BoK Report

8/14/2019 BoK Report

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CHAPTER 1 INTRODUCTION TO BANK

organization through SWOT analysis. At the end, some recommendations are

also given for the improvement of performance of the Bank.

1.3 Scope of Work

The internship of eight weeks is not a long time for understanding the

overall organizations functioning. This report will be beneficial to the

students in general and banking students in particular seeking guidance in

future. The management of the Bank generally and officers of the Finance

Division of Bank particularly may also use the information, which will be

useful in their course of duty and supervision.

1.4 Methodology of the Study

The research methodology is a prerequisite of carrying out research. It

defines the procedures followed during the course of research report. Research

methodology provides the guidelines for collecting information. The report

writer used both primary and secondary sources of data for writing this

research report.

1. Primary data collection technique:

It was done through:

i) Personal observations.

ii) Sittings with staff members.

iii) Interviews with senior officers.

2. Secondary data collection technique:

It was done with the help of:

i) Reference books.

ii) Annual and semi annual reports of BoK. (2000 to 2005).

iii) Brochures.

iv) Website of the bank

v) Manuals of the bank.

vi) Internet

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INTRODUCTION TO BANK

2.1 Banking: Historical Perspective

Banking practices are regarded as one of oldest activities in the history of

world. These practices have been recorded since 2000 B.C., in one form or other.

Some times these activities were carried out in temples, on benches and some

time in shops of goldsmiths. But these activities were the beginning of the

banking or it were the early stages of the modern day banking.

Interestingly no exact origin of the word Bank exits, and different

authors have attributed it to different origins. Some view that it is derived fromwords bancus or banque meaning a bench, referring to the benches of Jews in

Lombardy, transacting their money exchange. Other researchers say that it is

derived from German word Back which means Joint stock funds, and later

on in Italy this word became Bank. However no exact origin exits, and this

shows how old these practices are.

G. Crowther in his famous book, An outline of money has traced that,

modern English Commercial Banking has three ancestors i.e. the merchants, the

goldsmiths and the moneylenders. These merchants, goldsmiths, and

moneylenders performed the functions of accepting of deposits/gold, issuance of

notes, payment of interest and charging of interest etc. This was the beginning of

the modern banking.

2.2 Development of Modern Banking

The development of banking is the evolutionary process in which the

ancient banking practices evolved into present day banking. This process has been

traced form 2000 B.C.; Babylonianswere the first to develop banking system.

Banking activities of the same nature were started in third century B.C. in

the Roman Empire and continued through third century A.D. With the fall of the

old civilizations, banking suffered heavily. Banking activities in either form

remained in China, Egypt and sub-continent.

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In the sub-continent, the British Government started the modern day banking. In

1809 the Bank of Bengal was given charter, it opened more branches in 1839.

1840 saw the establishment of the Bank of Bombay followed by Bank of

Madras in 1843. Imperial Bank of India was founded in 1921 where as

Reserve Bank of India was established in 1935 with all the powers as the

central bank.

2.3 Banking in Pakistan

Like many other institutions, at the time of independence of Pakistan, in

1947, it inherited a poor and weak system of banking. It was due to the fact, that

most of the important sectors of the economy including banking were controlledby Non-Muslims. There were 487 offices of scheduled banks in the territories

now constituting Pakistan. Immediately after creation, it was difficult for Pakistan

to run its own banking system. The Reserve bank of India continued to function in

Pakistan until 30th September 1948, as central bank of Pakistan. But it failed to

safeguard the interests of Pakistans banking affairs.

The State Bank of Pakistan was established on 1st July 1948, with its head

office at Karachi. State Bank of Pakistan in addition to its normal duties as central

bank plays a very important role in the development, controlling and modernizing

of the banking system of the country. New banks like National Bank of Pakistan

etc were established while already existing banks like Habib Bank Limited

extended their network of branches through out the country and even outside the

country. Moreover, specialized financial institutions like Industrial Development

Bank of Pakistan, Agriculture Development Bank of Pakistan, Pakistan Industrial

Credit and Investment Corporation, National Development Finance Corporation,and House Building Finance Corporation were also created to help and finance

the particular sectors of the economy like industry, agriculture, and housing.

In 1974, all the commercial banks including SBP were nationalized. After

1990, the banks are in the process of privatization, because of the new thinking

and for the improvement of performance. Muslim Commercial Bank, Habib Bank

Limited, United Bank Limited, and Allied Bank Limited are already privatized. In

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addition, Government has allowed the establishment of new private banks, of

which many new banks like Indus Bank, Union Bank, Faysal Bank, Bank Al-

Falah, The Bank of Khyber etc. are established, having their branches almost in

all important cities of the country.

2.4 Banking in N.W.F.P

The N.W.F.P is a land of geographical diversity ranging from glacial

mountain ranges in the north to arid and semi arid regions in the south. This

geographical diversity holds a significant potential for development of

agricultural, industry, forestry, hydroelectricity and tourism. The Bank of Khyber

is the first N.W.F.P based bank and assists in the development of sound businessin these areas of growth.

There are about 22 Pakistani scheduled banks operating in N.W.F.P having

1147 branches or about 15% of all the branches of scheduled Pakistani banks, in

the country. In addition 3 foreign scheduled banks with a total of 3 braches are

also operating in the province. Historically banks in N.W.F.P have been able to

mobilize substantial amounts on the total deposits of the country. However their

share of investment in the province has not been proportional. As the development

process has gathered pace over the years, investment within the province has also

increased creating a demand for banking services. A large expatriate community

from N.W.F.P residing overseas especially in the Middle East are also offering

opportunities to banks operating in province

References:

1. Siddiqi. S. Asrar, 2003, Practice and Law of Banking in Pakistan, edition

7th , Royal Book Company, Pakistan, P 2.

2. Siddiqi. S. Asrar, 2003, Practice and Law of Banking in Pakistan, edition

7th, Royal Book Company, Pakistan, p3.

3. Money Banking and Finance

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CHAPTER 3 INTRODUCTION TO BANK OF KHYBER

INTRODUCTION TO THE BANK OF KHYBER

3.1 The Bank of KhyberThe Bank of Khyber (BoK) was established in 1991 under the act of the

N.W.F.P assembly its objectives included promotion of savings and investment in

N.W.F.P. In 1994 it acquired the status of a scheduled bank that allowed it to open

branches outside N.W.F.P, become a member of the clearing house, and engage in

trade finance activity. Advantages of scheduling have had a positive impact on the

Bank after adjustments to State Bank of Pakistan (SBP) requirements during

1995.

The Bank has a paid up capital of Rs. 750 million out of which Rs. 652.50

million has been provided by the government of N.W.F.P, while the remaining Rs.

97 .50 million has been contributed by Deutsche Investitions-und

Entwicklungsgesellscha (DEG), a German Development Bank.

The Bank has 29 branches with 23 in N.W.F.P and 2 at Karachi, one each

at Islamabad, Quetta, Lahore, and Muzzaffarabad, (Azad Jammu and Kashmir).

The Bank has 360 well qualified officers, and it places great importance on their

professional achievements.

3.2 Reaching for Excellence

Directing efforts with precision on maintaining client and employee focus,

Bank is in the process of upgrading its technological infrastructure to allow its

branches to provide a higher standard of service to its customers. For the future,

The Bank is fully geared to become one of the most dominant financialinstitutions of Pakistan.

Thus reflecting the Vision:

Gradual Conversion into

ISLAMIC BANKING

to develop and promote

a true Islamic economic system.

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3.3 Mission statement of the Bank

Mission, broadly stating, is the purpose for which an organization exists

and why should it compete in certain sectors and industries. Within mission,sometimes stated as purpose, the organization addresses itself to what it intends to

accomplish both in the long and short run. Mission is a very broad statement of

organizational direction, and is normally summarized and documented in a

mission statement. In same way, Bank being an organization has a mission

statement, as follow:

To increase shareholders value and provide excellent service &

innovative products to customers through effective corporate governance,

friendly work environment, and contributing towards an equitable

socioeconomic growth.

3.4 Core Values of the Bank

Highest quality of services

Professionalism

Integrity

Team Work

Innovation & utilization of latest technology

Corporate & Social Responsibility

3.5 Main Objectives of the Bank

Objectives are the ends towards which activities are aimed. In fact these

are the results to be achieved. Bank has certain objectives, which are as follows;

a. To mobilize private savings and public funds for diverting the same into

productive channels and ensure their availability.

b. To promote industrial, agricultural and socio economic processes through

the active participation of private and public sector in the province.

c. Help under develop areas and create employment opportunities, especially

in the rural areas of the province. Further, to guide and assist the people of

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N.W.F.P serving overseas to effectively and profitably invest their foreign

savings in the province as well as the other parts of Pakistan.

d. Create a diversified and sound portfolio for utilization of idle funds and

their investment in the existing and new ventures especially in the

pioneering of high-tech agro based export oriented and engineering

projects to ensure maximum returns.

e. Participate and seek the share of the province in the capital market of

Pakistan by way of subscription through locally pooled resources in the

leading stock exchanges of the country and eventually paving the way for

establishing a stock market in the province.

3.6 Pattern of Shareholding

Table no. 3.1

Institution

Name

No. of Shares

as at January

01,2005

Bonus shares

received during

the year

Number of

shares as at

December 31,

2005Government of

N.W.F.P

91,350,000 15,750,000 107,100,000

DEG 13,650,000 2,353,448 16,003,448

TOTAL 105,000,000 18,103,448 123,103,448

3.6.1 Total No. of Shares and Bonus Shares

Graph no. 3.1

N.W.F.P

DEG

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

No.ofSharesheld

Institute

Shares @ 01,01,2005

Bonus shares

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3.6.2 Total Shares held by N.W.F.P and DEG in percentage

Chart no. 3.1

13% 0%0%

87%

3.7 Employees of the Bank

(No. of total permanent employees)

Table no. 3.2

Year No. of Employee1999 340

2000 358

2001 365

2002 376

2003 368

2004 360

2005 370

Graph no. 3.2

330

340

350

360

370

380

No.of

Employee

1999 2000 2001 2002 2003 2004 2005

Years

Permanant Employess of Bok

N.W.F.P

DEG

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3.8 Branches Network of the Bank

Chart no. 3.3

1

1

21 1

23

N.W.F.P

Balochistan

Islamabad

karachi

A. J. Kashm ir

Lahore

No. of Branches

Table no. 3.3

N.W.F.P Islamabad Lahore Karachi Balochistan A. J. Kashmir

23 1 1 2 1 1

3.9 Risk Management at Bank

The financial institutions are exposed to various risks in pursuit of their

business objectives; the nature and complexity of which has changed rapidly over

time. The failure to adequately mange these risks expose financial institutions not

only to business losses, but may also render them unsuccessful in achieving their

strategic business objectives.

3.10 Future Outlook

1. The bank plans to open new braches during the year 2007 in the important

cities and business hubs.

2. All the banking activities are under process to execute one of the major

Banking activities are under process to execute one of the major Risk

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Management techniques of Segregation for effective management

controls.

3. The bank is required to raise its Share Capital to Rs. 1.5 billion during

2005.

References:

1. The Establishment Department of The Bank of Khyber.

2. The Shares Department of The Bank of Khyber.

3. The Micro Finance Department of The Bank of Khyber.

4. The Bank of Khyber Annual Report 2005.

.

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CHAPTER 4 DIVISIONS AND DEPARTMENTS

DIVISIONS AND DEPARTMENTS

The following are the Divisions and Departments of the Bank.

R&D Department

Customer relations

Department

Product promotionDepartment

Islamic Banking

Division

RRMC & RD

Treasury

Division

Banking Operations

Division

Commercial

Lending Division

Internal Audit

Division

Finance Division

Information Technology

Department

Marketing Division

Micro Finance

Department

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InternationalBanking Division

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Human Resource

Division

Chart no. 4.4

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Compliance

Department

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4.1 Banking Operations

The Banking operation Division is mainly responsible to manage the

operations i.e. work processing functions in the Bank. This division has pivotal

role, as it has to work in close coordination with almost all the other

Divisions/Departments for a smooth functioning of the Bank. The Banking

Operations Division controls branch operation and international banking

departments. The role played by the branch operations department is important

they propose operational polices procedures and ensure strict compliance of the

same through liaison with internal audit Division.

4.2 Marketing Division

The Marketing Division of the Bank is responsible for the formulation and

implementation of Marketing Strategy of the Bank's products both on assets and

liabilities side keeping in view the business environment of the province.

Accordingly the division works to popularize the Bank's deposit schemes and loan

products among the people with a view to improve business and over all image of

the Bank.

The Division works in close coordination with the Branches and other

Divisions/Department of the Bank towards the implementation of the marketing

strategy and achievement of the assigned targets.

4.3 Islamic Banking Division

Aims and target of the Islamic Banking Division is to implement the

decision of the Board of Director to gradually convert the whole Bank into an

Islamic Bank within three years under the supervision of the Shariah Supervisory

Board as per Rules and Regulations of the State Bank of Pakistan. To achieve the

target, Islamic Banking Division has devised an action plan for expansion and

conversion of the whole Bank by December 2006 and to develop the business in

various areas. According to the plan three new braches will be opened and six

branches of the Bank will be converted into Islamic Banking Branches in 2004.

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Islamic Banking Division plans to convert 12 more branches in 2005 and the

remaining in 2006.

4.4 Human Resource Division

It is imperative for the Human Resource Division to not only provide

educated and trained manpower so as to enable them to handle their jobs more

professionally and efficiently in all areas of banking but to develop talent and add

value to staff potential to enhance output improve profitability as well.

The Human Resource Division (HRD) puts in its concerted efforts to train,

develop and groom a sound human resource base for the Bank and to work for

continuous learning, adaptation and application of knowledge.

The HRD tries to create an environment of mutual trust and dignity so as

to ensure best positive results. It is playing a proactive role in capacity building,

experience sharing, strengthening analytical and policymaking, skill up-gradation

to help the staff in their endeavors to make Bank competitive, dynamic and one of

the best Banks in the country.

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4.5 Credit Division

The credit policy of the Bank is reviewed on periodic basis according to

the target market. It is communicated down the line and clearly spells out the roles

and responsibility of the individuals involved.

The Banks credit portfolio is diversified for different client segments. The

consumer finance, car finance and house finance schemes have successfully been

introduced and are in real sense helping common folks in upraising their standard

of living.

4.6 Remedial Risk Management Collections and Recovery

Division

RRMC & RD started functioning under its new name in February 2004,

and assumed the responsibilities for the Recovery of all irregular as well as bad

debts of the Bank.

RRMC & RD coordinates closely with Credit Department, as ongoing

feed back on performance of various segments of the portfolio is critical for fine

tuning/amendment of underwriting credit initiation criteria. The Division also co-

ordinates with IT Department for the automation of most of the processes and

preparation of MIS containing information of all the branches on different types

of loans in order to bring effectiveness and cost control in the Division.

One of the primary responsibilities of RRMC & RD is to develop

performance, monitoring, and evaluation criteria for Lawyers to optimize thelitigation strategy. It also coordinates with National Accountability Bureau for

high balance and political cases..

4.7 Internal Audit Division

The internal audit Division of a Bank is an extension of the management

and is a tool through which they gauge the qualitative and quantitative output of

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the field offices. The Internal Audit Division works independent of the

management and reports to Audit Committee of the Board of Directors. The

Internal Audit Division consists of two departments namely Audit and Inspection

and Compliance and Implementation. The Audit and inspection reports are passed

on to the implementation department for implementation/compliance and follow-

up.

The fundamental objective of internal audit is to assist the management in

materializing their pre-determined goals through established and clearly defined

plans, policies and programs, SBP regulations and also to assist them in the

effective discharge of their responsibilities, by providing them with reports,

information, analysis, appraisals, recommendations, and pertinent comments on

the activities reviewed. In short the internal auditor renders services to the

management to attain their over all objectives and to ensure.

Adequacy and soundness of internal controls within the Bank.

Implementation of management policies and procedures.

To safeguard Banks assets from all type of losses including fraud.

To recommend improvements in the systems and operations and pinpoint

inefficient and uneconomical operations.

Accuracy and reliability of management data.

4.8 Treasury and investment Division

Treasury was a main source of revenue generation during the year 2004,

for the Bank. The year 2004 was marked gradual rise in interest rates of the

country was seen.

Keeping in view gradual rise trend in the interest rates, the treasury moved

quickly to invest in the medium to long-term government papers, which was

giving relatively higher yields. The treasury also traded in the secondary markets

and maintained trading portfolio of Treasury Bills and Pakistan Investment Bonds

(PIBs), which had, generate trading profits.

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4.9 InternationalBanking Department

During first half of the year 2005, the Foreign Trade and Exchange

Business of the Bank show a significant increase, which has not only contributed

towards solid earnings of the Bank but also broadened the clientage base on

qualitative basis.

The Bank across the border business has effectively been instrumental

towards the income growth of the Bank, which includes Imports, Exports Foreign

Remittances, Negotiation of Foreign Bills, Collection of Foreign Bills, Export

Refinance and export of Foreign Currency cash in hand.

The Bank correspondent relationship at 1320 destinations of renowned

international banks around the globe, has not only been supportive to Bank in

meeting all kind of business requirements of the customers but also in

strengthening the rapport with them by pledging future business commitments.

The acquired latest mode of financial communication, i.e. SWIFT

system has enabled the Bank to remit to and receive funds from anywhere in the

world with in the same business day, which eventually has benefited the clients in

terms of their time constraints in business.

Bank is planning to further expand the network of foreign exchange

dealing branches in near future, which will, Inshallah, play a positive role in

further enhancing the profitability of the Bank.

4.10 Compliance Department

Under the directives of the State Bank of Pakistan and the Board of

Directors, a Senior Officer was designated as Chief Compliance Officer in

January 2004. He was given the task to appoint/designate Compliance Officers

down the line at all Branches and give a complete Compliance Program which

would cover the areas of Legal Compliance, Know Your Customer (KYC) and

Anti-Money Laundering (AML) system under the head of Customer Due

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Diligence. The Bank developed a Compliance Manual for the general use by all

staff involved at the Bank and especially for the benefit of the Compliance

Officers who were specifically made responsible to monitor and ensure

compliance at their respective areas.

4.11 Information Technology Department

Bank was established in 1991. In order to have an edge over its

competitors and to provide quick and efficient service to the customers, it was

considered mandatory to computerize banking network in the branches. IT

Department was established in 1994 and all the branches were successfully

automated by the year 1998.

IT department has progressed in the last eight years and trying its best to

stay abreast in the field of fast developing technology. In order to achieve its

goals, the management has decided to start on-line banking in the very near

future. IT Department of the Bank is working dedicatedly and with full

enthusiasm to provide best services by efficiently handling the in-house software

development/maintenance, hardware/software trouble shooting and uninterruptedsupport to 29 Branches. Besides, Information Technology Department is playing

an important role in development and deployment of Islamic Banking Application

and timely support to the end-user.

4.12 Micro Finance Department

The economic landscape of N.W.F.P is characterized by a number of

flourishing small-scale economic activities scattered throughout the province.

However, financing needs of these entities have not been met by formal sector

financial institutions due to various reasons, which include perceived risks, high

costs and lack of special skills associated with micro finance. Bank has taken up

this challenge and has become the lead Bank in the country as a provider of these

services by not only being the pioneer of micro financing in the formal sector but

also its strong advocate.

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Bank believes that poor are bankable and micro finance is commercially viable.

Micro lending operations are structured in a separate department called Micro

Finance Department (MFD) under the Credit Division of the bank. MFD aims to

be the largest Micro Finance provider in N.W.F.P on sustainable basis.

Its main objective is providing access to financial services by the low

income and disadvantaged segment of the society with adequate emphasis upon

women. The pursuit of this objective will significantly contribute to the

improvement of employment opportunities, income-generating activities. This

ultimately supplements government interventions of poverty alleviation in

N.W.F.P. Bank has been lending in remotest inaccessible parts the province under

the government area development projects

4.13 Finance Division

The Finance Division is responsible for overall fiscal managing, financial

control financial reporting, and accounting functions of the Bank. Division

ensures that the accounting records and system are maintained in accordance with

internal policies, regulatory requirements, and international accounting standards.It establishes policies and procedures relating to the finance function, monitors

returns on earning assets and reports on various performance indicators including

assets/liability mismatch. The Division directs control of the budgeting process in

accordance with the annual plans, policies, management directives, and strategy,

ensuring that quality budgets and forecasts are drawn up and consolidated for

approval.

Finance Division exercise budgetary control on all expense and income

items at both Head Office and branch level, ensuring the effective monitoring

arrangements are in place in respect of adherence to budgets/forecasts. It

continually reviews the accounting and control system, ensures that they are

appropriate to the requirements of the business and that they generate financial

information necessary for effective decision-making.

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CHAPTER 5 PRODUCTS AND SCHEMES OF BANK

OF KHYBER KOHAT BRANCH

PRODUCTS AND SCHEMES OF BANK OF KHYBER

KOHAT BRANCH.

The basic functions of a Bank of Khyber kohat branch, as we all are awareare, accepting deposits, and lending of money. But banks, with the passage of

time, development, and growing competition, realized that only these services are

not enough. So banks started providing other services and introducing newer

products to increase their customers in the growing competition.

The Bank is committed of providing innovative and competitive solutions

to all its customers according to their banking needs and a level of service that is

more efficient and personalized. Learning about the needs of its customers is a

continuous process at the Bank. To bring the high quality of banking services to

its customers is the first priority of Bank.

At present, The Bank of Khyber Kohat Branch has the following products

and schemes for its valued customers;

Assets Products

Liabilities Products

Non-Fund Based Services

5.1 Assets Products

Assets products mean advances which are created to attract the people to

borrow from the Bank and start or expand the business to enhance the economic

growth of the country and increase the Gross Domestic Products. To secure the

against interest risk the rates of most of the products have been linked with

Karachi Inter Bank Offered Rate. The following are the asset products of Bank Of

Khyber Kohat Branch.

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5.1.1 Running Finance

The bank of Khyber Kohat Branch provide special type of product i.e.

running finance which is offered for businessmen holding Pakistan National

Identity Card and resident/residing in N.W.F.P in order to meet their recurring

expenses and their existing business. The repayment is one to two years and

renewal on yearly basis. Mark-up rate is charged on outstanding

balance.Securities for this type of scheme are Registered/Equitable Mortgage,

Personal Guarantee acceptable to Bank and other acceptable securities. The

insurance of property and asset financed is essential.

5.1.2 Demand Finance

The other schemes which are provided by the bank of Khyber Kohat

branch is the demand finance scheme which is introduced to provide opportunities

to all Pakistani Nationals, to start their new businesses or expand the existing

businesses. The eligibility is so simple and that is Pakistani Nationals, holding

National Identity Card and Resident/Residing in N.W.F.P. The loan is sanctioned

as per clients requirements. The repayment period is upto 2 years.

5.1.3 Micro Finance Operation

Micro finance refers to provision of a wide range of financial services

including loan and saving products to low-income households and micro

enterprises. Loan products characterize smaller loans made to low-income

individuals to sustain self-employment. These loans may serve a number of

purposes like working capital for covering day-to-day expenses, seed capital forstarting up a business or investment capital for purchasing fixed assets.

5.1.3.1 Micro Enterprise Loans:

Micro enterprise loans are provided to individual clients without involving

intermediaries/facilitators; however, lending through organized clusters is

encouraged for its proven advantages. Cluster is taken as a geographical

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concentration of enterprises engaged in similar or complementing activities,

which plays an important role in promoting entrepreneurial and industrial culture.

Besides mobilizing finances, these clusters can facilitate its members in access to

specialized labor and technical support. Following are the salient features of

micro enterprise loans;

Financial requirement are met for fixed investment like

machinery/equipment and working capital. Skilled craftsmen are also

encouraged for establishing new enterprises

Maximum loan limit under this category is Rs. 500,000 for repeat loans

and first time loans are considered for up to Rs. 50,000. Loans up to Rs. 50,000 may be considered against hypothecation of stocks

and two personal guarantees acceptable to the Bank. Additional societies

are required for loans exceeding this limit.

Loan period shall not extend beyond three years repayable in equal

monthly installments. Lump sum repayment and quarterly installments are

considered in specific business situations and sectors.

Finances under this category are provided at commercial rate. However,

loans financed from credit lines under areas development projects are

charged as per specific agreement.

Repayment plan is drawn in consultation with clients keeping in view the

nature of the business and payback potential of entrepreneur.

Other terms and conditions as per specific nature of the business are

settled with prospective clients on case-to-case basis.

5.1.3.2 Motorcycle Finance Loans:

Bank Motorcycle Finance Scheme is another big achievement of the Bank

of Khyber kohat branch. This scheme has facilitated all those lower level of

income employees who couldnt afford to buy a motorcycle on lump sum amount.

All adults residents of N.W.F.P, getting regular monthly income and have

sufficient repayment capacity to meet their investment obligations are eligible for

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this scheme.

The minimum age limit is 21 years. At loan maturity age should not

exceed 60 years. The mark-up rate is 16%. The repayment period is fixed and that

is one year, two years and three years.

The minimum down payment is Rs. 10000. Two personal guarantees +

registered mortgage should be provided as securities. The documentation includes

mortgage and legal documentation, charges to be borne by the client. Insurance is

on lessees cost from the selected companies.

5.1.4 Consumer Finance Scheme

Bank of Khyber Kohat Branch has launched a Consumer Finance Scheme

for general Public. Under this scheme House Hold products like electronics,

audio-visual equipment and home appliance to be financed to the customers on

easy installments.

5.1.4.1 Eligibility

1. Citizen of Pakistan aged between 25 to 60 years.

2. Scheme will be opened to all permanent employees of Govt. & Semi

Government, Local Government., Non-Government Organizations,

Autonomous Bodies, University, Banks, Reputed Industries, Corporations and

self employed professionals or business man.

3. Applicant must be resident of the city where Bank's Authorized Branch is

operating.

4. The monthly installments must be up to of 1/3 of take home salary of

the applicant. (Take home salary is to be determined by the branch manager).

5. The Borrower has to provide a personal guarantee of a third person as a

security.

5.1.4.2 Guarantee

Guarantor can be a person between the age of 25 and 55 years. Preferably

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their valued customers. The eligibility is all adult residents of N.W.F.P getting

regular monthly income and has sufficient repayment capacity to meet their

investment obligations.

The minimum age limit is 21 years. At loan maturity, age should not

exceed 60 years. The maximum size of loan is Rs. 1200,000/-. Mark- up rate is

14%

Repayment period for this scheme is fixed. And that is period of 24 months,

36 months, 48 months, and 60 months. Minimum borrowing equityis 10% and

there is no need of any type of securities.

5.1.7 Suhana Ghar Scheme

This scheme is introduced for construction, purchase, extension and

improvement / renovation of house. The eligibility is like all other schemes that

are all adult residents of Kohat getting regular monthly income and have

sufficient repayment capacity to meet their investment obligations.

The age limit is 18 to 55 years. Size of loan is up to Rs. 1 million. Mark-

up rate is 12.5%. Repayment period for this type of scheme is up to 15 years in

easy installment. Securities include mortgage of the property for which the facility

is allowed. In case of employees of organizations, lien on terminal benefits. Third

party guarantee, if required.

Mortgage and legal documentation charges to be borne by the client and

insurance policy of the property offered as security covering all the related risks.

Processing fee for this scheme is Rs. 100/- per application, for amount up to Rs. 1

million and for above Rs. 1 million, Rs. 500/- per application are to be charged.

5.2 Liabilities Products

It means those products or scheme introduced by the Bank of Khyber Kohat

Branch to inculcate the people to save and invest their idle funds in the Bank in

order to earn profit. Some schemes of Bank are mentioned below;

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5.2.1 Current Deposit Account (Rupees)

The Bank Rupee current deposit account allows the facility of unlimited

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.

Balance in current accounts are payable on demand. Similarly there

are no restrictions on number of transactions during the day.

All individuals including foreigners, firms and corporate bodies are

entitled to open and maintain current accounts.

No profit is paid on current accounts.

Overdrafts are allowed on this account.

5.2.2 Saving Deposit Account (Rupees)

The Bank rupee saving deposit account allows the facility of multiple

withdrawals up to the credit balance, while accruing profit on deposits.

Types of saving deposit accounts.

i. Profit and loss sharing (PLS saving) account.

ii. Special deposit account (SDA).

Profit is paid bi-annually on minimum monthly balance (January-June

& July-December) which is announced in July and January

respectively.

Generally, withdrawals from this account are allowed on demand i.e.

without any prior notice of withdrawal.

Overdraft is not allowed on this account.

5.2.3 Term Deposit Account (Rupee)

The Bank Rupee Term Deposit Account offers the dual benefit of

attractive returns with high liquidity. Options to take profit monthly, quarterly,

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semi annually, annually or at maturity. Profit is accrued on a daily balance basis.

There is no penalty for premature encasement. However in case of an early

encasement the rate of the previous tender will be applied. The option of partial

liquidity is allowed i.e. with drawl to a certain percentage from the fixed deposit

without disturbing the remaining deposit is allowed.

Term or fixed deposits are accepted by Bank and having maturity from

one month to five years.

Profit on fixed deposits is paid on the maturity of deposits.

Each fixed deposit account is considered as a separate contract.

5.2.4 Security Deposit Receipts (SDRS)

This is a receipt issued by the Bank, at the instructions of the depositor,

confirming that amount of the SDR is held by the Bank to be paid whenever

called upon to do so by the beneficiary named in the SDR.

A SDR is a non-negotiable instrument.

SDRs are generally used to make advance payments or as earnest

money, retention money or security deposits etc.

A SDR can be repaid to a named beneficiary or the

purchaser/depositor upon proper identification.

5.3 Non-Fund Based Services

5.3.1 Khyber Lockers

The Bank Of Khyber Kohat Branch also provide the facility of Khyber

lockers to all account holders of Bank. All accounts holders can get lockers by

paying a nominal amount to the concerned branch. There are three types of

lockers available, small, medium, and large. For small lockers, the annual fee is

Rs. 750/- per annum, for medium Rs. 1000/- per annum and for large Rs. l500/-

per annum.

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5.3.2 ATM Facility

The Bank provides facility to its customers to Debit their Accounts

electronically by means of ATM. The customers are allowed to withdraw upto Rs.

10000 in a day, and the bank doesnt charge any sort of fee or commission on this

type of facility.

5.3.3 Online Banking

By adding this feature now the Banks customers can easily debit their

Accounts anywhere in the country through the Banks branches. For example, if

customer A has account in the Karachi-I branch so, he can easily withdraw money

from his account by presenting cheque in the Kohat branch on the spot. The Bank

charges only 0.1% on the debited amount.

5.3.4 Remittances

The Bank transfers funds of its customers from one branch to another

branch through D.D, T.T and M.T by charging small amount as commission.

5.3.5 Letter of Guarantee

The Bank provides assurance to the beneficiary of the guarantee about the

satisfactory performance of a certain act by the applicant of the guarantee.

In the letter of guarantee three parties are involved i.e.

1. Bank (provider of guarantee)

2. Applicant of the guarantee (Banks customer on whose behalf the Bank

issues a guarantee).

3. Beneficiary (in whose favor the guarantee is issued).

4. The Bank at the request of applicant issue the guarantee and charges

commission for its commitment from the applicant at the exposure is

secured against some security

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References:

1. The Credit Department of The Bank of Khyber.

2. The Micro Finance Department of The Bank of Khyber.

3. The Remittances Department of the Bank of Khyber

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CHAPTER 6 STRENGTHS, WEAKNESSES,

OPPORTUNITIES, AND THREATS

STRENGTHS, WEAKNESSES, OPPORTUNITIES,

AND THREATS

The main purpose of doing SWOT analysis is to highlight all aspects of

the Bank. We can say that it is a tool to get a quick overview of a firms strategic

situation etc. It is an effective technique for analyzing the strengths, weaknesses,

opportunities, and threats to an organization. It tells about the firm position. It

helps the readers to understand the performance of the firm, bank etc vary easily.

It forecasts the future status and points out the problems likely to come in

achieving the specified objectives.

As like the other banks the Bank has some strengths and weaknesses,

opportunities and threats, which are given below:

6.1 Strengths

Strengths are present within an organization and when utilized, become a

means of distinction from competitors.

i. The Bank of Khyber is a schedule commercial Bank with good branch

networks in the NWFP.

Being a provincial government Bank it is considered more secure..

ii. The Bank of Khyber Kohat branch offers new schemes and facilities from

time to time which keeps not only the clients of the Bank committed but also

leads to a growing sound base of deposits.

iii. For the first time extending credit to the rural have-nots

iv. The Bank of Khyber Kohat Branch has open communication system and

friendly environment developed by the Management and staff of the Bank

makes it very easy for the Management of the Bank to take the right decision

at the right time. Most of the banks in the country lack such type of

environment.

v. As compared to the other Pakistani banks its staff is well qualified, skilled,

knowledgeable, courteous, and can handle any situation tactfully.

vi. As it is provincial Bank for N.W.F.P so it is easily access able to the business

committee of the province.

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OPPORTUNITIES, AND THREATSvii. The Banks employees are from the same province so they understand the

environment and easily meet the needs of the people etc.

viii.Due to provincial Bank it is known as the provincial market very well as

compared to other banks.

ix. One of the major strength of the Bank is Micro Finance Unit (MFU) which

ultimate goal is to finance the project in rural areas and approve small loans.

6.2 Weaknesses

Weaknesses are the shortcomings in the structure or functioning of the

organization and need to be taken care of immediately. It is usually because of

these weaknesses that the competitors leave the firms behind in the race.

i. The Bank of Khyber has Unattractive branch interior and exterior.

ii. Most of the employees are not motivated and lack technical knowledge

and are scared about their carrier development.

iii. Salary and other benefit are small in number.

iv. As it is Provincial Bank so there is some influence by the provincial

government in decision process.

v. No fix tenure for promotion.

vi. Low level of employees satisfaction and commitment.

vii. The space in the Bank Kohat Branch is very limited, The Bank has no

proper marketing..

viii. Lack of staff in micro finance department..

6.3 Opportunities

Opportunities are always present in the external market whoever grabs it

first, is the market leader.

i. Make the MFD more efficient and accessible for the small businesses.

ii. As the Bank is planning to step in the Islamic Banking System so they should

capture this market before any competitor comes in..

iii. There is a good opportunity for the Bank to sponsor games on provincial and

national levels for its publicity.

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OPPORTUNITIES, AND THREATSiv. Offering of credit facilities to middle and lower income groups can reduce the

default risk and can enhance the Bank goodwill and profitability.

6.4 Threats

Threats are also part of a firms external environment and pose a constant

danger to an organizations operations. However, a proficient is the one that

converts these threats into opportunities for it.

i. Increasing number of private foreign banks in the country.

ii. The main treat to the BOK Micro Finance is from its own. The management

of the bank at many times has changed the basic structure of the Micro

Finance Department

iii. The low rate of savings in the country is a serious threat to the Bank. The

Bank should aware the general public about the advantages of savings and

investments.

iv. Global technology advancement.

v. The decreasing confidence of people on commercial banks on the basis of

offering low returns and charging high interest rates is a threat to the Bank

also.

vi. Quality services provided by the private banks.

vii. Sometime loan disbursement to the blue-eyed clients

viii.Traditional rift between the MFD incharge and the Manager of the

Branch.

ix. Misutilization of the loans by the clients

References:

1. The Bank of Khyber Annual report 2002 to 2005

2. The Bank of Khyber site www.bok.com.pk

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CHAPTER 7 FINDINGS AND SUGGESTIONS

FINDINGS AND SUGGESTIONS

FINDINGS

SHORT LEAVES.

The leaves for an hour or two are common during the banking hours. The

case becomes more severe when manager is outside the branch.

The branch manager should take serious notice of this matter and employees

should not be allowed to leave the bank unless there is a serious problem.

BURDEN OF WORK

The employees are most of the time over burdened with work. At times

employees have to work even after the working hours of the bank. Sometimes

employees are irritated due to excessive work and long working hours. More over,

officials are not given remuneration for working extra hours.

UNJUST RECRUITMENT

Some of the appointments are made on the recommendations of influential

people. There education is not according to the requirement thatswhy Bank of

Khyber Kohat branch is not showing profitability upto the mark.

NO PROPER MARKETING

There is no proper marketing department in bank of Khyber Kohat branch.

This is also a great threat to the bank.

ACCOMMODATION PROBLEM

The sitting arrangement in the branch is far from being efficient. So proper

seating arrangement should be made for the customers especially for ladies. As an

internee we also face this problem lot of times.

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PROPER DISTRIBUTION OF WORK

In the BOK kohat branch, Some employees have more work to do and are

under stress while others are not fully occupied. The work should be distribute in

such a manner that there should be no undue load or burned on anyone.

NO PROPER PLACING OF STAFF

The most important thing which I have found that there is no proper

placing of staff members according to their job requirement so the proper placing

of staff is very necessary to increase profitability.

SUGGESTIONS

ADVICE IS SELDOM WELCOME!AND THOSE WHO WANT IT

THE MOST ALWAYS LIKE IT THE LEAST. Recommendations suggest

improvemrnt in areas,which have room for polishing and progress.

My recommendations are based upon personal observations and most of

them are based upon opinions of the experts of the Bank for the improvement of

profitability and overall performance.

1. The proper placing of staff in different operational areas may result in

improved performance. so, if the Bank overcomes this weakness and place

experts at their proper place, it will increase the success of obtaining

organizational goals.

2. The Bank may increase the Micro Finance portfolio from Rs. 250 million

to Rs. 500 million in order to benefit more low level income holders, and

it will generate economic activities and ultimately unemployment will

decrease.

3. If the Bank adopts a proper product diversification strategy i.e introduces

Debit card, Credit card, and more loans products it may increase the

Banks profit.

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4. Today is the age of proper marketing not only of selling. If the Bank

reduces emphasis from selling and adopts proper marketing it may

enhance its efficiency.

5. Today media is getting more important for a proper advertising. If the

Bank adopts media for advertising it will increase the clientale base of the

Bank.

6. If the Bank introduces a proper motivation and incentive plan for its

employees it will fulfill their needs and organizational objectives may be

achieved very efficiently.

7. If the Bank revises the salary of the existing employees the turnover of

professional may be reduced.

8. If the Bank establishes a proper training division it will increase the

efficiency of the employees.

9. Every organization is now focusing on customers (customer satisfaction)

and it is achieved only by proper branch environment (seats arrangement,

branch interior and exterior design etc.) and good employees behavior

with customers..

10. In order to reduce banks risk, the long term loans trend is reducing and

most of the banks by syndicate this type of facility are providing. If the

Bank adopts this policy and increase short term financing and provides

long term finances by syndicate the Banks risk may be reduced.

11. In order to increase productivity and ensure safety the Bank may install

movie cameras at branch.

12. If the Bank establishes a separate information center for students, some

time the Bank may get a good report for enhancing performance without

payment of money.

13. The branch manager should take serious notice on short leaves and

employees should not allowed to leave the bank in working hours.

14. Employees should be selected on merit bases.

BoK Report

Documents

Transcript of BoK Report