax details
Taxpayer will get their PSID by log in on the portal by using their NTN (National Tax
Number)
Select the nature of payment whether it is withholding tax and sale tax
Taxpayer will directly credit the amount to FBR account

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Second
Commercial banks provide online services to their customers
Tax payer via his account log in the webpage/portal
Select the mode of payment and will debit his personal/department account by giving
credit to commercial banks
Commercial banks make a statement at end of day/week and send to SBP for accounts
settlements
SBP is maintaining the accounts of main branches. So it reconcile the accounts via
debit/credit to Government and commercial banks account
E-Challan
By using e-banking, public can pay their challan fee or stamp duty to Government
accounts
For this purpose, a portal of Government Receipts should be build
Customer will log in the portal/webpage by his National Identity Number
Select challan form and enter the details of the government account, to which credit is
intended, as well as the details of the person/institution by whom the challan is tendered.
Select mode of payment, amount, bank and also enter his mobile number and click on
submit button
After submission of E-form a text message will be received by the customer on his given
mobile number to verify that his payment has been paid.

Proposed processs benefit

Ensure data accuracy
Minimize manual data entry
Work efficiency of the worker will improve
Minimum time required
it reduces queue (waiting lines) in front of bank/counter
Payment system will become more secure

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Obstacles in the implementation of E-banking
The implementation of e-banking is not as easy as it looks to be.

Obsolete Federal Treasury Rules

Low level of finance
Lack of coordination between institutes
Lack of trained staff at DAO
Shortage of IT equipments/lack of computerization
Risks related to the implementation and maintenance of systems
Prize bond
Prize Bonds are a form of Federal Government Security issued under Public Debt Act, 1944. In
terms of an agreement signed in June, 1949 between the Federal Government and the State Bank
of Pakistan, the SBP is responsible for management of the public debt and the issuance of new
loans by the Federal Government and to act as an agent for the Federal Government in Pakistan
in the management of the public debt.
Prize bond is the bearer instrument and is type of a debt for government from general public.
Central Directorate of National Savings (CDNS) is the owner of this scheme and decides in all
policy related matters with regard to this scheme. Prize Bonds are printed by PSPC. State bank of
Pakistan issued the prize bond on behalf of the government. Generation of funds and the usage of
funds in the productive manner is the main reason behind the issuance of prize bond. Sale and
purchase of bonds occurs in open period (duration of 1 month after draw) and is carried out
through the 16 Field offices of State bank of Pakistan. The bonds can be en-cashed at any time at
the cash counter of SBP BSC or any commercial bank, after checking that bond is genuine or
not. The draw is held by manual system as per Draw Schedule issued by CDNS every year and
proper Draw committee is arranged. Draw of bonds of each denomination is held once in a
quarter in a year. To be included in draw it is necessary to purchase prize bond at least 2 months
before draw.
Current Denominations of Prize Bonds
There are total 8 different denominations of prize bonds:
Small Denomination Bonds
Rs.100, Rs.200, Rs.750, Rs.1500

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Its draw held at every 15th of every month
High Denomination Bonds
Rs.7, 500 Rs.15,000 , Rs.25,000, Rs.40,000
Its draw held at every 1st of every month
Payment Claim
Payment of prize money started right after the execution of draw result. The prize money can be
claimed within the six years at any SBP BSC office, otherwise the claim will be expire. On
prize money 15% of with-holding tax is deducted from filler.
Procedure for claim
The prize money which is below Rs.18,500 is paid on the same day (through one window
operation), and the prize which is more than Rs.18,500 and less than Rs.500,000 is paid within
next 20 working days, and the prize, which is above Rs.500,000 is paid after 30 working days.
Below Rs.18, 500
Following documents are required for claiming the prize money below Rs.18, 500
The form (PB 23) duly filled
Photocopy of CNIC
Photo copy of the prize winning bond duly signed by the applicant.
Above Rs.18, 500
Following documents are required to claim prize money for above Rs.18, 500
The form (PB 23-A, PB 32-A) duly filled
Photocopy of CNIC
Winning prize bond (original) duly signed by the applicant
Photo copy of the prize winning bond duly signed by the applicant.
After the counter is closed a confirmation Email in form PB-59/60 containing number of the
bond, place of issue, date of issue, draw number and amount of prize money are sent to the PDOs
concerned i.e. Karachi & Lahore for their confirmation of outstanding position. All 16 SBP BSC
are divided into 2 PDOs (public debt office) to reduce the risk involved in payment of high prize
money. Then after complete confirmation of the prize money the bond is paid.
PREMIUM PRIZE BOND
Premium prize bond is registered in the name of investor. Premium prize bond is hybrid type of
prize bond as it gives profit @1.5% semiannually and quarterly prize money draws (at 10 th of

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month). Profit rates are decided by the CDNS (Central Directorate of National Savings).The
amount of profit and prize money is directly credited to the investors account. No profit is paid
for the broken period, and it also had alpha numeric numbers. It can be purchased from SBP
BSC. It is secure as it is registered. Currently it is issued in two denominations
Rs.40,000 , Rs.100,000
Required Documents
Following documents are required to acquire Premium Prize Bond.
Copy of CNIC.
Account Maintenance Certificate.
Tax Certificate in case of Filer.
Nominee CNIC details.
The idea about Prize bonds is that what should we implement something new in it and make the
prize bonds more attractive for general public.
We should introduce electronic banking in prize Bonds. This will become the more benefitted
not only for the SBP but also for the stakeholders. By doing this initial cost will be maximize,
But the prize bond will become more secured. And another major benefit of this is that Black
money cannot be renewed into white money just because the help of Electronic based Prize
bonds.
Proposed Process
The Physical Existence of prize bonds should be ended.
All prize bonds should be come back by the General public and allot them an Electronic
Number.
Then that Electronic numbers should be registered in the Central Bank.
Mobile Apps should be launched for the easiest way of use Prize Bonds. But that App
should be registered with the state bank or national savings.
This App will contain the full detail and list of all draws.
This app will also connect with your commercial bank account.
The customer cant receive its amount from cash counter the payment will be transferred
to the customers account.

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 If customers prize bond number will match with the draw lists number, then payment
will be transferred to the customers account.
Analysis of current Process and E-banking Prize Bond System
Current situation
There is much more crowd of the people in the state bank and one of the major problems
is that they face many problems like sunny weather and wastage of time.
Black money is easily converted into white money. It is illegal and has negative effect on
economy.
The work load is higher in this situation.
New situation
If we adopt the E-banking in Prize bonds then people will not face these problems and
they will receive the amount without any wastage of time.
By doing this Line system will be end
Claim counter will be ended.
By adopting this Idea prize bond robbery will be End and this instrument become more
secure.
Prize bond will be registered in the Electronic Prize Bond system and whoever win this
the price will be directly transferred to the winners account.
Black money cannot be converted into wide money just because the help of Electronic
based Prize bonds.
The work load should be reduced on the employees of stat bank.
Conclusion
This report examines the possibilities of implementation of E-banking in Government receipts
and payments and also in prize bonds. Due to technological advances, world has become a global
village where E-banking is an important aspect of economic development. For this purpose we
have investigate the current working of Public Account Unit and prize bond. We find that the
current practice of payments and receipts in these units is require to come out better structure of
electronic banking. We have predicted some proposal to implement E-banking. But these are not
possible without the coordination of institutes.

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Recommendation
The implementation of e-banking is not as easy as it looks to be. There are many difficulties in
implementation of it. But SBP has a potential to promote it with cooperation of other institutes.
To the fulfillment of these we suggest that:
Federal Treasury Rules should be transformed
Eliminate the storage, handling and processing of paper cheques for Govt. receipts
The ways to promote the Electric prize bond system
Authorized dealer
In every city there must be 4-5 authorized dealers by state bank. There work is to issue
bond to general public on the behalf of state bank.
The authorized dealer should be registered by national saving and also with stat bank of
Pakistan.
State bank should take a handsome amount from those dealers as security.
A determined of fixed commission should be given to them at each bond issuance.
Help desk
There should be a separate help desk for general public where they can easily get the
information about electric prize bond system.
Publicity
State bank and central directorate of national saving should make the publicity of
Electronic banking by different methods that methods should be convenient. We all are
well known about the different ways of publicity like TV News paper and social media.
Reference
1. Hussain,z.,Das,D.,Bhutto,Z.A.,Hammad-u-Salam,M.,Talpur,F.,Rai,G., 2017. E-Banking
Challenges in Pakistan: An Empirical Study. Journal of computer and communication
(5):1-6
2. Tahir, R., Waheed, N., 2017 E-Banking Challenges in Pakistan. Journal of finance and
accounting (8):5
3. Gupta, P.K., 2008. Internet Banking in India Consumer Concerns and Bank Strategies.
Global Journal of Business research 2: 43-51.
4. Ali, S., Hashim, M., 2015. E-Banking in Pakistan: Issues and Challenges. International
Journal of Academic Research in Business and Social Sciences (5):3
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5. Rusu, R.F., Shen, K., 2012. An empirical study on E-Banking acceptance in the United
Arab Emirates (UAE).Journal of Electronic Banking Systems: 1-9.
6. www.sbp.org.pk.PAYMENT SYSTEMS REVIEW (FISCAL YEAR 2015-16)
7. http://www.the nation.com
8. workintown.com/the-history-of-online-banking

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