The Bank of Punjab started functnoing with the inaugration ...



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Presented to:

PROF. ZAHID ALI Sb.

Presented by:

KASHIF GHUFRAN ABDULLAH

(Session 2005-07)

Roll No. 15

DEPARTMENT OF COMMERCE

THE ISLAMIA UNIVERSTY BAHAWALPUR

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First of all a great thanks to Almighty Allah, Who enable me to complete this task and then I am thankful to my Respected Teachers Especially our Chairman and DSA (prof. AZHAR SHAIKH Sb) for providing such a friendly atmosphere and guideline during our two year stay at the University not only for the Academic Affairs but all other social and future prospective by sharing their remarkable experiences.

It was such a pleasant Experience to Work in THE BANK OF PUNJAB I own my gratitude and thankful to all those who helped me in preparing this internship Report by sharing there best of knowledge.

It is due to endless efforts of seniors and fellow members at THE BANK OF PUNJAB who provided me every favor and the last but not the least I am really very thankful to my beloved parents who have always been a source of inspection for me.

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To be the customer Focused Bank with service Excellence.

Be a dynamic resource of economic development and growth for stakeholders through service excellence achieving high standards of professionalism, dedication integrity and team work.

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← Our customer as our first priorot

← Profitablity for the prosperity of stakeholders that

allows us to constantly invest, improve and success

← Excellence I every thing we do

← Integrity I all our dealings

← Respect in our customer and each other

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The Bank Of Punjab started functioning with the inauguration of its first branch of 7-Egerton Road, Lahore on November 15, 1989. The architect of the bank Mr. Nawaz Sharif then, the Chief Minister of Punjab, performed the inauguration.

In Pakistan, over long periods of time the gap in saving and investment and balance of trade deficit has posed serious threat to the target levels of growth the ailments related to the budgetary deficit and public debt, both foreign and domestic are in addition. Interestingly even such adverse circumstances growth of real sector during the preceding year registered a favorable change, which speaks of hidden potential and strength of economy

Fortunately, the banking sector of the country has the well organized and properly institutionalized system, which is the major vehicle not only for mobilization of resources to finance trade, agriculture, and industry but also for the effective conduct of monetary policy.

The emergence of new bank on the national scene in the early 1990s has done two important services to the nation.

❖ The saving base of the economy has effectively enlarged and hence the investment opportunities have increased.

❖ The services of the banks in the fact of severe competition have improved considerably so that now consumer are left with extensive choice to do or undo their business relations with these banks keeping in view quality of their services.

The Bank of Punjab is working as a scheduled commercial bank with its network of 243 branches at all major business centers in the country. The Bank provides all types of banking services such as Deposit in Local Currency, Client Deposit in Foreign Currency, Remittances, and Advances to Business, Trade, Industry and Agriculture. The Bank of Punjab has indeed entered a new era of science to the nation under experience and professional hands of its management. The Bank of Punjab plays a vital role in the national economy through mobilization of hitherto untapped local resources, promoting savings and providing funds for investments.

Attractive rates of profit on all types of deposits, opening of Foreign Currency Accounts and handling of Foreign Exchange business such as Imports, Exports and Remittances, Financing, Trade and Industry for

working capital requirements and money market operations are some facilities being provided by the Bank. The lending policy of Bank is not only cautious and constructive but also based on principles of prudent lending with maximum emphasis on security. As agriculture is considered as backbone of our economy the Bank of Punjab has introduced "Kissan Dost Agriculture Finance Scheme" to small farmers.

The Bank of Punjab has the privilege to discharge its responsibilities towards national progress and prosperity. Within the couple of years of its scheduling, the bank has not only carved out for itself prominent niche in the mainstream banking of the country but in certain areas it has the distinction of taking the lead. In the short span of time the Bank has been able to evolve a distinct corporate culture of its owned-based policies, which are realistic and are on highly professional footings.

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The Bank Of Punjab was established under the provisions of Section 28 of Federal List included in the 4th schedule of the Constitution of the Islamic Republic of Pakistan 1973.

The Bank was established under the Act of Punjab Assembly viz. The Bank of Punjab Act 1989. He Bill to this effect was passed by the Provincial Assembly on July 3, 1989 and was passed to, by Governor Punjab in accordance with the Provisions of the Constitution on July 26, 1989.

The Act provided for the foundation on which the edifice of the bank was erected. It also included and provided for various modalities concerning the structure, the organization and scope of the bank laying down its objective share capital and principle of lending. The Act defines rules for the following.

1. Short title, extent, and commencement.

2. Establishment and incorporation of the Bank.

3. Share Capital.

4. Register of Shareholders.

5. Qualification of Shareholders.

6. Government to be shareholders.

7. Head Office of the Bank.

8. Board of Director.

9. Managing Director.

10. Qualification and disqualification of the directors.

11. Removal of Directors.

12. Terms of office of directors.

13. Vacancies.

14. General and special meetings.

15. Votes of the shareholders.

16. Business, which the Bank is authorized to transact.

17. Business, which the Bank is not authorized to transact.

18. Auditors / Governments auditors.

19. Right and duties of the auditors.

20. Liquidations of the Bank.

21. Powers of the Board to make byelaw.

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Being a commercial Bank, The Bank of Punjab performs all such functions as are attributed to commercial banking institution both in the area of resource mobilization, loans, and investment. The Bank is thus providing all type of advances to business, trade, and industry on seasonal and annual basis, and is ensuring, through the prudent policy, the safety and protection of its loan portfolios, as the resources base of the bank expands, project financing will also be brought into its fold.

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At the level of Decision-making and implementation, senior management of the bank is drawn from highly accomplished bankers with rich experience in the banking profession both domestic and international.

The entire responsibilities of policy formulation and management have been placed, under the law, with the Board of Director. Furthermore it will be heartening to know that Mr. Nawaz Sharif, during his chief Minister ship of

The province of Punjab issued special instructions to the political and executives’ echelons not to interfere in The Bank of Punjab, thereby ousting the possibility any pressure which may be put on the

management of the bank in respect of recruitment of staff or provision of credit. These instructions have become an essential part of the culture of the bank.

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The sun rising over the five wavy lines symbolizes the dawn of new era of progress and prosperity for the land of five rivers and hence for Pakistan. Furthermore the main objectives of the inclusion of cotton flowers and the spikes of wheat in the emblem is firstly to represent the fact that the economy of the Punjab stands on its agriculture produces especially cotton and wheat and secondly to highlight the emphasis which the bank is to place on development of agro-based industry.

The Bank of Punjab being a commercial bank performs all those function as are attributed to such banking institutions both in the areas of resources mobilization and investment. It is providing funds for commerce, trade, industry, and agriculture but its main emphasis is on accelerated development of agro-based industry. So the main objective of the bank is to channelize the resources into sectors, which have suffered from neglect. Other objectives included.

1. To provide speedier services to the common man.

2. To provide the highest rate of return to the shareholders by achieving good profitable growth.

3. To enter into financing contracts and to mobilize resources in local and now in foreign currencies consistent with the objects of the bank.

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The newly elected Government has pledged to continue economic reforms and policies of the previous regime resulting in the Government’s enhanced ability to engineer its economic future, which reinforces the confidence that has emerged during 2007. The success and growth, however, largely depends on the degree to which the Government can deliver on its political agenda and how smoothly the transition of power can work towards bringing about a greater degree of optimism amongst investors and the business community.

Although The Bank of Punjab are optimistic about the future outlook for Pakistan and are confident that expected GDP growth target will be achieved yet the geopolitical situation particularly with reference to Iraq the year 2008 appears to be far more challenging where the factors beyond our control may adversely affect our economy. Moreover, the prevailing money market scenario with extremely low interest rates and stagnant private sector credit is a serious deterrent to the banking sector growth. This situation will force the banks to shift their focus from conventional banking approach to retail based consumer

finance products and service and the banks taking lead in this shift process will be least affected by the prevailing unfavorable interest rate scenario.

The mission to transform The Bank of Punjab into a modernized business oriented institution is sailing smoothly and in this direction by now computerization of 156 branches has been completed successfully while the remaining 87 branches will also be computerized before the 2008 year end. Moreover, during 2008 we will also introduce ATM facility at our selected branches for which your bank has joined MCB switch and the agreement has been signed. In addition to offering ATM facility we have aggressively embarked on providing real time inter-branch banking services within 2008.

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The bank is one of the sponsors of Trust Management Services Pvt. Limited besides being a co-sponsor of Trust Modaraba a Modaraba company incorporated in Pakistan under the Modaraba companies and Modaraba (Floatation and control) Ordinance, 1980. Authorized Modaraba Fund and paid up Fund of the said unit in Rs. 500 million and Rs. 150 million respectively.

The Bank is one of the sponsors of Trust Leasing Corporation Limited a public limited company established under the Companies Ordinances, 1984. Authorized paid up capital of the company is Rs. 250 million and Rs. 100 million respectively.

First Punjab Modaraba Services (Pvt) Ltd. established in Pakistan under Companies Ordinance.1984 and register under Moderate Companies and Modaraba (Flotation and Control) Ordinance, 1980 is wholly owned subsidiary of the bank. Authorized fund of this Modaraba is Rs. 500 million where as paid up fund is Rs 200 million.

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The services in The Bank of Punjab are classified in different categories.

□ President

□ Executive Vice President (EVP)

□ Senior Vice President (SVP)

□ Vice President (VP)

□ Assistant Vice President (AVP)

□ Officer Grade I

□ Officer Grade II

□ Officer Grade III

□ Cash Officer

□ Clerical Staff

➢ Non-Clerical Staff

□ Driver

□ Guards

□ Gate Keepers

□ Tea Boy

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| | |

|DIVISION |DEPARTMENTS |

| | |

|ADMINISTRATION |ORGANIZATION & METHODS |

|OPERATIONS |INFORMATIONAL & TECHNOLOGY |

|BUSINESS DEVELOPMENT |OFFICERS TRAINING INSTITUTE |

|CREDIT |SHARES |

|INTERNATIONAL |LAW |

|FINANCE |STATIONERY |

|RECOVERY |PLANNING RESERCH & PUBLICATION |

|AUDIT & INSPECTION | |

|TREASURY | |

|HEADED BY: - |HEADED BY: - |

| | |

|GENERAL MANAGER |CHIEF MANAGER |

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Total Branches 34 Total Branches 64

Total Branches 43 Total Branches 60

Total Branches 05 Total Branches 36

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G.M

This division deals with the problems relates to the staff administration. The main function of this department is to arrange a

comprehensive training program for recruited staff. Others function includes:

□ Recruitment

□ Staff remuneration

□ Placing the staff

□ Providing and defining the opportunities for career development and growth

□ Devising and implementing services rules.

□ Promotion and demotion

□ Suspension and termination

□ Transportation

□ Security, health and benefits.

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G.M

This Division is concerned with the operational working in general banking, which is concerned with the routine working of the bank. Any problem or ambiguity arise in any branch working are rectified and suggested for correction by this division. This Division usually takes technical procedures involved the decisions like commissions. And also,

□ The maintenance of the existing building owned by the bank.

□ Opening new branches and their maintenance.

□ It also deals with the stationery problems of the bank.

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G.M

It is the other name of the marketing division. It promotes the bank cause i.e. deposits and work for the over all development of the bank. Deposits are

the lifeblood of any bank. Without deposits bank cannot perform any function of banking. This division fixes the deposits target of every branch by keeping and eye over the potential customers in the area. It gives motivation to branches to achieve their targets through different campaigns and schemes like cash prizes and special increments. It publishes a bulletin in which those branches are encouraged who achieves their monthly targets. The main function is to develop and attract the customers and depositors. It also manages:

□ Advertising policy

□ Sales promotion.

□ Schemes offered by the bank.

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G.M

This division control over all credit operations like sanction of loans, Inland Bill Purchased (IBP) and also keeps check over securities mortgage,

hypothecating or pledge. It also fix the rate of mark-up and other decisions concerning with the credit.

There is a credit committee, which consists of senior officers; Branches send the credit proposal to head office credit division. Credit committee approves it after making a through analysis. It also

□ Prepare the policies regarding the sanctioning loan

□ Monitor loans and credit

□ Look after the portfolio of the bank

□ Define credit limits against specified securities.

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G.M

This division is providing important services to the bank regarding the matters of International Trade, Import, Export Letters of Credit, Travelers cheque etc.

□ It develops “Correspondent Relationship” with others on commission basis and this helps to deal with the clients having import export business.

□ It handles treasury operations.

□ The Marketing and Spot Inspection cell, which were introduced by the bank, are showing positive results in terms of achieving foreign currency deposit targets and other foreign related business.

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G.M

It controls the routine financial matters. The permission of special expenditure incurred in the branches, and other such cases. The daily position and HO Extracts are daily sent to this division by all the branches. This division not only estimates the profit and loss of every branch but also prepare overall income statement and balance sheet of the complete bank. It also keeps record of total deposits of the bank and then their classification in the form of loans into different sectors of economy. The basic functions are:

□ Monitoring the fiscal and financial policies of the bank.

□ Deals in exploring means for investing surplus bank funds.

□ Maintenance and investment of Gratuity and Pension Funds of the employees.

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G.M

The recovery division, which was established in 1994 to assist in regularizing the difficult loan accounts, has rendered valuable services in this respect. To effect recoveries in an efficient manner, a policy has been framed in accordance with the guidelines issued by the State Bank of Pakistan Moreover, recovery cells at regional levels have been set up to assist the head office. This division looks after the matters of recovery of loans with the assistance of legal advisors.

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G.M

This department ensures appropriate system of checks and balances. It checks all the irregularities, errors and forgeries if any, under the rules and regulations formed by the Government of Punjab. For this purpose it doesn’t only keep and eye on the branches in their vicinity but also conduct surprise and comprehensive audits of the branches. This strategy has improved working at the branch level. It not only points out the discrepancies but also tries to solve it. Surprise audit maintain a good check on the over all working of the branch especially of the side of finance.

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The following are the services being provided to the claims.

□ Acceptance of deposits

□ Granting of loans

□ Transaction Foreign Exchange Services

□ Remittance – Collection

□ SPEDFAX- instant Fund Transfer Service

□ Lockers facility

□ Utility Services

The Bank of Punjab attaches specials importance to the fee earning business and business base remuneration. As part of diversification of the banks utility services, the collection of bills of INSTAPHONE (mobile phone network) was added to existing collection arrangements for WAPDA,

SUI GAS, WASA, PTCL, and PAKTEL. By using bank’s extensive branch network, effort have been to made to maximize the exploitation of this source in view of its rich potential of yielding business and deposit direct earning of

Commission.

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In modern times very few business enterprises are carried out solely with the capital of the owners. Borrowing funds from different sources has becomes an essential feature of today business enterprise. But in the case of an entire banking system is based on it. The borrowed capital of the bank is much greater then their own capital. Banks borrowing is mostly in the form of deposits.

These deposits are lent out to different parties. The larger the difference between the rate at which the deposits are borrowed and the rate at which they are lent the greater of the profit margin of the bank. Furthermore, the larger the deposit the larger will be the funds available for employment; larger the funds lent out the greater will be the profit of the bank.

To receive the deposit is the basic function of all commercial banks. The bank does not receive these deposits for save keeping purpose only, but they accept deposits as debts. When banks receive deposit from a customer, the relationship of a debtor and creditor is established where by the customer become the creditor and the bank a debtor.

When the bank receives amount of deposit as a debtor, it becomes the owner of it. It may, therefore use it as deems appropriate. But there is an implicit agreement that the amount owned would be paid back by the bank to the depositor after a specified period.

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□ CURRENT DEPOSITS

□ PROFIT & LOSS SHARING ACCOUNT

□ SHORT NOTIC TERM DEPOSITS

□ CALL DEPOSIT

□ TERM DEPOSIT RECEIPTS (TDR).

In this type of account the client to allowed to deposit or withdraw money as and when he likes. Because of their nature, these deposits are treated

as the current liabilities of the bank. There is not profit on such deposits. Usually this type of account is opened by the business.

This type of accounts is one step towards the Islamization of banking system in Pakistan. There are two types of PLS Accounts.

□ PLS Saving Account

□ PLS-TDR (Profit & Loss Sharing Term Deposit Receipts).

PLS saving accounts can be opened with the minimum sum of Rs. 100 and PLS-TDR account can be opened for a sum of Rs. 1000 or above. Profit is paid on both types of the PLS account on half yearly basis.

Under PLS saving account the depositor undertakes to share profit or loss on the deposits earned or sustained by the bank. Secondly the bank is at the liberty to invest the funds of the deposits in any avenue, it deems fit. The PLS deposits are invested in non-interested channels.

his kind of deposit is for a short period. The depositor may withdraw his deposit at any time by giving seven days notice to the bank. This type of deposit facilitates the depositor to withdrawn his amount with interest of the deposited period.

Call deposits are the sorts of deposits, which are deposited with the banker against any tender. This is without interest deposit. This may be with interest provided the depositor has agreed to keep this amount with the bank for some fixed period.

This type of deposit is same as the SNTD. The difference is that SNTD is for short period (7- 30 days) while TDR is for long period (1 month up to 5 years).

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Account opening is the first step towards establishing a relationship between the customer and the bank. The Bank of Punjab is offering basically two types of account:

□ CURRENT DEPOSIT ACCOUNT

□ PROFIT & LOSS SHARING ACCOUNT

The necessary condition for a customer, who wants to open an account with the bank, is introduction, which is preferably by the bank officers or any account holder of the bank. The different categories of accounts that are available are as under.

□ INDIVIDUAL account

□ Joint Account

□ Partnership Account

□ Limited Company Account

□ Clubs, Society, Association, or Trust Account

□ SNTD

□ TDR

□ Foreign Currency Deposit

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Clearing is the most important department of the bank performing various functions.

A clearinghouse is an organization of the member banks, working under SBP and which is for the purposes of setting inter banks claim resulting from transmission of funds from one bank to another. The branch cheque/instruments are credited into the account of the customer. The clearing can be:

□ Outward

□ Inward

The instrument collected or stored bank wise and a schedules is prepared separately for each bank mentioning the total number of instruments and the amount of the instruments. Then these are recorded in a

register called “OUTWARD CLEARING REGISTER” then a main schedule is prepared

showing the total number of cheque and their aggregate amount being presented in the clearing.

The cheque/instruments are handed over the clearing branch. Central clearing branch issue CREDIT ADVICE to the branch for passing credit to its customer immediately. The branch on receiving credit advice debits the clearing account and credits the respective customer accounts.

On receiving cheque/instruments from central clearing branch, the in charge checks the number and amount of cheque received in clearing must tally with the main schedule received from central clearing branch.

These cheque/instrument are entered in “INWARD CLEARING REGISTER” for the cheque/instrument passed in clearing is a credit advice for the aggregate amount of cheque passed in clearing is prepared, drawn on central clearing branch.

Deposit held by bank at SBP serves as check clearing and collection balances. Rather than physically transferring funds between banks, check

clearing and collection can be done by simply debiting or crediting a bank’s account at SBP.

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Remittance is a major function of the bank. It is the transfer of money from one place to another place. The need for remittance is commonly felt in commercial life particularly and in everyday life generally.

By proving this service to the customers the Bank of Punjab earns a lot of income in the form of service charges.

The Bank of Punjab deals with the following type of remittances: -

❖ Demand Draft (DD)

❖ Mail Transfer (MT)

❖ Telegraphic Transfer (TT)

❖ Pay Order

Now we discuss all these in detail: -

Demand draft is a written order given by the one branch of a bank on behalf of customer to another branch of the same bank to a certain amount to the certain person.

Procedure for Prepare Demand Draft.

1. A draft voucher is filled which contains the following information

▪ Name of the parties involved

▪ Date

▪ Amount to be sent

▪ Account number (if DD is crossed)

2. A credit voucher is filled in order to get the excise duty and exchange commission.

3. The sender deposits the total amount of the two vouchers i.e. the debit and credit vouchers.

4. Then the cashier sends the cash receipt voucher to the accounts department and the account records the amount paid in his cash scroll.

5. Accountant gives the DD leaf along with the DD voucher to his assistant who records the sender’s name, amount and receiver’s name. After writing all the information in the DD register he gives it to the officer along with the DD for authentication.

6. After authentication the DD is handed over to the sender and bank sends the advice to the concerned branch. So when the party presents the DD in the concerned branch its payment could be made.

Parties involved in the Demand Draft

The following parties are involved in demand draft;

1. Purchaser or Sender

The purchaser is the person who sends the money to a particular person payable at a certain branch.

2. Issuing or Drawing Branch

The branch from where the demand draft is issued to another branch of the same bank.

3. Drawer Branch

Branch in which the draft has drawn and called upon to pay the amount

4. Payee

The person who is entitled to receive the amount after presenting the demand draft in the drawer branch

It is the transfer of money from one branch to another branch of the same bank through mail service. In mail transfer there is no need of advice as the amount is directly credited to the receiver’s account.

Procedure

1. First a voucher is filled in whish the sender writes the amount to be sent, name, account number of the receiving person with the branch name and date.

2. A credit voucher is filled in order to deduct exchange, postage charges according to the amount of the mail transfer.

3. The sender deposits the total amount in the cash department.

4. The cash officer gives the vouchers to the officer after affixing received cash stamp and writing the amount in red ink.

5. Then the officer writes the amount paid in the cash scroll and gives the MT to his assistant.

6. MT leaf is filled according to the information provided in credit voucher. He also writes the same information in the MT register. Then he gives the MT leaf and MT register to the officer for authentication.

This is the most urgent method of remitting the money from one place to another place. This method is used when the sender desires to send urgently, in this case the sender request the manager of the branch to issue TT.

Procedure:

For sending the TT the manager and officer apply a test. In the test the manager and officer uses a coding technique. They write their own code numbers, which is allotted, to them as the bank branch code. After making all the conformation the concerned branch makes the payment to the receiver. If the sender wants to convey the same message through telephone then he has to

pay the charges of telephone along with the TT charges. First the person deposit the TT amount along with the charges through the credit voucher then his TT sent to the relevant branch.

A pay order is a written order issued by the bank on its own branch, drawn upon and payable by itself to pay a specified sum of money to the person. The purpose of a pay order is to transfer the fund from one place to another. It is usually not issued in favor of the parties of other cities. Usually the pay order is issued for the local transfer of money from one person to another or from the person to any other department. It is used for different purposes. The purpose may be the repairs of the branch or renovation of the branch.

Procedure:

The procedure of a pay order varies with the nature of the purpose. If the work is of huge amount then first the manager writes a letter to the Zonal Chief in order to get sanction of the work. Then the advertisement of the work is given in the newspaper in order to invite the contractors. But if the work is small then the branch manager has discretionary power to select the party

whose rate is lowest. After finishing the work the contractor submits the bill of work on his stamp pad. Then the bank issues a pay order, against the pay order the contactor gets the amount from the issuing branch.

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“Major source of bank’s Income”

It is the loan function, which produces the major person of bank’s income, and as such it is the major areas of professional banker’s concern and attention.

Principles while advancing

Basically there are five principles that must be duly observed while advancing money to borrowers.

□ Safety

□ Liquidity

□ Disposal

□ Remuneration

□ Suitability

Many there are two types of advances:

□ Short-term (maturity within one year)

□ Long term (maturity with the period of more than one year)

However they are further classified as:

□ Running Finance

□ Demand Finance

□ Cash Finance

□ Letter of Guarantee

This form of finance was previously known as “overdraft”. When a customer requires the temporary accommodation, his bank allows withdrawal his account in excess of credit balance, which the customer has in its account, a running finance occurs. The accommodation is thus allowed collateral security. When it is against collateral securities, it is called a “Secured Running Finance”

and when the customer cannot offer any collateral security except his personal security, accommodation is called a “Clean Running Finance.” The customer is

in advantageous position in running finance because he has to pay the mark-up only the balance outstanding against him on daily product basis.

This is common form of financing to commercial and industrial concerns and is mad available either against pledge or hypothecation of goods produce or merchandise. In Demand Finance the party is financed up to a certain limit either at once or as and when required. The party due to facility of paying mark-up only on the amount it actually utilizes prefers this form of financing.

Securities for Advances:

□ Pledge

□ Hypothecation

□ Guarantee

□ Indemnity

□ Charge

□ Advances against “ Stock Exchange Securities

□ Advances against immovable property “Mortgage”

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“The bailment of goods as security for the payment of the debt and the performance of a promise is called pledge”

Pledge is the characteristic mode of taking goods as the security and the pledge occurs when the goods or document of the title thereto or the securities are delivered by the customer to his banker to be held as security for the repayment of the advance.

In a pledge, the ownership remains with the pledger but the pledgee has the exclusive possession of the property until the advances in repaid in full, while in case of default the pledgee has the power of sale after giving due notice. People with the safe custody of goods, when entrusted with the goods for the specific purpose may not make the valid pledge.

“A legal transaction where by goods may be made available as the security for a debt without transferring either the property or the possession to the ledger.”

When the property in goods is in charged as the security for a loan from the bank but the ownership and the possession is left with the borrower, the

goods are said to be hypothecated. The essence of the hypothecation is that neither the property in the goods nor the possession of them passes to the lender, but the security is guaranteed by means of Letter of Hypothecation, which usually provides for a banker’s charge of the hypothecated goods.

“A contract to perform the promise, or discharge the liability of the third person in case of his default”

This is so when an application for the advances cannot offer any tangible security, the banker may rely on the personal guarantees to protect himself against loss and advances or overdraft to the applicant. Therefore a guarantee may be either written or Oral. The Grantee is a promise by one person called

the guarantor or security to another for answering the present or future debt if a second person called the “Principal Debtor”.

“A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself or by any other person is called the contract of indemnity”

Thus in an indemnity, the promisor is the only person who becomes liable to the promise if the latter suffers a loss on account of his doing something at the express desire of the former.

When immovable property of one person is by act of parties, or operation of law, made security for payment of money to another, and the transaction does not amount to mortgage, the latter person is said to have the charge on the property, and all the provisions herein before contained which apply to a simple mortgage shall, so far as may be apply to such charge.”

This means that a charge is a right of payment out of certain property. The charge can be created by the act of parties or by the operation of the law and although the property is made a security the payment of loan, is still not he mortgage.

Advances against Stock Exchange Securities:

Stock Exchanges Securities is the vast term which covers all gilt edged securities such as:

□ Federal and Provincial Government Bonds

□ Post trust or Municipal Bonds

□ Shares and debentures

Banker, as security for advances to the customer, frequently accepts these securities. Advances can be against:

□ Preference Shares

□ Ordinary Shares

□ Preferred Shares

It can be

□ Quoted or Unquoted

□ Registered

□ Bearer

□ Inscribed

Advances against Immovable Property (Mortgage):

A mortgage is the transfer of and interest in specific immovable property for the purpose of securing the payment of the money, advanced or to be advanced. By way of loan, and existing debts or the performances of the engagement this may rise the pecuniary liability.

The transfer is called the ‘mortgager’ and the transferee the ‘mortgagee’ the principal money and interest of which payment is secured for the time being and instrument by which the transfer is effected, is called the letter of the mortgage deed.

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Availability of adequate flows of credit for industry and agriculture are a sine qua non for the growth and development of an economy. This acquires

added importance when agriculture is the mainstay of the economy as also the sector where the bulk of the poor are concentrated. Growth and productivity in Pakistan's agriculture has slowed down in recent years and is, therefore, of serious concern given its importance for the economic prosperity of the country. Apart from various other weaknesses in the infrastructural support of the agricultural sector, inadequacy and lack of efficacy of credit, flows to support agriculture related activities has been a major constraining factor.

Agriculture is the largest sector of the economy. It contributes 25 percent to GDP, provides raw materials to 80 percent of industry and employment to over 50 percent of the population. This is a sector that has the

Shortest gestation period for investments and, therefore, a remarkable capacity to bring about a turn around in the economy .This important sector in Pakistan is suffering from a number of maladies and is consequently witnessing stagnation in productivity.

Due to policy and administrative exigencies, the savings in the agriculture sector remain low and, therefore, the sector has perpetually remained capital starved. The pricing of input and output in agriculture over the

years has forced the majority of farmers in Pakistan to plough back their incomes into agriculture and non-institutional credit, and has more often than not served to sap their potential earnings. Needless to say, that shortage of savings and lack of availability of capital is one of the major reasons for poverty in the country. The agricultural and rural sectors in Pakistan in general and in Punjab in particular are, therefore, suffering from severe under-development. Under a desirable development model, Punjab can:

□ Increase agricultural production to meet the country's requirement of essential foods items and industrial raw materials.

□ Develop agro-based industry in the rural sector for economic value addition;

□ Generate additional employment opportunities in rural as well as adjacent small towns/cities;

□ Control massive migration to the urban centers that in turn is causing a number of social, administrative (i.e. law and order) and economic problems for the urban areas.

□ Elevate poverty and improve the income generating capacity of the agri-based population.

 

Never before in the history of Pakistan, has the development of the agricultural and food sectors been as critical as at this juncture and appropriate short and long term measures are necessary for its revival, sustenance and stability. Supply of credit by Financial Institutions for meeting the specific needs of agriculture and rural sectors are essential components for improvement in both short and long-term development of the country. This has assumed even greater importance in the present situation of declining water availability. Per acre, production is plummeting. The per acre yield of most of the crops is stagnant rather diminishing. The most important factors responsible for this downward trend in productivity are: -

FACTORS RESPONSIBLE FOR LOW YIELD PER ACRE:

                       *          Imbalanced fertilizer use

                       *          Lack, availability of certified and good quality seeds

                      *          Improper control of pests and weeds

SCARCITY AND INEFFICIENT USE OF WATER:

 

           * Natural and mechanical water resources.

 

NON-USE OF MECHANIZED FARMING PRACTICES:

□ LACK OF EDUCATION AND RESOURCES, MOTIVATION TO USE ADVANCED TOOLS FOR AGRICULTURE:

□ HIGH COST, LOW OUT PUT, UNSKILLED LABOUR INTENSIVE

□ NON-AVAILABILITY OF CREDIT AND FINANCIAL ASSISTANCE TO THE AGRICULTURE SECTOR

.

The importance of availability of credit to the agriculture sector has always been recognized by Government and given Top Priority. Specialized institutions have been in place for a number of years. However, these

Institutions have failed to realize the full potential from the sector and at times contributed to its further deterioration . It is therefore of paramount importance that The Bank of Punjab through well thought out policies ensures that it does not repeat the follies of the past. 

A number of institutions are in the field yearning to obtain results. We in The Bank of Punjab will support the role of the Government in providing much needed support to the agriculture sector but with a difference. The difference being that instead of subsidizing the needs we will be active

participants in economically viable projects thereby safeguarding the investments of the Bank.

A precondition to lending by the Bank will be an undertaking from the customers/borrowers not to borrow from any other source whatsoever. This is important to ensure against any multiple borrowing and more importantly to restrain the borrower from falling into a debt trap.

The Bank of Punjab has been at the forefront in contributing to the Agriculture Sector at a limited scale and has initiated schemes in harmony with the State Bank of Pakistan approved/eligible programmes for the assistance/help of the agriculture farmers.

             Presently, the Bank is financing farmers in some specific areas only. The State Bank of Pakistan has expanded the scope of its scheme and included a number of items eligible for credit under Agri-finance Schemes.

            In terms of the importance, priority and current needs. We have short listed the items from the State Bank of Pakistan's list provided under cover of its Circular letter No. ACD/1044/1050/PD/P-08/2001 dated 26.04.2001.

The list of eligible items for Agri-Credit is mainly divided in two sectors; i.e.

 

          

  ►Farm Credit. And

  ►Non-Farm Credit 

Farm Credit is further bifurcated into:

□ Short-Term

□ Medium-Term

□ Long-Term Credit.

The priority items, which are recommended for inclusion in our schemes, are given here under;

XISTING:    

(Kissan Dost Agriculture Finance Scheme) Product /purpose of Finance) Seeds, Fertilizers, Pesticides, Herbicides, Weedicides, All types of labor and water charges are already embodied in our package financing, i.e., 8000 Per Acres (no change) 

PROPOSED:

                        (Product /purpose of Finance)

1.         Orchard and Nursery      2.         Manual Sprayers

3.         Sericulture                      4.         Apiculture

EXISTING:                        Tractors

                       (Product/purpose of Finance)

PROPOSED:

                        (Product & Purpose of Finance)

                        Tube-Well

  Installation of Tube-Well, water management, equipment, modules & culvert, lining of channels etc. Solar energy plants and pumps for irrigation, equipment for sprinkle/trickle/drip irrigation system.

Mechanization Support:

                                             Agri-implements, Equipment, i.e. trailers and thrashers, power tillers, power & boom sprayers, ploughs and cultivators, ridggers / drills, rotavators, diggers, saw machines for crates making, press machines for wheat straw and dry fodders. 

Farm Transport:                                           

Lease finance for purchase of Motor Cycles and small Vans for Milk and other agri products transportation to local market.

Islah-e-Arazi:

     Precision land leveling & reclamation, soil improvement, embankment, land formation and land improvement, laser leveling etc.                 

  For the time being, we do not propose to extending Non-Farm Credit, i.e. for big Dairy Farms, Poultry Farm but will accommodate existing borrowers and established small individual farmers by financing livestock. (Goat, sheep, cattle & fattening animals) on a limited scale to revive, accelerate and supplement the income generating capacity of the small farmers.

 

|Years |Deposits (Rs in Million) |

|1999 |15019 |

|2000 |17028 |

|2001 |19035 |

|2002 |23767 |

|2003 |34938 |

|2004 |54724 |

|2005 |88465 |

|2006 |137728 |

[pic]

|Years |Advances (Rs in Million) |

|1999 |6151 |

|2000 |6144 |

|2001 |5772 |

|2002 |6621 |

|2003 |18344 |

|2004 |39439 |

|2005 |63624 |

|2006 |101320 |

[pic]

|Years |Investment (Rs in Million) |

|1999 |4991 |

|2000 |7866 |

|2001 |5970 |

|2002 |8295 |

|2003 |11458 |

|2004 |16198 |

|2005 |18026 |

|2006 |28233 |

|Years |Capital (Rs in Million) |

|1999 |4537 |

|2000 |1509 |

|2001 |1672 |

|2002 |1795 |

|2003 |1823 |

|2004 |2180 |

|2005 |2940 |

|2006 |4537 |

[pic]

|Years |Assets (Rs in Million) |

|1999 |18215 |

|2000 |20186 |

|2001 |24803 |

|2002 |29533 |

|2003 |43621 |

|2004 |66320 |

|2005 |111154 |

|2006 |164855 |

[pic]

|Years |Profit (Rs in Million) |

|1999 |28 |

|2000 |157 |

|2001 |236 |

|2002 |284 |

|2003 |689 |

|2004 |1368 |

|2005 |2353 |

|2006 |3804 |

| | |

[pic]

|Years |Growth (Rs in Million) |

|1999 |1823 |

|2000 |2180 |

|2001 |2225 |

|2002 |1290 |

|2003 |2684 |

|2004 |2832 |

|2005 |6791 |

|2006 |6989 |

[pic]

|Categories |No of Share Holders|Shares Held |Percentage |

|Directors/CEO/Spouse |4 |11576 |0.01 |

|Provincial Govern |1 |51781427 |51.57 |

|Foreign funds |50 |3052275 |3.04 |

|Individuals |5659 |14378263 |14.32 |

|Insurance Companies |4 |3453355 |3.44 |

|Financial Institutions |28 |5881765 |5.85 |

|NBFI |103 |16547565 |16.48 |

|Modaraba & Modaraba Management Co |8 |9279 |0.01 |

|Others |28 |5299821 |5.28 |

|TOTAL |5891 |100415326 |100 |

[pic]

Balance Sheet

as at December 31, 2006

Restated

Note 2006 2005

Rupees in ‘000’

Assets

Cash and balances with treasury banks 14,054,859 8,787,387

Balances with other banks 3,722,089 9,367,595

Lendings to financial institutions 11,846,823 7,593,681

Investments 28,233,211 18,026,181

Advances 101,319,954 63,623,705

Operating fixed assets 2,068,744 1,715,061

Deferred tax assets - -

Other assets 3,609,457 2,040,568

164,855,137 111,154,178

Liabilities

Bills payable 856,448 478,001

Borrowings 6,989,424 6,791,007

Deposits and other accounts 137,727,606 8,465,051

Sub-ordinated loans _ _

Liabilities against assets subject to finance lease 40,988 55,403

Deferred tax liabilities 298,616 220,177

Other liabilities 2,816,341 1,474,425

148,729,423 97,484,064

Net assets 16,125,714 13,670,114

Represented by

Share capital 2,902,490 2,349,719

Reserves 4,537,232 2,940,399

Unappropriated profit 3,219,246 1,486,755

10,658,968 6,776,873

Surplus on revaluation of assets 5,466,746 6,893,241

16,125,714 13,670,114

[pic]

Rs. In Million

|For the Years |2006-2005 |2005-2004 |

| |Rs |%AGE |Rs |%AGE |

| |(In Million) | |(In Million) | |

|Assets | | | | |

|Cash and balances with treasury banks |5267472 |60% |2964856 |170% |

|Balances with other banks |5645506 |(60%) |(25629) |(1.3%) |

|Lendings to financial institutions |703666 |15% |3865167 |83% |

|Investments |849462 |20.6% |(372138) |(9%) |

|Advances |2656898 |21% |6432256 |51% |

|Operating fixed assets |2324704 |35% |(1895847) |(29%) |

|Deferred tax assets |- |- |25484 |11% |

|Other assets |2912 |7% |(505) |(1.12%) |

| Liabilities | | | | |

|Bills payable |(184025) |(33%) |61847 |11% |

|Borrowings |4730148 |23.7% |4616228 |23% |

|Deposits and other accounts |

|Sub-ordinated loans |- |- |32065 |6% |

|Liabilities against assets subject to finance lease |(1219715) |(12%) |2196943 |21% |

|Net assets |117435 |3914% | | |

|Represented by |4732280 |110% |2006325 |47% |

|Share capital |3808140 |21% |4405081 |24% |

|Reserves |

|Reserves |82308 |8% |(52040) |(5%) |

|Unappropriated Profit |1447 |1064% |(442) |(32.5%) |

|Stock Holder Equity |27600 |105% |211147 |11.7% |

|Total Liabilities & Equity |3780540 |19% |4616228 |23% |

[pic]Rs. In Million

|For the Years |2004-2003 |2003-2002 |

|ASSETS |Rs |%AGE |Rs |%AGE |

| |(In Million) | |(In Million) | |

|Cash and balances with treasury banks | | | | |

|Balances with other banks |(538543) |(31%) |275462 |15.7% |

|Lendings to financial institutions |(1613310) |(82%) |103030 |5.23% |

|Investments | 1161000 |25% | (2894966) |(62%) |

|Advances |(6984) |(.16%) |2039148 |50% |

|Operating fixed assets |(997837) |(8%) |(477320) |(3.8%) |

|Deferred tax assets |2875175 |44% |(1589964) |(24%) |

|Other assets |17929 |8% |(2955) |(1.2%) |

| Liabilities |(31108) |(69%) |(11058) |(24.6%) |

|Bills payable |(13179) |(4.7%) |(14013) |(5%) |

|Borrowings |192077 |(100%) | | |

|Deposits and other accounts |(80204) |(14%) |406102 |73% |

|Sub-ordinated loans |1976032 |10% |(1675195) |(8.4%) |

|Liabilities against assets subject to finance lease |

|Net assets |(741898) |(136%) |329069 |60% |

|Represented by |(10433355) |(104%) |736126 |7% |

|Share capital |(67345) |(241%) |39488 |141% |

|Reserves |105776 |25% |14854 |3.5% |

|Reserves |(11136822) |(101%) |1119537 |10% |

|Unappropriated Profit |(3000) |(100%) | | |

|Stock Holder Equity |9936479 |232% |2818507 |66% |

|Total Liabilities & Equity |1615164 |10% |(1698970) |(9%) |

[pic]

|For the Years |2006 |2005 |2004 |2003 |2002 |

|Service Revenue |

|Mark up/Interest, Discount & Returned |2069555 |2172956 |1934794 |2260770 |2259608 |

|Earned | | | | | |

|Fee Commission & Brokerage |60320 |51937 |61395 |60637 |58521 |

|Dividend Income |189051 |109804 |161307 |71258 |46738 |

|Other Operating Income |104581 |58647 |47300 |25725 |26150 |

|Total Service Revenue |2423507 |2393344 |2204796 |2425299 |2391017 |

|Less: Cost /Return on Deposit |996335 |1113151 |1083344 |1510145 |1755443 |

|Gross Income |1392644 |1259790 |999004 |912797 |635100 |

|Less: Operating Expenses | |

|Administrative Expenses |901041 |837055 |678675 |722009 |601368 |

|Provision against non- performing |76076 |39286 |143059 |81230 |(123615) |

|advances | | | | | |

|Provision for diminution in value of |(23472) |0 |0 |0 |27273 |

|investment | | | | | |

|Bad Debts |1574 |200 |33 |0 |337 |

|Total Operating Expenses |955219 |876541 |821767 |803239 |505363 |

|Operating Profit |437425 |383249 |177237 |109558 |129737 |

|Other Income |43154 |28480 |21967 |17269 |7561 |

|Other Charges |4664 |1460 |690 |2088 |1683 |

|Profit Before Tax |431844 |421275 |319639 |124739 |135615 |

|Less: Tax |147870 |185030 |162220 |96500 |12500 |

|Profit After Tax |283979 |236245 |157419 |28239 |123115 |

[pic]

Rs. In Million

|For the Years |2006-2005 |2005-2004 |

|Service Revenue |Rs |%AGE |Rs |%AGE |

| |(In Million) | |(In Million) | |

|Mark up/Interest, Discount & Returned Earned |(103401) |(4%) |238162 |10% |

|Fee Commission & Brokerage |8383 |15% |(9458) |(17%) |

|Dividend Income |79247 |170% |(51503) |(110%) |

|Other Operating Income |45934 |175% |11347 |43.39% |

|Total Service Revenue |30163 |1% |188548 |8% |

|Less: Cost /Return on Deposit |(116816) |(7%) |29807 |1.6% |

|Gross Income |132854 |21% |260786 |41% |

|Less: Operating Expenses | |

|Administrative Expenses |63986 |10.6% |158380 |26% |

|Provision against non- performing advances |36790 |30% |(103773) |(84%) |

|Provision for diminution in value of investment |(23472) |(86%) |0 |0% |

|Bad Debts |1374 |407.7% |167 |49.5% |

|Total Operating Expenses |78678 |15.5% |54774 |11% |

|Operating Profit |54176 |41.7% |206012 |159% |

|Other Income |14674 |194% |6513 |86% |

|Other Charges |3204 |190% |770 |46% |

|Profit Before Tax |10569 |8% |101636 |75% |

|Less: Tax |37160 |297% |22810 |183% |

|Profit After Tax |47734 |38.7% |78826 |64% |

[pic]

Rs. In Million

|For the Years |2004-1993 |2003-2002 |

|Service Revenue |Rs |%AGE |Rs |%AGE |

| |(In Million) | |(In Million) | |

|Mark up/Interest, Discount & Returned Earned |(325976) |(15%) |1162 |1% |

|Fee Commission & Brokerage |758 |.71% |2116 |3.61% |

|Dividend Income |90049 |193% |24520 |52% |

|Other Operating Income |21575 |82.5% |(425) |(1.6%) |

|Total Service Revenue |(220503) |(9%) |34282 |1.4% |

|Less: Cost /Return on Deposit |(426801) |(24%) |(245298) |(14%) |

|Gross Income |86207 |13.6% |277697 |43.7% |

|Less: Operating Expenses | |

|Administrative Expenses |(43334) |(7%) |120641 |20% |

|Provision against non- performing advances |61929 |50% |204945 |166% |

|Provision for diminution in value of investment |0 |(0%) |(27273) |(100%) |

|Bad Debts |33 |10% |(337) |(100%) |

|Total Operating Expenses |18528 |3.6% |297976 |59% |

|Operating Profit |67579 |52% |(20179) |(15.5%) |

|Other Income |4598 |61% |9708 |128% |

|Other Charges |(1398) |(83%) |405 |24% |

|Profit Before Tax |194900 |143% |(10976) |(8%) |

|Less: Tax |65720 |525% |84000 |572% |

|Profit After Tax |129180 |105% |(94976) |(77%) |

Comparative Financial Statement

Comparative financial statement present financial information for the current period and one or more past periods. In comparative analysis the statements predict about the movements and trends of the business with respect to past years, whether there is increase in the business activities or decrease. It may also help to comments about the future expectations of the ways in which the financial and operating performance will go.

There are two type of comparative financial statement analysis.

✓ Horizontal Analysis

✓ Trend Percentage Analysis

[pic] Comparison of two or more years’ financial statement is called Horizontal Analysis. It shows the changes between years both in rupee and percentages form. So in this way it facilitates the analyst to predict about the ways if the business in which it is going. It emphasis the proportional relationship between the reporting periods, rather than with in the reporting period.

In this report I shall use this type of comparative financial statement analysis to analyze the performance of The Bank of Punjab.

[pic]

Trend percentages state the several years’ financial data in terms of a base year. The base years equals to 100% with all other stated as some percentage of this base year. In this way it predict good and easy way information about the business activities. By simple looking at these percentages one can see the ways in which the business in going on whether the business is making performance or not.

[pic]

The results that I have perceived from the Comparative Analysis of Balance Sheet and Profit & Loss Account of 2006-05.

← The current assets increased by 60%, this is mainly due to a higher increase in Balance with other Banks i.e. 60%but cash is reduced which is not good for the Short term solvency of the bank. Account receivable also increases as compared to last year but other assets decrease i.e. 33%.

← Total Assets are increased by 23.7%.

← Fixed Assets are increased by 43%.

← The increase in Balance with other banks by 139% is a good sign for the short-term solvency of the bank.

← The Account receivable is increased by 15% in this period.

As a whole total assets and total liabilities plus owner’s equity is increased by 19% which corresponds with the increase in service revenue.

← The service revenue of the bank is increased by 1% than that of 2005, with the decrease of –7% in the cost return on deposits. So service decreased less than that of return on deposits.

← This less decrease, service revenue than that of return on deposits results in an increase of 21% of Gross profit.

← The other income of the bank also increased in 2006 then that of in 2005. These are increased by 194%.

← As the service revenue increased, the administrative expenses also increased by 11%.

← Overall profit after tax also increased by 39% in 2006 then that of 2005.

Comments on Comparative Analysis of 2006-2005

From Balance Sheet

← The current assets increased by 51%, this is mainly due to a higher increase in cash i.e. 170% but balance with other bank is reduce which is not good for the Short term solvency of the bank. Account receivable also increases as compared to last year.

← Total Assets are increased by 23%.

← Fixed Assets are increased by 8.2%.

← The decrease in Balance with other banks by –1.3% is not good sign for the short-term solvency of the bank.

← The Account receivable is increased by 83% in this period.

As a whole total assets and total liabilities plus owner’s equity is increased by 23% which corresponds with the increase in service revenue.

From Profit and Loss Account

← The service revenue of the bank is increased by 8% than that of 2005

← This less decrease, service revenue than that of return on deposits results in an increase of 41% of Gross profit.

← The other income of the bank also increased in 2006then that of in 2005. These are increased by 86%.

← As the service revenue increased, the administrative expenses also increased by 26%.

← Overall profit after tax also increased by 64% 2006 then that of 2005.

Comments on Comparative Analysis of 2005-2004

The results that I have perceived from the Comparative Analysis of Balance Sheet and Profit & Loss Account of 2005-2004.

From Balance Sheet

← The current assets decreases by -8%, this is mainly due to a higher decrease in Balance with other Banks i.e. -82% and cash is also reduced by -31%, which is not good for the Short-term solvency of the bank. Account receivable increase as compared to last year but other assets decrease i.e. 14%.

← Total Assets are increased by 10%.

← Fixed Assets are increased by 8%.

← The decrease in Balance with other banks by -82% is not a good sign for the short-term solvency of the bank.

← The Account receivable is increased by 25% in this period.

From Profit and Loss Account

← The service revenue of the bank is decreased by -9% than that of 2004, with the decrease of –15% Mark up interest on deposits. So service decreased less than that of Mark-up Interest.

← This less decrease, service revenue than that of mark-up on deposits results in an increase of 14% of Gross profit.

← The other income of the bank increased highly in 2005 then that of in 2004. These are increased by 61%.

← As the service revenue decreased, the administrative expenses also decreased by -7%.

Overall profit after tax also increased by 105% in 2005 then that of 2004

Comments on Comparative Analysis of 2004-2003

The results that I have perceived from the Comparative Analysis of Balance Sheet and Profit & Loss Account of 2004-2003.

From Balance Sheet

← The current assets decreases by –3.8%, this is mainly due to a higher decrease in Account Receivable but increased in Balance with other Banks i.e. 5% and cash is also increased by 15.7% which is good for the Short term solvency of the bank.

← Total Assets are decreased by -8.4%.

← Fixed Assets are also decreased by -1.2%.

← The Account receivables are decreased by -62% in this period.

From Profit and Loss Account

← The service revenue of the bank is increased by 1% than that of 2003, with the decrease of –14% in the cost return on deposits. So service decreased less than that of return on deposits.

← This less decrease, service revenue than that of return on deposits results in an increase of 43.7% of Gross profit.

← The other income of the bank also increased in 2004 then that of in 2003. These are increased by 128%.

← As the service revenue increased, the administrative expenses also increased by 20%.

← Overall profit after tax decreased by -77% in 2004 then that of 2003

THE BANK OF PUNJAB

TREND PERCENTAGES

|For the Years |2002/1998 |2001/1998 |2000/1998 |1999/1998 |

|ASSETS | |

|CCURRENT ASSETS | |

|Cash |161% |254% |84% |115% |

|Balance with other Banks |161% |21% |23% |105% |

|Account Receivable |161% |141% |62% |37% |

|Advances |160% |140% |149% |150% |

|TOTAL CURRENT ASSETS |161% |139% |88% |96% |

|LONG TERM INVESTMENT |126% |90% |119% |75% |

|Fixed Asset |166% |117% |106% |98% |

|Capital work in progress |11% |04% |05% |75% |

|TOTAL FIXED ASSETS |141% |98% |90% |94% |

|Deferred Tax Debt |00% |96% |100% |00% |

|OTHER ASSETS |136% |169% |158% |173% |

|TOTAL ASSETS |148% |124% |101% |91% |

|CURRENT LIABILITIES |

|Notes Payable |46% |30% |24% |160% |

|Accounts Payable |12% |25% |03% |107% |

|Accrued Liabilities |230% |67% |00% |241% |

|Other Liabilities |176% |165% |129% |103% |

|TOTAL CURRENT LIABILITIES |21% |30% |08% |110% |

|Deferred Liabilities |3914% |00% |00% |100% |

|Long Term Liabilities |556% |445% |398% |165% |

|TOTAL LIABILITIES |144% |13% |99% |90% |

|STOCK HOLDERS EQUITY |

|Share Capital |129% |126% |110% |110% |

|Reserves |133% |125% |130% |95% |

|Unappropriated Profit |1067% |3% |328% |165% |

|Stock Holder Equity |131% |133% |121% |101% |

|Total Liabilities & Equity |143% |124% |101% |91% |

THE BANK OF PUNJAB

TREND PERCENTAGES

|For the Years |2002/1998 |2001/1998 |2000/1998 |1999/1998 |

|Service Revenue | |

|Mark up/Interest, Discount & Returned Earned |91% |96% |85% |100% |

|Fee Commission & Brokerage |103% |88% |104% |103% |

|Dividend Income |404% |234% |345% |152% |

|Other Operating Income |399% |224% |180% |98% |

|Total Service Revenue |101% |100% |92% |101% |

|Less: Cost /Return on Deposit |56% |63% |61% |86% |

|Gross Income |219% |198% |157% |143% |

|Less: Operating Expenses | |

|Administrative Expenses |149% |139% |112% |120% |

|Provision against non- performing advances |61% |31% |115% |65% |

|Provision for diminution in value of investment |(86%) |0% |0% |0% |

|Bad Debts |467% |59% |9% |0% |

|Total Operating Expenses |189% |173% |162% |159% |

|Operating Profit |337% |295% |136% |84% |

|Other Income |570% |376% |290% |228% |

|Other Charges |277% |86% |40% |124% |

|Profit Before Tax |318% |310% |235% |91% |

|Less: Tax |1182% |1480% |1297% |772% |

|Profit After Tax |230% |191% |127% |22% |

Graphically Presentation of trend Percentages

This table and graph shows the trend of Total current Assets, Total Fixed Assets, and Total Assets during the years 1998-02

|No of Years |2002 |

|Return on Deposits | Net profit after taxes / Deposits |

|Return on Equity | Net profit after taxes / Equity |

|No of Years |2002 |

|Operating Profit Margin | Operating profit / Income |

|Net Profit Margin | Net profit / Income |

|No of Years |2002 |

|No of Years |2002 |

|Cash to deposits Ratio |Cash / Deposits |

|No of Years |2002 |

|Equity to Deposit Ratio |Total Equity / Deposits |

|No of Years |2002 |

|Investment to Total Assets Ratio |Investments / Total Assets |

No of Years |2002 |2001 |2000 |1999 |1998 | |Deposits to total liabilities Ratio |91% |85% |95% |92% |94% | |Investment to Total Assets Ratio |28% |24% |27% |27% |34% | |

Topics Page No.

← Strengths 92

← Weaknesses 94

← Opportunities 96

← Threats 97

STRENGTHS

← The major shares of BOP is owned by the Govt. of the Punjab, so it can develop a good image & trust among it customers.

← Stability of Bank is strength of any bank. The Bank of Punjab has stable growth since its establishment.

← The Bank provides the loan facility on sound basis that is very crucial for any bank to recover the loan. The Bank of Punjab has conservative policy for advances. So there are very less bad debts.

← Personal selling has key role in banking service. The officers of the Bank of Punjab go to the potential customers to develop the business. By the relationship with customers, they achieve the deposit targets.

← The promotion criteria of the bank are on the basis of the efficiency and passing the diploma examination of Pakistan Institute of Bankers.

← Entry in gains book if world record, rapid growth in expansion in short span of time, 243 branches in Pakistan.

← It is the policy of the management that requirements are made according to the principles of merit. The bank to train them in gives the staff banking. The past percentage of the candidates of Bank of Punjab is the highest among the entire commercial every year.

← People have trust in the Bank of Punjab because govt. of Punjab 52% shares of the bank.

← There is no union in the Bank of Punjab.

← Working environment is good. Officers and managers work together as a team. They are very cooperative with each other.

← The bank has very good branch network in Punjab and now after scheduling the bank is opening its more branches in other provinces.

← Higher management is experienced.

← The management style of the management is flexible.

← Profit rate is high as comparative to other banks.

WEAKNESSES

← The Bank of Punjab is centralized organization. The authority is not given to the branch level. Managers have to take permission from the Regional office or Head office for credit. Manager had to get permission if they have to given more rate of profit to the customers. So the customers have to wait for days, which may cause the change of customers. Managers cannot negotiate with customers without the permission of head office.

← The Bank of Punjab has less modern technology. Only few branches are computerized. Due to lack of modern technology, the bank’s services are low and foreign banks have large market share. In this era modern technology is very necessary for competitions.

← Salaries of the officers are less as compared to other private banks.

← The Bank of Punjab has very less promotional activities. Their advertising campaign is very low. They only use personal selling.

← The Bank of Punjab has very less staff in the branches of South Punjab as compared to Upper Punjab. This creates the problem employees have to spent most of their time in the bank to complete even their daily routine work. They have to sit till 7:00 to 8:00 PM before going back to their homes. For this reason their normal life is disturbing which create the irritation in the behavior of employees.

← The bank’s expenses are increasing at very high rate.

← The Bank of Punjab has less interest in foreign exchanges. And BOP has less number of expert officers in the foreign exchange business.

← Mostly small branches are going in loss.

← The Bank of Punjab has only six regional office in whole Pakistan. It is very difficult to control all branches in one region.

← The Bank of Punjab is deviating from the basic banking principles, because the basic function of bank is to accept the deposit and advance loans. But analysis of financial statement of BOP shows that advances are less as compared to investment.

← BOP is not taking keen interest in the marketing of traveler cheque than others bank. BOP is loosing its share due to the less interest.

OPPORTUNITIES

← Although commercial banks have launched many products but a gap exist between the customer’s want and what the banks are providing. This is an opportunity for the Bank of Punjab to move in and fill the gap between the ideal bank and the current service offerings by aggressive advertising, consumer friendly attitude products and service for attracting customers.

← The Bank has opportunity to expand the branch network all over the country, and it would be able to develop business and can start many other schemes for investment.

← The Bank has opportunity to use latest technology for providing good services to customers.

← There is an opportunity for more businesses if the BOP opens its branches in foreign countries.

← There is an opportunity for more businesses if the BOP offered credit cards.

← Different multinational are establishing their businesses in Pakistan. So there is a lot of potential for future businesses.

THREATS

← The salaries of the officers of the Bank of Punjab are less as compared to other private banks. It may cause transfer of the experts from the Bank of Punjab to other banks.

← Expansion of newly establishment banks like Picic Bank, Union Bank, Al-Falah Bank, Askari Commercial Bank etc. and their better performance may cause loss of the marker share of the BOP. According to the World Bank report, the Pakistan has become an “over banked” economy. With the cutthroat competition for deposits in the industry, the battle is on for the market share. The concept of 24 hours banking, Telephone and On-Line Banking, Automatic Teller Machine (ATM), and credit card are a direct result of the intense competition. But the BOP is far behind the above –mentioned services and will not provide better services as compared to other banks; it will lose its market share.

← The Bank of Punjab is also forced to give loans on potential basis. Due to this the recovery of such loans may become very difficult.

← Promotional activities of the BOP are nor sufficient. Due to this it may lose market share.

In the light of the Knowledge obtained during internship and studying the organization, the following recommendations may prove to be successful to the bank.

• In order to capture a considerable share in the banking sector of the country, the prime objective should be awareness in the general public. For this it should launch a well-planned advertising campaign in the general public.

• Physical facilities in a bank also play their role in enhancing its grade and sound image. The bank should keep these facilities like furniture, parking facilities for the customer.

• Salaries of the officers must be compatible to other private banks so that the BOP can attract professionals, intelligent persons.

• The Bank of Punjab should minimize its expenses.

• Special awards should be given to the hardworking employees who performed extra-ordinary in the bank.

• The bank should come up with new and innovative products. It would be advisable to make these products while keeping in mind the gap between what people want and what their banks are providing them.

• The Bank of Punjab should concentrate more on advances than on investments

• The bank should come up with such products or services in which the customers would not have to come to the bank at any stage i.e. Telephone Banking etc.

• The Bank of Punjab should use the latest technology because the bank which can provide speedy, accurate and standard services in the delivery of products, loans etc. to the customers will be successful e.g. computerization, fax installation.

• The authority should be delegated to the manager level.

• MIS should be improved by connecting all regional offices and branches to the head office through a network for timely delivery of information.

• Management of Bank of Punjab should try to avoid the political influences and should give loans on merit.

• The bank should make a plan to gear up its recovery function on war fooling and recognize the recovery function.

• The Bank of Punjab should give some extra credit to concern to professional qualifications such as MBA(IT)’s, M.B.A’s, C.A’s A.C.M.A’s at the time of recruitment and selection.

• Interview should be conducted while recruiting personnel, to consider the personality characters, communications skills and sociability.

• The bank should adopt a policy to accommodate and facilitate the research scholars who want to study the banking affairs. The universities and other institutions can help to launch the studies regarding banking business.

• All possible efforts should be made to protect the bank from the interruption of Provincial government.

• There should be an association of employees to convey the voice of the employees to the administration.

The Bank of Punjab is contributing a lot towards the industrial development and capital formation in the country. As it is exhibit from the data regarding the bank’s financial performance as shows in the financial performance as shows in the financial analysis, that bank is sharing major banking business of the country. Further more the policies and schemes as are introduced and carried on by the bank are of great source of help in its trading and non-trading growth.

They facilitate trade both inside and outside the country. The Bank if Punjab has endeavored to remain in the forefront of modern financial institutions and has consistently shows tremendous growth in all area of its activity. However after scheduling, due to its emphasis on consolidation and controlled lending, the growth of profit has somewhat declined. But the ban’s performances are in line with its set goals.

The policies of the bank are uniform and going very smoothly. The employees are given all the possible facilities and generous compensation. In return employees are stressed for their best efficiency. Merit policy prevails in all the activities of the bank. Administration has studied the administration of all other banks, and all their problems and drawbacks are planned to be avoided. Therefore, the policies of the management are progressive and proper.

The progressive approach and trend towards progress and prosperity reflects that bank will touch the zenith of development and progress. The dedicated, enthusiastic and motivated employees can bring that time even earlier.

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BOARD OF DIRECTORS

CHAIRMAN

SENIOR EXECUTIVE VICE PRESIDENT

EXECUTIVE VICE PRESIDENT

ASSISTANT VICE PRESIDENT

VICE PRESIDENT

OFFICER GRADE-III

OFFICER GRADE-II

OFFICER GRADE-I

CASH OFFICER

Category D:

Category c: C.

Category B:

Category A:

REGIONAL CHIEFS

BRANCH NETWORK

(243)

Admin & Establishment

Officer’s Training Institute

Computer Dept:

Stationary Dept:

Engg & Maintenance

O & M Department

PRP Department

Marketing Cell

Agriculture Credit Wing

Engg & Maintenance

Forex Money Market

Investment

International wing

Company Affairs

Shares Dept.

Balance Sheet Results Monitoring

SBP affairs and Compliance

Law Department

Audit of Branches

Rectification and Persuasion

From Balance Sheet

2002 2001 2000 1999 1998

FAISALABAD

LAHORE

GUJRANWALA

MULTAN

KARCHI / QUETTA

RAWALPINDI

CURRENT DEPOSITS:

PROFIT & LOSS SHARING ACCOUNT:

SHORT NOTICE TERM DEPOSITS (SNTD)

CALL DEPOSIT

TERM DEPOSIT RECEIPTS (TDR)

Clearing House:

Outward Clearing

Inward Clearing:

Reserves at State Bank of Pakistan:

DEMAND DRAFT (DD):

MAIL TRANSFER (MT):

TELEGRAPHIC TRANSFER (TT):

Pay Order (PO):

Forms of Lending:

Running Finance:

Demand Finance:

Pledges:

Hypothecation:

Guarantees:

Indemnity:

Charges:

From Profit and Loss Account

FARM CREDIT (SHORT TERM):

Farm Credit (Medium & Long Term):

Non-Farm Credit: (Livestock Development):

EMBLEM:

OBJECTIVES:

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The Bank of Punjab

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