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Chapter-1 Introduction to the Report
An Internship Report on The Bank of Khyber 1
CHAPTER NO. 1
INTRODUCTION
In this chapter I shall try to provide a comprehensive introduction to
the study covering the background, purpose, scope, methodology and scheme
of the report.
The Bank of Khyber was established through an Act of Khyber
Pakhtunkhwa (KPK) Assembly called, The Bank of Khyber Act 1991,
passed in June 1991. The bank was formally launched on November 01, 1991.
In 1994, the bank acquired the status of scheduled bank. The Head Office ofthe bank is situated at 24-The Mall, Peshawar Cantt, Peshawar.
This internship report has been written on The Bank of Khyber, G.T.
Road Branch, Peshawar.
1.1 BACKGROUND OF STUDY
Banks play significant role in mobilizing savings and investments thus
taking great part in the capital formation process. Their role in the
development of a country has increased with the advent of modern technology.
Today is the age of information technology, which has made the banking
sector to work more efficient and effective. Advanced ways of transferring and
receiving money nationwide and internationally like money transfer, ATM,
western union and centralized systems are some of the applications of this
technology.
1.2 PURPOSE OF STUDY This report is based on Internship carried out for the partial fulfillment
of the degree requirement of the MBA Course completion at CFCBE,CECOS
University, Peshawar.
The purpose of the study is to do practical work in field and apply theknowledge gained through class room lecture to the real life situation.
To analyze Bank of Khyber, G.T. Road Branch, Peshawar and performdifferent tasks and other analysis.
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To make relevant recommendation in the light of the analysis made. To study how the bank is making use of information technology in its
day to day operations.
1.3 SCOPE OF STUDY
The internship of eight weeks is not long enough for understanding the
overall functioning of any organization. However main emphasis of this study
is on the working of the Bank of Khyber G.T. Road Branch, Peshawar .My
internship is like simple touch to all the activities within this branch because it
is very difficult for the internee to study everything in detail due to shortage of
time and lack of authority to access.
1.4 METHODOLOGY OF RESEARCH
In my preparation of this report, following data collection techniques
have been used i.e. Primary data & Secondary data.
PRIMARY DATA
The data which is collected for the first time and exists in the raw form
is called the primary data. The information, such as perceptions & attitudes ofemployees are best obtained by talking to them, by observing events, peoples
and objects or by administering questionnaires to the individuals. Such data
gathered for research from the actual site of occurrence of events is in fact
primary data.
During my internship at BOK G.T. Road Branch, Peshawar I gathered
this data through:
i.
Personal observation.ii. Sitting with staff members.iii. Interviews with staff members.
SECONDARY DATA
The data gathered from existing resources is called secondary data. The
information such as the background details of the organization can be obtained
from available published records. The website of the organization, its
achievements & other sources, different types of written information such as
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Chapter-1 Introduction to the Report
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organization policies, procedures & rules can be obtained from organizations
records & documents.
Secondary data was mainly collected through:
I. Annual reports of the Bank of Khyber.II. Brochures.
III. Manual of the bank.IV. Internet.
1.5 SCHEME OF REPORT
The report has been divided into nine sections:
1.5.1 SECTION-I
Chapter No.1
This chapter is about the introduction of report i.e. the background of
study, purpose of study, scope of study, methodology of research, and scheme
of the report.
1.5.2 SECTION-II
Chapter No.2
This chapter consists of the history i.e. definition and evolution of
banking, banking sector in Pakistan, banking sector in Khyber Pakhtunkhwa
(KPK). It also includes the introduction of The Bank of Khyber, its vision,
mission, objectives, organizational structure and chart are also discussed here.
1.5.3 SECTION-III
Chapter No.3
This chapter gives information about the Head Office of the Bank of
Khyber. It gives information about the different divisions in the Head Office
and the human resource policies.
1.5.4 SECTION-IV
Chapter No.4
This chapter concentrates on the operations at the Bank of Khyber G.T.
Road Branch, Peshawar. It gives the information about the different
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departments of the G.T. Road Branch, Peshawar and gives an overview of the
operations at different departments.
1.5.5 SECTION-VChapter No.5
This is the financial analysis chapter of the report. It elaborates
different methods of financial analysis i.e. liquidity ratios, profitability ratios,
common size analysis etc.
1.5.6 SECTION-VI
Chapter No.6
This chapter deals with the analysis of organization i.e administrative
analysis.
1.5.7 SECTION-VII
Chapter No.7
This chapter belongs to the SWOT analysis of the organization. In this
chapter strengths, weaknesses, opportunities and threats to the Bank of Khyber
are discussed.
1.5.8 SECTION-VIII
Chapter No.8
This chapter concentrates on the various problems of The Bank of
Khyber. Some suggestions and recommendations are also made and forwarded
for resolving these problems and making improvement.
1.5.9 SECTION-IX
Chapter No.9
This chapter concentrates on some of the problems of The Bank of
Khyber and gives certain plans for implementation for resolving these
problems.
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CHAPTER NO. 2
HISTORY OF BANKING
Banks are very common nowadays. Almost every town has one or
more banks. They are so common that even a layman can understand the
functions of bank. The banking system has evolved through centuries. In fact
in the beginning, banks used to perform very limited functions, they have
evolved from very small beginnings and now engulf almost every aspect of
human life.
2.1 DEFINITION AND EVOLUTION OF BANKING
The word Bankis derived from the words Bancus or Banque that
means a bench. The explanation of this origin is attributed to the fact that the
Jews in Loombardy transacted the business of money exchange on benches in
the market place. Other authorities hold the opinion that the word Bank is
derived from the German word Back, which means joint stock fund. Later
on when the Germans occupied major part of Italy, the word Back was
initialized into Bank.
The banking business originated from the tradition of deposit of
valuables with the goldsmiths for safety purposes. The goldsmiths found it
appropriate to invest the same into profitable ventures for obtaining some
profits on it. As the wisdom progressed, the depositors realized their right for
entitlement for a share in return on the investment of their deposits with the
goldsmith and started asking for the same. This was the beginning of the
banking business in ancient times.
The conventional of the banks is defined as to obtain deposits from the
customers and lend it to the financing of the business. The banker used to keep
a cushion between the cost for obtaining the deposits and return on which the
amounts were made available to the business for financing purpose. This
cushion was said to be the profit of the banks that covered the administrative
costs and fair return on the investment.
With the passage of time, the functions of the banks kept on changing
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and the appropriate function of the bank in current economic situation is that
these are financial inter-mediator between the resources of the funds and
ultimate uses of it. It links the sources and resources. This is not necessary that
the funds are involved in linking of the sources and resources. Some time the
bankers commitment provides the required facility.
The development in the capital market has enlarged the activities of the
money market and new avenues of the business have opened. The complexity
of the foreign exchange transaction has geared the banking business into
profitable ventures. The banks play a major role in the regulation of the fiscal
policies and the control of the economy. A diversified role of the banks can be
visualized in the prevailing economic condition of the world.
2.2 BANKING SECTOR IN PAKISTAN
At the time of independence, there were particularly no industries, and
whatever raw material was produced was being exported from Pakistan.
However, commercial banking facilities were provided fairly well here. There
were 487 offices of scheduled banks in the territories now constituting
Pakistan.
As new country without resources it was very difficult for Pakistan to
run its own banking system immediately. Therefore, in accordance with the
provision of Indian Independence Act of 1947, an Expert Committee was
appointed to study the issue. The Committee recommended that the Reserve
Bank of India should continue to function in Pakistan until 30th September
1948, so that the problems of time and demand liability, coinage, currencies,
exchange etc. are settled between India and Pakistan.
In order to make necessary arrangements for the assumption of control
an Expert committee was appointed to recommend necessary steps, including
the required legislation to establish a Central Bank for Pakistan.
The foreign expert advised that due to acute shortage of qualified staff
the establishment of a Central Bank was not practicable; but he recommended
a Currency Board until such time as conditions become favorable. However,
contrary to recommendations, the Government of Pakistan decided to establish
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a full-fledged Central Bank. Consequently the Governor General of Pakistan
and the Father of the nation, Quaid-e-Azam Muhammad Ali Jinnah,
inaugurated the State Bank of Pakistan on 1ST July, 1948, after the State Bank
of Pakistan order was promulgated on 12th May, 1948. Thus a landmark was
made in the history of banking when the State Bank of Pakistan assumed full
control of banking and currency in Pakistan.
The first important task which the State Bank of Pakistan had to attend
was the issue of currency notes and withdrawal of Reserve Bank of India notes
with over printing there of government of Pakistan, which had been in
circulation in Pakistan so far.
As the central bank of the country, the State Bank addressed itself with
the equally urgent task of creating a national banking system. In order to attain
this goal it provided every help and encouragement to Habib Bank to expand
its network of branches, and also recommend to government the establishment
of a new bank which could serve as an agent of the State Bank. As a result, the
National Bank of Pakistan came into being in 1949; and by 1952 it became
strong enough to take over the agency function from the Imperial Bank of
India.
In order to develop sound banking and weeding out weak institutions,
the Banking Companies (Control) Act was promulgated in 1949, empowering
the State Bank to control the operations of banking companies in Pakistan,
including preparation of the required trained man power. Further, the State
Bank restricted the opening of new branches by foreign banks in port towns or
in big cities from where trade was being carried out with foreign countries,
while Pakistani banks were allowed to open as many branches as possible
within the country.
Development of agriculture largely depends on agricultural finance, but
the scheduled banks were not very willing to undertake this risky venture.
Therefore, the State Bank of Pakistan sponsored the establishment of
Agricultural Development Bank to attend exclusively to agriculture finance.
During 1956-1958 a new Pakistani Bank was registered and scheduled as the
National Bank limited; and government also established Pakistan Industrial
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Credit and Investment Corporation, a new institution in the field of industrial
finance.
The expansion in the banking and credit facilities was further enlarged
when during 1959-60 two more Pakistani banks, namely Eastern Mercantile
Bank Limited and Union Bank Limited were established and scheduled.
Another very significant event in the development of banking in
Pakistan was the appointment of the Credit Inquiry Commission in 1959 to
examine the scope and working of the institutions providing credit facilities to
agriculture, trade, commerce and industry, recommend measures for further
improvements.
More Pakistani scheduled banks continued to be established, which
included the Commerce Bank Limited and the Standard Bank Limited. By
June, 1965, the number of scheduled banks stood at 36.
Besides this growth, specialized credit and financial institutions have
also developed over the years, and cater the needs of specific sectors. National
Investment Trust; People Finance Corporation; Inquiry Participation Fund; and
National Development Finance Corporation; Bankers Equity Limited, Small
Business Finance Corporation etc are contributing their due share in the
countrys economic life.
A new concept of interest free banking was introduced in 1981 and by
now it has been established on sound footing, and new trends and techniques
are being implemented to make this system result oriented. New products and
their systematic consumption are making Pakistani banking comparable to
their several modern counterparts anywhere in the developed world.
2.3BANKING SECTOR IN Khyber Pakhtunkhwa(KPK)
The Khyber Pakhtunkhwa 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 agriculture, industry, forestry, hydro electricity and tourism.
The Bank of Khyber is the first KPK based bank and assists in the
development of sound business in the areas of growth.
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There are about 22 Pakistani scheduled banks operating in the KPK
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
branches are also operating in the province. Historically banks in the KPK
have been able to mobilize substantial amounts of 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 KPK residing overseas
especially in the Middle East are also offering opportunities to banks operating
in the province.
2.4 BACKGROUND OF BANK OF KHYBER
The Bank of Khyber was established through an Act of the KPK
Assembly called, The Bank of Khyber Act 1991, passed in June 1991. The
bank was formally launched on November 01, 1991. In 1994, the bank
acquired the status of scheduled bank. The Head Office of the Bank is situated
at 24-The Mall, Peshawar Cantt. Peshawar.
2.5.1 VISION OF BOK
To become a Leading Bank providing efficient and dynamic services
in both Islamic and Conventional banking through expanded nationwide
network.
2.5.2 MISSION OF BOK
To increase shareholders value and provide excellent service andinnovative products to customers through effective corporate governance,
friendly working environment and contributing towards an equitable
socioeconomic growth.
2.5.3 CORE VALUES OF BOK
Highest quality of service.
Professionalism.
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Integrity. Team work. Innovation & utilization of latest technology. Corporate social responsibility.
2.5 OBJECTIVES OF BANK OF KHYBER
Objectives are the ends towards which activities are aimed. In fact
these are the results to be achieved. The Bank of Khyber has also certain
objectives. These have been taken from the information memorandum and are
stated here in the same words. These are
i. Promotion of savings and investment in the KPK.ii. To mobilize private savings and public funds for diverting the same
into productive channels and ensure their availability.
iii. To promote industrial, agricultural and socio-economic processesthrough the active participation of private and public sector in the province.
iv. Help under developed areas and create opportunities, especially in therural areas of the province. Further, to guide and assists the people of KPK
savings in the province as well as in other parts of Pakistan.
v. Create a diversified and sound portfolio for utilization for idle fundsand their investments in the existing and new ventures especially in the
pioneering of high-tech agro based expert oriented and engineering projects to
ensure maximum returns.
The Bank of Khyber has been created with the objectives of providing
banking facilities to all segments of the population of the province particularly
and the country as a whole. With this objective, the bank has opened a total of
74 branches including 36 Islamic branches through out Pakistan. 43 branches
including 24 Islamic branches in the province of KPK. The branches cover all
divisions and important commercial centers of the province. Furthermore 17
branches including 4 Islamic branches in Punjab, 8 branches including 3
Islamic branches in Sindh ,2 branches both Islamic in Baluchistan,2 branches
including 1 Islamic branch in Islamabad and 2 Islamic branches in AJK are
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also operating. These branches cover almost all the divisions of KPK and
important commercial centers of the country. The expansion is under way and
branches of BOK are being opened in all districts as well as in all important
commercial centers.
2.6 ORGANIZATIONAL STRUCTURE
The organizational structure is defined as the set of elements that can
be used to configure an organization. The technology, environment, size, and
strategy can all influence an organizational structure. It is also the framework
that defines the boundaries of the formal organization and within which the
organization operates. The organizational structure of Bank of Khyber is also
achieving specific corporate objectives. The general superintendence and
direction of the affairs and business of the bank has been entrusted to the
Board of Directors (BoD).
2.6.1 BOARD OF DIRECTORS
The existing Board of Directors comprises the following:
i. Mr.Attaullah Khan Chairmanii. Dr. Bilal Mustafa ManagingDirector/CEOiii. Mr. Mir Javed Hashmat Executive Directoriv. Sahibzada Saeed Ahmad Directorv. Mr.Muhammad Asif Directorvi. Mr.Muhammad Maqsood Khan Directorvii. Mr.Maqsood Ismail Directorviii. Mr.Amjad Pervez Director
2.6.2 MANAGEMENT
The day to day operations of the Bank are run by a capable team led by
Mr. Attaullah Khan who is a competent, well-qualified and highly respected
senior civil servant having a vast experience of 32 years in management,
administration and planning. Over the past few years, he has gathered a team
of professionals and well qualified senior executives of the bank. These
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executives have been selected from foreign and local private and public sector
banks.
The Bank of Khyber emphasizes on lean, efficient and professionally
managed organization, with a strong private sector orientation. It competes for
business on commercially competitive terms with other banks in the province.
2.6.3 EMPLOYEES
The bank has currently hired a total of 4585 employees. They include
PhDs, postgraduates including MBAs from foreign and local universities and
graduates. The bank provides them with On the Job Training, as well as
exposure to advance courses and seminars conducted by the Institute of
Bankers in Pakistan and other professional institutes. The bank places high
priority on professional education and encourages its employees to sit in the
professional examinations conducted by the Institute of Bankers in Pakistan.
2.7 ORGANIZATIONAL CHART
The Bank of Khyber is a centralized organization in which little
authority is given to the lower levels of management. The Head Office of the
Bank of Khyber has two divisions and each division has its own set of
departments. These are
i. Banking Operation Divisionii. Personnel and Establishment Division
These are further classified for the purpose of administrative convenience.
The organizational structure of Bank of Khyber is given below in the
following chart.
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CHART: THE ORGANIZATIONAL STRUCTURE
Chart-2
Branches 29
Monitoring & Recovery Department
Credits Department
Foreign Exchange Department
Account & Treasury Department
Branch Operation Department
Banking Operation Division
Public Relation Department
P & E Department
Micro Finance Unit
Computers
Investment
Personnel & Establishment Division
Managing Committee
Managing Director
Board of Directors
Source: The Bank of Khyber Annual Report 2011
THE BANK OF KHYBER
Branches
74
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CHAPTER NO. 3
THE HEAD OFFICE
3.1 THE HEAD OFFICE
The Head Office of the Bank of Khyber is situated at 24-The Mall,
Peshawar Cantt, Peshawar. The Head Office is fully equipped with latest
equipment and technology and controls all the activities of the bank. It
contains different divisions and provides us all the important information
about the different activities related to the Head Office and about different
branches of the bank.
3.2 DIFFERENT DIVISIONS IN HEAD OFFICE
The division is the process of grouping jobs according to some logical
arrangements. The manner in which the activities should be divided and
formed into specialized groups is usually referred to the divisions. The BOK
has used the most common base for divisions and has several divisions at the
Head Office. These divisions contain different departments.
The following are some of the divisions at Head Office:
i. The Banking Operation Division.ii. The Marketing Division.iii. The Islamic Banking Division.iv. The Credit Division.v. The RRMC and RD Division.vi.
The Internal Audit Division.
vii. The Treasury and Investment Division.viii. The Finance Division.ix. The Information Technology Division.x. The Human Resource Division.
i. THE BANKING OPERATION DIVISION
The Banking Operation Division is mainly responsible to manage the
operations i.e. work processing functions in the bank. This Division has a
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pivotal role, as it has to work in close coordination with almost all other
divisions or departments for smooth functioning of the bank. It controls
branch operation and international banking departments. The role played by
the branch operation division is important; they propose operational policies,
procedures and ensure strict compliance of the same through liaison with
international banking.
The banking operation division not only provides guidance to the
branches enabling them to provide quick and error free customer service and
maintains service standards but also identifies training needs of their staff and
suggests in-house training programs. It is also responsible to maintain internal
security, proper cash vaults, test keys, customer records and computer security
features in the branches and also to allocate annual operational target and
monitor performance of staff against set objectives. This division works like a
bridge between SBP and branches for implementation of its relevant rules and
procedures as circulated from time to time.
ii. THE MARKETING DIVISION
The Marketing Division of the Bank is responsible for the formulationand implementation of marketing strategy of the Banks products both on
assets and liabilities side keeping in view the business environment of the
province in particular and the country as a whole. It works to popularize the
Banks deposit schemes and loan products amongst the people with a view to
improve business and overall image of the Bank. The division works in close
coordination with the branches and other divisions and departments of the
bank towards the implementation of the marketing strategy and achievement ofthe assigned targets.
The division is comprised of three departments viz. research and
development department, customer relations department and product
promotions department. The responsibility of the research and development
department is to search and develop new products according to the
requirement of the market. The customer relations department is responsible
for the implementation of the marketing strategy. The product promotion
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department has been assigned with the promotion of the products through
electronic and print media and through other means of promotion.
The division has developed consumer finance products as well as
conventional products. These are in addition to Agri Products which have been
developed for the agriculture sector of the economy. Searching for good
corporate clients is the core activity of the division, which is receiving full
attention of the relevant department with a result oriented approach.
iii. THE ISLAMIC BANKING DIVISION
The Bank of Khyber has started Islamic Banking by converting all
assets and liabilities of Hayatabad Branch Peshawar on 27th Ramadan (22ndNovember 2003). At present it has a total of 36 Islamic Banking branches.
These branches are now working according to the guidelines of Shariah
Supervisory Board. The Aims and target of the IBD is to implement the
decision of the Board of Directors 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 SBP. To achieve the
target, Islamic banking division has devised an action plan for expansion andconversion of the whole bank into an Islamic Bank within a laid down
framework and to develop the business in various areas. Presently Islamic
Banking Branch is offering Ijara, Murabah, Diminishing Musharakha and
Guarantees as Islamic finance services and investing the idle funds through
Treasury in the Capital. While the consumer financing schemes under Islamic
modes of financing are Housing Finance Scheme, House Construction
Scheme, Export scheme, Foreign exchange Accounts etc.
iv. THE CREDIT DIVISION
There has been a remarkable growth in core business of the Bank and
the Credit Division has played very effective role in this regard. The credit
division of the bank continuously reviews its policy frameworks in accordance
with the tough competition faced in the wake of reducing mark up rates and
increased liquidity in market. Credit monitoring is being strengthened with a
view to develop early warning signals through constant monitoring of loans
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from different angles and risk management plan is being developed giving a
rating to the clients based on industry status, financial strength of the clients
security offered, repayment behavior among other factors. The conventional
loans, micro and consumer finance, Islamic mode of financing are the salient
characteristics of BOK credit schemes whereas the agricultural lending policy
is being formulated with new features. Introduction of new schemes like house
finance, car finance and other financing schemes will definitely improve and
enhance the credit portfolio. The BOK has strengthened its grip on the target
market for these schemes.
The Micro lending operations in the Bank are structured in a separate
department called the Micro Finance Department under the credit division of
the Bank. It aims to be the largest Micro Finance provider in the KPK on
sustainable basis. Its main objective is providing access to financial services by
the low income and disadvantaged segment of the society.
v. THE RRMC AND RD DIVISION
The main responsibilities of the division include the recovery of all
regular as well as bad debts of the bank. As a part of the re-engineering of thedivision, a full fledged collection unit was established whose major
assignment is to follow-up the delayed accounts from the very first day of
default in order to mitigate the risk of further infection. The division
coordinates closely with credit division as ongoing feed back on performance
of various segments of the portfolio is critical for fine tuning of underwriting
credit initiation criteria.
The division is responsible for the capacity planning, hiring of the staffbased on number of accounts and training programs in order to ensure better
understanding by the collection officers of the imperatives of handling the
customers according to the banks policy. They must also understand the
product in order to effectively negotiate with customers the terms of
perspective settlements and regularization of infected account.
Moreover, the KPK Provincial Assembly amended BOK Act 1991 and
put the bank under the ambit of Land Revenue Act of the province, which isbeing utilized as a deterrent tool for recovery of infected loans of the bank.
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The actions under the Land Revenue Act have proved useful especially
towards recovery in accounts involving smaller accounts.
vi. THE INTERNAL AUDIT DIVISIONThe auditing is a systematic examination of all books and records in
order to ascertain or verify and to report upon the facts regarding its
operations. The Internal Audit Division works independent of the management
and reports to the Audit Committee of the Board. The audit committee
comprises of two wings i.e. the Head Office & Field Audit Department and
The Inspection & Implementation Department. The former ensures audit
according to the plan and the later is responsible for inspections andimplementation and follow up action.
The main function of internal audit division of a bank is to conduct
independent appraisal of all activities aiming to add value. Every activity of
the bank falls with in the scope of the internal audit. The prime objective of
internal auditor is to examine, evaluate, and manage to control and eventually
to mitigate the risk. In addition, the internal audit division advises and
recommends senior management for improvements in internal control and riskmanagement system.
vii. THE TREASURY AND INVESTMENT DIVISION
The Treasury and Investment Division has developed a reputation as a
proven market player. Treasury remained the main source of revenue
generation for the bank. Investment department is responsible for managing
the banks equity portfolio. The division is also responsible for day-to-day
management of liquidity for the bank.
Owing to rising trends in interest rates, treasury prioritized investment
in corporate bonds offering float rate at KIBOR. Besides return on government
securities that also saw rising trend, COT contributed handsome return in
profit of the treasury. The swap market did not offer any significant
opportunities for interest arbitrage. The overall currency exposure is being
managed prudently and effectively while generating sustainable exchange
earnings. The financial markets of the country continue to develop; the bank
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expects significant opportunities to arise for division by trading, funding and
gapping areas.
viii. THE FINANCE DIVISIONThe Finance Division is responsible for bookkeeping and accounts,
overall fiscal management, financial control, financial reporting and
accounting functions of the bank. The Finance Division ensures that the
accounting records and systems 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 indicatorsincluding asset/liability mismatch. The division directs control of the
budgeting process in accordance with the annual plans, policies, management
directives and strategy, ensuring that quality budgeting and forecasts are drawn
up and consolidated for approval.
The Finance Division exercises budgetary control on all expense and
income items at both the Head Office and branch level, ensuring the effective
monitoring arrangements are in place in respect of adherence to budget orforecasts. It monitors capital adequacy in accordance with regulatory
directives. The division maintains the financial databank and carries out
industry financial analysis vis--vis banks strengths and opportunities.
ix. THE INFORMATION TECHNOLOGY DIVISION
The Information Technology Division of the bank was established in
1994 and all the branches were successfully automated by the year 1998. The
Information Technology division has progressed in the last eight years and
trying its best to 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, this will facilitate the customers of the BOK and they will be
able to transfer money between any two branches through out the country. The
bank beside this works in the field of information technology and gets
advantages from the technology in a more advanced way to build a strong
means of communication between the different branches. The BOK has
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launched its ATM service in some of the branches for their customers so that
they may draw money easily in non-banking hours.
x. THE HUMAN RESOURCE DIVISIONThe Human Resource Division is strategically the most important
contributor to organizational effectiveness. It is responsible for human
resource management, including areas like recruitment, training, performance
appraisals and career development. HRD acts on the conviction that people at
Bank of Khyber are the most important assets for the bank.
The division tries to create an environment of mutual trust and dignity.
It plans to hire, develop and retain the human resource base with the right levelof skills and talent to meet current and future business needs. The HRD aims
to transform the bank into a modern and dynamic bank, highly professional
and efficient, fully equipped to play a meaningful role, on sustainable basis in
the economic and social development of KPK as well as the country.
In addition to the above, the bank acknowledges professional acumen,
experience and expertise of its staff through regular financial benefits in the
shape of competitive salaries, cash awards, promotions, academic
sponsorships and other incentives so as to boost their morale for greater input
towards betterment of the bank.
3.3 HUMAN RESOURCE POLICIES
Human Resource Management is the part of the organization that is
concerned with the staffing, training, development, motivation and
maintenance of employees. It is a step-by-step process, which is followed by
many companies all over the world. The HRM strategy includes the following
steps.
3.3.1 SELECTIONS AND RECRUITMENT
Selection is the process of choosing from amongst the candidates from
within the organization or from outside, the most suitable person for current
position or for future positions. Recruitment is the process of discovering
potential candidates for actual or anticipated organizational vacancies.
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Pakistan Banking and Finance Commission has designed recruitment
policy. This commission serves as an employment agency. The bank sends
their recruitment criteria to the commission and rest of the legal requirement
and procedures are carried out by it. This commission conducts competitive
exams and after announcing the results then qualified candidates are called for
the interviews. If they clear the interview they can then be appointed in the
required bank. The BOK for the appointment of office cadre strictly follows
Recruitment Policy. MBAs and Economists are preferred for this job.
3.3.2 TRAINING
Training is a learning experience that seeks a relatively permanentchange in an individual that will improve his or her ability to perform on the
job. Training need usually rise when there is a gap between actual and desired
performance. These training needs are usually assessed through training needs
surveys, which range from simple questionnaires where employees assess their
own needs, to elaborate and testing of skills.
The Institute of Bankers in Pakistan (IBP) arranges training programs
for all the banks including the Bank of Khyber, to upgrade their managementskills. IBP also arranges seminars, conferences and training programs for 1 to
2 or more days. IBP conducts three exams in the full service of a banker; Part
I, Part II, and Part III. It is called DAIBP (Diploma Associates, Institute of
Bankers in Pakistan). Initially the time period for the exams was eight years
but now there is no such restriction. This facility is only provided to permanent
employees. If a banker clears all the papers in the first chance he would get a
cash prize. After clearing part I, a lower grade officer is given the option oftaking the cash prize or a promotion. In grade II only the cash prize is offered.
For improving the skills and knowledge of its employees, the management of
the BOK has on the job training, job rotation, and off the job training.
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i. ON THE JOB TRAINING
Normally, given by a senior employee or supervisor, the trainee is
shown how to perform the job and allowed to do it under the trainers
supervision. The bank provides them with on the job training, as well as
exposure to advance courses and seminars conducted by the IBP and other
professional Institutes. The bank places high priority on professional education
and encourages its employees to sit in the professional examinations
conducted by IBP.
ii. JOB ROTATION
Job Rotation is defined as the practice of periodically rotating jobassignment. It enables the employees to work on different positions and get an
overall picture of the banks operations.
iii. OFF THE JOB TRAINING
Off the job training in BOK includes conferences, seminars, meetings
and refresher courses. This mode of training is done to enable employees to
upgrade their knowledge to new developments in profession, and also to
broaden their outlook and train them in new techniques.
3.2.3 SUPERVISION AND PERFORMANCE APPRAISAL
A formal assessment of how well an employee is doing his or her job,
supervision of the employees whether new or old is necessary in any
organization. BOK has designed many forms for the performance evaluation.
Each employee has to fill them and has to keep them updated. They are then
asked on weekly and monthly basis to present these forms and after this, their
performance is evaluated.
3.2.4 ALLOWANCES AND BENEFITS
The BOK allows the following allowances:
i. House rent allowances.ii. Conveyance allowances or maintenance allowances.iii. Utilities allowances.iv. Cost of living allowances.
v. Medical allowances.
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Benefits are the things of value other than compensation that an
organization provides to its workers. The BOK allows to executives and
managers only, the following benefits.
i. Residential telephoneii. Bank cariii. Residential facilities
3.2.5 PROMOTIONS
i. Promotions to various posts are made on merit and no employee shallhave a claim to be promoted by virtue of seniority alone.
ii. No employee is eligible for promotion to the next higher grade till hehas completed at least three years service in a grade.
iii. The MD on the recommendation of the Promotion Committeeapproves promotions up to the grade of Joint Director.
iv. Junior officers (Grade III) who pass DAIBP Part I have the option ofpromotion to the next higher grade, or avail the cash award as prescribed from
time to time.
3.2.6 RETIREMENT, TRANSFER AND TERMINATION
An employee can take early retirement before the maximum age limit
subject to the condition that he has completed a service of 25 years. The
maximum age limit for retirement is 60 years at BOK. The arrangements of
post retirements contributory provident fund are also carried out by personnel
offices; personnel section is responsible for transfer. Transfers are due for each
employee after three years.
If a person is not performing satisfactory in a specific job he might be
transferred to another job which may be relatively easier. BOK hires
employees on contract basis. These employees are required to do well in
probationary period if they dont perform well they are eventually laid offor
terminated due to their consistent poor performance.
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3.2.7 DISCIPLINARY RULES
The Bank of Khyber has framed certain disciplinary rules to keep the
employees on the stated policies, rules and regulations. Upon violation of these
rules penalties are also imposed on the defaulters.
For the normal functioning of the organization, the general rules are:
i. Observance of rules and regulationsii. Maintenance of secrecyiii. Conduct of service.iv. Fraud and forgeries.v. Disobedience to any lawful and reasonable order of the supervisor .
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CLEARING DEPTREMITTANCES DEPT
CASHDEPT
ADVANCES
DEPT
GENERAL BANKING
OPERATIONAL MANAGER
MANAGER
ACCOUNTSDEPT
CHAPTER NO. 4
DEPARTMENTS AT BRANCH LEVEL
The Bank of Khyber has a branch network of 74 branches spread
through out the country. The branches are situated in major cities of the
country and are controlled by its Head Office. The G.T. Road Branch,
Peshawar of the Bank of Khyber was established in 1992. It gained the
confidence of the local residents and business people in a short span of time
and became a major source of earning for the Bank. Businessmen and rest of
the community patronize it due to its efficient services and innovative
products.
CHART: THE OPERATIONAL CHART
BANK OF KHYBER G.T. ROAD BRANCH, PESHAWAR
Source: The Bank of Khyber G.T. Road Branch, Peshawar
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4.1 ACCOUNTS DEPARTMENT
The accounts department is concerned with the different activities in
the bank. This department deals with the customers account and many other
activities in the bank. Accounts are opened here and maintained by them.
4.1.1 OPENING OF AN ACCOUNT
Opening of an account is the establishment of banker-customer
relationship. Before a banker open a new account, he should determine the
perspective customers integrity, respectability, occupation and the nature of
business by the introductory references. The main objective of all the banks is
to accept and mobilize deposits of money from the public and to lend or invest
them into the most profitable avenues possible.
TYPES OF ACCOUNT
The following are different types of the accounts:
i. Current Deposit Accountii. Saving Deposit Account
iii. Term Deposit Account.iv. Security Deposit Receiptv. Khyber Monthly Scheme.
vi. Regular Aamdani Scheme.vii. Zabardast Aamdani Scheme.
i. Current Deposit Account
The Bank of Khyber Current Deposit Account allows the facility of
unlimited withdrawals up to the extent of the balance in account. The balance
in current accounts are payable on demand. Any amount can be withdrawn
without prior notice and there is no restriction on number of transactions
during the day. All the individuals including foreigners, firms and corporate
bodies are entitled to open and maintain current account. The distinguishing
feature is that there is no profit and no interest on current account.
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ii. Saving Deposit Account
The Bank of Khyber Saving Deposit Account allows the account
holder the facility of multiple withdrawals while accruing profit on his deposit.
Profit is paid bi-annually on minimum monthly balance, which is announced
in July and January respectively. The withdrawals from this account are
allowed on demand i.e. without any prior notice of withdrawal.
Different types of Saving Deposit Accounts are given below:
i. Profit & Loss Saving Account.ii. Special Deposit Account.iii. PLS 7 Days Notice Deposits.iv. PLS 30 Days Notice Deposits.
iii. Term Deposit Account
The Bank of Khyber Term Deposit Account offers the benefits of
attractive returns with high liquidity option to take profit monthly, quarterly,
bi-annually, annually or at maturity. The profit is accrued on a daily product
basis. There is no penalty for premature encashment. However, in case of early
encashment the rate of the previous tender will be applied. The option of
partial liquidity is allowed i.e. withdrawal to a certain percentage from the
fixed deposit without disturbing the remaining deposit is allowed. The term or
fixed deposits are accepted by the bank which mature between one month to
five years.
iv. Security Deposit Receipts
This is a security deposit usually initialized by the Govt. or Private
contractors for auctions etc. This is submitted along with quotation to the
concerned department or organization. The banks dont pay interest on it.
v. Khyber Monthly Scheme
In Khyber Monthly Scheme, the Bank of Khyber gives monthly interest
on amount deposited with the bank. It is a kind of fixed deposit and the
customers will have to keep the deposits for a period of 5 years.
vi. Regular Aamdani Scheme
In Regular Aamdani Scheme, the Bank of Khyber gives interest after
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six months on amount deposited with the bank. It is a kind of fixed deposit and
the customers will have to keep the deposits for a period of 5 years.
vii. Zabardast Aamdani Scheme
In Zabardast Aamdani Scheme, the Bank of Khyber gives monthly
interest on amount deposited with the bank. The amount required for opening
this account is Rs.100, 000/- and the customers will have to keep the deposits
for a period of 3 years.
4.1.2 CLOSING OF BANK ACCOUNT
When a customer wants to close his account, he comes to the bank and
checks his account in the accounts department. When the department provides
information about the account, then he is required to give in writing the
directions for closing the account. He is also required to give the unutilized
cheque leaves to the bank officer or give in writing that he has closed it and
bank will deduct the charges of account closing and then close the account.
4.1.3 ISSUANCE OF CHEQUE BOOK
For New Account Holder
The customer has to fill a form. Entries are made in the register and the
account holder is given an account number, which is stamped on every page of
the cheque. The form is signed by the banker and kept in records. Charges for
the cheque book can either be paid or deducted from account.
For an Old Account Holder
In this case, the account holder has to detach the requisition leaf from
the old Cheque book, fill it and give it to the bank employee responsible for
issuing cheque books. The bank employee will issue cheque book by writing
the customers account number on all Cheque leaves and also record the
distinctive number of the Cheque book on the required slip received from the
client.
Loss of Cheque Book
In such circumstances, it is the customers duty to inform the bank at
once the customer must mention the issued cheque number to avoid any fraud
too. The customer is then required to fill a form. The leaf of the Cheque isattached to the form mentioning charge of loosing the Cheque book and
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issuing a new Cheque book. Again it is signed and kept in records.
4.1.4 THE BANK STATEMENT
The Bank issues a statement to its account holders, at the time of first
deposit, and then periodically according to the demand of the account holder.
It may be monthly, quarterly or bi-annually.
4.1.5 LOCKERS
Another function of the accounts department is renting out lockers to
the customers for safe keeping of their valuables. The person who is eligible
for having a locker is an account holder of the bank. When the account holder
doesnt want to use the locker anymore, he can simply return the key and the
security deposit is then refunded.
There are three different types of lockers which are given in the table.
TABLE : TYPES OF LOCKERS AND ITS CHARGES
No. SIZE CHARGES PA SECURITY
1. Small 750 1000
2. Medium 1000 1500
3. Large 1500 2000
Source: The Bank of Khyber G.T.Road Branch,Peshawar
Actually there are two keys. One is Master Key and second is
Customer Key. The authorized bank person first opens the locker with the help
of the master key and then the customer opens it with his key. The account
holder can operate the locker personally or through authorized representative.
4.2 CASH DEPARTMENT
Cash department owes its importance to the fact that it is a major point
of contract between the bank and the customer, the Banks most valued
relationships. Cash department mainly deals with receipt and payment of cash.
Thus in this department there are basically two main functions as explained
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below:
4.2.1 CASH RECEIPT
Cash into the bank is recorded in the receipt book. The amount is
written in slip, filled by the client himself along with the counter file and the
cash is handed over to the officer dealing with the client who after counting
the cash, signs and stamps on the receipt and hands it over to the depositor and
the amount is credited to the account holder by the ledger keeper.
4.2.2 CASH PAYMENT
When a person comes with a cheque to the bank, the bank will honor
his claim if the amount claimed is available in his account. Withdrawals from
the account or other payments are recorded by the cashier in the cash payment
register, after proving genuineness of the instrument. After the closing of the
normal banking hours the cash is balanced and placed in the safe, which is
housed in the strong room.
4.2.3 CHEQUES
A Cheque is defined as a bill of exchange drawn on a specified banker
and not expressed to be payable otherwise than on demand.There are two types of cheques, one is Open Cheque, which is paid
across the counter in cash. There are another two types of open Cheques; one
is Bearer Cheque, in which the payment can be made to the person carrying the
Cheque and the other is Order Cheque Rewrite, it is also encashable on the
counter but its holder must satisfy the banker that I am the person of which the
order has been placed.
The second is Crossed Cheque; it is done through drawing two parallellines across the face of the Cheque. The payment in this case is credited to the
account, not through the counter of the drawer bank. It is deposited into the
account of person in whose favor it is drawn.
4.3 REMITTANCES DEPARTMENT
One of the important functions of a bank is to transfer funds for
customers from one location to another. The function of remitting funds is
performed by remittances department. Instruments used by The Bank of
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Khyber for remittances include:
4.3.1 TELEGRAPHIC TRANSFER:
Telegraphic transfer is an electronic system of transferring fund. This is
the quickest mode of transferring funds. The procedure followed is; first the
customer fills a form where the customers writes down his name and address,
the amount to be transferred, the name of the branch to which the funds are
transferred, and the name of account number of beneficiary, for which it is
prepared and a message is sent to the drawee branch. The funds can be
immediately withdrawn almost half an hour after the funds are remitted. The
charges for sending the funds through TT are the same irrespective of the
amount of funds send, so it is beneficial for customers who need quick transfer
of huge amount.
4.3.2 DEMAND DRAFT
A draft is defined as an order Cheque drawn by one branch of a bank
upon another branch of the same bank. It is a common mode of funds transfer.
It is different from telegraphic transfer in the sense; the funds are not
immediately transferred to the collecting branch at the receipt of the draft. The
collecting branch will credit the account of the beneficiary at the receipt of
advice from the issuing branch. The procedure for demand draft is just same as
above. The bank prepares draft, and gives it to the customer who will himself
choose the mode to send it to beneficiary. The draft will be recorded in the
Draft issuance register. The demand draft can be open, which is encashable at
branch cash counter after properly identifying the true beneficiary.
4.3.3 MAIL TRANSFER
It is just like a DD, the only thing differentiating it from DD is that DD
is physically handed over to the customer and upon presenting the draft the
amount can be withdrawn. But in case of mail transfer one branch sends
instructions to another named branch ordering it to credit the amount to the
account of the person in whose favor the amount is deposited.
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4.3.4 PAY ORDER
Pay Order is just like DD except that pay orders is made for local
transfer of money whereas DD is meant for remittances of funds from one city
to another. Pay order is the most convenient, simple and secure way of
transferring of money.
4.4 CLEARING DEPARTMENT
The bank along with their daily business activity also provides the
facility of collecting credit claims for customers. Main functions of the
clearing department are to interchange and settle the credit claims. The
functions of clearing-house were performed by the central bank of the country
but now this function is performed by NIFT.
4.5 ADVANCES DEPARTMENT
A bank is a profit seeking institution. It attracts surplus balance from
the customer at low rate of interest and makes advances at a higher rate of
interest to the individuals and business firms. Credit extensions are the most
important activity of all financial institutions, because it is the main source of
earnings. Advances department is one of the most sensitive and important
department of the bank. The major portion of the profit is usually earned
through this department. The job of this department is to make proposals about
the loans. The various types of advances provided by the bank are:
i. RUNNING FINANCE
Running finance is a type of short term loan. It is given to meet the
working capital requirements of a business. The loan is normally repayable
with in a period of one year and markup is charged on it and this can be
renewed.
ii. DEMAND FINANCE
Demand finance is a fixed amount of financing accommodation,
allowed to the borrower for a fixed period, repayable in month or quarterly
installments, at a fixed future date. The customer has to pay mark-up on the
entire amount, whether withdrawn or not. It is a long term loan and the time
period for these types of loans is from one to ten years.
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iii. ADVANCE AGAINST SALARIES
The Advance against salaries facility is available to the government
and semi government employees up to fifteen salaries. The time for advance
against salaries is four years. These facilities are available to the BOK clients
on attractive terms and conditions. The BOK provides personalized services
and ensures to fulfill the clients needs.
iv. MICRO FINANCE
The Bank has perusal development activities as primary objectives.
The strategy for financing small scale enterprise, the Bank of Khyber
specifically focused on fulfilling financing needs of micro enterprises in the
country with the establishment of an independent department Micro Business
Development department in April 1995. The Bank has also established
linkages with various international organizations like Pak Holland metal
Project working for promotion of micro enterprises in the country, to promote
the economic conditions of citizens by providing loans to them on easy
installments for the growth of their businesses and for the establishment of
new industries.
v. AGRICULTURAL LOANS
The Bank of Khyber also provides various types of agriculture loans
for the formers to improve their economic condition by producing more crops
in limited resources. The Bank of Khyber provides loans for the formers to
purchase various types of agriculture equipment, fertilizers and other things
related to agriculture. The time period for these types of loans is two years and
after two years they are renewed.
vi. CONSUMER FINANCE
The Bank of Khyber provides various types of consumer financing
schemes like electronics and other types of equipment for their customers.
Through this, the organization looks forward to serving their customers in an
even more efficient manner by providing them attractive terms and conditions
and a technologically superior product range to choose from. The time periodfor these types of schemes is two years and markup is charged.
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vii. HOUSE FINANCE
The Bank of Khyber has made this dream of a house come true by its
house-financing scheme i.e. Suhana Ghar. Whether one plans to build a house,
tailor made to ones requirements or buy a constructed house. The Bank of
Khyber mortgage finance enables them to pursue it without any problems. The
Bank of Khyber mortgage finance offers the customer, the convenience of
owing a house of his own choice while living in it at its rental value. The
customers pay the price of their property in affordable installments for a fixed
time period simply as they pay monthly rent for their residence. The
installment plan has been carefully designed to suit both their budget and their
accommodation requirements. The time period is from one to ten years and
markup is charged on it.
viii. CAR FINANCE
The Bank of Khyber also provides the car financing scheme because it
is another dream of every person to have his own car. The bank gives the cars
to their customers on the monthly installments for five years period of time
and markup is charged on it.
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CHAPTER- 5
FINANCIAL ANALYSIS
5.1 Liquidity Ratios
Liquidity ratios measure the ability of a firm to meet its short-term
obligations. They indicate how quickly and easily a company can obtain cash
for its needs. Following liquidity ratios have been calculated for Bank of
Khyber:
5.1.1 Current Ratio
Current ratio is simply current assets divided by current liabilities.
Current assets include cash, accounts receivable, marketable securities,
inventories, and prepaid items. Current liabilities include accounts payable,
notes payable, salaries payable, taxes payable, current maturities of long-term
obligations and other current accruals. Short-term creditors and management
are interested in this ratio.
Years2007 2008 2009 2010 2011
Current Assets 25672561 27004975 29372558 36790065 48800434
Current Liabilities 23552808 23081176 25765402 32848273 41709773
Current Ratio1.09 1.17 1.14 1.12 1.17
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INTERPRETATION:
This ratio shows a firms ability to cover its current liabilities with its
current assets. The Bank of Khyber has consistently grown in current ratio,
especially during the last four years. This growth shows a good liquidity
position of BOK.
As can be seen from the table and the graph, the current ratio of Bank of
Khyber is showing mixed trend. 1st decreased and then again increased. Its
current ratio is highest in Year 2008 & 2011. In Year 2007, current ratio was
lowest at 1.09, meaning that if in 2007, The Bank of Khyber had Re.1 as
current liability; it had 1.09paisas in current assets to pay its current liability.
5.1.2 QUICK RATIO
The quick ratio measures the firms ability to meet current obligations
based on the most liquid assets. Most liquid assets include cash, marketable
securities, and accounts receivable.
1.18
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Years 2007 2008 2009 2010 2011
Current Asset-
Inventory
25437033 26774164 29114904 36461583 45463653
Current
Liabilities 23552808 23081176 25765402 32848273 41709773
QUICK RATIO
1.09 1.16 1.13 1.11 1.09
INTERPRETATION:
The quick ratio measures the firms ability to meet current obligations
based on the most liquid assets. Most liquid assets include cash, account
receivable etc. This means that inventories and any prepayment are deducted
from current assets to arrive at the figure of liquid assets. The Bank of Khyber
acid test ratios are equal in 2007 and 2011.
From the table and the graph, it is clear that the trend for quick ratio is the
same as that for the current ratio i.e., quick ratio too has improved over time
and it has become almost constant in Year 2008&10. In Year 2008, quick ratio
was highest at 1.16, meaning that if in 2008, The Bank of Khyber had Re.1 as
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current liability; it had Rs.1.16 in most liquid assets to pay its current liability.
5.1.3 Cash Ratio
Cash ratio shows the ability of the firm to pay its current liabilities
through cash. It is the most conservative form of liquidity ratios. Management
and short-term creditors are the most interested parties in this ratio.
Years 2007 2008 2009 2010 2011
Cash 5181618 5077859 4637772 3941793 6256466
Current
Liabilities 23552808 23081176 25765402 32848273 41709773
Cash Ratio 0.22 0.22 0.18 0.12 0.15
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INTERPRETATION:
Cash ratio shows the ability of the firm to pay its current liabilities
through cash. It is the most conservative form of liquidity ratios. As can be
observed from the table in the year 2007&2008, cash ratio was highest at 0.22,
meaning that if in 2007&08, BOK had Re.1 as current liability; it had 0.22 in
cash to pay its current liability. A lower cash ratio shows that cash is not lying
idle and it is being managed properly. BOK has managed the cash in last three
years quite impressively.
5.1.4 Leverage Ratio
Leverage ratios show the extent to which the firm is financed by debt.
The financial analyst uses debt ratios to assess the relative size of a firms debt
load and the firms ability to pay off the debt.
Years 2007 2008 2009 2010 2011
Total Debt 24182304 23863488 26636119 32823133 41319935
Total
Equity 2430382 5965872 4681216 5738310 6176373
Debt to
Equity
Ratio
9.95 4.00 5.69 5.72 6.69
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INTERPRETATION:
From the table and the graph, it can be seen that The Bank of Khyber is
a little leveraged Bank. The Bank of Khyber debt to equity ratio is showing a
mixed trend; first increasing and then again decreasing. Debt to equity ratio is
highest in Year 2007, meaning that its total debts are more than itsshareholders equity. This is because of the fact that the deposits made by the
customers in Year 2007 were far greater than the deposits in the preceding
years. And deposits make up the largest liability of the banks, and that is the
main reason that The Bank of Khyber is a little leveraged bank.
Years 2007 2008 2009 2010 2011
Total Debt 24182304 23863488 26636119 32823133 41319935
Total Assets 27211260 29829360 31336611 39075158 51012265
Debt to Total
Asset Ratio
0.88 0.80 0.85 0.84 0.81
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INTERPRETATION:
After decreasing in Year 2008 to 0.80, the debt to asset ratio of The Bank of
Khyber again rose to 0.85 in Year 2009. This means that in Year 2009, 85%
of The Bank of Khyber assets were financed from debt and the rest 15% were
financed from equity.
5.2 Profitability Ratios
Profitability ratios measure how the Banks returns compare to its sales,
asset, investments, and equity. Profitability ratios measure how much bank
revenue is eaten up by expenses, how much a bank earns relative to the sales
generated, and the amount earned relative to the value of the firms assets and
equity. Management is also interested in profitability ratios.
5.2.1 Net Profit Margin
The net profit margin is a measure of the banks profitability of sales
after taking account of all expenses and income taxes. It tells us a banks net
income per rupee of sales. It measures the percentage of net income in net
sales. This ratio shows the management of direct expenses as well as the
management of other expenses in the bank. If this ratio is high, it means that
the bank is managing all of its expenses effectively.
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Years 2007 2008 2009 2010 2011
Net
Profit
90032 351706 752470 328997 5416965
Net
Sales
176534 234471 376235 671422 2851034
NPM 0.51 1.52 2.02 0.49 1.90
INTERPRETATION:
The net profit margin of The Bank of Khyber 2011 FY is 197%, which is
higher than net profit margin in FY 2010. In FY 2011, each rupee of total
revenue generated only 197 paisas of net profit. Net profit margin increased in
Year 2011.
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5.2.2 Asset Turnover Ratio
This ratio indicates the ability of a bank to use assets to generate sales.
It shows how much sales each rupee invested in assets, generates. If this ratio
is high, it means that the bank is using its assets effectively. If this ratio is low,
it means that there is something wrong in asset management.
Years 2007 2008 2009 2010 2011
Net Sales 176534 234471 376235 671422 2851034
Avg Total
Asset 271591 173682 124355 388105 507301
Asset
Turnover
Ratio0.65 1.34 3.02 1.73 5.62
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INTERPRETATION:
The Bank of Khyber asset efficiency ratio is showing a mixed/unstable
trend, which means that with the passage of time; The Bank of Khyber is not
managing its assets effectively. In Year 2007, asset efficiency ratio is 6.4,
meaning that The Bank of Khyber generated 64 paisas of revenue from each
rupee invested in its assets whereas in year 2011 it is 5.62.
5.2.3 Return on Investment
The return on assets ratio indicates how much income each rupee of
assets produces on average. It shows whether the business is investing in its
assets effectively. Objective of investment is to earn money. By using this
ratio, the firm wants to calculate the net effect of its investment.
Years 2007 2008 2009 2010 2011
Net Profit 236284 15631 12435 3881 5073
Avg Total
Asset
271591 173682 124355 388105 507301
Return on
Investment 0.87 0.09 0.10 0.01 0.01
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INTERPRETATION:
It is observable from the table and the graph that The Bank of Khyber
ROI is highest in the Year 2007. Each rupee of assets is producing on average
87 paisas of income. By using this ratio, the Bank wants to calculate the net
effect of its investment.
5.2.4 Return on Equity
For publicly traded companies, the relationship of earnings to equity or
return on equity is of prime importance since management must provide a
return for the money invested by shareholders. Return on Equity (ROE) is a
measure of how well management has used the capital invested by
shareholders. Return on Equity tells us the percentage return for each rupee
invested by shareholders. A high return on equity often reflects the firms
acceptance of strong investment opportunities and effective expense
management.
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Years 2007 2008 2009 2010 2011
Net Profit 90032 351706 752470 328997 541696
Avg Share
Holder
Equity
750266 8792650 12541167 2990882 10833920
Return on
Equity 0.12 0.04 0.06 0.11 0.05
INTERPRETATION
This is clear from the table and the graph that in Year 2007, the shareholders
of The Bank of Khyber got 12% return on the funds invested by them, which
again is the highest amongst the five years data reported.
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5.2.5 COMMON SIZE ANALYSIS OF BALANCE SHEET
ASSETS 2007 2008 2009 2010 2011
Cash and balances with treasury banks
5.78 4.510 4.107 3.107 10.00
Balances with other banks
13.710 12.54 10.73 6.110 2.105
Lending to financial institutions
10.16 10.61 8.13 4.66 5.04
Investments 31.47 210.106 2.86 46.18 310.08Advances
33.88 33.104 40.34 30.50 35.100
Other assets
0.52 8.310 6.13 4.610 3.102
Operating fixed assets
0.35 0.71 5.107 2.61 2.20
Deferred tax assets
5.01 0.21 1.26 1.17 0.08
Liabilities
Bills payable
0.55 1.17 0.310 0.31 0.55
Borrowing from financial institutions
15.810 4.44 2.100 13.26 5.610
Deposits and other accounts
70.10 72.56 78.101 67.72 72.80
Other liabilities
2.31 2.63 2.84 3.05 2.43
Deferred tax liabilities
_ _ _ 3.05 _
Share capital
Reserves2.16 4.43 4.58 1.12 1.07
Inappropriate profit
0.02 0.74 0.76 _ _
Surplus on revaluation of securities
(net of tax)
1.210 1.03 3.18 12.88 1.12
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Chapter-6 The Analysis of Organization
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CHAPTER NO. 6
THE ANALYSIS OF ORGANIZATION
6.1 THE ANALYSIS
The analysis plays an important role in evaluating an organizations
performance. In data analysis we will elaborate on the various statistical tests
and the interpretation of the results of the analysis.
To analyze the data we have following objectives.
Getting a feel for the data i.e. The feel for the data will givepreliminary ideas of how good scales are, how will the coding and entering of
data have been done.
Testing the goodness of data i.e. the objective is testing the goodness ofdata, can be accomplished by submitting the data for factor analysis, obtaining
the split half reliability of the measures and so on.
Testing the hypothesis developed for the research i.e. hypothesistesting, are achieved by choosing the appropriate menus of the software
programs to test each of the hypotheses using the relevant statistical test. The
results of these tests will determine whether or not the hypothesis
substantiated.
Analysis is an important section of any report, so for this purpose
different techniques and procedures have to be followed for analysis. The
analysis of the report constitutes different areas, which are given below.
6.2 ADMINISTRATIVE ANALYSIS
6.2.1 CENTRALIZATION
BOK has a centralized structure. There is no delegation of authority to
the lower management / staff. In order to improve the performance of the staff
and to build their confidence, some authority must be delegated to the lower
management.
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6.2.2 NEGLIGENCE OF RULES AND REGULATIONS
It has been noted that the Banks officers usually neglect the rules and
regulations either intentionally or unintentionally; because these have not been
properly communicated to them. Their prompt communication must be
ensured and the employees must be informed about the penalties in case of
negligence.
6.2.3 IMPROPER DISTRIBUTION OF DUTIES
In BOK there is improper distribution of duties and responsibilities. It
is being observed that sometimes an officer of the same grade might have less
or more responsibility than another officer of his grade.
6.2.4 PRODUCT RATES
When BOKs product rates are compared with the competitors, one can
notice that they either have the same or lower rates. So in order to attract the
customers, BOK must offer rates above the market to have a better market
share.
6.2.5 POOR JOB ROTATION
Branch officers are not properly rotated. It is noted that an experiencebanker from Accounts section doesnt know about the work of remittance
department. So they must be rotated in all the departments of the banking in
order to get familiar with the working of different departments and to have a
know- how of the whole system.
6.2.6 SLOW CAREER GROWTH
Promotion is one of the motivational tools; promotion policy of Bank
of Khyber is very slow. The opportunities for upward advancement are very
few.
6.2.7 WORKING SETUP
It is observed that there are some deficiencies in the branch setup,
which creates extra disturbance, and excessive movement, which in turn affect
the efficiency of employees and thus that of the whole organization also.
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6.2.8 LACK OF SPECIALIZED TRAINING
In BOK training is provided on the basis of generalization rather than
specialization. After completion of training a person is inducted into a specific
field. Due to lack of knowledge he faces difficulty to perform the assigned job.
6.2.9 SEPARATION OF ACTIVITIES
There is no separation of activities e.g. clearing of cheques. This is
partially done in cash department and partially in accounts. This creates
confusion and conflicts. In order to avoid mishaps, there should be complete
separation of activities.
6.2.10 SPACE SHORTAGE
It is observed that branches suffer from space shortage. The seating
arrangement is not sufficient as compared to the number of employees and
customers.
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Chapter-7 SWOT Analysis
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CHAPTER NO. 7
THE SWOT ANALYSIS
The SWOT stands for Strengths, Weaknesses, Opportunities and
Threats. It is a useful tool for assessing and analyzing an organizations overall
situation. This approach attempts to balance the internal strengths and
weaknesses of an organization with the opportunities and threats that the
external environment presents.
7.1 STRENGTHS
Strengths refer to the positive aspects of the bank. Due to these points,
the bank is having competitive advantage over competitors. These points
contribute to the growth and profitability of Bank of Khyber.
i. In a short time, the bank has entered the line of largest operating bank in thecountry.
ii. Rapid spreading of branches all over Pakistan.iii. Having large international correspondent Network.iv. The bank operates under experienced and high-class management.v. Offers handsome salary and allowances to keep its employees satisfied/
motivated.
vi. To enhance deposits, offers attractive mark-up rates.vii. Offers a range of products to its customers to increase its marketability in
order to broaden its customers base and improve profitability.
viii. Offers ATM, Western Union and online banking facilities to its customers inmajor cities of the country.
ix. Having a credit division responsible for efficient and effective identification,control and management of credit risk, through sound and prudent lending
policies.
x. Bank of Khyber has its own Web page by www.BOK.com.pk thus offeringInternet banking facilities to its valued customers.
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7.2 WEAKNESSES
Weakness in any organization doesnt mean that the organization lacks
administrative and operational functioning. It simply indicates the loopholes in
an organization. These weaknesses must be identified in order to overcome
them in the future. Some of such weak spots are uncovered and are listed
below.
i. No specific advertising campaigns planned and executed for buildinginstitutional good will or promoting its products.
ii. Still the product offered are in a narrow range, alternatives are easily found.iii. High mark-up rates, thus discouraging the middle class borrowers.iv. Insufficient motivational programs for employees in the organization exist.v. A number of branches are equipped with latest technology, but some of the
branches still lack the facilities.
vi. No clear feed back system for employees.vii. Promotion for products is limited to big cities.viii. No service of utility bills collectionix. ATM service (not in all branches).
7.3 OPPORTUNITIES
Opportunities are the external circumstances, events, or situations that
offer and organization the chance to achieve its objectives.
i. New style of management.ii. Introduction of new products and services.iii. Introduction of new technology.iv. New deposits schemes.v. The possibility of extending banking hours.vi. The possibility of hiring fresh graduates with appropriate skills.vii. Offering of tele-banking services to the customers through local telephone
exchanges.
viii. The bank can extend more loans to the agriculture sector.ix. Bank should take interest in the new market segments like I.T business etc.x. If new schemes are introduced for the overseas Pakistanis, they can get the
business of remittances more than any other bank or hundi business.
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7.4THREATS
These indicate the pinch points, the edges after which the
production and profitability margin of any organization hampers. These are the
obstacles in the external environment. Similar obstacles are found against the
banking practice of Bank of Khyber.
i. Increase in growth of other private & foreign banks in the country i.e. BankAlfalah.
ii. Uncertainty in economy, a drawback for investors.iii. Political influence and their vested interest.iv. Due to inflation, reduction in saving accounts.v. High rate of turnover due to employees leaving for foreign services.vi. Rapid downsizing, reducing people confidence in private banks.vii. Rapid rate of global technology and slow pace of acquiring them.viii. Expensive modern technology.ix. Unstable political conditions.x. Comparatively less mark up rates on loans.
For the SWOT analysis we can conclude that the management of the
bank should adopt systematic planning for the bank growth, talking with the
all management levels of the bank to discover new segments of the customers,
offering new schemes for its customers. Similarly Bank of Khyber can have
more customers as compared to the other banks, if they give proper attention
to every customer & their needs, then it will become one of the leading &
comprehensive banks of the country.
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Chapter-8 Findings and Recommendations
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CHAPTER NO. 8
FINDINGS AND RECOMMENDATIONS
Presently in the Bank of Khyber, a centralized system of decision
making is prevailing. President and Executive Committee take most of the
decisions without taking the middle and lower management into confidence.
Sometimes the implementers do not feel easy with these decisions. The lower
staff intensively fe