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Internship Report on NBP, Civil line Branch, Sargodha, (2010),

INTRODUCTION TO STUDY
1.1 INTRODUCTION

As a part of requirement by University, the students of BS-Economics are required to under go 3 to 4 months of internship in a well recognized organization where they can learn to survive in an organizational environment and can practice their previous knowledge as well. This internship is related to National Bank of Pakistan (NBP), Civil Line Branch Sargodha. Since the inception, NBP is improving continuously and has become now the largest commercial bank in Pakistan. PURPOSE OF INTERNSHIP The main purpose of the exercise is to develop following skills in students: To develop professional attitude in students. To develop interpersonal communication. Practice of knowledge.

These skills are helpful for a student in presenting himself in market in a dynamic and efficient manner. SCOPE OF INTERNSHIP As an internee the basic emphasis of my efforts was to understand the basic procedure of banking. These procedures were concerning to Cheque collection Department, Clearing Department, Government section of NBP, Utility Bills Collection Department, Tax Collection Department (FBR), Remittance Department, Advance Salary Department, SME and Agriculture loaning Department, Foreign Exchange Department, Account opening Department and other general procedures.
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1.4

LIMITATIONS IN WORKING AND REPORTING

The study may not reveal all the edges of banking system because being an internee some restrictions were present in working in the branch as well as in reporting the work in internship report. The first restriction was that an internee is not allowed to use the Electronic banking System (EBS, latest software that contains the details of all finance of the bank). Secondly, the internees are required to fill secrecy bond before joining that bounds the internee to express all the knowledge he/she gained from the bank due to Bank secrecy. 1.5 BENEFIT OF THE STUDY

The study is very useful for the students of Economics, Accounting and Finance and Marketing, They utilize the study to understand the basic procedure of organizations specifically of Banks. The students who are interested to choose banking as career will be benefited a lot because the study will help them in understanding the Basic Banking System. 1.6

DATA COLLECTION

The major part of data used in the study is primary data, that I gained from my own observation and from interviews of staff members. Secondary data is also used in the study. 1.6.1 PRIMARY DATA:

Primary data includes; Personal observation and Interviews of The Staff Members of the branch.

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1.6.2

SECONDARY DATA:

Secondary data is depicted from Manuals, Journals, magazines, Annual Reports from the web site of NBP.

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INTRODUCTION TO BANK

2.1

INTRODUCTION TO BANK

There are different opinions that how the word Bank originated. Some of the authors 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 Bankrupts 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 Bank.

IN SIMPLE WORDS: A bank is 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 a higher rate of interest to those who apply for loan. The difference between the terms at which it borrows and those at which it lends from the source of its profit

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2.2

NEED AND EVALUTION OF BANKING SYTEM IN PAKISTAN

Before partition of the subcontinent, the entire banking system was almost in the hands of Non-Muslims. When Hindu capitalists become sure of the division of the sub continent, they transferred their fund to India in safe places. There was also a mass scale migration of Non-Muslims from Pakistan to India, which also caused a reduction in the bank deposits. At the time of independence in 1947 Pakistans Commercial banking facilities were almost jammed according to a plan. The following lines will give us a fair view of the situations, which were prevailing at that time 2.2.1 INDUSTRIAL SECTOR

Pakistan had practically no industries except a few textile mills and only produced food grains and agricultural raw materials; most of the industries were situated in the areas, which now constitute India. 2.2.2 LACK OF BANKING FACILITIES

A number of banks closed their branches with the result that only 81 branches remained open on 30th June 1948 out of 487 in 1947. As their head offices were in India and most of their Hindu staff fled to India. Imperial Bank of India, which was conducting government, receipts and payments work closed down most of its branches thus blocking the funds needed most by the government.

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2.2.3

HABIB BANK LIMITED

The country being in infancy, needed most of the general commercial banking and credit facilities. And this need was a little bit satisfied with the transferring of the head office of the H.B.L. to Karachi on 7th August 1947.this bank played a great role in the next many years of the economic development of Pakistan. As the Habib Bank was also new in the newly born country .It was asked to open more branches at new places. Imperial Bank of India, which was conducting government, receipts and payments work closed down most of its branches thus blocking the funds needed most by the government.

2.2.4 FORMATION OF THE STATE BANK OF PAKISTAN:


In view of the above-mentioned circumstances and in order to rehabilitate the banking in Pakistan without further delay, on the recommendations of an expert committee it was decided to establish as early as possible a Central Bank to control the banking and currency in Pakistan. Accordingly State Bank of Pakistan was inaugurated by Quaid-e-Azam Muhammad Ali Jinnah on 1st July 1948.This bank lost no time in meeting the national requirement of banking currency and took following remedial measures:Requested Government to start a new bank for nation wide service. Accordingly National Bank of Pakistan was formed in 1949, which opened numerous branches. It also took over government agency work from Imperial Bank of India in 1952. 2.2.5 WITH DRAWL OF THE INDIAN CURRENCY

It withdrew Indian currency notes of Rs.125 crore from general circulation and sent these for recovery to Reserve Bank of India.

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In order to help the growth of foreign trade foreign exchange department was setup in State Bank of Pakistan. Banking Companies (control) Act 1949 empowering State Bank of Pakistan was passed.

The following banks were also opened:


2.2.6 AGRICULTURE DEVELOPMENT BANK:

Agricultural Development Bank was set up to finance agriculture production in order to overcome food shortage. 2.2.7 PICIC:

Pakistan Industrial Credit and Investment Corporation (PICIC), was acted to finance industrial projects. 2.2.8 UBL:

United Bank Limited was established to meet the increasing demand for funds consequent upon the commodity market having become firm. The following banks and other financial institutions were also formed with the passage of time. 1. Commerce Bank Limited 2. Standard Bank Limited 3. Muslim Commercial Bank Limited 4. Australia Bank Limited

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3.1

INTRODUCTION TO NATIONAL BANK OF PAKISTAN LIMITED:

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 services offered through its nation wide branches. 3.1.2 ESTABLISHMENT:

National Bank of Pakistan was established under the National Bank of Pakistan ordinance 1949 and it came into existence on November 20; 1949.Its main aim was to provide all types of banking services to the government and private sector. The bank also handles treasury transactions for the Govt. of Pakistan as agent to State Bank of Pakistan.

VISION STATEMENT OF NBP:


To be recognized as a leader and a brand synonymous with trust, highest standard of services quality, international best practices and social responsibility.

MISSION STATEMENT OF NBP:


NBP will aspire to the values that make NBP truly the nations Bank, by:
Institutionalizing a merit performance culture Creating a distinctive brand identity by providing the highest standard of services Adopting the best international management practices Maximizing stakeholders value

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Discharging our responsibilities as a good corporate citizen of Pakistan and in country where we operate

GOALS:
To enhance the profitability and maximization of NBO share through increasing leverages of existing customer base and diversified range of products.

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3.1.4.1

BOARD OF DIRECTORS

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(Source Annual report 2009)

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3.1.5

SENIOR MANAGEMENT

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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. (Source www.nbp.com.pk)

NET WORK OF BRANCHES:


NBP has a vast network of 1265 branches across the country.

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3.1.6

In Pakistan it has 29 regional offices:

3.1.7 Branches Network


NBP Domestic Branches Online Branches SWIFT Branches NBP Overseas Branches Network ATM Finder

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3.2

NBP ISLAMIC BANKING:

NBP is proud to expand its range of products and services to include Shariah Compliant Islamic Banking products, now available at our dedicated Islamic Banking Branches at Karachi, Lahore and Peshawar. ISLAMIC BANKING MISSION

To become a leading player in the growing field of Islamic Finance in Pakistan and abroad, providing depositors and shareholders in a truly SHARIAH COMPLIANT way, the best combination of returns and future growth

ISLAMIC BANKING VISION To set standards of best practices and performance through efficient asset allocation, and offer / develop products based on the true spirit of Islamic finance.

3.2.1

ISLAMIC BANKING NETWORK:

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The branch I chose:


I chose National Bank Civil line Branch Sargodha for my internship because is main branch of the region and there was a lot of things to learn there.

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Legal identity of the branch:

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HIERARCHY OF NBP CIVIL LINE BRANCH SARGODHA,Sargodha.

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4.1

FUNCTIONS OF NBP

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

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Like other commercial banks, NBP is engaged in financing international trade. Its other major functions include receiving deposits, advancing loans and discounting of exchange. The functions performed by NBP are: ACCEPTING DEPOSITS This function is important because banks largely depend on the funds deposited with them by its customers. Deposits are of many types: 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.5000/-. 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.1000/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
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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. AGENCY SERVICE NBP also provides best and unique service to its valued customers. NBP provide the following agency services to the customers: 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. 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. ACTING AS AN AGENT NBP also acts as an agent correspondent or representative for its customer at home or abroad. GENERAL UTILITY SERVICES: Utilities provided by NBP are as follows: CLEARANCE OF UTILITY BILLS NBP provides the service of clearing the utility bills i.e. electricity, gas and telephone bills of its customers. For this purpose it also provides evening banking services

LOCKERS FACILITY

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

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Safe Deposit Lockers for customers.

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4.2

RETAIL PRODUCTS OF NBP

Amount of investement required from Rs. 20,000/- to Rs. 5,000,000 Investment period is 5 years Free Demand Draft, Pay Order and NBP Online Aasan Banking* Free Cheque Book / NBP Cash Card (ATM + Debit) Profit paid every month as follows: Period Profit Rates** 1st year 7.50% 2nd year 8.50% 3rd year 9.50% 4th year 10.50% 5th year 11% Financing facility available upto 90% of the deposit value Premature encashment will attract penalties Zakat and withholding tax will be deducted as per rules

Minimum saving balance of Rs. 20,001 and a maximum balance of Rs. 300,000*

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Free NBP Cash Card (ATM + Debit) Two debit withdrawals allowed in a month and no limit on number of deposit transactions Profit calculated monthly and paid on half yearly basis

Profit *Certain **Premature encashment

rates conditions will result in

are lower rates of

expected apply return

***Expected rates are for the given year For further details and application forms, visit NBP branches nationwide or call 080080080 from 8:30 am to 10:00 pm or log on to www.nbp.com.pk. Added convenience of NBP Online Aasan Banking available in 30 cities.

President's Rozgar Scheme, if you are aged between 18 and 45 years, you could be eligible for easy financing for self employment in the categories below:
NBP Karobar Utility Store

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NBP Karobar Mobile Utility Store NBP Karobar Mobile General Store NBP Karobar Transport NBP Karobar PCO NBP Karobar Tele-Centre

Home Purchase Home Construction Home Renovation Purchase of Land + Construction Balance Transfer Facility (BTF) Financing Amount

Upto 35 Million

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Financing Period Debt to Equity

3 to 20 Years 85:15 (Maximum)

Financing Amount Financing Period Debt to Equity

Upto 35 Million 3 to 20 Years 85:15 (Maximum)

Financing Amount Financing Period Debt to Equity

Upto 35 Million 3 to 20 Years 85:15 (Maximum)

Take 20 advance salaries (currently for NBP account holders of govt. or related organization employees National Bank of Pakistan (NBP) NBP Advance Salary , the leading personal loan product of the country, is maintaining its inimitability ever since it was launched. This was only possible due to its swift growth and remarkable loan disbursement of over 138 billion. You can avail up to 20 net take home salaries with easy repayment installments. Its hassle free acquisition with no prior formalities and easy availability in a short turn around time are attributed as the most distinguishing features of the product. The product is offered countrywide

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CashCard is an 24-hour direct access ATM/Debit card to your bank account, which lets you pay directly from your account as an alternative payment method to cash. The transaction is authorized and processed by entering PIN. The NBP CashCard holders are able to transact at any of the 4000 + Merchants where Orix logo is displayed and can withdraw cash from NBP, 1-Link & M-NET ATMs across the country.

Advantages

You won't need to carry a lot of cash with you every time you go out. Secure and Safe transaction. Account Information on tips (like: Mini Statement, Balance Inquiry, Utility Bill Payment etc.) Enable To Withdraw Cash From 1-Link ATMs / MNET ATMs. Enable To Make Purchases From Around 4000 POS (Merchants) Countrywide including 2500+ POS in Karachi. No Card Issuance Fee for first 12 Months

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Features:

Comfortable and secure environment for trading NBP financing at very easy terms requiring minimum documentation Minimum turn around time No security requirement from the customer except for the customer's equity

With NBP's Cash n Gold, you can meet your need for ready cash against your idle gold jewelry Rate of mark-up 13% p.a. Facility of Rs. 10,000 against each 10 gms of net contents of gold No maximum limits of cash Repayment after one year Roll over facility Only gold ornaments acceptable

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Weight and quality of gold to be determined by NBP's appointed schroffs No penalty for early repayment

This program is related to dairy farmers. Under this program dairy farmer are given loans on reasonable interest rate and loans are sanctioned in less paper work.

This program is related to farmers. Under this program farmer are given loans on reasonable interest rate and loans are sanctioned in less paper work.

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Product Information:
Insurance Coverage In case of Accidental Death (Including death due to *Riots, *Strikes, *Civil commotion, *Acts of Terrorism and Natural Calamities like Flood, Earth Quake, Cyclones etc). Coverage of Rs. 200,000/- for Rs. 20/- per month Definitions: *provided the insured is not directly involved in these activities

5.1

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. 5.1.2 DEMAND DRAFTS

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If you are looking for a safe, speedy and reliable way to transfer money, you can now purchase NBPs 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. 5.1.3 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. Using the NBP network of branches, you can safely and speedily transfer money for our business and personal needs. 5.1.4 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. 5.1.5 TRAVELER'S CHEQUES

Travelers cheques are negotiable instruments, and there is no restriction on the period of validity of the cheques. Rupee travelers 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.

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5.1.6

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. 5.1.7 AIL TRANSFERS

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. 2.1.8 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

5.1.9

NEW FEATURES:

The existing system of home remittances has been revised/significantly improved and well-trained 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.
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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.

5.1.10 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, NBPs rates of profit are extremely attractive, along with the security and service only NBP can provide. 5.1.11 NATIONAL INCOME DAILY ACCOUNT (NIDA) 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

5.1.12

It is a checking account and there is no limit of withdrawals. EQUITY INVESTMENTS

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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. 5.1.13

NBP IS INVOLVED IN THE FOLLOWING: Investment into the capital market Introduction of capital market accounts (under process)

NBPs involvement in capital markets is expected to increase its earnings, which would result in better returns offered to account holders 5.1.14 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 customers best resource in making NBPs products and services work for them. 5.1.15 TRADE FINANCE OTHER BUSINESS LOANS

There are two types of trade finance. 5.1.16 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.

5.1.17 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

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will be made role models for other farms and farmers to follow, thus helping farmers across Pakistan to increase production. 5.1.18 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.

5.1.19 AGRICULTURAL CREDIT (MEDIUM TERM):


Production and development Watercourse improvement Wells Farm power Development loans for tea plantation Fencing

Solar energy Equipment for sprinklers

5.1.20 FARM CREDIT:

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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. 5.1.21 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. 6.1 DEPARTMENTALIZATION 2

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 6.1.2 CASH DEPARTMENT

Cash department performs the following functions

RECEIPT The money, which either comes or goes out from the bank, its record should be kept. Cash department performs this function. The deposits of all customers of the bank are

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controlled by means of ledger accounts. Every customer has its own ledger account and has separate ledger cards. PAYMENTS It is a bankers primary contract to repay money received for this customers account usually by honoring his cheques. CHEQUES AND THEIR PAYMENT The Negotiable Instruments. Act, 1881 3 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

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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

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

BEARER CHEQUES
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Bearer cheques are cashable at the counter of the bank. These can also be collected through clearing. 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. CROSSED CHEQUE These cheques are not payable in cash at the counters of a banker. It can only be credited to the payees 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 bankers primary contract to repay money received for his customers account usually by honouring his cheques. Payment of money deposited by the customer is one of the root functions of banking. The acid test of banking is the receipt of money etc. from the depositors, and repayment to them. This paying function is one, which is the distinguishing mark of a banker and differentiates 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 customers cheques if the following essentials are fulfilled. a) b) Cheques should be in a proper form: Cheque should not be crossed:
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c) d) e) f) g)

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:

6.1.3 CLEARING DEPARTMENT:


The basic function of clearing department is to provide services to customers in collection of their cheques of other banks, whether they are in city or outside the city. The customer can get the money in his account at NBP from the cheques drawn on another bank. CLEARING BY BANK: These days the clearing work is over held by the NIFT(National Institutional Facilitation Technology) instead by the state bank .When the bank is going to make the payment then the bank officer will sign the cheque if the amount of the cheque is greater then Rs50000/- then signature of the officer +signature of the head of the deposit department. Important Things in Clearing;


6.1.3.1

Cross Stamp Clearing Stamp Endorsement Stamp


TYPES OF CLEARING:

Inward Clearing Outward Clearing


INWARD CLEARANCE:

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Cheque drawn on NBP and presented to other Banks. That is inward clearance for NBP. So inward clearing results in outflow of funds for NBP by reducing the balance in the clearing account

OUTWARD CLEARANCE: Similarly cheque, which is drawn on other bank and presented to NBP are known as outward clearance for NBP. So outward clearing results in inflow of funds for NBP.
6.1.4 ADVANCES DEPARTMENT

Advances department is one of the most sensitive and important departments of the bank. The major portion of the profit is earned through this department. The 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.
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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 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.

6.1.4.1 NBP ADVANCE SALARY:

This product is for fixed-income permanent employees of Federal & Provincial Government, Semi-Government, Autonomous, Semiautonomous, local bodies and other Government organizations. The product is purely cash flow based and offers its holder to avail 20 (twenty) net salaries in one go to be repaid in up to 60 (sixty) months. With no collateral, insurance or requirements. Other things about Advance Salary are: A maximum of 20 take home salaries up to 490000/ are given to the employees The mark up rate is 15% P.A reducing balance and processing fees is 1%.

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Maximum repayment period is 60 months. Undertaking signed by D.D.O (Drawing & Disbursement Officer) that the salary of the employee will continue to come in NBP and also intact his end service benefits. Partial payment is not allowed only through monthly installment or balance in lump sum and no charges on before adjustment. FED is 5% of the processing fees.

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6.1.4.2 RUNNING FINANCE AGAINST LIQUID SECURITY:


It is for the period of 1 year and is issued against liquid securities.
LIQUID SECURITIES;

Defense Saving Certificates Special Saving Certificates Regular Income Certificates Prize Bonds Foreign Currency Deposits Local Currency Deposits

PROCESS OF RUNNING FINANCE:

A running finance account is opened by the customer. Up to 20M is allowed to the NBP. An application is submitted by the customer with B.F.S and 2 references and the following documents: I.D Card Copy Original Instrument Lean from issuing Branch (so that no one could issue the duplicate certificate. This certificate is signed by the customer).
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 borrowers disposal in lump sum for the period agreed upon, and the borrowing customer has to pay interest on the entire amount. Thus

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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

6.1.5

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) e) Demand Draft Telegraphic Transfer Pay Order Mail Transfer Inter Branch Transaction

DEMAND DRAFT

A bill drawn either on demand or otherwise by one bank on another in favor of third party or by one branch of the same bank or buy the Head Office on a branch or vice versa. It is from city to city. It is the best way of making payment from city to city.
CHARGES OF D.D

Customer Non Account Holder Account Holder Staff


a) b) Open DD: Cross DD:

FED 8 5 5

Exchange 50 50 -

Where direct payment is made. Where payment is made though account.


50

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NBP CHARGES FOR DD I. II. Up to Rs. 50,000/- is Rs 50/- only Over Rs. 50,000/- is 0.1%

PAY ORDER

The document which instructs a bank to pay a certain sum to a third party. Such orders are normally acknowledged by the bank which provides a guarantee that the payment will be made. It is within the city. It is the best way of making payment with in the city. Charges of Pay Order
Customer Non Account Holder Account Holder Staff
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 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.

FED 8 5 5

Commission 100 50 -

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MAIL TRANSFER

Customer requests the bank to transfer his money from this bank to any other bank of the branch of same bank in the city, outside the city of outside the country the first thing he has to do is to fill an application form. In which he states that I want to transfer the money from this bank to that bank by mail. If the customer is the account holder of this bank, the bank will debit his account and the concerned officer will fill the six different forms to make the mail transfer complete. The six forms used for this purpose are listed below: Branch Mail Transfer Mail Receiving branch registered copy Issuing Branch Register Copy Debt Voucher Beneficiary's Advice Advice to Customer
INTER BRANCH TRANSACTION:

It is freshly introduced online service. In this service NBP to NBP branch transactions are made. FED voucher is attached. Commission voucher is attache

6.1.6 DEPOSIT DEPARTMENT: It controls the following activities: a) A/C opening.


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b) c) d) e) f)

Issuance of chequebook. Current a/c Saving a/c Cheque cancellation Cash

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 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. 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. Formal Application Introduction Specimen Signature Minimum Initial Deposit

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1. 2. 3.

Operating the Account Pay-In-Slip Book Pass Book Issuing Cheque Book

QUALIFICATION OF CUSTOMER The relation of the banker and the customer is purely a contractual one, however, he must have the following basic qualifications. He must be of the age of majority. He must be of sound mind. Law must not disqualify him. The agreement should be made for lawful object, which create legal relationship Not expressly declared void. 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

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Agents account Trust account Executors and administrators accounts Pak rupee non-resident accounts Foreign currency accounts ISSUING OF CHEQUEBOOK: This dept. 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.

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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 Savings Deposits account can be opened with very small amount of money, and the depositor is issued a chequebook for withdrawals. Profit is paid at a flexible rate calculated on six-month basis under the Interest-Free Banking System. There is no restriction on the withdrawals from the deposit accounts but the amount of money withdrawn is deleted from the amount to be taken for calculation of products for assessment of profit to be paid to the account holder. It discourages unnecessary withdrawals from the deposits. In order to popularize this scheme the State Bank of Pakistan has allowed the Savings Scheme for school and college students and industrial labor also. The purpose of these accounts is to inculcate the habit of savings in the constituents. As such, the initial deposit required for opening these accounts is very nominal. CHEQUE CANCELLATION: This dept. can cancel a cheque on the basis of; a) Post dated cheque b) Stale cheque c) Warn out cheque d) Wrong sign etc

CASH

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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. B) DEPARTMENTATION OF BALAKOT BRANCH, BALAKOT NBP. Dividing an organization into different parts according to the functions is called departmentation. So NBP Balakot Branch,Balakot is divided into two main parts.

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1. 2.

Cash Department General Banking Department.

CASH DEPARTMENT: To facilitate people in the payments of their bills and taxes and repayments of cash There are two main functions of cash department. i. i. ii. Payment ii. Receipts

Payments are the function that they pay their cheques and pay cash. Receipts mean collection of utilities bills, taxes etc.

GENERAL BANKING In this section of the bank the general banking function is performed. It is divided into five departments Marketing Department Remittances Department. Computer Department. Advances Establishment Department Department. Clearing Department..

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REMITTANCES DEPARTMENT: The objective of this department is:-

To transfer the money of people from one place to another place in safe and comparable way The main functions of this department are: i. ii. iii. iv. v. vi. vii. Issuing of demand draft. Issuing of Mail transfer. Issuing of Telegraphic transfer. Issuing of payment order. Issuing of call deposit. Pension payments etc. Closing and scrolling of government collections.

ADVANCES DEPARTMENT: Every bank has a department, which advances money to borrowers. The objective of Advances Department is To facilitate people by giving short term and long term loans on easy terms and conditions. The main function of this Department is to take surplus money from the people at low rates and lend this money to borrowers at high rates to earn profit.

Clearing by Bank:

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These days the clearing work is over held by the NIFT(National Institutional Facilitation Technology) instead by the state bank .When the bank is going to make the payment then the bank officer will sign the cheque if the amount of the cheque is greater then

Rs.50000/- then signature of the officer +signature of the head of the deposit department. Important Things in Clearing;

Cross Stamp Clearing Stamp Endorsement Stamp

TYPES OF CLEARING:

Inward Clearing Outward Clearing INWARD CLEARANCE:


Cheque drawn on NBP and presented to other Banks. That is inward clearance for NBP. So inward clearing results in outflow of funds for NBP by reducing the balance in the clearing account

OUTWARD CLEARANCE:
Similarly cheque, which is drawn on other bank and presented to NBP are known as outward clearance for NBP. So outward clearing results in inflow of funds for NBP. . 3.18.4 COMPUTER DEPARTMENT: The objective of this Department is to facilitate customers in payment of their cheques. The main functions performed by this department are:
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a) b)

Checking balance. Deduction from balance on clearing cheques.

c) d)

Issuing bank statements. Dealing Western Union. ESTABLISHMENT DEPARTMENT: This department mainly deals with the branch employees. The main objective of

this department is to To regulate bank business. Main functions of this department are: a) b) c) Keeps the record of attendance of employees. Employees salaries distribution. Employees bonuses etc.

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SWOT ANALYSIS

INTRODUCTION
SWOT analysis stands for STRENGHT, WEAKNESS, and OPPERTUNITIES AND THREATS. My observation was very keen during internship to observe SWOT aspects of NBP. And I observed following SWOT analysis:

STRENGTH
o o o o o o o o o OLDEST INSTITUTION ALTERNATE DUTIES IN SBP ABSENCE MORE DEPOSITS THAN OTHER BANKS EMPLOYEE BENEFITS BROAD NETWORK STRICTLY FOLLOWED RULES & REGULATION: PROFESSIONAL COMPETENCE HEALTHY ENVIROMNMENT RELATION BETWEEN STAFF AND OTHER EMPLOYESS

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WEAKNESSES
o o o o o o o o LACK OF MARKETING EFFORT NBP UNDER POLITICAL PRESSURE FAVORITISM AND NEPOTIS LACK OF FINACIAL PRODUCT INEFFICIENT COUNTER SERVICES IN THE RUSH HOURS LACK OF COMPUTERIZED NETWORK. LACK OF MODERN EQUIPMENT UNEVEN WORK DISTIBUTION.

OPPORTUNITIES
o o ELECTRONIC BANKING MICRO FINANCING

THREATS
EMERGENCE OF NEW COMPETITORS o o o POLITICAL PRESSURE BY ELECTED GOVERNMENT DOWNSIZING CUSTOMERS COMPLAINTS

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COMPETITIVE ANALYSIS

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WORK DONE BY ME IN INTERNSHIP AT NATIONAL BANK OF PAKISTAN


I started working as a proper internee in NBP from Deposit seat under the supervision of MR. Sharik Saleem.

WHAT I LEARNED THERE:


Collection of Cheques. Reporting of Cheques in day books. Account opening procedure and formalities. Passing (authentication) of Cheques.

I worked on this seat with full devotion for three weeks, and then I precede my internship training in Clearing Department.

WHAT I LEARNED IN CLEARING DEPARTMENT:


About the process, rules and regulation of National Institutional facilitation technologies (NIFT). Formalities and endorsements of inward clearing. Formalities and endorsements of outward clearing.

I worked in clearing department for two weeks under the supervision of M. Akram khan (Grade-1 Officer). Then I moved in Government section of NBP for further learning.

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WHAT I LEARNED IN GOVERNMENT SECTION:


About receipts of Government related to:

Central receipts Provincial Receipts District Receipts About Payment seat of Government, related to:

Pension passing Government contractors payments Government to bank and Govt. to Govt. Transfer. About seat of incharge of Govt. Government seat:

How to check advices of different heads of Government? How to check necessary formalities on documents? How to manage work under pressure? I worked in Govt. section for four weeks, and then I go in utility bill collection department.

WHAT I LEARNED ON BILLS COLLECTION SEAT:


To collect and report all type of utility bills and passport fees.

I worked on Utility bill collection seat for half a week.

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WESTERN UNION SEAT:


I worked on western union seat for half a week and learned there: To receive foreign remittances from different services like SAMBA and WESTERN UNION. Then I was given under the kind supervision of Mr. Abid Ali (GRADE- 2 Officer) in Remittance Department.

WHAT I LEARNED IN REMITTANCE DEPARTMENT:


To make Mail transfer, Demand drafts, Telephonic Transaction, Inter branch Transaction. To pass benevolent funds.

I worked in remittance department for two weeks and then I went to Advanced salary Department for further training under supervision of Mr. Aisf (GRADE-1 Officer.)

WHAT I LEARNED IN ADVANCED SALARY DEPARTMENT:


Documentation formalities in receiving, posting compiling an advanced salary case. To close advances salary account.

I worked in advanced salary department for one week and then I went in running finance department.

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WHAT I LEARNED IN RUNNING FINANCE DEPARTMENT:


About the sanction the loans to small and medium scale enterprises. About the sanction the loans to farmers.

I worked theare for one week and then I moved to Foreign Exchange Department.

WHAT I LEARNED IN FOREIGN EXCHANGE DEPARTMENT:


Reporting and handling of foreign remittances.

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REFRENCES Annual report of National Bank of Pakistan, 2009 http// www.nbp.com.pk .services Department.march 20th, 2009. NBP Main Branch Sargodha 3. President Office, June 21, 2009 Circular No. 13, 2002. Head Office National Bank of Pakistan Israr, Siddiqi H. (1998). Practice and Law of banking in Pakistan. Karachi: Decent Print Enterprises. Sir, Paged John. The law of Banking. The Law of Banking. McGraw Hill Publication: Nasir, Saeed H.(2001). Money and Banking. Pakistan, Kitab Markaz:
1. www.nbp.com.pk 2. Bank Nationalization act 1974. 3. www.google.com.pk

Personal observations Interviews of Satff.

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