ACKNOWLEDGMENT
We have no words to express our gratitude to Almighty Allah, the most Merciful and Compassionate, the most Gracious and Beneficent, who enabled us to complete this study. This gratitude would remain incomplete without paying Darood-o-salam on the Rahmat-Ulil-Alamin Hazrat Muhammad Mustafa (Peace be upon him).
We extend our deepest gratitude and profound regards to our advisor Mr. Wisal Hassan and other teachers for constant supervision, inspiring guidance, valuable suggestions and constructive criticism throughout the course of this study. We are also thankful to him for his moral support.
I am very thankful to my parents and family members and my friends.
Project Report
On
THE BANK OF KHYBER
Submitted By:
Name
MBA (FINANCE)
Roll no: 0000
Reg. No: _____________
OF
College Name
has been approved for submission to the controller of Examinations,
MASTER OF BUSINESS ADMINISTRATION
__________________ ___________________
Date: ______________ Date: ______________
DEDICATED TO
I dedicate this humble
effort to my honorable parents
Especially to my sweet and loving
Mother who always prayed for
My success and supported me
Spiritually and financially
In Every stages of life,
My friends & teachers.
PREFACE
The Bank Of Khyber (BOK) established in 1991, under the bank of Khyber passed by KPK assembly. Its objectives included promotion of saving and investment in the KPK .In 1994 it acquired the status of a scheduled bank that allowed at opening branches outside the KPK ,becoming a member of clearing house and engaged in trade finance activities directly.
Doing this project has been an enjoyable experience. Keeping pace with time is the key to success, left behind means lost. This report is an essence of my degree requirement and without writing report the whole training process will end in smoke. Computation and purification of data become fruitful when it comes in the shape of information. It is very hard to convert data into information, it requires wide span of time, but still it was a great experience for me to have a feel of the practical world.
My project on Bank Of Khyber branch university road was a good experience. I have learned a lot about general banking, observed the organization structure and different departments and also their working. I want to thank every one at the bank who helped me to understand about basic banking and also made my internship at the bank a memorable experience.
Since banking is a wide spread profession, it is impossible to jot out each and every function, so I highlighted few functions of banking. Being the student of Finance I tried my level best to decimate as much information as which was necessary.
I will like to thank all the staff of BOK's university road branch, especially Mr Zahir Shah (Manager) for his support and guidance in cash department who treated me with care and answered all my quarries.
I also want to thanks all staff of BOK's university road branch for there Sports who guided me throughout making of this report. Without their valuable guidance it would have been a much difficult task to do. In the end I would also like to thank my parents and friends who supported me throughout my program.
SAYED ABAD
TABLE OF CONTENTS
Topic Page No.
CHAPTER 1:
INTRODUCTION TO REPROT: 1
1.1……..Objectives of study 1
1.2 ………Scope Of Study 1
1.3…………Importance Of study 1
1.4………….Research Methodology 2
1.5………..Background Of Study 2
1.6…………Purpose Of Study 3
1.7………..Problem Statement 3
1.8………….Methodology Of Report 4
Chapter 2
2.1………....History OF BOK 5
2.2…………….Vision Statement 6
2.3…………..Function Of BOK 7
Chapter 3
DEPARMENTAION: 10
3.1……..Departmentation of the head office 11
Chapter 4
4.1……….IMPORTANCE OF FINANCIAL PRODUCTS 18
AND SERVICES OF BOK:
4.2 ……………BOK Performance At Glance 22
Chapter 5
BOK’S CREDITS/FINANCING 23
5.1………… Introduction 23
5.2…………Principles of Financing 23
5.3………..Types of Credits 25
5.4…………Types of Advances Offered By BOK 26
5.5……….Procedure Of Applying For Finance 32
5.6………..Market Appraisal /commercial Finance 35
CHAPTER 6
“DEPOSITS” 39
6.1………..Introduction 39
6.2…………Deposits /Products By BOK 39
6.3………..Account Opening Procedure 42
6.4………Nature Of Account 43
CHAPTER 7
CRITICAL ANALYSIS 47
7.1……….Problem At the Branch 47
7.2 ………Functional Analysis 48
7.3……….Administrative Analysis 50
7.4……….Personnel Mgt Analysis 51
CHAPTER 8
FINANCIAL ANALYSIS 53-56
CHAPTER 9
SWOT ANALYSIS 57
9.1………Strength Of BOK Haripur 57
9.2………weaknesses of BOK Haripur 57
9.3……….Opportunities Of BOK Haripur 58
9.4………..Threats of BOK Haripur 59
CHAPTER 10
RECOMMENDATION & FINDING 60
10.1 ………Availability of Required Staff 60
10.2……….Computerization of Branch 60
10.3…………..Inter Departmental Transfer 61
10.4…………..Customer Friendly Environment 61
10.5………….Professional Attitude 62
10.6………….Personal Marketing 62
10.7…………Equal Distribution Of Work Load 62
10.8………..ATM Facility 63
10.9………..Delegation Of Authority 63
10.10…………Role Of Presentation 63
10.11…………..Compensation 64
10.12 …………Consumer Satisfaction 64
10.13 …………Recommendation to HRM 64
BIBLIOGRAPHY 67
EXECUTIVE SUMMARY
Bankers mean a person transacting the business of accepting money for the purpose Of lending or investment, of deposits of money from the public, repayable on demand or other wise and withdraw able by cheques, drafts or otherwise and includes any Post Office Saving banks. Bank play with the money of other peoples by taking money from people at lower interest rate and lending it to investors at a higher rate of interest and the difference between these two interest rates are the bank profit.
Bank Of Khyber 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 large network of branches locally, internationally and representative offices.
The purpose of this report is to analyze the performance activities of The Bank of Khyber university road branch and BOK overall performance and its financial position and organizational structure as well. According to my knowledge BOK chain of command is chairman of BOK is the upper most position and there are many directors under that chairman then chief executive then five senior executive vice president and this hierarchy is going to end at non clerical staff.
In this report we analyze different departments of Bank Of Khyber including Cash department, Accounts opening department, Clearance department, Advances / Credit department, Remittance department, Foreign Exchange department and after analyzing these department we have certain findings and recommendation for that.
INTRODUCTION TO STUDY
“BOK’s
Chapter-1
1.1 Objective of the study
For completing the Master degree of MBA, each student is required to make a project report on a recognized organization. The students are required to work according to their own field in which they are doing their specialization.
Main purpose of this program is to make students familiar with the practical work, as there is great difference between what they have learnt during their course and how the job is practically done.
Another important aspect of making a project report is to implement the knowledge so far one has acquired.
1.2 Scope of the study
1). It is a compulsory requirement for the award of Master degree.
2). It will help the present and prospective students of the department in making assignments and writing reports on the BOK, evolution of banking, importance of banking and different operations.
3). It can also provide help to BOK’s management in identifying their Strengths, Weaknesses, Opportunities and Threats.
4). It can also provide assistance to students about the banking system and is management practices.
1.3 Importance of study
Banks play a central and very important role in the economic life of a country, that’s why they are considered as the lifeblood of modern economy. Today no one can deny the importance of banking in the economy. They facilitate and expedite trade and commerce and provide a variety of services that one can’t imagine with out banks.
We have chosen the Bank Of Khyber for our mini project because it has all the departments a bank could have and is the largest network nationwide.
Besides this, BOK plays an important role in the economic development of Pakistan.
1.4 Research methodology
The methodology that we adopted for this research project is based on both the primary as well as secondary data. The sources of primary data were:
1 Formally arranged interview/ discussions with Management, Director and Joint Directors.
2 Personal observations.
3 The sources of secondary data were;
4 Annual reports
5 Over view of the BOK
6 Relevant books.
7 Internet
1.5 BACKGROUND Of Study:
The socio economic growth of any developing country depends mainly on the health of its monetary based institutions. The banking sector is one such example, which plays a vital role in the development of the economy. Its involvement in the industrial sector, trade and commerce of the country makes it an integral organ of the over all development of the county.
Bank Of Khyber was established under the ordinance 1949. The primary objective of the setting of BOK was the purchase of jute from the growers in the former East Pakistan and also to perform the commercial banking
The bank is also authorized to act as an agent and trustee of State bank where the State bank of Pakistan (SBP) has no branches. The bank therefore performs dual responsibility, one as commercial bank in its own right and at the same time a trustee of business finance.
1.6 Purpose of Study:
The purpose of this study is to fulfill an important requirement of MBA course that is to write an internship report. The main focus of this study is on retail banking.
Apart from this there are other purposes such as:
a) To get practical knowledge about the working of the bank, i.e. the procedures followed for the retail banking.
b) To get used to the working conditions of an organization.
c) To analyze the weaknesses of the said organization and give some solutions to overcome these weaknesses.
d) To have a working experience.
1.7 PROBLEM STATEMENT:
The following problems are in the university road branch of BOK are as under.
a)The ATM Machine facility are not used in this branch.
b)The proper space is not for the bank .The seating arrangement is not sufficient as compared to the number of employees and customers.
c)The bank hires new employees from the external sources. in case where the Bank has competent and experienced officers the vacancies are filled with internal employees. There are certain posts in the Bank for which internal as well as external recruitment sources are used.
d) like all the other charges, the bank charges are higher rate of markup on the short-term loans in comparison to other.
e) It is obersved that there are some deficiencies in the branch setup which creats extra disturbance and excessive movement. This in turnn affects the efficiency of employees and thus that of whole organization.
1.8 Methodology Of Report:
The methodology that I have adopted in preparing this research report is based on both primary as well as secondary data.
Primary data is gathered by using different techniques such as:
a) Interviews
b) Discussions with staff
c) Personal observation
The main sources of the secondary data are:
a) Annual report
b) BOK brouchers
c) Leaflets, newsletter
d) Internship reports
During this process I observed that enough material regarding my topic was not available in the books so I had to count on my personal observation and interviews for writing this report.
I have spent 8 weeks in the branch; during my stay I interviewed few officers of the bank and held discussions with others. As such most of the data used is primary in nature.
Chapter-2
2.1 HISTORY OF BANK OF KHYBER
The Bank of Khyber is one of such bank which came in to being after passing of a Resolution in the provincial Assembly of KPK in 1991. The focus on point for the establishment of the bank is to provide employment opportunities for the man and the power of this province & to provide financial assisstance to the people of KPK , who are engaged in the small, medium and large scale bussiness.most if the nationalized commercial bank have their head offices in the province other then KPK ,which is the main hindrance to availing loan in time from these banks.The bank have to take formal approval from their H/O in order to advance loans to their customer or to make some transactions within the branches.therefore it was felt that there was a great need to have a bank which has its Head Office in the same province also, so that there could be time delay, communication gap or provisioning of documents to have advance loans expenditiously,intially,the bank of Khyber had agency arrangements with ABL and MCB for clearing and collecting cheques from other banks, but with the grace of Almighty Allah and the hard work of its management, it become a scheduled bank .it started its operation in SBP and to have a clearing officer of its own for clearing purposes and tackling of other matter with SBP.presently,this bank has started to work as an agent for all its corporate main branch became the first authorized dealer to deal in foreign exchange business and trade services/finance. The BOK corporate main branch also provided its services to its different branches, which had import/export businesses but were not authorized for such business, the licenses were also availed for The Bank Of Khyber GT Road University road branch and other branches in KPK , the Bank of Khyber has its network of branches in Islamabad, Lahore, Muzzaffarabad, Rawalpindi Karachi also. The bank of Khyber is providing loans to the private as well as public organization, not only for the prosperity of the people but also the development of KPK in this way, job opportunities surface in different sectors, mainly for the people of KPK , which may help the country get out of cultures’ of unemployment and related poverty problems.
Besides, the running Finance & Demand Finance facilities, it has started loaning for small clusters, which has a separate controlling department called the Micro Finance Department .MFD has been introduced to cover the businesses, which are on a small scale either in the shape of shops, small projects or home level projects of ladies, like “embroidery” beauty parlors’ & stitching centers. After they provide two guarantors to the BOK.
The SBP has recently allowed the opening of banks and branches based on pure Islamic Banking System in the country. For the said purpose an Islamic Banking Department has been established by the SBP to provide necessary guidance to the bank and concerned staff. They have also instructed all the banks to introduce necessary steps for promotion of Islamic banking division has been established by the Bank of Khyber to evaluate and implement policy and procedural matters to cater to Islamic banking demand of our valued customers. The recruitment of suitable staff for Islamic banking operation and their necessary training arrangement are as under process.1
2.2 Vision Statement
“Human Capital – The Way Forward”
Mission Statement
“To be recognized in the market place by Institutionalizing a merit & performance culture, Creating a powerful & distinctive brand identity, Achieving top-tier financial performance, and Adopting & living out our core values”.
Objectives of BOK :
The Bank of Khyber is also a commercial organization and its main objective is profit maximization. This is achieved in two ways:
1. By increasing its deposits.
2. By charging interest on loans provided to the people due to increased deposits
These are explained as:
2.2.1 Increase in Deposits:
Competition in banking is intense and every bank whether it is Pakistani, foreign, private or nationalized tries to increase its deposits by providing better facilities to its customers. By increasing its deposits a bank can extend greater amount of loan and hence achieves higher profit. BOK is also improving its facilities and services to attract customers with higher volume of deposits. There are two main factors involved in increasing the deposits. These factors are improving the services and courtesy. BOK is continuously working on these two factors to increase its deposits.
2.2.2 Extension of Loans:
The profitability of a bank largely depends on the amount given to people as loan and the type of people to whom credit is given i.e. the credit worthiness of the borrowers. This strategy has worked quite well for BOK. Deposits are collected from the people and invested in different projects. BOK prefers to give loans to financially sound and reliable parties, after securing the collators. BOK has an extremely well organized section. The staff is trained and educated and competent. They carry out extensive financial analysis before deciding on the loan. Interest charged on the loans potentially contributes to higher profits.
Some of the other objectives of BOK are:
a) Improve customer services.
b) Quick disposal of credit.
c) Better cooperation.
d) Operation and advisory services for foreign exchange accounts activities.
e) To earn an adequate and sustainable profit for the shareholders and for the sack of own smooth operations.
f) To supply or provide employment opportunities to the people.
g) To help in the development and industrialization of the country.
2.3 Functions of BOK:
Since BOk is a commercial bank, it performs a variety of functions. Like other commercial banks, BOk is engaged in financing international trade. Its other major
functions include receiving deposits, advancing loans and discounting of exchange. The functions performed by BOK are:
2.3.1 Accepting Deposits:
This function is important because banks largely depend on the funds deposited with them by its customers. Deposits are of many types.
i. Current Deposits:
Current deposits are also called demand liability on current deposits. BOK pays practically no interest on current deposits. Businessmen usually open current accounts. In BOK current account can be opened with a minimum amount of Rs.2000/-.
ii. PLS Saving Deposits:
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.2000/-
iii. PLS Term Deposits:
Fixed term deposits are deposits with the bank for certain fixed period before the expiry of which they cannot be withdrawn unless giving due notice. In this case the rates of profit will be different depending upon the time period.
2.3.2. Discounting Bills Of Exchange:
Discounting of bill is practically speaking lending for exchange at their market worth i.e. it pays to holder of the bill an amount equal to the face value after deducting interest at the current market rate for the period. This bill has to be mature. This is the common way used for keeping a part of assets of the bank in a liquid form.
2.3.3. Agency Service:
BOK also provides best and unique service to its valued customers. BOk provide the following agency services to the customers:
i. Collection of Dividends:
As BOK deals with the purchase and sale of various types of securities, therefore BOK also provide dividend or interest earned on share or bonds or invested money.
Collection of Cheques:
The collection and payment of Cheques, bills and promissory notes etc. Bank of Khyber acts as an agent for its customers.
iii. Acting as an Agent:
BOK also acts as an agent correspondent or representative for its customer at home or abroad.
iv. General Utility Services:
Utilities provided by BOK are as follows:
a) Clearance of Utility Bills:
BOK provides the service of clearing the utility bills i.e. electricity, gas and telephone bills of its customers. For this purpose it also provides evening banking services.
b) Lockers Facility:
The Bank of Khyber also provides locker facilities to its customers to keep their valuable assets in it. The charges of different size of lockers are different.
c) Acts As A Referee:
BOK provides useful services to its customers by acting as a referee to their credit worthiness.
d) Supply Of Information:
BOK provides operational and advisory service for foreign exchange accounts/activities.
Chapter-3
ORGANIZATIONAL DEPARTMENTATION CHART
THE BANK OF KHYBER
DEPARTMENTATION
Departmentation is the logical process of grouping of activities, or the process of grouping jobs in the logical arrangement through which the organizational goals or objectives can be achieved. It is also the process of division of work into various sections or department or divisions, over which a manager has authority and responsibility for performance of specified activities. Basically there are four ways for organizational Department.
1) Deparmentation by function
2) Departmentation by product
3) Departmentation by geography
4) Departmentation by customer
The deparmentation in the BOK has been done purely on functional basis, in the following manner:
3.1 DEPARTMENTATION OF THE HEAD OFFICE LEVEL
The BOK’s H/O is located in Peshawar, and it has complete control over administrative matters and operations as well as other areas of the BOK.
3.1.1 Personal, training & establishment Division
This division performs the following tasks:
Recruitment & selection
Training
Supervision
Postings
Promotion
Leave and other staff matters
Motivation
Termination
While the Establishment Division deals with procurement, repair/renovation and disposal of real assets of the bank, the purchases are made against demands of various departments through open building .The contracts are given to an agency, which provides the best quality products at the competitive rates and the delivery is made according to the schedule. if the assets is depreciated according to the set percentage and it is no longer feasible to use it, then the Establishment division deals with building , furniture/ fixtures, vehicles, computer and many other items, which are related to the bank or juts staff.
3.1.2 Banking Operation Division
This division is constitutes.
Teller’s operation
Cash management
Remittances
Bills
Consolidation & statement.
Hajj operation
Special
Deposit Scheme
Travellers Cheques Credits Cards etc.
3.1.3 Treasury Division
Treasury Division is involved in the investments in the shares market, bonds debentures, placement of the funds & reconciliation of Nastro accounts (foreign currency Accounts maintained in the foreign countries in the respective currencies) The settlement of trade finances, inward and out ward remittances, through Nastro accounts is made possible by the treasury division.
3.1.4 Audit & Inspection Division:
This division is known as the eyes and ears of the top executives of the bank. it keeps them informed of any contraventation of bank regulations by any branch/department or staff and also proposes remedial measures to set it right. in the BOK there are three types of Auditing, i.e. internal Audit , External Audit. And SBP Audit. Auditors are assigned to make comprehensive audit on yearly basis of all branches. A separate team of audit Division is deputed to make sure the compliance of all irregularities, pointed their inspection..
The board of Directors of the BOK has appointed External Auditors for comprehensive audit of all branches on the yearly basis. The board of BOK has to appoint any chartered Accountants from the list of the SPB. Since they are External auditors and approved for SPB, therefore they prepare all the financial statements of the BOK.
Since SBP is the central bank of the country and it has a right to carefully monitor all the activities of all banks therefore they also conduct their audit in the BOK on yearly basis. In case any bank violates “Prudential Rules & Regulation” of the SBP, SBP reverse the right to panalize such banks .in case of any major violation , they may dissolve the management of any bank .the compliance of irregularities are made sure by them as well.
3.1.5 Credit Division
This division is engaged in providing fund based & non fund based facilities to customers of different branches. They receive proposals & recommendation from their branches along with application requests of their customers. Then they prepare aggregate proposals for further submission to the Credit Committee, where these proposals are discussed thoroughly and final decisions are made by the competent authority. This sanction loans proposals and forward the same to the relevant branches with instructions to retain proper security, offerd by the customer and retain all legal documents to safeguard the bank’s position. Any activity related to facilities may also be altered by this division.
3.1.6 Computer Department:
The Bok has appointed some qualified software and hardware engineers in the BOK IT department. The senior most is deputed as “in –charge” of IT department. Software engineers/programmers are not only responsible for application development in the BOK , to fulfill requirements of the bank, installation of the hardware in the also act like trouble shooters, whereas, installation of the hardware in the branch set up is the responsibility of the hardware engineers, in the each branch, they have assigned a systems administrator to look after jobs related to the computing system. Proper trainings have been provided to the system administrator in this effect.
3.1.7 Micro Finance Division:
The Micro Finance department at the branch level are watched carefully by this division.MFD is exclusively designed to approve loans on a small scale to small units like, toy shops, garment shops, and stitching centers run by women.
3.1.8 Public Relations Department:
It establishes a liaison between public sector organizations and corporate customers with the bank on the behalf of the management of the bank.
3.1.9 International Banking Department:
This department carefully looks after the business transactions and activities of all the branches which are authorized in the Foreign Exchange Business, like Trade services and Finance, foreign Currency accounts, Remittances, Travellers Cheques issues and FOBC (Foreign outwards Bills for collection) the details will be discussed in analyses section of the report.
3.1.10 Islamic banking division:
This division looks after PLS banking and other Islamic modes of financing. This department does research in Islamic Banking and conducts training courses for the staff.
3.1.11 Consumer Finance Department:
This department facilities the common masses in getting all kinds of electrical house holds items, like television , microwaves, oven, air conditioners, tape machines, music system and refrigerators. This facility may be allowed against a personal guarantee of a single individual.
3.1.12 Marketing Department:
Banks are aware of the fact that marketing and advertising are very important for the healthy growth of all organizations including banks. Advertisements are meant to get the attention of a segment of the society which is the bank’s target. This is done through the following
1) News papers/ periodical/ journals
2) Radio & T .V
3) Out door boards / sign boards
4) Gift with the bank’s name printed on them like key chains or wall clocks.
3.1.13 BOK ‘s ORGANIZATIONAL CHART
The graphical representation of an organization structure is known as an organizational chart.
The organizational chart is a formal document, which shows the chain of command and titles, which have been given to the managers and other members of the organization.
THE BANK OF KHYBER ORGANIZATIONAL CHART :
 |
3.1.14 THE BOK ‘S BRANCH NETWOR:
Branches The Bank Of Khyber has the totle 34 branches in the different cities. all the branches are inter
related with each other.
| THE BANK OF KHYBER BRANCHES SERIAL NO BRANCHES |
| 1 CORPORATE MAIN BRANCH (PESH) 2 UNIVERSITY ROAD BRANCH (PESH) 3 HAYATABAD BRANCH, (PESH) 4 G.T ROAD BRANCH (PESH) 5 SADDAR ROAD BRANCH, (PESH) 6 SECTERAIT BRANCH (PESH) 7 KHYBER BAZAR BRANCH, (PESH) 8 KOHAT BRANCH , KOHAT 9 ASHRAF ROAD BRANCH , (PESH) 10 D.I.KHAN BRANCH ,D.I .KHAN 11 ABBOTABAD BRANCH , ABBOTABAD 12 BANNU BRANCH, BANUU 13 MARDAN BRANCH , MARDAN 15 HATTAR BRANCH , HATTAR 16 NOWSHERA BRANCH, NOWSHERA 17 MINGORA BRANCH , MINGORA 18 MANSHERA BRANCH, MANSHERA 19 HANGU BRANCH, HANGU 20 UNIVERSITY ROAD BRANCH, UNIVERSITY ROAD 21 CHARSADDA BRANCH , CHARSADDA 22 TANK BRANCH BRANCH , TANK 23 MUZZAFFARABAD BRANCH , MUZAFFARABAD 24 ISLAMABAD BRANCH, ISLAMABAD 25 LAHORE BRANCH , LAHORE 26 KARACHI “1” BRANCH , KARACHI 27 KARACHI “2” BRANCH KARACHI 28 QUETTA BRANCH , QUETTA 29 CHITRAL BRANCH , CHITRL 30 SWABI BRANCH ,SWABI 31 RAWALPINDI BRANCH 1” RAWALPINDI 32 RAWALPINDI BRANCH 2” RAWALPINDI 33 MULTAN BRANCH , MULTAN 34 LAHORE BRANCH “2” LAHORE |
REFERENCE:
Rose peters (1991) commercial Bank Management. Boston: Donnelly & son Company. P. 253
Chapter-4
4.1 Important Financial Products and Services of BOK:
Few of the important products and services are:
4.1.1 Current Deposits Account (Rupee)
“The BOK rupee current deposits account allows the facility if ultimate withdrawals up to the extent of the balance in account. there will be no tax deducted on the funds that some one chooses to keep in these accounts”
(A) balance in current accounts are payable on demand .any amount can be with drawn prior notice. Similarly there are no restrictions on number of transactions during the day.
(B) All individuals including foreigners, firms and corporate bodies are entitled to open and maintain current accounts
(C) No profit will be paid on the current accounts
(D) overdrafts are allowed on this accounts.
4.1.2 Saving Deposit account(rupee)
The Bank of Khyber rupee saving deposit account allows the facility of multiple withdrawals up to the credit balance, with accruing profit on the deposits”
4.1.3 TYPES OF SAVING ACCOUNT
- Profit and loss sharing account (PLS)
- Special Deposit Account (SDA)
- PLS 7 days Notice Deposit.
- PLS 30Days Notice Deposit.
Profit is paid bi-annually on the minimum monthly balance (Jan-June & July-dec) which is announanced in the July and January respectively.
Gernally, withdrawals from this account are allowed on demand i.e. without any prior notice of withdrawals.
Over draft is not allowed on this account.
4.1.4 Term Deposit Account (rupee)
“The BOK Rupee term deposits Account offers the dual benefit of attractive returns with highly liquidity. Option to take profit monthly, quarterly, bi annually, annually or at maturity. profit is accured on the daily basis. There is no penality for premature encashment.however ,in case of any encashment the rate of the previous tender will be applied. The option of partial liquidity is allowed i.e withdrawals to a certain percentage from the fixed deposits without disturbing the remaining deposit is allowed”.
Term of fixed deposit are accepted by BOK, mature between one to five year.
Profit on fixed deposit is paid on the maturity of deposits
Each fix deposit account is considered as a separate contract.
4.1.5 Khyber monthly Scheme (KMS)
On KMS the BOK gives monthly interest on amount deposited with the bank . This is a sort of fixed deposit and the customers will have to keep the deposit for the five years.
4.1.6 Security deposit Receipt (SDR’S)
This is a receipt by the bank, at the instruction of the depositor, confirming that amount of SDR is held by the bank to be paid whenever called upon to do so by the beneficiary named in the SDR
A: A SDR is non – negotiable instrument. SDR;s are generally used to make advanced payment are as earnest money or security deposit etc
B: SDR can be re paid to a named beneficiary or the purchaser/depositor upon proper identification.
C: Non-profit is paid on called deposits
4.1.7 Khyber Rupee Traveller Cheque:
The generally issued for the convince of persons travelling abroad, but some Pakistani banks issue them in Pakistanis currency, for use within the country as well.
Before issuing the banker received the amount equal to the face value of the cheque, and also charged a small commission. The traveller cheque are far fixed amount and are treated as order cheque payable only to the purchaser whose specimen signature appear on the traveller’s cheque itself, Foreign currency traveler cheque are issued and en cashed an accordance with provision of the exchange control regulation act 1947”
“Khyber Rupee traveler cheque (KRTC), is a negotiable, which can be remittances
funds and as alternative to cash”
4.1.8 CONSUMER FINANCING
(a) Fund Based Facilities:
“Fund base facilities are those which involved a cash disbursement at the time of allowing the facility”
Running Finance
This is a working of capital finance facilities available for the one year and renewed subject to satisfactory utilization there of Mark up is to changed on out standing balance.
It is a term loan disbursed in lump sum
And repayable in two year in the form monthly or quarterly installment.
Advance against salaries
This facility is available to Govt. and semi Govt. employees up to five gross salaries.
(b) Non- fund Based facilities:
The non-fund Based facilities are those in which the bank doesnot invest its own funds rather it commitment is involved against which the bank charges a certain amount in the shape of commission these facilities are available in the form of letter of credit and letter of guarantees.
4.1.9 Letter Of Credit(LC)
Letter of credit is required in the settlement of international trade, some time local transaction are also done through the letter of credit which are termed as in the land L/Cs. usually there are four parties involved in L/Cs:
A: Importer
B: Exporter
C: importer’s bank
D: exporter’s bank
L/C may be on the sight or issuance’s basis .in sight based L/Cs, the importer has to pay the amount upon payment of value. In case of issuance L/Cs, the exporter extends credit to importer. The document are handed over to the importer against his acceptance of bill and assurance of payment of the maturity date of acceptance.
4.1.10 Letter Of Guarantee (L/G)
The bank provide assurance to beneficiary of the guarantee about the satisfactory performance of certain act by the application of the guarantee.
In the letter of guarantee, there parties are involved i.e.
A: Bank (provide of guarantee)
B: Application of the guarantee (Bank customer on whose behalf the banks issue a guarantee)
C: Beneficiary (in whose favor the guarantee is issued)
The bank at request of application issues the guarantee and charges commission for it commitment from the application at exposure is secured against some security.
4.2 BOK Performance at a Glance:
THE BANK OF KHYBER has performed well over the years. The performance of the bank for last five years is:
BOK Performance at a Glance:
(Rs. Bn)
| Items | 2005 | 2006 | 2007 | 2008 | 2009
|
| Income | 28.2 | 34.2 | 34.5 | 35.3 | 33.7 |
| Expenditure | 29.5 | 33.2 | 32.4 | 34.8 | 32.7 |
| Pre-tax profit/(loss) | (1.26) | .995 | 2.14 | .52 | 1.03 |
| Total assets | 274.1 | 310.6 | 325.9 | 350.4 | 370.7 |
| Deposits | 235.9 | 254.9 | 273.4 | 294.8 | 316.5 |
| Advances | 85.9 | 105.6 | 109.5 | 122.6 | 140.3 |
| Investments | 108.2 | 109.5 | 102.9 | 91.5 | 80.4 |
| Employees | 1500 | 1800 | 1850 | 1890 | 1911 |
Chapter-5
“BOK’S CREDIT / FINANCING”
5.1 INTRODUCTION
The progress of a countries performance, especially a developing country is heavily dependent upon the dynamic growth of its industries, trade and commerce, as well as agriculture. BOK plays a pivotal role in ensuring the proper employment and distribution of funds for rapid, sustained growth in all these sectors of vital importance. Also, the indicators which mainly reflect the high quality of BOK’s management are its prudent financing decisions, proper control of financing and prompt recovery of bank’s dues, as per borrower’s commitment / repayment schedule.
Keeping in view all these factors, SBP lays down the regulation / guidelines of credit policy and within this broad framework, BOK develops its own individual financing strategies and policies.
5.2 Principles of Financing
Basically, there are six principles, which must be duly observed while advancing money to borrowers.
Safety:
It covers the elements of character, capacity, capital, collateral and condition. It means taking all the risky factors into consideration and trying to hedge the bank from any possible financial loss.
Liquidity:
Covering the element of capability to liquidate or repay on maturity and also prior to the maturity, in case of need. It is an utmost important duty of a banker to assess the financial position of the burrower i.e. if the party/client is financially sound or will be completely dependant on the finances of the bank because a party/client with a shaky financial position can be a greater risk to the bank.
Term or Period of the Finance:
The facilities granted should be for a predetermined period of time, which would depend on whether the bank is offering short, medium, or long term facility depending upon the purpose of financing.
Dispersal:
The lending portfolio should be as wide-based and diversified as possible in order to spread the risk.
Remuneration:
Pricing the loan according to the risk undertaken and the ancillary business income committed is very important in order to ensure that optimum revenue is generated from the advances.
Suitability:
Purpose for which credit is extended should be lawful, and conform to the policies and imperatives of the bank, as outlined in its credit policy guidelines.
The 5c’s that are a must to be assessed before considering a customer are explained as follows:
1 CHARACTER
The loan officer must be convinced that the customer has a well defined purpose for requesting the bank credit, and has a serious intention to repay.
In character the banker looks for the Customer’s Integrity, Purpose of loan, Customer’s obedience to law, Credit rating, his loyalty to nation, his environment, Intention to repay, Customer’s personal habits, Customer’s business code of ethics, his keeping of words. When a loan officer is satisfied with these above conditions, he recommends the loan after giving due consideration to certain other factors addressed below.
2 CAPACITY
The loan officer must be sure that the customer requesting credit has the authority to request a loan and the legal standing to sign a binding agreement. The customer characteristic is known as the capacity (authority) to borrow money. The banker here checks the customer’s past payment record, experience of other lenders with this customer, purpose of loan, customer’s track record in forecasting, credit rating, presence of consignors or guarantors of the proposed loan.
3. CAPITAL
Does the borrower have enough available cash (capital) to repay the loan? The loan officer satisfies himself in respect of the loan applicant’s past earnings, dividends and sales record, Adequacy of projected cash flow, Availability of liquid reserves, Turnover of payables, receivables and inventory, Capital structure and leverage, Expense controls, Coverage ratios, Recent performance of borrower’s stock and P/E ratio, Management quality, Content of auditor’s report and statement footnotes, Recent accounting changes
4 COLLATERAL
In assessing the Collateral aspect of a loan request, the loan officer must ask about the ownership of assets, age of assets, vulnerability of assets to obsolescence, liquidation value, degree of specialization in assets, liens, encumbrances, and restrictions, leases and mortgages issued, Insurance coverage, Guarantees and warranties issued, Bank’s relative position as creditor, Lawsuits and tax situation, Probable future financing needs.
5 CONDITION
The loan officer while assessing a loan request must also take into account those aspects which come under the environmental conditions head like Customer’s position in industry and expected market share, Customer’s performance vis-Ã -vis comparable firms in the industry, Competitive climate for customer’s products, Sensitivity of customer and industry to business cycles and changes in technology, Labour market conditions, Impact of inflation on customer’s balance sheet and cash flow, Long run industry outlook, Regulations, political and environmental factors.
5.3 TYPES OF CREDIT
On the basis of funds involved credit can be categorized as fund, and non-fund based. Fund based financing involves immediate disbursement and out flow of funds. Here the funds are provided to the customers upon sanction of the respective credit lines by the bank and fulfilment of bank’s conditional ties and formalities, while the non-fund based facilities are contingent facilities such as letter of credits, and letter of guarantee. Credits extended to the clients are also classified on the basis of duration of facility as follows.
1 Short term – Up to 1 year duration.
2 Medium Term – Up to 3 years
3 Long Term – Above 3 years
Types of Advances
LOANS, ADVANCES & FINANCES
Non-Fund Based Finances
Running finance Letter of Credits
Demand finance Letter of Guarantees
Cash finance
5.4 TYPES OF ADVANCES OFFERED BY THE BANK OF KHYBER
BOK Credit department deals with all the advances, which are made to the customers. Advances are important for the banking business because it gives the bank interest on the amount loaned. BOK is also very active in advancing loans to customers, thus helping the economy of the country in its development. It provides the following finances:
5.4.1 Running Finance
This is a type of Finance which meets the day to day financial requirements of the business. The amount is transferred to the debtor’s current account and can be withdrawn through cheques. The limit for this type of finance is Rs. 35,000 and the maximum period which it is extended is one year, and can be renewed by a new sanction. Repayment is on discretion of the customer to repay in lump sum or in periodic instalments.
5.4.2 Secured Running Finance
It is also called overdraft. In such type of finance a customer is authorized to borrow up to an agreed amount in excess of his bank balance. The BOK usually provides this facility to its customers. The time period for this type of finance is less than one year. The mark up is paid on monthly basis and the principal amount is repaid at an agreed date(s).
5.4.3 Cash Finance
Cash finance is also called working capital finance. It is a short-term credit facility. Probably the most popular form of providing funds to the clients in the banking sector is the Cash Finance system or traditionally known as Cash Credit. In this, the bank lends money to borrowers against tangible security. The total amount of loan, which is granted, is not paid in one instalment. The borrowers have to pay mark-up on the amount borrowed.
a. Hypothecation of stock: When goods are not physically handed over to the bank as security for loan advanced, but the bank has a lien over the goods through the letter of hypothecation.
b. Pledge: When goods are physically handed over to the bank as security for loan advanced.
Borrowers prefer this type of facility because they have to pay on amounts actually utilized. The time period for this type of finance is normally one year but also depends on the manufacturing cycle of the organization.
5.4.4 DOCUMENTS REQUIRED UNDER CASH FINANCE
Against Pledge
Application/agreement with the customer for opening cash finance account.
· IB 6 (revised)
· IB 26
· IB 12 (Appendix )
1 Letter from customer authorizing the bank to debit salaries of go down staff, insurance premium and other incidental charges to his account.
Insurance cover together with premium paid receipt.
Against Hypothecation and Third Party Guarantee
§ Application/agreement with the customer for opening cash finance account.
§ IB 6 (revised)
§ IB 12
§ IB 29
§ Letter from customer authorizing the bank to debit salaries of godown staff, insurance premium and other incidental charges to his account.
§ Insurance cover together with receipt of premium paid.
§ Letter of hypothecation
The controlling officer may also require the client to submit other documents.
5.4.5 DEMAND FINANCE
Initially they were called “Loan ordinary”. When a customer borrows from a banker a fixed amount repayable either in periodic installments or in lumps sum at a fixed future times, the amount of loan is placed at the borrower disposal in lump sum for the period agreed upon, and the borrowing customer has to pay interest on the entire amount. The borrower gets a fixed amount of money for his use, while the banker feel satisfied in lending money in fixed amounts for definite short period against a satisfactory security.
5.4.6 Demand Financing Against Gold Ornaments
Gold finance/loan is a type of demand finance being offered by BOK to a large number of customers. Demand financing against the security of gold ornaments under State Bank of Pakistan scheme for Financing Small Business/Industry or otherwise may be made to borrowers known or introduced to the Bank by constituents, in multiples of Rs. 100/- with a minimum of Rs. 1000/-.reference The rate of valuation of gold and the gold ornaments will be advised to the branches by Head Office from time to time keeping in view the rise or fall in the market price of gold after providing for the necessary margin. The valuation of the gold ornaments must be based on the weight and fineness of the gold contents only. The rate per 10 grams will be regulated by the fineness of the gold and will be expressed to the nearest rupee. It must not exceed the maximum rates laid down from time to time by the Head Office.
Documentation for Financing against Gold Ornaments:
· IB 6A
· IB 12
· IB 26
5.4.7 Industrial Small Finance
This Type of Finance is for industrial owners only, and is usually for expansion purpose. The limit of this type of finance is up to 3,000,000/- Securities demanded against this type of finance are immovable properties or against stock of raw material and finished goods. The time period for this type of finance is up to five years. This amount is repaid in instalments determined by the bank. High rate of mark up is charged against this type of finance.
5.4.8 Agricultural Credit:
The agricultural financing strategy of BOK 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.
5.4.9 Agricultural Credit (Medium Term):
· Production and development
· Watercourse improvement
· Wells
· Farm power
· Development loans for tea plantation
· Fencing
· Solar energy
· Equipment for sprinklers
5.4.10 Farm Credit:
BOK also provides the following sub sized loans for a period ranging from 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
In case of Farm Credit BOK charges 14% to 16% Mark-up on both Short Term and Medium/Long Term credit. While for Non-Farm Credit the rate of Mark up is 16% p.a.
5.4.11 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.
5.4.12 Consumer Finance
BOK has launched a scheme for the all types of Electronics. Customer will get a TV set ,microwave oven , air conditions, tape recorder and all house hold items. and will have to pay monthly instalments to the bank.
5.4.13 Foreign Bills Purchased (FBP) (Documentary / Clean)
This is a post-shipment finance facility provided within the sanction limit and is provided against export documents under collection. Banks normally prefer holding collateral security in such cases.
5.4.14 Foreign Bills Purchased – against L/C (FBP)
Under this arrangement foreign documentary bills are negotiated/ discounted at prevailing exchange rate. The Bank ensures that documents are compliant with the L/C terms, and reimbursement instructions are carefully studied.
5.4.16 Payment against Documents – Under Sight L/C
Import documents if compliant are lodged in PAD and released upon payment from the party. The amount of bill plus charges, if any, claimed by the negotiating bank would be converted into Pak Rupees at the exchange rate prevailing on the date of lodgement or at the booked rate where forward booking was done at the time of opening of L/C.
5.4.17 Inward Foreign Documentary Bills for Collection under Usance LC
Such documents are lodged in IFDBC and are released against acceptance or trust Receipt or pledge of imported goods. In the later case goods are cleared through the bank’s approved clearing and forwarding agents and delivery orders issued against cash receipts.
5.4.18 Finance against Trust Receipt (FATR)
This facility is extended to valuable customers to enable them to obtain delivery of the goods received under L/C or against bills under collection and shall retire the documents out of the sale proceeds of goods or from other sources. The borrower will sign a standard Trust Receipt form and related security documents covering hypothecation of goods.
5.4.19 Finance against Imported Merchandise (FIM)
Under the import L/C either at party’s request, or due to the importer’s inability to discharge liability immediately FIM facility for a period not exceeding 90 days against pledge of the imported goods on mark- up basis is extended.
5.4.20 Inland Bills Purchased (Documentary / Clean)
This facility is allowed to customers against documentary bills and other negotiable instruments. In case of dishonour the related party’s a/c is debited, and the drawer is asked to arrange for sufficient funds in his a/c for adjustment thereafter. Besides the above mentioned products BOK is providing various fund / non–fund based facilities such as, overdrafts, loan against salary, LMM etc. Amongst these facilities which are governed under the rules/.regulations of SBP, are allowed by BOK if clients fulfil the criteria determined by the SBP.
5.4.21 Staff Finance
BOK is also serving its employees along with its customers. It gives loans to its employees for the purchase of a car, house, and motorcycle and for the marriage ceremonies of their sons/daughters. BOK provides the following loans to its staff:
5.4.22 House Building Finance
The employee having served for 5 years or more in the bank, either in the capacity of a clerk or an officer will be granted 15 basic pays as a loan for building a house. If the loan availed exceeds Rs. 160,000, then 10% interest rate will be charged on the amount exceeding Rs. 160,000/-.
5.4.23 Motor Cycle, Car, and Personal Vehicle Finance
The car loan may be granted to those employees whose minimum basic pay is at least Rs. 10,000 and have served for at least 3 years. The employee will be granted 18 basic pays as loan. If the amount is exceeding Rs. 160,000 the 10% interest rate will be charged. The maximum Motor Cycle Loan is 56,000.
5.5 Procedure for Applying for Finance
Any customer who applies for finance should have an account (usually current account) with the concerned BOK branch, which should be in a running position.
First of all the customer or company has to submit a feasibility report which is sent to the higher authorities for recommendation. Following this, the recommending authority prepares its own feasibility report of the customer/company’s project and then hands over these to the sanctioning authority which finally approves whether finances should be released or not.
Sanction or approval is granted by the bank by specifying the terms and conditions of the credit to the party concerned. The bank does not advance 100% finance, rather a 30% margin is deducted from all finances.
A charge form is signed by the party before receiving the credit facility. If the borrower becomes insolvent, the bank can use it for recovering the amount advanced through the court of law.
5.5.1 LOAN PROCESS
Pakistani banks have similar procedure for advancing loans. The process for granting loans to the clients is described in detail:
1. Establishment of Relationship:
The opening of a current or saving account by the customer with the bank results in the establishment of banker-customer relationship between the two. This relationship enables the banker to develop understanding of the customer’s corporate status, nature and place of his business, age, major stakeholders, and ultimately the genuineness of the customer.
2. Credit Investigation:
It involves the following steps:
Preliminary enquiries:
The banker approaches other banks functioning in the same area and gathers information about the track record and creditworthiness of its specific customer. Bank can also take information from the SBP credit information bureau or credit rating agencies where available.
3. Credit Analysis: WHAT MAKES A GOOD LOAN?
Credit analysis refers to the process through which qualitative and quantitative factors having direct bearing on the business of the customer are analyzed. This effort can help in making a lending decision, positive or negative. The analysis must be based on facts and should encompass all the relevant aspects of the credit deal. Findings of the analysis must be logically drawn and supported by relevant documents and reports. The division of the bank responsible for analyzing and making recommendations on the fate of most loan applications is the Credit Department. Experience has shown that this department must ask and satisfactorily answer the following question regarding each loan application:
4. Is the Borrower Creditworthy?
The question that must be dealt with before any other is whether or not the customer can service the loan i.e. repay the credit when due, with a comfortable margin for error. This usually involves a detailed study of five aspects of the loan application known as 5 Cs-Character, Capacity, Capital, Collateral, and Conditions. All must be satisfactory for the loan to be good one from the lender’s point of view.
5. Qualitative Analysis:
It is carried out to ensure that the credit is extended to a genuine borrower who has the capacity to borrow and good intention to repay. Following points are taken into consideration like:
Ownership of business, track record, market reputation etc.
Personal traits of owner and qualification.
Experience and management qualities.
6. Quantitative Analysis:
For quantitative analysis, financial statements provided by the borrower are thoroughly examined. The focus of financial analysis is on key figures in the financial statements and the significant relationship that exist between them.
Ratio analysis enables the analyst to carry out comparison of the following:
Trend Ratios: Involve the comparison of ratios of a firm over a period of time i.e. present ratios are compared with past ratios for the same firm.
Inter firms Comparison: Involve comparison of the ratios of a firm with those in the same line of business for the industry as a whole reflecting its performance in relation to its competitors.
5.6 Market Appraisal / COMMERCAIL FINANCE:
Market appraisal becomes imperative when credit facilities are desired by a customer desirous to establish a new manufacturing unit. In order to determine the extent of demand for the products of the proposed industrial unit, the banker must apprise himself of the ground situation with regard to the following:
Demand and supply situation.
Major producers and local distribution channels.
Price and credit terms availed by the retailers
5.6.1 Evaluation of Feasibility Reports:
The projections and forecasting contained in the feasibility reports need to be checked and adjusted by using varied standards. As a result of this exercise, the banker is in a position to determine the break-even quantities, revenues and profit and loss of the firm at different operating capacities.
5.6.2 Credit Reports:
Credit reports obtained from other banks and the CIB report provide a base for the lending decision of a banker.
5.6.3 Problem Identification:
The main objective of credit analysis is to avoid problems that may crop up due to lack of good judgment with regard to the following:
Negative Macro Indicators Including:
a) Unfavourable change in the government policies.
b) Excessive and negative competition.
c) Change in consumer’s tastes, fashion, income and spending.
d) Labour unrest or deteriorating law and order situation.
Negative Business Factors Including:
Inconsistent business structure and Ineffective business plan.
Inadequate market share and unplanned expansion.
Plant and machinery obsolescence and loss of stakeholders’ confidence.
III. Negative Management Factors Including:
Change in ownership and unnecessary centralization.
Evasive style and lavish spending behaviour.
Unsatisfactory past performance.
IV. Negative Financial Indicators Including:
Change in auditors, and accounting policy.
Late submission of statements.
Climbing up debt-equity ratio and abnormal reduction in fixed assets.
5.6.4 Processing of Credit Proposal:
Normally standard formats designed by the banks are used for this purpose wherein all relevant information and recommendations for grant of credit are recorded.
Necessary documents are attached with proposal like request letter, financial statements, resolution of the Board of directors, letter of partnership etc.
5.6.5 Sanction of Credit:
Credits are sanctioned either at the branch level or by the competent authority at the controlling offices. At the controlling office the credit proposal are assessed and approved on the basis of accuracy of credit analysis and other considerations as recommended by the branch management. Sanction advice is issued which is important and essential to ensure proper record of the terms and conditions of a credit, for legal purpose, execution of the required security documents, monitoring recoveries, timely renewal, and audit purpose.
5.6.6 Security Documentation:
After sanction but before disbursement of a loan, the credit administration department must ensure that charge documents are obtained from the borrower in accordance with the nature of credit facility, terms of credit and nature of approved security. The charge documents must be properly filled in, signed by the customer and designated officer and two witnesses where required. In case of mortgage registration is effected by the Registrar of Assurances before disbursement is done. In case of a limited company, charge is to be created on the assets of limited company with the Securities & Exchange Commission within 21 days. In case of partnership firm, authorized officials of the borrowing firm must sign the documents in their official capacity and affix their stamp thereon. In the meanwhile facility letter is issued wherein the terms and conditions of the loan are intimated to seek his acceptance thereto.
5.6.7 Disbursement:
Disbursement of the credit facility is made through either of the following method i.e. Running finance/Cash finance/Term finance.
5.6.8 Monitoring and Periodic Evaluation:
The credit administration department is responsible to ensure that the borrowing customers:
Maintain their accounts regularly with the bank and pay amounts due in time.
Pay the mark up accrued on their accounts within a reasonable period.
Pay instalments on due date.
Adjust their liability accounts as per stipulation of the loan agreement.
5.6.9 Recovery and Follow Up of Advances
This is the most critical activity of the credit administration department. Default puts a bank in an embarrassing situation as not only its funds are tied up for indefinite period, but in most of the cases involve it in circuitous litigation entailing high cost. The following steps are involved in the recovery process:
Verbal and written reminders to the customer for the payment of overdue amounts.
To serve of legal notice, in case of ignoring reminders issued.
Making preparations for taking legal action.
Filing of recovery suit and follow up of legal process.
Tracing out the assets of the defaulters and putting the same to auction through the court, and making efforts to make recovery from the proceeds of assets auctioned.
Chapter-6
“DEPOSITS”
INTRODUCTION
Deposits are the foundation out of which the bank grows and thrives. They are unique items on a bank’s balance sheet that certainly distinguishes it from other types of business firms. Deposits provide the means for bank loans and thus, represent the ultimate source of bank profits and growth. Bankers who fail to stay abreast of changes in their competitors’ deposit pricing and marketing programs stand to lose both customers and profits.
Deposits/Products offered by BOK:
BOK 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 large network of its branches.
It classifies deposits on the basis of duration and purpose for which these are kept with the bank. They are as follows:
PLS (Saving Deposits)
PLS means Profit and Loss sharing Account. Here the bank shares with the customer the profit or loss resulting from investment of customer’s funds along with the bank’s pool of funds.
Salient Features
This account can be opened with Rs.2000/-
Profit is declared by the head office of BOK at the end of each half year accounting period, and the profit is distributed through all the branches.
Profit is calculated @ 4.10% p.a.
For profit the minimum balance is Rs.5,000.
Profit or return is paid bi-annually on minimum monthly balance (Jan-June & July-Dec.) which is announced in July and January respectively.
Generally withdrawals from PLS saving accounts are allowed on demand, i.e. without any prior notice of withdrawal.
All cheques and other instruments should be crossed, before they are deposited for credit into account.
Zakat @2.5% is deducted from the balance outstanding on the first day of every valuation date i.e. 1st Ramadan.
Overdraft/CF is not allowed in PLS saving accounts.
Withholding tax @ 10% on the profit amount is to be recovered whenever profit is paid on deposit account.
PLS (Term Deposits)
The PLS Term Deposit is non-interest bearing account. It is also called time liability because it is kept for a certain period of time by the bank. Initially this type of deposit was called as fixed deposits but after the islamization of banking system.
Salient Features
The deposits are accepted for a minimum duration of three months.
b. The maturity dates are 5 years, 4 years, 3, 2, 1 year, 6 months and 3 months.
c. Every six months the profit rates are changed.
d The PLS term depositors are eligible for sharing profit/loses with the bank at the rate determined by the bank.
f. The profits and losses are distributed on half yearly basis.
g. On the maturity, the depositor has the option to withdraw the deposit along with his profit share if any, or renew the deposit.
Current Deposits
A current account is that account which is payable on demand. A holder can withdraw the money on any working day during working hours of the bank without giving any prior notice. That is why the bank has to keep sufficient funds to meet the withdrawals of the current account holders.
Salient Features
The account holder is expected to maintain a minimum balance of Rs.500/- in his account or whatever the minimum amount is prescribed for the purpose.
No profit or return is paid on current accounts.
The deposits and withdrawals can be made through cheques, demand drafts, pay orders etc. drawn on the branch.
These accounts are completely exempted from withholding tax and Zakat deduction.
Call Deposit Account
A Call Deposit Receipt is issued by the bank for the amount received from the customer. The amount can be withdrawn at any time by presenting the receipt issued by the bank. The purpose of these deposits is to serve as a guarantee provided by bank to any department either public or private in taking or giving tenders. This type of account is to participate in tender bid; contractors are required to deposit a certain amount or percentage of the tender amount along with the tender documents for which Call Deposit Receipt are issued by Banks. Call deposit does not bear or earn any interest. When a contractor requires such a receipt, he has to approach the bank for the issuance of Call Deposit Receipt.
ACCOUNT OPENING PROCEDURE
The opening of an account is the establishment of banker customer relationship. Before a banker open a new account, the banker should determine the prospective customer’s integrity, respectability, occupation and the nature of business by the introductory references given at the time of account opening. Preliminary investigation is necessary because of the following reasons.
Avoiding frauds
Safeguard against unintended overdraft.
Negligence.
Inquiries about clients.
FORMAL APPLICATION:
The customers are to fill in an account opening form. It is a formal request by a customer to the bank to allow him to have and operate upon the account.
OBTAINING INTRODUCTION:
Before opening an account the banker requires introduction of the customer from an old customer.
SPECIMEN SIGNATURE:
The customer gives the banker specimen signatures generally taken on a card supplied by the bank which is specially designed for the purpose. Operating instructions from the customer, title of account, and account number are entered on it. It expresses customers’ authority for the payment of cheques drawn on his banker.
MINIMUM INITIAL DEPOSIT:
The customer must have to maintain at all times not less than the minimum required balance according to the requirements by the bank.
OPERATING THE ACCOUNT:
- After opening an account the banker gives to the customer
- Pay-in-slip book
- Cheque book, with the account number assigned to the customer.
QUALIFICATIONS OF A CUSTOMER:
The relation of the banker and the customer is purely a contractual one. For keeping an account he/she must have the following basic qualifications
- He must not be a minor.
- He must be of sound mind.
- He must not be disqualified by law to open an account..
- The agreement should be made for lawful object, which create legal relationship.
- Not expressly declared void.
NATURE OF ACCOUNTS
The different types of accounts being generally opened by a bank are as follows:
Individual Accounts
The accounts opened in the name of persons are called individual or personal accounts. While opening the individual account, the details about following columns should be taken carefully:
- Occupation
- Address
- Special instructions
- Next of kin
- Copy of N.I.C.
Partnership Firms Account:
“Partnership is the relation between persons who have agreed to share the profits of the business, carried on by all or any of them acting for all”.
A partner is the agent of the firm having powers to execute transactions for the purpose of the business of the firm. A retiring partner has no liability so far as the transactions after his/her retirement are concerned, if a notice of such retirement has been given to the bank. Otherwise, the retiring partner continues to be liable, even for finances made after his/her retirement.
In case of the death of a partner, the firm will be dissolved. The account should therefore, be closed and a new account will be opened with the remaining partners.
The following procedure and documents should be obtained:
The names of all partners should be written in the AOF.
Specimen signatures of all partners.
On SS card & on form “A” only authorized person(s) will sign.
Letter of partnership should be obtained.
If the firm wants to authorize manager to operate the account then they will sign
Partnership deed is to be obtained (but it is not necessary).
JOINT ACCOUNTS
“The account in the name of more than one person is called joint account”.
The account shall be operated on by:
Any one singly or survivor or either or survivor(s).
Any two or jointly or survivor(s).
All jointly or survivor(s).
The survivorship mandate should be taken.
Signature of all partners should be obtained at the specified places.
JOINT STOCK COMPANIES ACCOUNT
Accounts opened by organizations formed by incorporation under Companies Ordinance, 1984 are called Companies Accounts.
A company is an artificial person created by law and the assent of this artificial person is signified by means of a common seal and perpetual succession. Just like an individual, it can hold property and incur liabilities. It can sue and can be sued in the same way as that of an individual. Bank is a joint stock company registered under Companies Ordinance, 1984.
While opening the account of the company the following documents should be taken:
Attested copy of the N.I.C of each Director.
Copy of the Certificate of Incorporation.
Copy of Memorandum and Articles of Association.
Copy of the Resolution of the Board of Directors to open an account with the bank.
List containing the names and signatures of the Directors.
Copy of the Certificate of Commencement of Business (in case of public limited company).
Audited Balance Sheet.
ASSOCIATIONS, SOCIETIES & CLUBS ACCOUNTS
Accounts are often opened in the names of non-trading institutions such as Clubs, associations, schools, committees, funds and Unions.
The following documents should be taken:
Attested copies of N.I.C of all the office bearers.
Certified Copy of the bye-laws or rules & regulations.
Copy of the Resolution of the Governing Body/Managing Committee for opening an account with the bank..
Account opening form duly signed by the authorized persons.
List containing the names, addresses and signatures of the Directors.
PROPRIETARY FIRMS’ ACCOUNT
A firm owned by one person is called proprietary firm or sole proprietorship.
The following procedure should be followed:
Take the sole proprietorship form from the customer.
The signature of the sole proprietor is obtained in his/ her personal capacity under the declaration.
If he wants to give authority to some other person to operate the account he has to sign the “Form CD 55”.
In case of death of the proprietor, any authority given to any one will be ceased.
REFERENCES
1: Bank pf Khyber
Ibid
Chapter-7
CRITICAL ANALYSIS
During my short stay at the BOK Hripur Branch . I spent around one week in each department of the bank and this short span of time is not sufficient for getting all the information about the organization. During this short period of time, I personally observed and experienced few problems along with those narrated by concerned personnel of the branch. I do admit that these problems may or may not be present in other branches of the bank. I have divided critical analysis into four parts, which are as follows:
Problems at the branch.
Functional Analysis.
Administrative Analysis.
Personnel Management Analysis.
7.1 Problems At The Branch:
Some problems regarding to the BOK University road Branch are:
7.1.1 Communication Problems at the Branch:
There is a single hall in the branch and the staff of the bank uses peon or shout to communicate with the other employee. As a consequence there is noise and disturbance in the branch. The flow of information is very slow as there is gap between the counters. The relationship among the staff members was good but sometime in the working hours the employees leave their chairs for a chat with their colleagues leaving the customers stranded.
7.1.2 Limited Number Of Staff:
The staff at BOK University road branch is limited in number. When one employee goes on leave it puts additional burden on the other employees, it affects the efficiency of the branch and the customers have to wait for a long time. There is no telephone operator so when another officer is busy receiving telephone calls the customers are left stranded. It gives a bad impression about the bank and the branch. Also there was a need of public relation officer (PRO). As the queries of the customers have to be answered by the busy staff, which was resulting in loss of time.
7.1.3 Unequal Distribution Of work Load:
During my internship I observed that the work is not equally distributed which resulted in discomfort among the staff. On one hand there are employees who are all day without having much work to do whereas on the other hand there are employees who don’t even have the time to relax for a moment. So this created a lot of over work situation for some while relaxation for others.
7.1.4 Manual System:
As the system is manual, it takes a longer time to process the records. For instance, if a customer asks for his balance it takes too much time to get the required information. As the competition from HBL branch is growing with the technological advancements BOK is also taking on the challenge up but it is very slow. There is urgent need of computerization of branch.
7.1.5 Cash Counter:
Cash counter is a sub section of the operations department. Being a busy branch most of the time there is a queue of five, six people at the cash counter.
7.1.6 Staff Relationship:
Good relationship among staff members leads to the peak performance in any organization. Apart from few occasions the overall the relationship between most of the staff was cordial and friendly.
7.2 Functional Analysis:
7.2.1 More Accounts less Deposit:
Efficient banking is one in which the emphasis is on total deposits not on number of accounts. In BOK university road branch the number of account are higher with respect to deposits. As a result of this personalized service cannot be provide to all the account holders. This results in effecting the efficiency of the branch. There was higher percentage of accounts with balance less then Rs. 1000.
7.2.2 Delegation Of Authority:
Manager has a limited authority. He has to take the approval from his management authority. In branch the officers have limited authority. They have to take approval of chief manager even in the case of minor issues. Due to this there is delay in decision-making and these delay can result in poor performance. Decisions have to be taken timely and have to be implemented quickly. Manager has no authority to sanction loans.
7.2.3 Need For Competitive Attitude:
THE BANK OF KHYBER has monopoly in the government transactions due to which its employees lack in competitive attitude. There are instances when not in good mood, they simply say to the customers, you please go to any other bank. This is the thing, which is responsible for the disaster of all the government control organizations including. BOK The management of the branch has been successful in minimizing this attitude.
7.2.4 Competition:
As it has already been mentioned that the competition in the banking business is increasing day by day with the introduction of new private banks and now it is the “survival of the fittest”.
It is not only the privatized banks that are putting pressure on the nationalized banks but there are also international banks that are doing good business in Pakistan. The branch in study is facing a stiff competition from UBL branch, which has become sounder with the computerization and addition of ATM facility. Right know BOK branch is lacking in the technological field, as the branch is not computerized and there is no ATM facility available in the branch.
7.3 Administrative Analysis:
7.3.1 Lack of Specialized Training In Customer Services:
THE BANK OF KHYBER does not provide adequate facility of specialized training in the customer services to its staff. As the workers finish their training they are inducted into a specific field. The major deficiency in the staff of the branch was related to customer service. Specific attention should be given to customer service in the training programs of the bank.
7.3.2 Separation Of Activities:
There is lack of delineation of responsibilities. As such a function of remittances is partially done in remittances and partially in deposits department. This creates confusions and conflicts in the decision making process. There should be complete separation of activities to avoid all this ambiguity and this may also reduce overlapping of work. This problem is due to the shortage of space available to the branch.
7.3.3 Low Profits:
Most of the customers shifted their account to the national saving center because of the low profit rates of saving deposits. The bank management should increase their profits to enhance business during this era of competition.
7.3.4 Delay In Loan Advancement:
It has been observed that there are delays in sanctioning of loans from the head office, which results into customer dissatisfaction. This is primarily due to the fact the chain of cycle of authority is very long and manager has very little powers. He has no power even to sanction small loans.
7.3.5 High Work Load And Improper Distribution:
The workload on the employees of BOK civil sectrait branch is immense. As it is a very busy branch due to the presence of accounts of government servants, so they should be compensated for the extra time spent by them. Proper distribution of work leads to success in every organization. Proper distribution of work prevents the employees from over work and under work situations. So for the smooth running of an organization, proper distribution of work is the hint to be followed, there are employees who work tirelessly while there are employees who have little work to do.
7.3.6 The Role of Presentation:
In every walk of life presentation plays a very important role, specially the business concerns have to care about their presentation. Clients are attracted by means of a proper presentation. In the banking business the presentation of the branch office and the officers both are very important. In the newly established private banks we can observe that the officers are dressed smartly, it is all due to the policy of the bank. It means that the getup of the officers attract the customers. Nicely and smartly dressed people do make a lot of difference.
The Bank Of Khyber has a lot of branches all over Pakistan, even in the remotest part of the country, but the branches are not very well maintained. BOK University road was a very well maintained branch but the dress up is not up to the mark and it needs a lot of improvement.
7.4 Personnel Management Analysis:
7.4.1 Need For Better Training Program:
The need of training is felt all over the world. Training of the personnel is a part of human resource management. Once a candidate has been selected and placed on the respective job, it becomes essential to train him adequately for the task. They should learn new methods for motivating customers. The training program of the bank should include scientific techniques to improve the decision making and interpersonal as well as individual’s needs of the employees.
7.4.2 Recruitment Policy:
Human resources are the lifeblood of organization. If the personnel are recruited carefully they can become an asset to the organization and in the case of carelessness the personnel can become a liability. Due to favoritism, nepotism and political influence unsuitable candidates are selected. Both the top authority and staff union tries their best to recruit their favorites.
7.4.3 Transfer Policy:
Promotion policy of BOK is very slow. Those employees who are having approach to higher authorities are transferred to the seats or branches of their own choices, and those who are not having approach are working on seats which they do not deserve, or they will work in the branches which will not suit them either in one way or other.
7.4.4 Performance Appraisal:
The rating of the employees on the basis of their performance in an organization, performing certain defined standards is called performance appraisal.
It is again a scientific tool provided by the personnel administration. BOK has followed the checklist method for the evaluation of the employees. It is a simple procedure of checking the list with the given set of objectives or descriptive statement and these are used for the performance evaluation of the employees.
In BOK ACRs are used for the purpose of evaluation, but the observation shows that the element of subjectivity is involved in it. The confident report (CR) of the employees are signed by the immediate boss, and then it is counter signed by two superiors. The superior may not know about the employee or the hazards involved with the employee’s work or the superior may not be in direct contact with the employee.
Chapter 8
FINANCIAL ANALYSIS
FIVE YEAR PERFORMANCE AT A GLANCE
| (Rs. In millions) | |||||
| Years | Total Assets | Deposits | Advances | Investments | Shareholder Equity |
| 2005 | 325,057 | 273,391 | 109,524 | 102,969 | 9,978 |
| 2006 | 350,406 | 294,754 | 122,559 | 91,486 | 10,358 |
| 2007 | 371,636 | 316,493 | 140,318 | 72,609 | 11,378 |
| 2008 | 415,089 | 349,617 | 170,319 | 71,759 | 11,959 |
| 2009 | 432,803 | 362,866 | 140,547 | 143,525 | 14,279 |
| 2010 | 471,860 | 395,568 | 160,990 | 166,196 | 18,134 |
Source: Annual Report 2010
Source: Annual Report 2010
Source: Annual Report 2010
Source: Annual Report 2010
5.8 FIVE YEAR PERFORMANCE AT A GLANCE
| (Rs. In millions ) | ||||
| Years | Pre-Tax Profit | After-Tax Profit | Number ob Branches | Number of Employees |
| 2005 | 2,135 | 530 | 1,434 | 15,785 |
| 2006 | 520 | 31 | 1,431 | 15,541 |
| 2007 | 1,032 | 461 | 1,428 | 15,351 |
| 2008 | 3,016 | 1,149 | 1,245 | 15,163 |
| 2009 | 6,045 | 2,253 | 1,204 | 12,195 |
| 2010 | 9,009 | 4,198 | 1199 | 13272 |
Source: Annual Report 2010
FIVE YEAR PERFORMANCE AT A GLANCE
FINANCIAL HIGHLIGHTS
| Rs. In Millions | |
| Authorized Capital | 5,000 |
| Paid up Capital | 4,130 |
| Shareholder Equity & Reserves | 27,584 |
| Deposits | 395,568 |
| Advances –Net | 160,990 |
| Investment Net | 166,196 |
| Total Assets | 471,860 |
| Pre-Tax Profit | 9,009 |
| After-Tax Profit | 4,198 |
| No. of Branches | 1199 |
| No. Of Employees | 13272 |
Source: Annual Report 2010
Chapter-9
“SWOT ANALYSIS”
SWOT is an acronym for an organization’s strengths, weaknesses, opportunities and threats. A SWOT analysis consists of sizing up a firm’s internal strengths and weaknesses and its external opportunities and threats. It’s a tool, to get a quick overview on a firm’s strategies situation. The SWOT analysis of BOK, BOK university road is as follows:
9.1 STRENGTHS OF BOK’s UNIVERSITY ROAD:
The strengths of BOk are as follows:
BOK, BOK University road is a profitable branch.
Being a government branch it collects utility bills.
It has the goodwill of the people.
The branch staff is motivated to make it one of the best branches.
It is a secured branch.
Best optional policies and attractive compensation packages for employees, which has really improved their commitments, dedication and headwork towards the accomplishment of the objectives.
Human resources development and employment of tecnology towards modern development.
Rupee traveler cheques(RTCS) that manimaze the degree of risk. Attention and experienced private management group also involved in other intrests like, textile and cement industries.
9.2 WEAKNESSES OF THE BRANCH:
There are some weaknesses of the branch. Which are discussed below.
The authority of the manager in decision-making is limited.
Employees are facing fears of downsizing.
Employees lack training in the consumer dealing.
4) "Govt. interferences also badly affect the credit and other policies of the bank.
5) It is also a major weakness of BOK because of nepotism and favoritism the competent personnel cannot reach the higher positions and badly affects the performance
Slow down in advance groth the short term as BOK focuses on quqlity customers in the market.
New schemes are not introduces this year, due to which the attraction of customers is slow down.
9.3 OPPORTUNITIES FOR THE BRANCH:
Positive external conditions of BOK that cannot be controlled but which can be used to take advantage are as follows:
They have the opportunity to open new branches in the country as well as in the foreign countries. They should open new branches at least at the district level.
They have to open in new branches in the Afghanistan taking NOC from the SBP.
BOK has also opportunity to expend new technology.
Foreign exchange department can open in those cities branches where foreign activities are developing.
The branch should be computerized.
ATM facility should be introduced in the branch.
Employees should be sent for training and seminars to get advanced knowledge about banking.
9.4 THREATS OF BOK:
The threats of BOK are as follows.
Increased competition especially from HBL branch, which has introduced ATM facility and has computerized its branch.
Deteriorating confidence of people in bank.
Reduction in business activities in the country..
Politico economic situation of the country.
5) In the era of globalization the bank is now going to face tuff competition with multinational banks, which are interested in opening their branches in Pakistan.
6) Privatization policy of the Govt. also create tuff times for he bank because of this reason the bank is going away and away from the Govt. support during hard times.
Strict regulation by the govt over credit facilities to the customer as well as to meet the prudential regulation.
Hors of confidence of overseas prospectus and customers due to freeing of accounts.
Changing of customer needs.
The step of islamization of bank in pakistan is in big threats for the BOK Because the Whole banking system will be changed.
Chapter-10
FINDINGS AND RECOMMENDATIONS
During my internship of one month I observed a lot of things and I felt that there is always nice ways of doing things so some recommendations are suggested for the bank in accordance to the critical analysis.
10.1 Availability of Required Staff:
Required staff should be provided to branch in order to improve the functioning of the branch. Especially a telephone operator and a customer service officer should be appointed. These are necessary because without the customer service officer the customers are facing a lot of difficulties. The employees waste a lot of time on attending telephone calls. The customers are left stranded during this course of time, damaging the reputation of the bank. The employees have to answer the queries of the customers such as account balances on telephone. It wastes a lot of time of the staff. In these conditions there is a need of telephone operator.
There is a need for the establishment of customer information center. It will take one additional person who will handle both of these jobs. Although it will cost the bank but it will benefit the bank in goodwill and better working environment.
10.2 Computerization of Branch:
Computers should be introduced in BOK . This will reduce administrative cost to great extent. This will help a lot in the operation of the bank, Computer knowledge should imparted to the employees. Communication and coordination problem will be solved to great extent. It will help in speeding up the decision making process regarding the loans. The branch will send these proposals instantly to headquarter will process it swiftly. This will save the time, which is lost in the delivery process.
Keeping in view the new world requirement it is essential for the bank to install a computer information system. To achieve the organizations goals in limited time and budget, it is felt that the bank must have modernization in its operations. This will decrease the workload on the employees in the branch. The accuracy is also another an advantage which comes with the use of computers. Although the installation of computer in the branch will cost a lot initially but in the longer run it will produce fruitful results. As the computers are fast they can do a lot more work than the human being thus the need for future employment will decrease considerably. The employees have to be paid with the fringe benefits, but the computers are bought once.
Proper training of computer has to be imparted to the staff. This can be done in terms of 2-weeks short course at the computer center or evening coaching can be done at the branch itself.
10.3 Inter Departmental Transfer:
There should be inter departmental transfer of employees, so that they should know about all departments, in this way a proper coordination could be achieved. They must have some basic information of other departments. There must be proper job rotation. This will enhance the capabilities of the employees, as due to change in work they will escape monotony. This will give them refreshing change and motivate them for their work.
In the branch there were few seats where the load of work was more then the other seats so the need of rotation was felt there so that no body should be overburdened. As the officers working in those departments a spent quite a lot of time so need of interdepartmental transfer was felt. It was seen that these persons were not happy with this and due to this their motivation level was not at the highest level.
10.4 Customer Friendly Environment In Branch:
Friendlier environment should be created because it will help to gain the interest of employees in work. Noise in the office should be reduced because it has unfavorable impact on the working environments. At the start of the month there is a rush in the bank due to the payment of salaries, in this kind of situation a cool head is required as there is an element of lack of discipline in the customers. It is required for the staff to educate them to follow discipline. All of them should be treated equally; no relaxation should be given to the near ones.
10.5 Professional Attitude:
More professional attitude is required from the bankers. The management should curtail the unnecessary expenses to improve profitability. All loop holes must be closed that are used to incur expenses in respect of telephone, fuel, electricity, fringe benefits etc. the bank should analyze each activity on cost and benefit basis (cost benefit analysis).
As these are controllable expenses and they lead to the minimization of the profits of the branch so the management should bring it to the minimum level. The staff of the branch should be punctual and should follow the office timings very strictly. There were few instances when the officers were not punctual and the customers had to wait for the arrival of the officer. In today’s world of competition the wastage of time is not tolerable so the staff should be loyal to their duties.
10.6 Personal Marketing:
A very useful mode of contact is through personal marketing visits. Such visits have importance for products, such as information about the customer’s financial and business position, about his market reputation and creating a feeling of importance in the mind of client. Such visits should be properly planned with regularity and consistency.
The staff of the branch is like an ambassador of the bank, by his personal contacts and goodwill he can attract customers to the branch. This will help in increasing the deposits of the branch and ultimately the profit of the branch. The officers of the branch should increase their contacts among the local businessman who are the potential customers for the bank.
10.7`Equal Distribution Of Work Load:
The employees of the branch should be given equal workload. The distribution of workload should be such that there should be no undue load or burden on any one. This will enhance the motivation and efficiency of the employees. No body should be given undue relaxation.
There were few officers who were over loaded with work, at the same time there were few who had little work to do. This created a unfair situation in which the overloaded person felt disheartened. For the elimination of this kind of situation the management should distribute the workload equally.
10.8 ATM Facility:
ATM facility should be introduced in BOK university road . This technological advancement is necessary for improving the service of the bank. This will allow the customer to get 24-hour banking service. The need of ATM facility is felt even badly because of the fact the biggest competitor of BOK City branch is UBL branch, has just introduced the ATM facility to its customers. In this way the competitor has got a technological advantage of the BOK university road.
To cope with this kind of competition the branch has to be up to date with the technology, these types of facilities are the need of the customers. Without being update it will be difficult for the BOK university road to compete with the better-equipped competitor.
10.9 Delegation Of Authority:
In BOK there is lack of delegation of authority. All of the major decisions are taken at higher level of management. Or in head office peshawar.Major decisions have to take accordance with the employee’s opinion. It will benefit both the management and the organization.
The authority delegated to the managers of the branch is limited. They have to take permission of the higher authority for almost every action. Same was the case in BOK university road where the manager had to take permissions form the higher authority for small affairs.
10.10 Role of Presentation:
As it is said, “first impression is the last impression”, BOK has to improve its internal and external outlook of branches. As private banks are very good in this field, so compete with them it is necessary that BOK should concentrate on the internal and external outlook of its branches. The officers should be dressed smartly so that they could attract the customers by their personality and behavior.
As far as the outlook of BOK, BOK university road is concerned its quite attractive. The only thing that needs to improve is internal outlook i.e. the dress up of the officers of the branch and their customer handling. They should always be properly dressed. It gives a pleasure to the customers to come in a bank where every thing is attractive. This improvement in the presentation of the branch will attract customers and they would love to come the bank again and again.
10.11 Competition:
Competition is one of the major problems, that every business is facing and banking is not exempted from the competition. BOK is facing competition both from private and international banks.
BOK is facing a stiff competition from HBL branch.
10.12 Consumer Satisfaction:
In today’s world of competition only consumer’s satisfaction can reduce competitive advantage. As said in critical analysis there are some problems related to the dissatisfaction of consumers.
The Bank of Khyber has to improve services provided to the pensioners and also they have to adopt scientific methods of paying utility bills. Improving the quality of consumer service can do all these things. If the consumers are satisfied from the service he will expand his business with the bank. But if the level of services is not good then the bank will loose its customers. For this proper training has to be imparted to the employees.
10.13 Recommendations Regarding To Human Resource
Management:
1) A modern and effective performance evaluation system should be devised, so that every improvements and progress in employee’s skills, knowledge and performance should be properly reported and suggestions can be forwarded.
2) A specialized officer should be hired so that he deals with employees to increase their efficiency by watching and observing them. He should also check and monitory employees dealing with customers. The officer should be given the authority to have immediate corrective actions where faults are found. He should encourage the employees to give
3) Proper training should be carried out on regular basis and if required other educational, technical and skills development facilities should be engaged in. their suggestions performance evaluation system should be devised, so that every improvements and progress in employee’s skills, knowledge and performance should be properly reported and suggestions can be forwarded.
4) Management should develop a mechanism for job rotation so that employees can get experience in all the departments of the bank because at times when a particular Operational Head is on leave, a lot of time is wasted in making temporary adjustments for that seat.
5) BOK staff lacks professionalism. They lack the necessary training to do the job efficiently and properly. Although staff colleges in all major cities but they are not performing well. For this purpose these staff colleges should be reorganized and their syllabus should be made in such a way to help the employee understand the ever-changing global economic scenario. Banking council of Pakistan should also initiate some programs to equip the staff with much needed professional training.
6) Employees of the bank should be given a task and authority and they should be asked for their responsibility.
7) The manager should strictly monitor the performance of every staff member. All of them should be awarded according to their performance and result in the shape of bonuses to motivated and incite them to work more efficiently.
8) Transfer is not properly carried out. Some of the employees are continually serving at the same post. They are simply rotated at the same branch. Therefore it is recommended that evenly rotation of every employee should take place after every three years in different braches of the bank
9) Required, qualified staff should be provided to branch in order to improve the functioning of the branch. Especially a telephone operator should be appointed.
10) Bank should their administrative expenses. This was Rs 8 billion in the year 2000. That can be done by lying off the surplus pool of employee with golden handshakes scheme. The branches that are not much used could also be closed. Employee can also be how to control the bank expenses. That will give positive results in the future.
11) Good relationship among staff member leads to the peak performances in any organization. I observed that the staff relationship was normal other wise but some time I noticed that there existed a little conformity among the staff members. Another syndrome from which the staff suffered was that all of them considered themselves more important than others. Some of the officers used to say that if I am absent for a day the bank would stop working. So this sort of attitude is not good because it mars bank image and juniors’ willingness learn and work hard and in the end will hurt the whole team.
12) In the BOK’s during my internship I saw that when some of the employees are transfer to other places, due to their relation with influential people and with top management they can cancel their transfer in few weeks, when they are unsatisfied at that place. So I suggest that in the organization there should be no favoritism, nepotism and politics and their transfer and promotion should be made on merit and according to the rules and regulations of the bank and provided favorable environment to the employee to show their performances.
13) There should be an information desk to provide the information and to receive the complaints of the customer in the bank. There is no complaint box available in the branch and not any person appointed to hear the complaints. Every person cannot go to the manager for the complaint because most of the people are hesitant. So I suggest management to install a compliant box in the branch, and recruit a special person for that guidance of the customer when they are unable to manage some difficulties in banking matters.
BIBLIOGRAPHY
1) Koontz , Harload and Heinz Weigh Rich (1993), A global prospective , Tenth Edition. (international Edition) , New York : MC Graw Hill, Inc.
2) Nasir Muhammad Saeed (1996) Banking Currency and finance, Sixth edition. Fasilabad: Nafees Printing Press.
3) http:// wwwbok.com.pk
4) http: //www.bangor.ac.uk/ab/postgraduate/mbaf.htm
5) The Bank Of Khyber, information Memorandum,(2004).
6) The Bank Of Khyber, branch Operation Manual, (2008).
7) The Bank of Khyber Annual Report, 2006.
8) The Bank of Khyber Annual Report 2005.
9) The Bank of Khyber Annual Report 2004.
LIST OF ACRYNOMS:
1. BOK Bank of Khyber
2. SBP State Bank of
3. ATM Automatic Teller Machine
4. H/O Head Office
5. ABL Allied bank limited
6. MCB Muslim Commercial Bank
7. MFD Micro Finance Department
8. PLS Profit & Loss Sharing Deposit
9. FOBC Foreign outwards Bills for collection
10. SDA Special Deposit Account
11. KMS Khyber monthly scheme
12. SDR Security deposit receipt
13. KRTC Khyber Rupee traveler cheque
14. LC Letter of Credit
15. L/G Letter of guarantee
16. FBP Foreign bills purchased
17. FATR Finance against trust receipt
18. FIM Finance Imported Merchandise
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