Internship Report on

State Bank of Pakistan

Banking Services Corporation, Lahore

Submitted By
Tahmina Saleem
M12BBA003
BBA (B&F)
Session 2012-2016

Hailey College of Banking

and Finance
University Of Punjab
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 Dedication

I am dedicating my Report to my parents especially to

my mother who love me a lot and always pray for me.

2
 Acknowledgment

All the appreciation is for Almighty Allah the most merciful, gracious and
beneficent who is entire source of all the knowledge and wisdom to mankind. All
the thanks to the name of Almighty Allah, who helped us in setting goals and
objectives and blessed us to reach the destination. Without His assistance none is
capable of accomplishment.
I would be doing injustice without mentioning the name of the person who
helped us throughout the report and made us understand the major concepts of my
Project so my special thanks goes to
Mr. Saad
Heartiest gratitude and compliments to my Parents, without their continuous
love and encouragement I could not complete this task.

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 Table of Contents
Part 1
1 Bank..................................................................................................................... 9
2 Central Bank........................................................................................................ 9
2.1 Objectives of central bank...........................................................................10
3 State Bank of Pakistan (SBP).............................................................................. 11
3.1 Introduction................................................................................................. 12
3.2 History......................................................................................................... 12
3.3 Core values of State Bank of Pakistan..........................................................15
3.4 Vision Statement.......................................................................................... 16
3.5 Mission Statement....................................................................................... 16
3.6 Subsidiaries................................................................................................. 17
3.6.1 State Bank of Pakistan Banking services corporation SBP-BSC..............17
3.6.2 National institute of Banking and Finance (NIBAF).................................17
3.7 Departments of State Bank of Pakistan.......................................................19
A Quick overview of the departments of SBP.....................................................20
3.7.1 Agricultural Credit & Microfinance Department.....................................20
3.7.2 Banking Inspection Department - II.......................................................20
3.7.3 Banking Inspection Department - I........................................................21
3.7.4 Banking Policy & Regulations Department.............................................21
3.7.5 Banking Surveillance Department.........................................................21
3.7.6 Banking Conduct and Consumer Protection Department (CPD).............22
3.7.7 Domestic Market & Monetary Management Department (DMMD).........22
3.7.8 Exchange Policy Department (EPD).......................................................22
3.7.9 Economic Policy Review Department.....................................................22
3.7.10 External Relations Department..............................................................23
3.7.11 Finance Department..............................................................................23
3.7.12 Legal Service Department.....................................................................23
3.7.13 Human Resource Department...............................................................23
3.7.14 Information System & Technology Department.....................................23
3.7.15 Infrastructure, Housing & SME Finance Department..............................24
3.7.16 Internal Audit & Compliance Department..............................................24
3.7.17 International Markets & Investments Department.................................24
3.7.18 Islamic Banking Department.................................................................24

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 3.7.19 Monetary Policy Department.................................................................25
3.7.20 Office of the Corporate Secretary..........................................................25
3.7.21 Off-site Supervision & Enforcement Department...................................25
3.7.22 Payment Systems Department..............................................................25
3.7.23 Research Department............................................................................26
3.7.24 Risk Management Department..............................................................26
3.7.25 Statistics and Data Warehouse Department..........................................26
3.7.26 Strategic Planning Department.............................................................26
3.7.27 Treasury Operations Department...........................................................27
3.8 Functions of State Bank of Pakistan.............................................................28
3.9 Management................................................................................................ 29
3.9.1 Governor................................................................................................ 29
3.9.2 Deputy Governor................................................................................... 30
3.9.3 Board of Directors.................................................................................. 31
3.9.4 Organogram of State Bank of Pakistan..................................................32
4 State Bank of Pakistan Banking Services Corporation SBP-BSC..........................33
4.1 Introduction................................................................................................. 34
4.2 Objectives.................................................................................................... 34
4.3 Key Functional & Operational Areas of SBP -BSC.........................................35
4.4 Vision Statement.......................................................................................... 36
4.5 Mission Statement....................................................................................... 36
4.6 Field Offices of State Bank of Pakistan Banking Services Corporation.........37
4.6.1 Banking Services provided by Field Office.............................................38
4.7 Currency Issue Circle Offices........................................................................39
4.8 Departments of State Bank of Pakistan Banking Services Corporation SBP-
BSC 40
4.8.1 Accounts Department............................................................................41
4.8.2 Currency Management Department......................................................41
4.8.3 Internal Audit Department.....................................................................41
4.8.4 Engineering Department.......................................................................41
4.8.5 Foreign Exchange Operations Department............................................42
4.8.6 Foreign Exchange Adjudication Department..........................................42
4.8.7 Internal Bank Security Department (IBSD)............................................42
4.8.8 General Service Department.................................................................42
4.8.9 Human Resource Management Department..........................................43

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 4.8.10 Development Finance Support Department...........................................43
4.8.11 Strategic & Corporate Affairs Department.............................................43
4.9 Management................................................................................................ 44
4.9.1 Board of Directors.................................................................................. 44
4.9.2 Committees of the Board of SBP_BSC....................................................44
4.9.3 Managing Director.................................................................................44
4.9.4 Organogram of State Bank of Pakistan Banking Services Corporation. 45
5 State Bank of Pakistan Banking Services Corporation SBP-BSC, Lahore.............46
5.1 Introduction................................................................................................. 47
5.2 Functions and Responsibilities.....................................................................47
5.3 An Issue Office............................................................................................. 47
5.4 Role in Credit Disbursement........................................................................47
5.5 Organization Structure.................................................................................48
5.5.1 Group Management Team (GMT)...........................................................48
5.5.2 Divisional Management Team (DMT).....................................................48
5.5.3 Unit Management Team (UMT)..............................................................48
5.6 Architecture at SBP-BSC Lahore...................................................................49
5.7 Organogram of SBP-BSC, Lahore..................................................................50
5.8 Division of State Bank of Pakistan, Banking Services Corporation, Lahore. .51
5.8.1 Prize Bound Division..............................................................................51
5.8.2 Securities Division.................................................................................54
5.8.3 Engineering Division.............................................................................. 55
5.8.4 Administration Division..........................................................................56
5.8.5 Foreign Exchange Adjudication Division (FEAD)....................................58
5.8.6 Internal Monitoring Division (IMU).........................................................58
5.8.7 Foreign Exchange Operation Division (FEOD)........................................59
5.8.8 Development Finance Division...............................................................60
5.8.9 Issue & Treasury (Cash) Division............................................................61
5.8.10 Baking Division...................................................................................... 63
6 HR Policies of State Bank Pakistan, Banking Services Corporation, Lahore........67
6.1 Leaves.......................................................................................................... 68
6.1.1 Normal Leave......................................................................................... 68
6.1.2 Extra Ordinary Leave/ Leave without salary EOL/LWS...........................69
6.1.3 Study leave............................................................................................ 69
6.1.4 Rest & Recreational leave (R & R)..........................................................69

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 6.1.5 Maternity leave...................................................................................... 69
6.1.6 Short Leave........................................................................................... 69
6.1.7 PCL (Permission for coming late)...........................................................69
6.2 Recruitment................................................................................................. 70
6.3 Salary/ Bounces/Compensation...................................................................70
6.3.1 General Provident fund..........................................................................71
6.4 Allowances................................................................................................... 71
6.5 After Retirement Benefits.............................................................................71
6.5.1 Regular Retirement Benefits..................................................................71
6.5.2 Benevolent Fund.................................................................................... 72
6.5.3 Early Retirement.................................................................................... 72
6.6 Loan Policy................................................................................................... 73
6.7 Training........................................................................................................ 74
6.7.1 In-House training................................................................................... 74
6.7.2 External training.................................................................................... 74
6.7.3 NIBAF training........................................................................................ 74
6.8 Rotation....................................................................................................... 74
6.9 Promotion..................................................................................................... 74
7 Analysis of SBP_BSC........................................................................................... 76
7.1 Stakeholders Analysis.................................................................................. 77
7.2 SWOT Analysis............................................................................................. 79
7.3 Financial Analysis......................................................................................... 81
8 Product/Services of State Bank Pakistan, Banking Services Corporation............85
9 Assignments Done At Bank................................................................................86
9.1 Project.......................................................................................................... 87
9.1.1 Modes/forms Of Receipt of Income Tax..................................................87
9.1.2 Observations & Identify Problems..........................................................95
9.1.3 RECOMMENDATIONS..............................................................................96
9.1.4 Conclusion............................................................................................. 97
9.2 Interaction with officers came from Head Office..........................................98
9.3 Prize Bound Draw......................................................................................... 99
9.4 Visit of Pakistan Mint..................................................................................101
9.5 Problem I observed at bank.......................................................................104
9.6 Recommendations..................................................................................... 104
9.7 Feedback.................................................................................................... 104

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 9.8 References................................................................................................. 105

Part 1
1 Bank
Bank is a financial institution that is allowed or licensed to deal
with money and its substitute by accepting time and demand liabilities or otherwise and
advancing loan from these deposits or investment in securities.

According to the banking companies ordinance 1962

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Banking means the accepting for the purpose of lending or investing of deposit of
money from the public repayable in demand or otherwise and withdraw able by cheque,
draft or otherwise.

2 Central Bank
About the central bank Will Rogers has said that

There have been 3 great innovation since the beginning of time

Fire, Wheel, and Central Bank.

Central bank is a bank or institution whose customers are commercial banks and the
state. In the beginning there was no concept of the bank. The origin of the bank can be
traced back before the Christ. As Dr. Crowther writes in his famous An outline of Money
sad that the present day banker have three ancestors namely

Merchants
Money lenders
Goldsmith

These ancestors issued receipts at their will which was used as medium of exchange
but it create confusion and disturbance. In order to manage all this it was decided that
there should be one bank who should have the authority of note issuing. This decision
gave birth the idea of central bank. The first bank was established in Geneva in 1578.

After the World War 1 there was great depression on the world economy and there was
fiscal defaults. So a conference was held in Brussels in 1920 and it was decided that
every country must set up its central bank to perform specialized function and to
exercise special rights and powers.

2.1 Objectives of central bank

The objectives of
central bank are

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 Accommodating
commercial bank

Ensuring economic
development

Working for government

Control of credit & money

supply

Supervision of banking
system

Working in public interest

Safeguarding financial
stability

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 3 State Bank of Pakistan (SBP)

3.1 Introduction
Central bank of any country is the bank of all banks, it supervise
the whole banking system, solely responsible for issuing of currency note , handle
government transactions and keep an eye on financial sector as a whole. The central
bank of Pakistan is State Bank of Pakistan. It was established and started its operation
on July 1, 1948 under the

State Bank of Pakistan order1948

Policy arm
Arms of
State Bank of 11
Pakistan Operational
arm
The State Bank of Pakistan has two arms or sided on is the policy side and other is the
operation side. The policies are made by the State Bank of Pakistan and the operation
are performed by the State Bank of Pakistan banking service corporation SBP-BSC.

The SBP form the basis of its operation under the State Bank of Pakistan Act 1956.
According to the State Bank of Pakistan Act 1956 SBP has twofold objectives

Issuance of currency notes

Advanced objectives of leading a country toward development and prosperity

The head office of State Bank of Pakistan is in Karachi and SBP has 16 field offices
across the country. The current governor of State Bank of Pakistan is Ashraf Mahmood
Wathra.

3.2 History
In 1947 after partition it was very difficult for Pakistan that without
resources to run its own banking system immediately. So a committee of experts was
appointed to study this issue in accordance with the provision of Indian independence
act 1947. The committee that the Reserve bank of India should continue to act as a
central bank of Pakistan till September 30, 1948. This arrangement was implemented
on August 14, 1947 under an order called
Monetary system and reserve bank order 1947

The important points of the order was that

Reserve bank of India continue to as central bank of Pakistan till September

30,1948
Indian currency notes will remain legal tender in Pakistan till September 30,1948
The Pakistan government issue its own notes and coins from October 1, 1948
The Reserve bank of India will transfer the Pakistans share of 75 crore cash
balance held by them at the time of partition till September 30, 1948. The ration
of the share was 30% for Pakistan and 70% for India

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But the Reserve bank of India did not perform its function honestly. It withheld
Pakistans share. In this situation the need for a central bank felt badly. Either it was
decided that the Reserve bank of India act as the central bank of Pakistan until
September 30,1948 contrast with all this recommendation the governor general of
Pakistan issued an order for the establishment of State Bank of Pakistan on May 12,
1947 called the

State Bank of Pakistan order 1948

State Bank of Pakistan was established and its started its operation on July 1, 1948.
The most important which the State Bank of Pakistan had to performed was

Issuances of currency notes

Withdrawal of reserve bank of India notes which had been in circulation in
Pakistan so far.

The first Pakistani note was issued in October 1, 1948 of the denomination of 5, 10,100.
As a central bank State Bank of Pakistan had an urgent task of creating a national
banking system. For attaining this goal State Bank of Pakistan provide help and
encouragement to the Habib bank for expanding its branches and SBP also recommend
government to establish a new bank which could serve as an agent of SBP. As a result
National bank of Pakistan came into being in 1949.

Under the State Bank of Pakistan order 1948 the main job of SBP was

"Regulate the issue of bank notes and keeping of reserves with a view to securing
monetary stability in Pakistan and generally to operate the currency and credit system
of the country to its advantage".
Later the State Bank of Pakistan Act 1956 was passed and according to that act SBP

Regulate the monetary and credit system of Pakistan and to foster its growth in the
best national interest with a view to securing monetary stability and fuller utilization of
the countrys productive resources".

State Bank of Pakistan had a paid up capital of Rs.3 crore divided into 3 laces fully paid
up share capital 51% was contributed by central government and 49% was subscribed
by the public. After nationalization in 1974 the federal government took the remaining
49% shares.

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During the February 1994 the SBP was given full autonomy. This autonomy was further
strengthen in 1997 when the government issued three Amendment Ordinances (which
were approved by the Parliament in May 1997). Those included were the State Bank of
Pakistan Act, 1956, Banking Companies Ordinance, 1962 and Banks Nationalization
Act, 1974. These changes gave full and exclusive authority to the State Bank to
regulate the banking sector, to conduct an independent monetary policy and to set limit
on government borrowings from the State Bank of Pakistan .

3.3 Core values of State Bank of Pakistan

The core
values of State Bank of Pakistan are

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 Trust

Team
Openess
work

Core
Value
s
Commitm
ent to
Courage excellenc
e

Problem
solving
approac
h

3.4 Vision Statement

The State Bank of Pakistan has said the
To transform the SBP into a modern and dynamic
following as vision statement
central bank, highly professional and efficient, fully
equipped to play a meaningful role on sustainable
basis in the economic and social development of
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Pakistan.
3.5 Mission Statement
The State Bank of Pakistan has said
following as mission statement

To promote monetary and financial stability and

foster a sound and dynamic financial system, so as
to achieve sustained and equitable economic growth
and prosperity.

3.6 Subsidiaries
The

State Bank of Pakistan

Banking services
corporation (SBP-BSC)
State Bank of
Pakistan National institute of
16
Banking and
Finance (NIBAF)
3.6.1 State Bank of Pakistan Banking services corporation SBP-BSC
This is the operational arm of State Bank of Pakistan. Before 2002 it was called the
State Bank of Pakistan and the Karachi head office was called Central Directorate.
Under the State Bank of Pakistan banking service corporation ordinance 2001 the field
offices started to called State Bank of Pakistan banking Service Corporation. Baking
service Corporation was established and it start its function on 2nd January 2002.

3.6.2 National institute of Banking and Finance (NIBAF)

NIBAF is the subsidiary of SBP. It is the non-profit organization whose aim is to provide
training to the central and commercial bankers at national and international level. The
main role of NIBAF is to train and develop the human resource of SBP, its subsidiaries
and commercial bank. In its training program the bankers from foreign country program
also participate from friendly country. NIBAF is headed by the chairman who is the
governor of the State Bank of Pakistan, Board of Director and by Managing Director.
NIBAF campus are at Karachi and Islamabad. Its head office is in Islamabad.

3.6.2.1 History

Under the Bank Nationalization Act 1974 SBP and schedule banks were nationalized.
Under the Bank Nationalization act the Pakistan Banking council (PBC) was created.
The functions of Pakistan Banking Council were or powers which were given to PBC
were

To inspect banks and issue instruction in the matter of

credit management and administration

The PBC was running a training at institution at Islamabad which was named as

National Institute of Banking and finance (limited by Guarantee)

It was set up on 8 March 1993 under Companies Ordinance 1984 with a paid up capital
of Rs.250 million. The equity of NIBAF was contributed by the Nationalized Commercial
Banks who have 97% of its shares and PBC held 3% of remaining shares on its name.
The Nationalized commercial banks which contributed in equity are

National bank of Pakistan

Habib bank limited

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 United bank limited
Muslim commercial bank
Allied bank limited
The bank of Punjab

When the PBC was dissolute the SBP took over the assets and liabilities of PBC and
SBP also showed interest in the purchase of assets of NIBAF. The president of
shareholding bank was agreed with this proposal and SBP purchase NIBAF and made
payment to the shareholding bank except the National bank of Pakistan to acquire the
control. The voluntary winding up take more than one year which exceed from the time
period which was given in companies ordinance for winding up. Later on the mindset of
SBP change and decided to make NIBAF as subsidiary.

3.6.2.2 Mission Statement of NIBAF

NIBAF has said the following as the mission statement

To train, develop and groom human resources of SBP, its subsidiaries and other
national, international banks and financial institutions

3.6.2.3 Core Functions

The core functions of NIBAF are

Design and develop training programs for SBP staff at every level
Ensure the implementation of SBP training business plan

Conduct international training programs

3.6.2.4 Courses offered by NIBAF

NIBAF offers three type of courses

International courses
Certificate courses
SBP courses

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In international courses it offers central banking courses and commercial banking
courses. In certificate courses it offers Islamic banking and micro-finance courses. The
courses which NIBAF offers to the employees of the SBP are on different topics like law
and practices of bank, book keeping, accounting economics etc.

3.7 Departments of State Bank of Pakistan

The departments of State Bank of
Pakistan are

Agricultural Credit & Microfinance Department

Banking Inspection Department - II
Banking Inspection Department - I
Banking Policy & Regulations Department
Banking Surveillance Department
Banking Conduct and Consumer Protection Department
Domestic Market & Monetary Management Department
Exchange Policy Department
Economic Policy Review Department
External Relations Department
Finance Department
Legal Services Department
Human Resource Department
Information Systems & Technology Department
Infrastructure, Housing & SME Finance Department
Internal Audit & Compliance Department
International Markets & Investments Department
Islamic Banking Department
Monetary Policy Department
Museum & Art Gallery Department
Office of the Corporate Secretary

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 Off-site Supervision & Enforcement Department
Payment Systems Department
Research Department
Risk Management Department
Statistics and Data Warehouse Department
Strategic Planning Department
Treasury Operations Department

A Quick overview of the departments of SBP

The brief overview of the departments is as follow

3.7.1 Agricultural Credit & Microfinance Department

The Department objective is to increase financial inclusion through development of
agricultural credit market, promotion of microfinance and branchless banking. The
Department is responsible for achieving its objectives through enabling regulatory
environment, developing market infrastructure, promoting financial inclusion through
branchless banking innovations and financial literacy. Two sectors which are handled at
the Department are critically important i.e. Agriculture sector and Microfinance sector.

3.7.2 Banking Inspection Department - II

This is the
important department of SBP. This department has the responsibility to supervise the
financial institutions for the purpose of maintaining soundness of the financial system
and to safeguard the interest of the depositors. Banking inspection department II
conduct regular onsite inspection of the affairs of the Schedule banks, foreign Banks,
Islamic Banks and DFI. It also inspect oversea branches. The inspection of bank focus
on risk assessment, compliance with laws, regulations & supervisory directives,
compliance with policies & procedures, adequacy of internal control, governance
framework and practices, and effective view of management. Banking inspection
departments II work in collaboration with other departments of SBP which include
Banking inspection department I, offsite supervision and enforcement department and
banking policy and regulation group for performing supervisory assessment. Onsite
inspection is conducted according to approved inspection schedule.

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3.7.3 Banking Inspection Department - I
This
department perform work with the collaboration of Banking Inspection Department II.

3.7.4 Banking Policy & Regulations Department

This department has the task to achieve the regulatory objective through incorporation
or required improvement in existing regulatory environment and if required or need
adapt the international best practices for our banking industry.

Basically its work is policy formulation and update the existing laws according to the
need or when required. This department is the regulatory arm of SBP. This department
has developed a set of prudential regulation for various sectors such as Corporate,
SME, Consumer finance in consultant with Pakistan Bank Association and other stake
holders. It also introduced Fit and Proper Test criteria for the appointment of Key
Executives in the banks.

3.7.5 Banking Surveillance Department

This
department is responsible to supervise financial institution in the country. It ensure that
effective adherence to regulatory and supervisory policies, monitor risk profile, and
evaluate operating performance of individual bank. It also ensure that banks have
adequate capital and have policies and system to access various risks. Credit
Information Bureau (CIB) also fall within the domain of this department. It provide
online collection & distribution of credit related information to the Financial Institutions.

3.7.6 Banking Conduct and Consumer Protection Department

(CPD)
Consumer protection department has been established to
effectively deal with public complaints against Banks/DFI/MFB in quick, fair and
transparent manner. This department has the responsibility to prepare consumer
protection policies and guidelines. This department also ensure that banks are
managing its affairs in an effective manner regarding the collection of utility bills and
disbursement of pension through branches. This department provide assistant to the
banks and Financial Institution in the process of credit risk management through
providing online access to Electronic credit information bureau database. The
department has goal of promoting social responsibility in banks, DFI and MCB for
amicably resolving disputes.

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3.7.7 Domestic Market & Monetary Management Department
(DMMD)
The primary goal of the department is to implement the
monetary policy of SBP in both money and foreign exchange market by using tools
which are available. The objective of the department are to monitor the activities of
foreign exchange market and money market. It conduct auction for raising short term
and long term domestic debt for the government. It also monitor the activities of banks
treasury to ensure that it complies with the regulation of SBP. It analyze and report
foreign exchange reserves.

3.7.8 Exchange Policy Department (EPD)

It is the one
of the most important department of the SBP. It is the responsible for overall stability of
foreign exchange market. The rules and regulation which facilitate the foreign exchange
activities are also reviewed by economic policy department. EPD lays down policy in
consultation with relevant government department, trade bodies and stakeholders.

3.7.9 Economic Policy Review Department

This department came into being on 22 nd February 2011 by the merger of Economic
analysis department and Economic policy research department. The evaluation of the
different sector of the economy is the responsibility of this department. The Economic
analysis which is done by this department is dispersed through the Annual and Quarter
reports and this analysis provide input for discussion in monetary policy. The
department has a key function of publication of Annual and Quarter reports. These
reports provide a better understanding of the interaction between monetary policy and
macroeconomic policy and their impact on overall economic growth.

3.7.10 External Relations Department

In SBP
policymaking communication plays a vital role. This department has given the
responsibility to implement a modern, comprehensive and effective communication
strategy. This department provide reliable data to the stakeholder. This department also
communicate about the bank policies, regulation and about the future strategies. This
communication is also conveyed by issuing press account in both English and Urdu.
This department holds press conferences and also maintain banks website. For
accessing public reaction on policy ERD on daily basis monitor information printed in
newspaper and timely respond any query. This department is also responsible for

22
arranging the publication of advertisement of banks departments, SBP-BSC and NIBAF
in local and foreign print media.

3.7.11 Finance Department

The books of accounts of SBP
remain in the custody of finance department. This department is responsible for overall
management and supervision of accounting activities of bank, currency management
and prepare the consolidated budget of SBP and monitor it at ongoing basis. The bank
use Globus system for undertaking and recording of core banking function.

3.7.12 Legal Service Department

This department
has the responsibility of providing legal support to different departments of SBP and its
subsidiaries.

3.7.13 Human Resource Department

This
department have 5 division and work under three tiers model. The first tier coordinate
directly with other departments to understand their needs problems and address them
properly. The middle tier have two solution centers and these are responsible for all HR
areas like recruitment, promotion, training and others. Third tier which is called
knowledge & information management and center of excellence. It is responsible for
develop and interpretation of HR policies.

3.7.14 Information System & Technology Department

The aim of this department is technology advancement in SBP, find out solution that
reduce operating cost and improve the performance of end users. ISTD not only
improve and strengthen the SBPs technology portfolio but also focus on safeguarding
the information assets of SBP through different securities plan and policies.

3.7.15 Infrastructure, Housing & SME Finance Department

SME
finance department was established in July 2008. The purpose of this department is to
provide a regulatory frame work for SMEs to access their credit needs, awareness to
the banks through seminars/conferences. Recently infrastructure and Housing finance
department was merged with SME finance department and it renamed as Infrastructure,
Housing & SME Finance Department.

23
3.7.16 Internal Audit & Compliance Department
This department
examine and evaluates the SBP risk management framework of SBP, examine its
control to ensure that it is functioning properly. This department give recommendation to
the senior management for the improvement of internal control and risk management.
NIBAF audit is also conducted by this department.

3.7.17 International Markets & Investments Department

Internationa
l Markets and Investments Department (IMID) was established in September 2006.
IMID consolidated the reserve management activities of SBP in a single Department.
The Department is divided into three divisions to achieve its goals.

FX & Liquidity Management Division

Performance, Relationship & Product Review Division

Fixed Income Investment Division

3.7.18 Islamic Banking Department

Islamic Banking means banking
according to the ethos and value system of Islam and governed under the principles,
laid down by Islamic Shariah. The Islamic Banking department has been working hard
to develop a progressive, sound, and stable Shariah-complaint banking system.

3.7.19 Monetary Policy Department

Monetary Policy Department (MPD) is one of the core departments of the State Bank of
Pakistan. This department is responsible for providing information for the formulation,
implementation, and dissemination of monetary policy of the SBP.

3.7.20 Office of the Corporate Secretary

Organization of meetings of the SBP Board and ensures effective implementation of the
Boards decisions is the responsibility of Office of the Corporate Secretary. The
Corporate Secretary is responsible for ensuring that the relevant information is available
to the Board members, in order to facilitate the informed decision-making. The Office
interfaces with the Federal Government on the matters related to Governor/Deputy
Governors and Directors of the Board.

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3.7.21 Off-site Supervision & Enforcement Department
Off-Site
Supervision & Enforcement Department is responsible for off-site supervision of the
financial institutions. The department also ensures effective enforcement of regulatory
and supervisory policies, monitors risk profiles, evaluates operating performance of
individual banks/DFIs and takes necessary enforcement actions against institutions for
their non-compliance. The Non-compliance is identified by, the inspection teams during
their onsite examination and by the supervisors of this department based on submitted
returns, interaction with financial institutions and market information. Enforcement
actions are taken for various violations identified by examiners during their onsite
examination. The enforcement actions include imposition of penalties and continuous
follow-up for compliance by the concerned institutions.

3.7.22 Payment Systems Department

Payment System Department was
formed in 2002. The objective of this department is to bring efficiency and mitigate
risks in Payment Systems through regulation and framework. Payment Systems
consist of inter-bank, clearing and settlement systems and payment systems
instruments. PSD also regulates and oversee the clearing functions conducted
through ATM, Internet and Mobile Phone.

3.7.23 Research Department

Research Department carry out research on
economic issues affecting Pakistan in current regional and global environment. This
department services the SBP Board of Directors, senior management, and other
departments of the Bank. Research Department publishes high quality research in
economics and finance in the form of short notes, working papers, and journal articles.
This activity promotes healthy public debate with academics, journalists, and other
stakeholders. The department also contributes directly and indirectly to various
publications including the annual and quarterly reports on the state of Pakistan
economy. Management of SBP Working Paper Series and the Research Bulletin is the
responsibility of Research Department.

3.7.24 Risk Management Department

Risk Management Department
(RMD) has the responsibility to effectively deal with various types of risks in order to
achieve organizational objectives. RMD is responsible for safeguarding SBP foreign
exchange reserve management activities and performing organization wide IT security

25
function. RMD formulates and implements risk management policies and procedures for
the assessment, monitoring of market, credit, operational, and others risks. The
department aims to closely coordinate and provide required expertise to all other banks
departments and its subsidiaries on risk related matters.

3.7.25 Statistics and Data Warehouse Department

Statistics and
Data Warehouse Department is responsible for collection, compilation and
dissemination of statistics on economic, financial and monetary aspects. It collects and
compiles data on money and banking, international trade, monetary accounts, balance
of payments, international investment position, exchange rates, foreign exchange
reserves, foreign investment, private external debt, flow of funds, inflation etc. These
information are disseminated through SBP website and also in form of publications. The
department regularly brings out two monthly, two quarterly, bi-annual publications. The
department plays a key role in providing statistics to the government, policymakers,
academia and other stakeholders for research, policy formulation and decision making.

3.7.26 Strategic Planning Department

Strategic Planning Department (SPD) established in 2014 is responsible to facilitate,
monitor, and implementation of the Strategic Plan of the Bank. The department is a
main point for managing strategic and business planning activities at State Bank of
Pakistan.

3.7.27 Treasury Operations Department

Treasury Operations
Department (TOD) was established in 2006.The objective of this department is to
consolidate the treasury related activities and foreign currency transactions handled
by different SBP departments for ensuring efficiency. TOD help in handling of foreign
exchange reserve. TOD performs Nostro Accounts Administration and Cash
Management Operations. TOD handles IMF Communications to SBP relevant
departments. TOP provides SWIFT support for SBP departments in transmission of
outward messages to Nostros and dispatch of incoming messages to concerned
SBP departments / SBP BSC Offices.

26
3.8 Functions of State Bank of Pakistan
The functions of State
Bank of Pakistan is broadly divided into two categories

27
 Functions of
SBP

Developme
Traditional
nt
Functions
Functions

Provision of
Primary Secondary training
Function Function facilities to
bankers
Maintaining close
relationships Institutionalizat
Banker to
with ion of savings
Government
international and investment
financial
institutions.
Lender of Development of
the last Advising the financial
resort government on framework
policy matters

Provision of
Bankers
credit to
bank Management of priority sectors.
foreign exchange
Regulation
and
supervision
of the Management of
financial public debt
system

Issuness of
notes

Conduct of
monetary
policy
3.9 Management
The management of State Bank of Pakistan consist of the Board of
directors. The State Bank of Pakistan board of directors include Governor who is the

28
chairman of the board, Sectary, Finance Division, Government of Pakistan and
Directors. There should be at least one director from each province, who should be well
known professional from the field of Economics, finance, Banking. The Governor,
Deputy Governor and Board of Directors are appointed by the Government for a period
of 3 years.

3.9.1 Governor
According to the State Bank of Pakistan Act 1956 the
governor shall be appointed for a period not exceeding 5 years and it will be eligible for
reappointment as governor. But the amendment which was made in 1993 according to
that a governor will be appoint for a non-renewable period of 5 years.

Again in 1994 amendment was made according to that amendment a governor shall be
appointed by the federal government for a period of 3 years and governor will be
eligible for reappointment of another term of 3 years.

3.9.1.1 Governor Profile

The current governor of State Bank of Pakistan is Mr. Ashraf

Mahmood Wathra. He has been appointed as governor with
effect from April 29, 2014 for a period of 3 years. Mr. Wathra
acted as Deputy Governor of SBP and later on acting
Governor of SBP. Mr. Wathra has experience of 35 years of
Commercial and Investment banking. Prior to join SBP he
worked at National bank of Pakistan, Habib bank limited and
Faysal bank limited. Mr. Wathra has the Master degree in
Business Administration. Mr. Wathra has attended a number
of seminars, conferences and courses at home and in abroad. Mr. Wathra have an
extensive experience of restricting and reorganization of business unit, investment and
commercial banking experience, trade Finance product, experience of marketing, audit
and risk review and credit and risk management.

3.9.2 Deputy Governor

Currently there are 2 deputy governors of
SBP, Mr. Riaz Riazuddin, and Mr. Saeed Ahmad

29
3.9.2.1 Profile of Deputy Governors

Mr. Riaz Riazuddin

He was appointed as deputy governor of SBP by the Federal

Government for a period of 3 years with effect from March 30,
2015. Mr. Riazuddin was a member of Advisory committee on
monetary policy and had been the member of board of directors
of NIBAF. He has a 20 years experience of central Banking. He
had a degree from Karachi and Bosten University in Statistics
and Economics.

Mr. Saeed Ahmad

He has been serving as the deputy Governor of the SBP since

January 21, 2014. He is leading Islamic Banking, Financial
Market, Operational and Special initiative Group at SB. He is
heading the Investment committee of the Central bank which is
responsible for Reserve management. He has degree in
Economics from London School of Economics. He also attended
senior management program of Harvard Business School at
Boston, USA.

30
3.9.3 Board of Directors

31
 The current board of directors of State Bank of Pakistan
consist of the following members.
Dr. Waqar Masood
Khan
Secretary, Finance
Chairman Mr. Ashraf
Division,
Mahmood Wathra
Government of
Governor
Pakistan
Appointed on April 16,
2013
Dr. Tariq Hassan
Appointed on March
22, 2016 Sahar Z. Babar
Present term ends on Corporate Secretary
March 21, 2019

Mr. Sarmad Amin Mr. Mohammad Riaz

Appointed on March Appointed on March
22, 2016 22, 2016
Present term ends on Present term ends on
March 21, 2019 March 21, 2019

Mr. Ardeshir Khursheed

Mr. Zafar Masud
Marker
Appointed on March 22,
Appointed on March 22,
2016
2016
Present term ends on
Present term ends on
March 21, 2019
March 21, 2019

Khawaja Iqbal Hassan Mr. Zubyr Soomro

Appointed on March 22, Appointed on March 22,
2016 2016
Present term ends on Present term ends on
March 21, 2019 March 21, 2019

Hafiz Mohammad Yousaf

Appointed on March 22,
2016
Present term ends on
March 21, 2019

32
 3.9.4 Organogram of State Bank of Pakistan

Library

IT Strategy & project Management

Executive Director
(BSG)

Information System

Information Technology
Governor

Banking conduct
Banking&Consumer
Inspection-IIProtection
Executive Director
(Operation)

Off-sit supervision & Enforcement

Banking Inspection-I
Deputy Governor
Executive Director (Financial market,
(DFG) Islamic banking &
Financial Stability special initiatives)

Corporate
Management

33
Infrastructure Housing & SME Finance
Agriculture credit & Microfinance

Financial Institution
Islamic Banking

4 State Bank of Pakistan Banking Services Corporation

SBP-BSC

Executive Director
(BPRG)

4.1 Introduction
Exchange Policy
State Bank of Pakistan Banking Services Corporation
Banking policy & Regulation
SBP-BSC was established as a wholly owned subsidiary of State Bank of Pakistan and
started functions on January 2, 2002 under the Banking Services Corporation

34
 (FM&RM)

Ordinance 2001. State Bank of Pakistan Banking Services Corporation SBP-BSC is an

operational arm of State Bank of Pakistan.

The Rationale of State Bank of Pakistan Banking Services Corporation SBP-BSC

The rationale behind the establishment of Corporation was to provide general Banking
services to the stakeholders of SBP, so that the SBP would be able to concentrate more
onDomestic
its core Market
functions i.e. Formulation and monitoring of Monetary & credit policy,
& Monetary Management
regulation and supervision of Financial Sector, Foreign exchange regime and exchange
International Markets & Investments
rate policy etc. There was a need to segregate the operation activities of SBP from its
policy making activities. So, it was decided that the operational activities and the
businesses which do not fall within the preview of a Central bank would be transferred
to an organization which work as a subsidiary of SBP. As a result of that SBP-BSC was
established.
4.2 Objectives
Following are the objectives of BSC and these also describe the purpose
of its establishment

Currency Management:
Currency management involves handle the receipt,
supply and exchange of bank notes and coins which are the legal tender.

Management of Prize bound and other National Saving Scheme of the

government:
Issue, supply, sale, encashment and handling of prize bound draws
thereof and other saving instrument of Federal Government or provisional
Government.

Operational functions and activities delegated from SBP:

Revenue collection and payment on the behalf of Federal Government
Provincial Government or Local Government
Maintenance of the accounts of the Federal Government, Provincial
Government, local Government, Commercial banks and Financial
Institution
Operation work related to the management of debt
Operational work related to Foreign exchange

35
4.3 Key Functional & Operational Areas of SBP -BSC
The operational and key functional areas of SBP-BSC are

Banking
Services to
the
Governme
nt

Payment
Currency
and
Manageme
Settlement
nt
Key Systems
Functional
&
Operationa
l Areas

Foreign
Exchange
Export
Operations
Finance
and
Scheme
Adjudicatio
n

4.4 Vision Statement

The State bank of Pakistan Banking Services
Corporation has said the following as Vision Statement

36
 To develop SBP-BSC into a dynamic and efficient
organization equipped with requisite technology and
human resource capable of extending sustainable
support to state bank of Pakistan in achieving its
objectives

4.5 Mission Statement

The State bank of Pakistan Banking Services
Corporation has said the following as mission Statement

To provide excellent banking and financial service to

stakeholders beside ensuing implementation of SBP
policies in order to command their trust and
respect.

4.6 Field Offices of State Bank of Pakistan Banking Services

Corporation
There are 16 Field Offices of State Bank of Pakistan
Banking Services Corporation and these field offices are broadly structured into three
regions Southern Region which cover 5 Field Offices (Karachi North Nazimabad,
Hyderabad, Sukkur Quetta) Central Region which cover 6 Field Offices (Lahore,

37
Faisalabad, Sialkot, Gujranwala, Multan, Bahawalpur) and Northern Region which
cover 5 Field Offices (Islamabad, Rawalpindi , Peshawar , D.I. Khan, Muzaffarabad).

Lahore
Gujranw karachi
ala
Dara
Ismail Faislab
khan ad

Muzfrab
Multan
ad

SBP-
Bahawal BSC Quetta
pur Feild
Offices

Sukkha Peshaw
r ar

HydraB Hydrab
ad ad

Islama
Sialkot
Rawalpi bad
ndi

4.6.1 Banking Services provided by Field Office

F

ield Offices of the Bank typically provide the following Banking Services

38
 Currency Management Services (Issuance, Exchange & Destruction of Currency

Notes).

Coins Management (Supply & Receipt).

Receipts of Governments Taxes & Levies.

Management of Governments Payments (Salaries, Pensions & Suppliers).

Public Debt Management (Management of National Prize Bonds & SSCs/DSCs

Schemes on behalf of Central Directorate of National Savings (CDNS), National

Savings, Ministry of Finance, Government of Pakistan, Islamabad.

Provision of Governments Funds Transfer Facility.

Locker facilities to the Government for Safe Deposit of Articles.

Customers Facilitation for General Banking Complaints.

Other Banking Services as and when required by the Government Departments.

4.7 Currency Issue Circle Offices

For proper and efficient management of the business relating to the issue of notes /
currency, there exist four Currency Issue Circle Offices of the Bank. The location of
these Offices and their geographical limits are as under

39
 Karachi Lahore
Province of
Province of Punjab
Sindh including
Government
of Azad
Jammu and
Kashmir

Peshawar
Quetta Province of
Province of Khyber
Balochistan Pakhtunkhw
a and
Government
of Gilgit-
Baltistan

4.8 Departments of State Bank of Pakistan Banking Services

Corporation SBP-BSC
The different departments of Banking Services
Corporation are as follow

Accounts Department
Currency Management Department
Internal Audit Department
Development Finance Support Department

40
 Engineering Department
Foreign Exchange Operations Department
Foreign Exchange Adjudication Department
Internal Bank Security Department
General Services Department
Human Resource Management Department
Training and Development Department
Strategic & Corporate Affairs Department

The operational functions or departments of the SBP-BSC have been clustered into
following main groups as under

Gro Name Department/Function

up
1 Accounts
Network & Financial Currency Management
Management Regional Offices
(South/Central/North)
2 Foreign Exchange Operations
Forex & Development
Development Finance Support
Finance
Foreign Exchange Adjudication
3 Human Resource Management
HR & Support Services General Services
Internal Bank Security

Internal Audit, Strategic and Corporate Affairs and Engineering directly report to MD.
Each Group is headed by Group Head (GH), reporting to MD, whereas Directors /
Heads of Departments report to respective Group Heads.
A Quick Overview of the Departments of Banking Services
Corporation
The overview of the different departments of Banking Services
Corporation is as follow

41
4.8.1 Accounts Department
The account department of the Banking Services
Corporation is responsible for consolidation of Accounts of 16 field Offices of SBP-BSC.
It also prepare the Financial Statements of BSC. This department also prepare and
monitor the annual Revenue and Capital budget of BSC and manage the assets of BSC
either Physical assets or System data. It also supervise the banking operation which are
handled at Field Offices.

4.8.2 Currency Management Department

This department is responsible
for ensuring uninterrupted provision of good quality Bank Notes and Coins, National
Prize Bound, Special & Defense Saving Certificate across the country. This department
also ensure the retrieval of unfit bank notes and their destruction with the help of
different Field Offices of SBP-BSC. This department also arrange public awareness
program to inform Commercial Banks, Government, public about the security Features
of the Bank Notes in circulation. This department provide Feedback to the Concerned
Department of SBP related to Forecasting the demand of fresh Bank Notes and Coins,
improving Security features in currency notes and indenting and printing of Bank Notes.
For these purpose it coordinates with Pakistan Security Printing Corporation (PSPC),
Pakistan Mint, and Central Directorate of National Saving.

4.8.3 Internal Audit Department

This department provide information with
reasonable assurance that Organizations Management Control System are adequate
and operating effectively. This information is provide to the Management and the Audit
Committee of the Board of SBP-BSC. Internal Audit Department perform financial,
Compliance, Operational and IT audit and give independent review and report to Audit
Committee and Management so that corrective actions can be taken.

4.8.4 Engineering Department

Engineering Department is responsible for
Construction, renovation and maintenance of Building, HAVC (Heating, Ventilation and
Air conditioning) and requirement of SBP, SBP-BSC and NIBAF. The functions which
are performed by the Engineering Department include civil construction, repair,
renovation, maintenance, installation, replacement, maintenance of electrical & power
distribution network, lighting etc. This department also obtain Insurance cover for bank.

42
4.8.5 Foreign Exchange Operations Department
Foreign Exchange
Operations Department is responsible for providing or facilitating the foreign exchange
activities in the country. Foreign Exchange Regulation Act 1947, Foreign Exchange
Manual 2002 and instruction issued by Exchange Policy Department regulate or under
the umbrella of theses law FEOD operate. FEOD is an Operational arm of Exchange
Policy Department. Foreign Exchange Operations Department is responsible monitoring
the repatriation of exports Proceeds, granting approval for commercial, private and
Government Foreign Exchange Remittance. FEOD collect and analysis various return
on the foreign exchange related transaction in the country.

4.8.6 Foreign Exchange Adjudication Department

The amendments which
were made in 1987 in Foreign Exchange Regulation Act 1947, according to these
amendments different Foreign Exchange Courts were established at SBP-BSC head
office Karachi and in different Field Offices. The aim of these Courts is to formulate
adjudicating process for the cases of offenses related to the non-repatriation of exports
proceeds within the specified time or misuse of foreign exchange. FEOD manage these
Foreign Exchange Adjudicating Courts. There are total 9 Courts in the country, 4 in
Karachi, 2 in Lahore, 1 in Multan, 1 in Sialkot, 1 in Faisalabad. These courts adjudicate
the complaints filed by the FEOD against exporters for delay in realization of exports
proceeds or against the Authorized Dealer for violation of instruction issued by SBP and
SBP-BSC.

4.8.7 Internal Bank Security Department (IBSD)

Internal Bank Security
Department is responsible or try to maintain an environment which provide security and
safety to the employees, assets, infrastructure of the bank by using modern security
equipment. This department ensure proper implementation security guidelines across
SBP, SBP-BSC and its Field Offices and NIBAF.

4.8.8 General Service Department

General Service Department is responsible
for providing cost effective services to the SBP, SBP-BSC. The major function of the
department is the procurement and include procurement of IT equipment and services,
Professional Consultancy Services, vehicles, offices equipment, furniture and fixture,
medicines. It also provide health services to bank employees and their eligible
dependents, this department also manage employees salary, their retirement and other
benefits.

43
4.8.9 Human Resource Management Department
Human Resource
Management Department perform the important function of recruitment, formation of HR
policies, periodically review the compensation structure and oversee the performance
management system and also manage the overall Human Resources of BSC through
training and development activities.

4.8.10 Development Finance Support Department

The purpose of this
department is to develop such inclusive financial system that can cater the financial
needs of different departments. This department also help the Development Finance
Group of State Bank of Pakistan in monitoring, awareness & information dissemination
of various SBPs policies, initiatives and schemes through different activities, implement
the exports refinance schemes, Prime Ministers Youth Business Loan and other
Schemes.

4.8.11 Strategic & Corporate Affairs Department

This department
paly a supporting role in corporate governance framework of SBP-BSC. This
department tact as a medium between the Board and Management and also ensure
that the Board decision are implemented.

44
4.9 Management
The Banking Services Corporation is a body
corporate, a legal entity which work under the control and direction of its Board of
Directors. The management of SBP_BSC comprise of Board of Directors.

4.9.1 Board of Directors

The Board of Directors of SBP-BSC
comprise of
Members of the Central Board of Directors of SBP
Managing Director, SBP-BSC

The member of the Central Board of Directors of SBP comprise of Governor, Sectary
Finance and eight non-executive Directors nominated by the Federal Government. The
Managing Directors is appointed by State Bank of Pakistan as mandate by the SBP-
BSC ordinance 2001.

4.9.2 Committees of the Board of SBP_BSC

According to the SBP-BSC
Ordinance 2001 bank can formulate committee having an adequate number of directors
and committees independently deal with matter entrusted to them. There are two
committee of SBP-BSC Board

HR Committee
Audit Committee

4.9.3 Managing Director

The Managing Director is the Chief
Executive of the SBP-BSC and control the affairs of the bank on the behalf of the Board.
The departments at the head office are headed by the Directors and the Field Offices
are headed by the Chief Manager under the overall supervision and control of the
managing director. The Managing Director has been empowered to conduct business
and manage the affairs of the bank except for matters that specifically fall under the
purview of the board. The MD is assisted by a team of directors/Head of Department
and Chief Manager. Current Managing director of SBP-BSC is Mr. Qasim Nawaz.

45
 Board of Directors HR Committee of Board
4.9.4 Organogram of State Bank of Pakistan Banking Services Corporation

Governor/
Audit Committee of Board
Engineering
Managing Director
Internal Audit Strategic & Corporate Affairs
Internal Bank Security Foreign Exchange Adjudication
Regional Heads
(South/Central/North)

46
General Services HRMD
Development FinanceForeign
SupportExchange Operation
Accounts Currency Management
Group Head
Group Head
HR & Support Services
Forex & Development Finance
Group Head
Network & Financial Management
 5 State Bank of Pakistan Banking Services Corporation
SBP-BSC, Lahore

5.1 Introduction
State Bank of Pakistan has come a long way in Lahore. Initially
Lahore office was housed in the Reserve Bank of India building and remained there

47
from July 1948 till December 1986. The current 12 storey building of State bank Lahore
was inaugurated on December 13, 1986 by the Prime Minister Muhammad Khan
Junejo. Before 2002 this building was called State bank of Pakistan and the head office
was called the Central Directorate. When the SBP-BSC Ordinance was promulgated
and after the inception of SBP Banking Services Corporation as retail arm of State Bank
of Pakistan in January, 2002 the name of the building was amended as SBP BSC,
Lahore Office.

5.2 Functions and Responsibilities

As an operational arm of
Central bank, Lahore office is engaged in retail business which includes:

Receipt, Supply and exchange of bank notes and coins

Collecting revenue and making payments for and on the behalf of government
Maintain the accounts of government, banks and other financial institution
Disbursing of loans and advances to the government, banks and financial
institutions
Performing agency functions while dealing saving instrument of government
Operational work relating to management of debt and foreign exchange.

5.3 An Issue Office

SBP-BSC Lahore Office as being one of the four
issue offices perform the following functions

Responsible for issuance and destruction of currency

Maintaining books of accounts of issue
Replenishment of chests of NBP as well as SBP
Management of currency in Lahore circle
Responsible for cancellation of notes

5.4 Role in Credit Disbursement

Lahore Office is dealing
with 80 Scheduled banks and 902 branches of NBFIs. Volume of work and number
of transactions processed are second highest among field offices. Lahore office is

48
 also actively engaged in disbursement of refinance under the export refinance
scheme.

5.5 Organization Structure

The SBP-BSC Lahore office is
consisted of following three tiers of management to take decision and to review the
operation of the office.

Group
5.5.1 Management Team Group
(GMT)

Divisional
Management Team
(DMT)

Unit Management
Team (UMT)

Management Team (GMT)

This is headed
by Chief Manager of Lahore Office and consist of Divisional Heads, Security Officers
and System Engineer-ISD, Lahore reporting to Chief Manager. The GMT forum is
effectively used to regularly discuss, at least one in a month, the issues relating to the
internal affairs of efficiency, improvement and maintenance of good governance, staff
rotation, business plans and other important matters are discussed here.

5.5.2 Divisional Management Team (DMT)

This is
headed by the respective Divisional head of the Divisional and consist of all the unit in
charges reporting to Divisional Head. The DMT is found to be very effective in office.
The matters discussed in division may also be referred to the GMT for consent.

5.5.3 Unit Management Team (UMT)

This is headed by
unit in charge at division and consist of all employees working under unit in charge. The

49
UMT work at the micro level and are responsible for the smooth management of day to
day proceedings and affairs at the unit level. It helps the management to know the
feedback and suggestions are also taken from employees. In this way UMT may feel
themselves in a better position to resolve the issues and better implementation of the
can take place.

The constitution of these teams have been carried out from the stand point of promoting
group dynamics in decision making so as to improve the governance in the bank. This
may encourage officers on different level of hierarchy to use the authorities delegated to
them for efficient decision making.
5.6 Architecture at SBP-BSC Lahore
Lahore office
building is 12 storey and in this office following facilities are available
Huge number of public counters in banking and cash division
Automatic PABX telephone facility
Customer Support Services
Lifts facilities
Fire alarm system
Mobile jamming devices
Nursery for children of employees
Mosque
Automated teller machines
Shredding machines library
Parking facility
Main lift lobby(having wall hanging depicting the old building view of Lahore, a
wooden box contains coins with their period of issue since the creation of
Pakistan)
Technological Advancement: with the assistance of State Bank of Pakistan
automation process was initiated. The objective of this process is to enhance the
decision making process of management and to improve the working efficiency
of BSC operations. A Hyundai Information Technology (HIT) was consulted to
design and technology up gradation envisaged by the Arthur Anderson. To
manage the operation of banking Globus-banking solution and Oracle (ERP)
technologies are used .To lessen the paper work and for labor intensive job the
Globus Banking System is designed. It provide benefits like reliable
information, information available at the touch of button and security control. To
improve the efficiency of business transactions Lahore office is focusing on
technology up gradation.

50
 Information System Department (ISD): ISD was establish to support the IT
automation of the office which directly report to Chief manager SBP BSC, Lahore
for ant matter. ISD Lahore is in close contact with ISD Karachi for existing and
future plans to upgrade SBP, SBP-BSC offices with latest technology.

5.7 Organogram of SBP-BSC, Lahore

Chief Manager

PM UNIT-I

51
PM
 NIT-II
5.8 Division of State Bank of Pakistan, Banking Services
Corporation, Lahore

DCM (PM) Division

There are following division at State Bank of Pakistan, Lahore
office

Banking Division
Administration Division
Prize Bound Division
Issue & Treasury (Cash) Division
Securities Division
Development Finance Division
Internal Monitoring Division
Foreign Exchange Operation Division
Foreign Exchange Adjudication Division
Engineering Division

5.8.1 Prize Bound Division

Prize bound is a debt instrument through which
government raise debt from general public. Prize Bound is a non-interest bearing
security. It Develops savings habit in public. Prize Bound is issued in 8 denomination of
100, 200, 750, 1500, 5000, 15000, 25000, 40000. Prize Bound is issued in the series
from A to Z. Each series consist of 999999 bounds. I and O series are not issued in
prize bound. Draw of each Prize Bound denomination is held after every 3 months and
4 times in a year.

Prize Bound Scheme is controlled by Central Directorate National Saving, Ministry

of Finance. Prize Bound is a bearer instrument and there is no fix rate of interest, draw
conducted and prize money is paid. On Prize Money tax is deducted and then prize
money is paid. The rate of tax for filer is 15% and for non-filer is 20%. If anyone win
prize money he can claim it within 6 years after that it will expire. If prize money is less
than Rs.10000 than prize bound will return to customers and if prize money is greater

52
than Rs.10000 than prize bound will retain by SBP-BSC. Prize Money up to 1 million is
authorized by DCM and above 5 million authorized by CM.

Laws Governing the Prize bound Scheme

Prize Debt Act 1944

Prize Bound Rules 1999

Governs the prize bound scheme.

Shut period (Preceding two months from the date of draw of a particular denomination.
During shut period the sale of particular denomination bound continue but these bound
are not included in draw).
Prize Bound Categories
Prize Bound is divided into 3 Categories
Fresh bound (which are First time issued)
Re-issuable bound (the bounds which were issued and encashed by public but in
a condition that they can again issue)
Defective Bound (which is in non-acceptable condition)
Defective Bound are divided into 2 categories
Clearly Payable (which are slightly oily or burnt it encash on the same day when
are presented)
Claimable bound ( these are not paid on the same day and pad in 7 working days
,experts opinion is taken on these bound. For the claim PB 1 form is used. If
experts says these are not payable or claim is not valid then claim is rejected and
against these rejection appeal can file within 3 months to CM and if CM also
reject the claim than after 3 months of rejection of claim by CM bounds are
destroyed)
Defective claimable Bound which are rejected are destroyed before one day of draw.
The remittance of Prize Bound from on field office to the other field office is done with
the head office approval.
Prize Bound division is divided into 3 units

Prize Money Payment Unit (This unit is responsible to pay money on prizes won
by public)

53
 Prize Bond Account unit (This unit is responsible for maintenance of stock of
bonds, making sales and receiving claims of defective bonds)
Prize Bond Marking Unit (This unit maintains manual record of prize bonds which
are won by public, credited to Govt. and which are not sold)
Functions of prize bound Division
The Function of different units of
prize bound Division are as follow

Prize Money Payment Unit

It perform the following function
Handles payment of prize money up to Rs.18500 on same day, Above Rs.18500
to Rs.185000 within 10 days, above Rs.185000 to Rs.500000 within 15 days and
above 0.5 Million to up to 75 Million within 20 days.
Prize money of Rs 1 million and above bound are sent to PSPC for verification of
their genuineness. All payments are made through payment order and within
timeline except up to Rs 18500 within same day payment.

Prize Bond Account unit

It perform the following function
Maintenance of record of Sale/encashment of prize bound
Fresh prize bound register
Re-issuable prize bound register
Destruction of retained Prize Bound
Making arrangement for holding of Prize Bound Draw etc.
Stock Management
Books maintenance
From Prize Bound Account unit consolidated report are sent to Head office and From
Head Office to the Ministry of Finance. PB Account is also responsible for supply of
stock. PSPC give supply of prize bound to the PDO and PDO supply prize bound to the
other Field Offices. PB Account unit supply stock according to the demand of the area
not accordingly what the field offices are saying.
Statements maintained in Prize Bond Account unit

54
 Prize Bond Account unit
maintained followings Statements
Sale/ Encashment Statement (every day sale & encash of PB is recorded)
Commission Paid to Commercial Banks Statements
Prize money paid to public Statement

Prize Bond Marking Unit

It perform the following function
Manual record of prize bonds which are won by public
Credited to Government account
Not yet sold
In Prize Bond Marking Unit different books are manually maintained
PB 18 (in which the winning prize are recorded which are claimed by the public)
Prize bound Not Yet Sold
PB 55 from this statement entries are made in PB 18 it is like a telex which come
from all offices which come under Lahore PDO which show the payment which
they have made against the prize bound
PB 2 is only maintained in system not manually maintained. It shows the national
Bank of Pakistan sale and encash of prize bounds.
Sale points for Prize Bound to Public
Following are the sale points for Prize Bound
to Public
All offices of SBP_BSC
National Saving Center
Schedule Commercial Banks and head Post Offices.

Public Debt Office (PDO)

Public Debt Office (PDO) deals with securities issued by
Government of Pakistan from time to time to raise debts enacted by Public Debt Act,
1944. There are two PDOs

Lahore PDO (it cover 11 field offices)

Karachi PDO (it cover 5 field offices)

55
5.8.2 Securities Division
This division deal with the Defense Saving
Certificate (DSC) and Special Saving Certificate (DSC) of National Saving Schemes.
DSC/SSC are Non-Bearable instrument. These certificates are registered on person
name and these certificate cannot use as cash because these are non-transferable.
Securities division sells these securities directly itself to the public or indirectly through
commercial banks.
Functions
This Division perform the following functions
Sale of SSC/DSC to the general public
Encashment of SSC/DSC to the general public
Payment of profit on SSC/DSC
Maintenance of SSC/DSC sold by commercial banks
Reimbursement of paid SSC/DSC to commercial banks
Borrowings is of two types
Internal borrowing
External borrowing

Through National Saving Schemes Government raise internal borrowing. National

Saving Schemes has two instruments in SBP-BSC deal

Prize Bound
National Saving Certificates (Defense Saving Certificate (DSC) and Special
Saving Certificate (DSC) of National Saving Schemes)

Denomination
SSC/DSC are in following Denomination

500, 1000, 5000, 10000, 50000, 100000, 500000, 1 million

Similarities and differences in DSC and SSC

The Similarities and differences in
DSC and SSC are as follow

Similarities

Denomination is common in both certificates

No cap on upper limit

56
 Zakat is applicable
Taxable (for filer rate is 10% and for Non-Filer rate is 17.5%)

Differences
Maturity
SSC mature in 3 years
DSC mature in 10 years
Profit
SSC profit is paid biannually. First profit is simple profit and after
that compounded profit is paid
DSC profit is paid when year complete and on encashment
5.8.3 Engineering Division
This division is responsible for
Repair and maintenance of office building and equipment
Floating tender for new project
Procurement of new equipments
The purpose of this division is to provide uninterrupted services, secure and maintain
bank assets, Develop new assets (e.g. to build new security room or extend the area of
existing division) and to carry on the construction work in bank.

The others works which are performed by the engineering division are as follow
Operation & Maintenance of Assets
Provide HVAC (Heat, Ventilation and Conditioner)
To maintain the temperature of the bank
Ensure the power supply/electricity. In case of loads adding through generators
provision of power and generators maintenance is also the responsibility of
engineering division
Install and maintain CCTV cameras
Install and maintain Fire alarms, Smoke Detector and Fire Hydrant System
Water Supply
Maintain Lifts
Carry on construction work

57
5.8.4 Administration Division
The functions which are performed
by administration division are as follow
Management of HR Resources
Keep records of leaves of the employees
To maintain discipline
Arrange training
Promotion of employees
Administration Division is divided into following units
Staff Matters Unit
General Services Unit
Salary/Advances/Pensions Unit
Medical & Welfare Unit

Functions
The functions of these units are as follow

Staff Matters Unit

This unit deal with following things
Cases of transfer/posting, disciplinary matters, promotion and confirmation of
staff recruitment in SBP-BSC
Deal with retirement, dismissal, resignation and death of employees
Maintenance of working strength of the offices
Arrangements of DMT (Divisional Management Team) and GMT(Group
Management Team) meetings
Transfer of employees
Issuances of Service Certificate
To prepare Annual performance Evaluation Reports Forms of all employees of
the office

58
 Handle the internship program

General Services Unit

This unit deal with following things
Provide Janitorial Services
Deal with canteen affairs
Payments of utilities
Management of stationary articles

Salary/Advances/Pensions Unit
This unit deal with payment
of salaries, conveyance charges, overtime charges, release Staff Loan, pay pension to
retired employees etc.

Medical & Welfare Unit

This unit deal with payment of medical
charges, payments of gifts to retired employees and other welfare programs .

5.8.5 Foreign Exchange Adjudication Division (FEAD)

The functions of this division are to handle Exports Overdue Cases and ensure the
repatriation of exports proceeds within the country, adjudicate the disputed cases and
impose penalties
.
For handling cases Adjudication Courts are established which are helpful in quick
disposal of exports overdue cases. In Lahore field office 2 adjudication courts are
present for handling of exports overdue cases. The purpose of these courts is to speed
up the process. The applications received from FEOD may be against exporter (i.e.
Export proceeds are not realized within specific time) or against Authorized Dealer (i.e.
non submission of documents or willfully submission of wrong or uncompleted
documents which provide untrue information). The Foreign Regulation Act 1947 and
Appeal Rules 1988 gives powers to the adjudicating Courts.
Procedure of Case
When applications received from FEOD authorized officer
scrutinize the application, check the required documents are complete after ensuing this
Show Case Notice of 15 days is sent to the accuser, if accuser does not respond 2 nd
notice of 10 days is sent, if again accuser does not respond final notice of 30 days is

59
send to the accuser. If after final notice accuser or his lawyer does not appear ex-party
decision is made.

If he respond Hearing start, issues are framed, recording of evidences and cross
examination is done. In case if adjudicating officer proved the relative case against the
accused and accused fails to produce his obligation, penalty is imposed by adjudicating
officer according to the amount of exported goods value on date on which opportunity of
making a representation is given to the accused. If exporters use Foreign Exchange for
a purpose other than mentioned penalty will imposed on him. If authorized dealer does
not provide documents or willfully provide wrong document penalty up to 5000 is
imposed on AD.
5.8.6 Internal Monitoring Division (IMU)
The functions which are performed
by Internal Monitoring Division are as follow
Perform pre-audit of all payments effecting expenditures like salary, medical, R &
R, utility expense and others
Conduct surprise check on the behalf of CM
Liaison with external auditors
Surprise check of Vaults etc.

5.8.7 Foreign Exchange Operation Division (FEOD)

The function which are performed by Foreign Exchange Operation Division are as follow
Monitor exports, imports, Foreign exchange transactions and foreign exchange
related activities, subsidies given to the exporters
Checking of various forms received from authorized dealer to monitors to monitor
the flow of foreign exchange
Exporters performance reports are prepared here
Report advance payment
The FEOD has to ensure that exports proceeds are realized in country on time. To
secure foreign exchange is also there purpose.
Units
This division is divided into followings units
Return Unit

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 Export Checking Unit
Import Checking Unit
Private Remittances Unit

Return Unit
This unit has to receive monthly returns from all the Authorized
Dealers and verified it. AD report to FEOD about foreign exchange transaction through
different forms
Export is report on E Form
Import is report on I Form
Miscellaneous is report on M Form

Advance Payment is report monthly to FEOD through A-2, O-2 Schedules. Other than
advance payments are reported on A-1, O-1. Inward and Outward remittances are also
handled through Form E and Form I. Export overdue are reported on V-16
Export Proceeds Realization Certificate are also received from AD which is submitted by
exporters to the AD.

Export Checking Unit

This unit deals with repatriation of export proceeds
allowed for all exports are 180 days and for carpet allowed for 270 days. In case of non-
repatriation of export proceeds notices are given to exporter and after that cases are
forwarded to FEAD.
Import Checking Unit
This unit maintain the record of how much
shipment is received against which importer has made the advance payments and also
check importer status by scrutinize I Form.

Private Remittances Unit

It specifically deal with Form M used for
miscellaneous purpose.
5.8.8 Development Finance Division
The functions which
are performed by Development Finance Division are as follow
Monitoring and implementation of SBP financing schemes
Handle Export Refinance scheme
On Site verification of documents provided for export refinance scheme

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Units
This division is divided into following units
Access to Finance Unit
Export Refinance Scheme part 1
Export Refinance Scheme part 2

Verification Unit
Access to Finance Unit (AFU)
This unit look after activities related to
SMEs, Microfinance, Agriculture and Islamic Banking. To create awareness among
financial institution Awareness programs, focus group (banks, policy making, trade
bodies) meeting are also arranged by AFU. Feedback is conveyed to head office

Export Refinance Scheme Part 1 unit

The purpose of export
refinance scheme is to boost up the export. For negative list export product this facility
is not available. Export Refinance Scheme Part 1 is transaction base. In part 1 exporter
approach the commercial bank. Commercial bank after proper verification finance the
exporter after that commercial bank approach the SBP_BSC for refinancing facility
SBP-BSC after all verification give finance to the commercial bank. Under this scheme
finance may be
Post Shipment Finance
Pre Shipment Finance
In this unit scrutiny of loan application on account of Post/Pre Shipment on prescribed
Form-D is conducted, complete information are checked and after proper scrutiny case
is put for rechecking to the ACM and then send to DCM for approval. After approval of
DCM all particulars of grant are being inputted in Globus and authorize. If Commercials
banks provide this facility to corporate organization SBP-BSC profit is 2% and in case of
SME profit is 1%.
Refinancing is initially given for 180 days and further extended for 90 days. In case if
exporter does not ship exported goods on time Late Shipment fine is imposed.
If goods are not shipped at all non-shipment fine is imposed, Short Shipment fine is
imposed if exporter shipped half goods, Non submission EPRC fine and other fines are
imposed by this division

Export Refinance Scheme Part 2 unit

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 This part is performance based. In this part
on the basis of exporter last year exports he can avail finance up to 50% of last year
exported goods value

On site Verification Unit

Commercial Banks sent form D not the original
document so onsite verification of original document is done. The functions which are
performed by this unit are as follow
To scrutinize the all original documents i.e. E Form, Bill of lading, Original
Contract/LC etc.
To check ineligible reporting
To check non shipment fines

5.8.9 Issue & Treasury (Cash) Division

The functions
which are performed by this division are as follow

Payments and Receipts on behalf of Government

Issuance and exchange of Currency Notes
Issuance of Commemorative Coins and other coins of Rs. 1, Rs. 2 and 5
To prepare chest mechanism
Inspection process of chest
Chest on daily basis report to treasury
Coins lifting from Pakistan Mint and cash payment to Pakistan Mint
From Lahore field office coins are distributed to all field offices and chest and this
work is performed by the treasury department
Handling the process of passing of Claims Notes
Settle the soiled notes issues
At different cash counters SSC/DSC Receipt or payment is made
Government Payment
Defective notes
Notes Exchange counter

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 There is Fresh Notes Vault in which consignment received from
PSPC/SBP_BSC, Field Offices are kept
The most important which are maintain by treasury Division are
Home Note Account (Balance of currency in circulation)
Value Account (Statement of Affairs/ Assets & Liabilities of SBP_BSC
The treasury division of all the Field offices report to Currency Management Department
about the demand and denomination of currency notes and Currency Management
Department on aggregate basis sent this demand of current year to the PSPC for
printing of currency notes when notes are printed it is sent to the field offices through
Pakistan Railway only in Karachi notes are sent through security van. When currency
notes come from PSPC they are counted through counting machines. The currency
notes of lower denomination are counted on sample basis. When Notes come they are
kept in fresh currency notes vault with the status of unexamined but when they are
counted and examined they get the status of examined.
Denomination
The Currency notes are broadly categories into 3 denominations
Lower denomination (It covers currency notes of Rs.10, 20 & 50)
Middle denomination (It covers currency note of Rs.100)
Higher denomination (It covers currency notes 500, 1000 & 5000)
The currency notes are divided into following categories on the basis of condition
Fresh Notes (Which are first time issued)
Re-issuable Notes (Which were issued by SBP_BSC and again come back but
these notes are in good condition and are again sent in circulation)
Soiled Notes (These notes are divided into 3 categories)
Soiled Currency notes
Clearly Payable Currency Notes (Which are slightly oily or burnt)
Claimable Currency Notes (Which are fully oily or is in pieces but notes
are identifiable go in claim)
Claim may be pay on one window or next day. The currency notes of 10, 20, 50, and
100 are paid on same day or one window and the notes above this value are paid on
next day. The Soiled notes which are in very bad condition is received from public on
public counter these are sent in examination hall after that holes are made in notes
through machines now Soiled notes get the status of Cancelled Notes after that

64
Cancelled Notes are kept in Cancelled Notes Vault than these Cancelled Notes are sent
in Note Verification Unit where Cancelled Notes are re-examined either there is any
forged note or not after that when Cancelled notes are 100% check the examiner who
check seal it, if any deficiency is found the examiner report the shortage after that
currency notes are destroyed through shredding machines.

5.8.10 Baking Division

Banking Division consists of two units.

Public Account unit (PAU)

Deposit Account unit (DAU)

Public Account
Receipt Unit
Public Account
Unit
Banking Public Account
Division Payment Unit
Deposit
Account unit

Public Account Unit

This unit is the backbone of the State Bank of
Pakistan. Being Banker to the Government relating its basic functions it play a key role
to perform central bank obligations, collect taxes on behalf of government which is the
most important function of the Central Bank. This Unit is responsible for keeping
account of all monies paid into the SBP BSC (Bank) for credit to Government Accounts
(Federal and Provincial).
Role of Public Account Unit
Its roles are as prescribed under
Dealing in Government Accounts
Bankers to the Government & hold cash balances of Government Accounts
Collection of taxes
Payment of salaries to the employees of the Government

65
 Dealing with the receipts & payments of Government sector
Balances & stock reports preparation with PAU data
Government Account maintenance & transferring of funds on transactions
Daily closing of accounts at DAU with the records of PAU
Closing of Bank daily operations after sending PAU vouchers

Deposit Account Unit (DAU)

The other most important unit of State Bank
of Pakistan-BSC is Deposit Account Unit. DAD is responsible to maintain the current
accounts of Scheduled Banks. A statement showing balances of each bank account is
sent to Banking Supervision Department, State Bank of Pakistan on daily basis.
Banking Supervision Department monitors the CRR and SLR of the Scheduled Banks.

Role of Deposit Account Unit

The roles of DAU are as follows:
Banks Accounts maintenance
Transferring of fund
It directs the working criteria of commercial banks.
Daily closing of accounts are made here.
Balance & stock preparation
Effecting remittances of funds for commercial banks and other financial
institutions, as well as government agencies by telegraphic transfer and by
government drafts and charging commission as per approved rates. Also makes
payment to SBP suppliers through payment orders.
Recording of receipt and payments transactions on due authority undertaken by
the local office.
Opening of new accounts of the scheduled banks.
Handling deposit and withdrawal from accounts.
Maintenance of records of stop or cancelled cheques and payment orders
Compilation and maintenance of monthly/weekly returns submitted by scheduled
banks.

66
 Imposition of penalties in case of delay in submission of monthly/weekly and half
yearly returns and Statutory Reserve Requirement (SRR) in case of all
commercial banks.
Current account section (DAD) is responsible to maintain the current accounts of
Scheduled Banks. A statement showing balances of each bank account is sent to
Banking Supervision Department, State Bank of Pakistan on daily basis. Banking
Supervision Department monitors the CRR and SLR of the Scheduled Banks in
terms of sections 36(1) of SBP Act 1956.
Processing cases of penalties imposed by the Banking Supervision Department
(BSD) on various other non-compliances, in particular Cash Reserve
Requirement (CRR).
Monthly compilation of profit and loss account.
Provide demand loan and overdrafts to financial institutions on proper authority &
monitoring the loans.
Comparison of Banking Division with other Departments

When I compare Banking division with other departments, one thing that differentiates
this department with other department except Prize Bond and Cash is direct public
dealing. Because of direct dealing with general public banking division is very noisy and
rushy place. There is lot of hustle and bustle in this division. Every employee in the
counters is busy in dealing with the public. They have the busiest of time. As compared
with other departments, they are not so much busy.

Being Banker to the Government relating the basic functions of Pubic Account Receipt
Unit are it play a key role to perform central bank obligations, collect taxes on behalf of
government which is the most important function of the Central Bank.
Whereas comparing the roles of these two units of banking division with other
Departments which are performing totally opposite functions.

Currency Management Unit

Issue note & note design

Monitor the performance of all the commercial banks relating to cash and
currency

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 Physical transferring of funds to chest offices
Record of currency note with its denomination
Forge note dealing & disposal of notes etc.

Foreign Exchange Operation Department (FEOD)

Facilitating exporters & importers

Facilitation of export by strict monitoring
It regulates foreign exchange with FERA Act 1947
It directs the working criteria for foreign exchange transaction.

Development Finance Department (DFD)

To aware general public about the beneficial scheme regarding financing

To communicate the banks policies & schemes to stakeholders
To monitor bank performance towards achievement of their goals etc.

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 6 HR Policies of State Bank Pakistan, Banking Services
Corporation, Lahore

HR policies at SBP-BSC, Lahore will cover the following points

Leaves
Recruitment
Training

69
 After Retirement Benefits
Pension
Commutation
Benevolent fund
Compensation/ Salary/ Bounces
Promotion
Rotation
Loan to employees
Allowances
The policies regarding to these points at SBP-BSC, Lahore are as follow

6.1 Leaves
About leaves it is said that leave is not the right of an employee.
But when there is an emergency or urgent work leaves is granted to the employees.

Types of Leaves
The leaves is divided into following categories
Normal Leave
Extra Ordinary Leave/ Leave without salary EOL/LWS
Study leave
Rest & Recreational leave (R & R)
Maternity leave

6.1.1 Normal Leave

Normal leave is a wide term. It covers sick leave,
urgent work leave, death leave, marriage leave etc. Normal leave is maximum for 15
days. Generally for leave, application which is in a prescribed format is filed and on this
application unit in charge (ACM) signature is required and ACM allow the leave and this
application is submit in the admin. Leave up to 15 days is signed by ACM and for more
than 15 days is signed and allowed by Divisional head (DCM).
6.1.2 Extra Ordinary Leave/ Leave without salary EOL/LWS
This leave may have 2 effects

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 1. There is no leave in the persons account but he want leave, leave can be given
but salary is deducted.
2. There is leave in the persons account but ACM do not want to give leave, but if
leave is given it depends upon the unit in charge either to deduct the salary or
not.
It is maximum for 15 days or depend on the divisional head. For salary deduction
related department inform the salary department.
6.1.3 Study leave
Study leave is of two types
Within country study leave
Foreign country study leave
This leave is for 2 years. For this leave university letter is required and this leave is
authorized by Chief Manager. It is paid leave.

6.1.4 Rest & Recreational leave (R & R)

This is
mandatory leave. This leave is for maximum 15 days on continuous basis. This leave is
fully paid. For availing this leave there should be at least 15days leave balance in the
employees account. If there is no leave balance or balance is less than 15 days leave
Rest & Recreational leave (R & R) is not given.

6.1.5 Maternity leave

This leave is given for maximum 90 days or 3
months and it is fully paid. This leave is non debit able leave and maximum given for 3
times to a woman during her service. If this is given 4 th time this leave will be unpaid.

6.1.6 Short Leave

This leave is for maximum 2 hours and given in the
second half of the day.

6.1.7 PCL (Permission for coming late)

This leave is
st
given in the 1 half of the day and also for 2 hours but it depend upon unit in charge.
If a person comes late 3 days in a month his one leave is deducted and if there is no
credit leave in his account his salary will be deducted. The maximum leaves which are
credit in an employee account are 40 and during his service the maximum leave which

71
are credited are 730 and at service end if the employee has balance he can encash
these leaves.

6.2 Recruitment
The recruitment procedure at SBP-BSC, Lahore is as
follow. Firstly advertisement is given in newspaper or SBP/IBP website and eligible
criteria is also given in the newspaper. Then people are selected are for written test.
Institute of Banker in Pakistan conduct the test for SBP. When the test is clear interview
is conducted. The people who clear the interview their theoretical training start at NIBAF
in Islamabad. For OG1 officer this training is for 1.5 months and OG2 get the training of
3 months. After theoretical training there is a final test. It is compulsory to pass the final
test. After the final test is passed there is on job training in head office Karachi State
Bank of Pakistan. After that training employees are posted. Female employees are
posted in the field office which is near their residential city. And male employee are
mostly posted in head office or in field offices where employee are needed. Employees
are recruited as OG1 under Junior Officer Training Program and OG2 officer are
recruited under YPIP (Young Professional Induction Program).
SBOTS (State Bank Official Training Scheme) is used for recruitment of OG2 level
officer who work at State Bank of Pakistan, head office Karachi.

6.3 Salary/ Bounces/Compensation

The salary pay scale
at State Bank of Pakistan Banking Services Corporation, Lahore is as follow

Officers Grade Monetize Pay Scale

(Rupees)
OG1 49000-157000
OG2 82000-246000
OG3 112000-336000
OG4 142000-426000
OG5 170000-510000
OG6 223000-669000

Bounces are given to the Clerical and Non Clerical staff. The rate for bounces
vary every year.

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6.3.1 General Provident fund
General provident fund is
maintained for employees benefits. For that purpose 5% is deducted from salary every
month and credit to General provident fund. The employees who are recruited after
2010, 6% of their salary is deducted and credited to general provident fund.

6.4 Allowances
SBP-BSC, Lahore provide following allowances to their
employees
Conveyance Allowance (Provide in the case of late sitting or provided if do work
on holiday in bank)
Telephone Allowance
To the officers from OG4 to OG6 personal mobile charges are given
To the OG6 officer car, house facility is also provide
Medical Facility is provided to every employees.
Overtime is pay to Clerical & Non Clerical Staff. The current rate of overtime is
Rs. 98 per hour.

6.5 After Retirement Benefits

Retirement may be
Regular Retirement (retirement at the age of 60 years) or
Early Retirement (there is no age limit in early retirement)

6.5.1 Regular Retirement Benefits

Retirement at the age of 60 years is
called regular retirement. In regular retirement the benefits are
Pension
Commutation
Benevolent fund
Commutation is a part of pension when the pension is calculated 50% of that gross
pension is encash at retirement. The accumulated pension which is encash at
retirement is called commutation.
Service is of 2 types

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 Total service (It is period from the date of appointment to the date of retirement)
Net qualifying service (Total service Leaves without salary)

Pension is calculated on monetize salary. Pension is given till the whole life. For
obtaining pension employees should have service of 20 years .If the pensioner die than
the pension is given to the widow till her death or till remarriage. If widow die or
remarriage the pension is paid to the elder child, if the elder child is girl than the pension
is paid to her till marriage and if the elder child is boy than paid till the age of 21 years
and after that to the 2 nd next child. Pension increase every year. Pension is paid on the
1st of every month but if the first day of the month is not the working day than pension is
paid on the last day of the previous month.
Now currently two Schemes are operating in SBP-BSC, Lahore for retirement benefits
General Provident Fund
Provident Fund

6.5.1.1 General Provident Fund

In General Provident Fund pension
and commutation both are paid to the employees.

6.5.1.2 Provident Fund

In Provident Fund pension is not paid only accumulated
amount is paid.

6.5.2 Benevolent Fund

A specific amount is deducted from the salary under the
head of benevolent fund and that fund is paid after retirement up to 15 years. The
deduction of benevolent fund depends upon salary.

6.5.3 Early Retirement

Early Retirement include following benefits
Pension
Commutation
Additional Salary equal to Service Years
Encashment of leaves up to 2 years if he has balance in leaves and he has
remaining balance in service years also.

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 Medical facility can also encash up to 10 salaries or 1 million whichever is
greater.

6.6 Loan Policy

SBP (BSC), Lahore provide loan to the employees
under followings heads

Personal Loan
PC Loan
Motor Car Loan
House Building Loan

Eligible Criteria for obtaining Loan

The eligibility for obtaining
loan under different heads is that employees after recruitment can immediately apply for
personal and PC loan. For obtaining motor car loan and house building loan employees
should have service of at least 3 years. The condition that loan installment amount
should not exceed 50% of salary also apply for all type of loans.
PC loan, motor car loan and house building loan come under Staff Loan.

Maximum Loan Amount

The maximum amount of loan which is given to an
employee under different head is as follow

Maximum loan
Loan Head
amount
Personal loan Up to 3 salaries
PC loan Up to 70000
Motor Car loan Up to 800000
House Building loan Up to 60 salaries

Loan Pay Back Period

Personal loan is payable within 2 years and other
three types of loan are adjustable during the whole service.

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Note
All the loan are interest free but if employee receive interest from bank on
provident fund than he has to pay interest on PC loan, Motor Car loan, House Building
loan. Personal loan is the free of interest in all case.

6.7 Training
Training is basically divided into 3 categories
1. In-house training
2. External training
3. NIBAF training

6.7.1 In-House training

In house training is arrange within the premises of bank or
that training in which employees of SBP (BSC), Lahore give training to the other
employees of SBP (BSC), Lahore. In house training is the on job training.

6.7.2 External training

External training is arrange outside the
premises of SBP (BSC), Lahore means at hotels or others places. This is the off job
training.

6.7.3 NIBAF training

This is also off job training. Mostly this is given to the
employees at the time of recruitment.

6.8 Rotation
The purpose of rotation is to develop multidimensional skills among the
employees. In SBP (BSC), Lahore rotation is done after 3 to 4 years from one division
to another division. Within division rotation is also done but it depend upon the
discretion of Deputy Chief Manager.

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6.9 Promotion
In SBP (BSC), Lahore for promotion of employees Career
Development Policy is used. According to this policy employees are rated by their
supervisors e.g. employees are rated by their ACM, ACM by their DCM and so on.
Rating is given in numeric score. For promotion employees have to achieve 15 points
and the points which employees achieve maximum in 1 year are 5 points, so promotion
require a minimum time period of 3 years. Suppose if an officer of OG1 is working
properly and achieve the maximum points which are required after 3 years he will
promoted to OG2. The promotion is based on performance of the employees.
But sometimes employees are not promoted for many years the reason is that they do
not meet the promotion criteria. But sometimes employees meet the criteria but all the
employees who meet the criteria are not promoted because seats are limited and
employees are in great number than employees are interviewed after that who is the
best for seat is promoted.
The thing which I observed in bank is that growth chances from OG1 to OG2 are more
but from OG2 to OG3 growth chances are less. Demotion is also possible but it is very
rare.

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7 Analysis of SBP_BSC

78
7.1 Stakeholders Analysis
The stakeholders of SBP-BSC are
Commercial Banks
Governments
General Public
National Bank of Pakistan
State Bank of Pakistan
Pakistan Mint
Pakistan Security Printing Corporation
IBP
NIBAF
Employees/ Ex-employees
NIFT
Others

Commercial Banks
Commercial Banks are stakeholder of SBP-BSC. Commercial Banks
have current account in SBP-BSC, get currency supply, avail finance under export
refinance scheme, invest in govt. securities which are issued by SBP-BSC and remit
amount domestically through SBP-BSC.

Governments
SBP-BSC collect Tax on the behalf of government, provide domestic
remittance facility, raise public debt for the government, and make payment on the
behalf of the government, pay salaries and pension to the government employees.

General Public

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 SBP-BSC exchange the currency notes which are brought by
general public, issue Defense Saving Certificate, Special Saving Certificate, Prize
Bound, Fresh Notes, Coins are issued to the general public. Organizations can pay
deposit tax in SBP-BSC.

National Bank of Pakistan

National Bank of Pakistan perform the Chest
Operation where SBP-BSC is not present.

State Bank of Pakistan

State Bank of Pakistan is the stakeholder of SBP-BSC. It
gives instruction, set polices according to which SBP-BSC perform work. SBP-BSC sent
financial reports to SBP.

Pakistan Mint
Pakistan Mint made coins according to th requirement of SBP-BSC.

Pakistan Security Printing Corporation

Pakistan Security Printing Corporation
print and issue currency notes to SBP-BSC.

Institute of Banker in Pakistan

It take test for recruitment of employees for
SBP-BSC. It also provide training to the banker.

NIBAF
NIBAF is subsidiary of State Bank of Pakistan. It provide training to the
employees of SBP, SBP-BSC.

Employees/ Ex-employees
Employees/ Ex-employees are stakeholder to that
extent SBP-BSC deal with HR related matters, Salary, Pension etc.

NIFT
It provide clearing facility.

80
Others
Others include SME forums and trade bodies

7.2 SWOT Analysis

Strengths
The strengths of SBP_BSC are as follow
Motivated, dedicated, honest and experienced employees
Engineering department equipped with qualified technical and non-technical staff
Availability of well-defined manual regarding banking, audit and other matters
Availability of support and guidance from HRD (SBP)
Proper maintenance of building and equipments
Trust and confidence of the customers
Proactive response to the security issues
Proper management of prize bound and currency notes
Effectively handling of Banking Transaction on the behalf of the government
On time corrective action are taken
Follow the proper procedure for any work
Also consider the employees welfare
Established through an ordinance which provide adequate framework
Centralized setup

Weaknesses
The weaknesses of SBP_BSC are as follow

Manuals not fully compliant with automated solutions

Lack of sufficient computer hardware
Lack of succession planning
Lack of legal training in FEAD

81
 No independent recruitment policy
Lack of training on regular basis
Sometimes internet breakdown are there
Excessive public dealing
More manual wok in Prize Bound marking and FEOD

Opportunities
Proper training and skill development of staff on regular basis
Take advantage of NIBAF training programs
Strengthen field office by delegating more authority
Increase liaison with law enforcing agencies
Rapid and complete computerization of manual work
Office automation to increase efficiency and effectiveness

Threats
The threats which are faced by SBP-BSC are as follow
Counterfeit bank notes
External pressure
Sudden break down of internet or computer system
Delay in implementation of IT technology
Lack of delegation of powers
Frequently transfer of staff
Training constraints

82
ASSETS 2014-15 2013-14
Rupees in Rupees in
000 2014- 000 2013-
Balance in 15 37,876,8
40,635,7 14
current account 54 46 7.3 Financial Analysis
with State Bank 77.8% 76.6%
of Pakistan
Investments 571,720 569,449 Common Size Analysis of Balance Sheet
Employee loans 10,577,8 1.1%
10,577,9 1.2%
and advances 5720.2% 16 21.4%
Property and 284,665 237,867 A common Size balance sheet items are
equipment 0.54% 0.48%
expressed in the ratio of each asset to the total
Medical and 132,479 125,061
stationery 0.25%
assets and the ratio of each liability to the total
0.25%
consumables liabilities is called common size balance sheet.
Advances, 39,107 32,283
deposits and 0.07% 0.07%
prepayments
Total assets 52,241, 49,419, 100.0%
100.0%
582 422
LIABILITIES 87.1% 86.0%
Deferred 45,488,8 42,518,8
Liabilities- Staff 20 51
Retirement 11.0% 11.9%
Benefits
Deposits & other 5,752,7698.1%
5,900,57 98.0%
liabilities 2 1.9% 1 2.0%
Total Liabilities 51,241, 1.9%
48,419, 2.0%
582 422
Net Assets 1,000,0 1,000,0
00 00
Share Capital
1,000,0 1,000,0
00 00

83
Interpretation
Investment in term of amount increase but in term of percentage it has decrease
from the previous year
Advances, deposits increase in term of amount but in term of amount percentage
it remain same
Property and equipments both in term of amount and percentage have increased
Deposits and other liabilities have decrease both in term of amount and
percentage

Common Size Analysis of Profit & Loss A/C

2014-15 2013-14
Discount and Interest
Earned 48,573 48,907
Net Operating Expenses 14,179,759 13,980,071
Reimbursable from the
State Bank of Pakistan -6,873,983 -7,086,827
Allocated to the State Bank -7,305,776 -6,893,244
of Pakistan Common Size
-
Analysis -
(Vertical)
Operating profit 48,573 2013-14
2014-15 48,907
Gain/Loss on disposal of 1,263
100% 100%121
property and equipment
29193% 655 28585%
1,081
Other income
Profit for the year 50,491 50,109

Interpretation 100% 100%

3% 0%
Net operating 1% 2%
expense increased both in
term of amount and 104% 102% percentage

84
ASSETS
There 2014-on the
is gain 2013-
disposal of 2014- 2013- 2012- 2011-
15 14 15 14 13 12
property Rupees Rupees 182.5 170.16 116.73 100.
Income from other insources
in 000 000 have 5 00
Balance in
decreases 40,635,7 37,876,8
current account 54 46
Profit increased from the last year 63.50 63.24 102.91 100.
with State Bank
of Pakistan 00
Investments 571,720 569,449 96.41 96.41 100.4 100
Employee loans 10,577,8 10,577,9 158 212 839
and advances 57 16 116.3 97.20 80.89 100
Property and 284,665 237,867 303 601 651
equipment 113.1 106.7 102.1 100.
Medical and 132,479 125,061 1 7 0 00
stationery
Trend Analysis
consumables 139.5 115.2 128.2 100.
Advances, 39,107 32,283 8 2 4 00
Balance
deposits andSheet Trend Analysis 151.1 143.0 110.8 100.
prepayments 7 0 0 00
Total assets 52,241, 49,419,
582 422 155.9 145.7 112.2 100.
LIABILITIES 4 6 7 00
Deferred 45,488,8 42,518,8
Liabilities- Staff 20 51 131.1 134.4 103.4 100.
Retirement 0 7 7 00
Benefits 152.6 144.2 111.1 100.
Deposits & other 5,752,76 5,900,57 9 8 2 00
liabilities 2 1 100 100 100 100
Total Liabilities 51,241, 48,419, 100 100 100 100
582 422
Net Assets 1,000,0 1,000,0
00 00
Share Capital
1,000,0 1,000,0
00 00

85
Interpretation
In balance with SBP, property and medical and in deferred liabilities there is increasing
trend.

Profit & loss A/C Trend Analysis

2014-15 2013-14
Discount and Interest
Earned 48,573 48,907
Net Operating 14,179,7 13,980,07
Expenses 59 1
-
Reimbursable from the 6,873,98 -
State Bank of Pakistan 3 7,086,827
- -
Allocated to the State 7,305,77 6,893,244
Bank of Pakistan 6
2014- 2013 2012
- 2011
-15 -14 -13 -12
Operating profit 48,573 48,907
71.0 71.50 84.83 100.
Gain/Loss on disposal 1,263
1 121 00
of property and 118. 116.4 100.7 100.
equipment 09 3 0 00
Other income 655 1,081
111. 114.9 100.7 100.
Profit for the year 50,491
47 2 50,109 5 00
125. 118.0 100.6 100.
09 3 5 00
Interpretation
There is increasing 71.0 71.50 84.83 100. trend in operating
expense and 1 00 decreasing trend in
interest earned. 47.7 4.57 -29.31 100.
0 00
Ratio Analysis 935. 1544. 2730. 100.
71 29 00 00
70.9 70.45 83.19 100.
9 00
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 Bank average rate of lending
Markup/ Interest Earned (Investment+ Advances) *100
2015 2014
7.95% 8.12%

Return on Assets
Net profit Total Assets *100
2015 2014
0.096% 0.101%

8 Product/Services of State Bank Pakistan, Banking

Services Corporation

The SBP-BSC provide different services or facilities to the Government and commercial
banks
It make payment on the behalf of the government
It raises long term, short term and medium term debts for the government
Sell government securities
L/C facility
Remittances facility
SBP-BSC provide to the government receipts service
Prize bound selling facility provide to the CDNS
Collect all type of tax

For commercial banks it provide following facilities

Provide loan facility

The most important is Export Refinance Scheme
Bankers bank
Remittance facility
Consultancy service

87
Part 2

9 Assignments Done At Bank

88
I was posted in SBP-BSC, Lahore for internship. There were almost 40 internees whose
come for internship. In the 1st week of my internship Sir Mansha who was supervising
our internship program divided the internees into 3 groups and sent internees in
different division for orientation. I spend the whole week in different division for
orientation. The employees of different division provide me the details of division which I
already mentioned in part 1. In 2 nd week Sir Mansha assigned different divisions to the
internees. The division which was assigned to me was Banking Division. In Banking
Division the topic which was assigned to me was
Income Tax Procedure: Identify Flaws and give Recommendation
On this topic I have to collect the data and make report on it. I worked in Banking
Division and complete my project. The detail of project is as follow

9.1 Project

Income Tax Procedure: Identify Flaws and give

Recommendation
Income tax is collected every month. Organization pay tax in the SBP-BSC, Lahore and
it receive tax on the behalf of government.in banking there are 3 counters of FBR from
which tax depositor can obtain Challan form and bring this Challan with tax amount.

9.1.1 Modes/forms Of Receipt of Income Tax

In
come Tax can be collected into the following three ways or forms
In cash.
By cheques drawn on banks through clearing
By cheques drawn on Government Account or current account maintained with
the Bank. (Through transfer)

89
9.1.1.1 CASH RECEIPTS
When tax depositor wants to pay tax in
cash he follows the following procedure:
Tax payer goes to the FBR counter housed in office premises and get the
Challan form, Challan form must have PSID (Payment System Identification
Number)
Than he approaches the receipt counter along with cash and the Challan form
which contains PSID
ATO (Assistant treasury Officer) receives cash and one of the officers makes
entry in Globus, entering transaction in Globus is called inputting and writes
down the Globus transaction serial number on Challan form
ATO passes on the Challan form to the next counter, where the sitting officer
access the FBR System which is called

PaySys (Payment System)

The officer will access FBR system and check the PSID in pending PSIDs
He tallies the Challan form with the information which is given in PaySys, if there
is a discrepancy the Challan form will be returned to the tax depositor for
correction from the FBR counter. The officer will tally the following information
Name
CNIC
Tax amount etc.
After that the officer generates the CPR (Computerized Printed Receipt) in two
copies and passes on this to the ATO along with Challan form
ATO enters the entry number in Globus and checks the details of Challan form
and CPR e.g. name, amount etc.
After confirming all this ATO writes down the entry number on CPR, signs CPR
and stamps both copies of CPR and Challan form

90
 One copy of CPR is given to the tax depositor and one remains in bank with
Challan form which is sent to treasury office of the government on a daily basis
This is the whole process of receiving income tax in cash

9.1.1.2 Flow Chart of Cash receipt of Income Tax

91
 Tax payer goes to the FBR counter and get the Challan
form, Challan form must have PSID

Approaches the receipt counter along with cash and the

Challan form

ATO receives cash and one of the officers makes entry in

Globus, and writes down the Globus transaction serial
number on Challan form

ATO passes on the Challan form to the next counter,

where the sitting officer access the FBR PaySys System

The officer generates the CPR in two copies and passes

on this to the ATO along with Challan form

ATO enters the entry number in Globus and checks the

details of Challan form

ATO writes down the entry number on CPR, signs CPR

and stamps both copies of CPR and Challan form

One copy of CPR is given to the tax depositor and one

remains in bank with Challan form which is sent to
treasury office of the government on a daily basis

92
9.1.1.3 Cheque Deposit for Income Tax Payment
Tax can be
paid in the form of cheques. The procedure of income tax payment in the form of
cheque is as follow:

Tax depositor bring Challan form and cheque and goes to the receipt counter
The officer takes the Challan form and cheque and enters the PSID in FBR
system and check the information given in Challan form with the information
which are given in PaySys.
After that the officer give a token to the tax depositor and says him that he can
receive CPR within 7 working days
After that cheque goes in clearing process

Types of Clearing
There are three types of clearing
Same Day clearing
Normal clearing
Inter-city clearing

Same day clearing

In this clearing cheques clear on the same day and if
you want to pay tax under this clearing than cheque must be given to bank by 9:30am
and till 4:00pm. In this clearing the same date clearing stamp is affixed.

Normal clearing
In Normal clearing cheque clear on the next day till 9:00am. In
this clearing the next date clearing stamp is affixed

Inter-city clearing
In Intercity clearing cheques clear on the evening of the next day
mean 4:00pm of the next day.
When the cheque receive from customer and it goes in clearing
process

9.1.1.3.1 Clearing process

93
 The OG1 officer makes entry in the FBR system, tally the particulars and check
the amount of tax is the same as written on Challan form and in PaySys, making
entry in FBE system is called CAP (Collection Automation Project )/Capping.
Here there are two things
Receiving
Authorization
The OG1 make receiving entry and when cheques clear authorization entry is
made and Government account is credit when cheques are clear
After making entry in PaySys the OG1 officer through an interface do entry in the
Globus
After that the cheques are stamped, a copy of the list containing the detail of
cheques along with cheques will be passed on to the NIFT

On the next day NIFT informs that either cheques have been clear or not. The
cheques which are not cleared these cheques are returned to the SBP-BSC,
Lahore along with return statement which are with every cheques those have
been returned describing the reason of its return.
When customer come after specific days CPR is given to him. In case cheque is
not cleared cheque is return to the customer

94
9.1.1.3.2 Flow Chart of Cheque receipt of Income Tax

95
Tax depositor bring Challan form and cheque and goes to
the receipt counter

officer takes the Challan form and cheque and enters the
PSID in FBR system and check the information.

Cheque goes in clearing process

OG1 officer makes entry in the FBR system

Making entry in PaySys the OG1 officer through an

interface do entry in the Globus

Cheques are stamped and passed on to the NIFT

NIFT informs that either cheques have been clear or not.

The cheques which are not cleared these cheques are
returned to the SBP-BSC,.

When customer come after specific days CPR is given to

him. In case cheque is not cleared cheque is return to the
customer

96
9.1.1.4 TRANSFER DEPOSIT
Transfer means when tax is paid by the
government department because banking division maintain the government account so
one account of government is debit and other is credit. The procedure is as follow:
Challan along with cheques deposited at counter
The cheques are got passed from concerned units (DAD, PAD)
If DAD says ok than cheques are stamped
Receipts are normal issued next day received.
This receipt is almost like cash and receipt can be issued same day if needed.
Cheques so collected are delivered to the concerned unit where same are drawn
on.
In case any irregularity is noticed in such cheques by the paying Unit, they should be
returned by it with objection memos attached thereto, to the dealing official at Public
Accounts Unit who will return the cheques together with the Challans to the Government
Department concerned against surrender of the paper token issued or proper
acknowledgement for the same.

9.1.1.4.1 Flow Chart of Cheque receipt of Income Tax

Cheques
The so
cheques collected
If DAD Receipts
Challan are got are
says ok are
along with passed delivered
than normal
cheques from to the
cheques issued
deposited concerned concerned
are next day
at counter units unit
stamped received.
(DAD, where
PAD) same are
drawn on.

97
9.1.1.5 Balancing of Accounts

After business hours are over and the recording/ authorization of cheques /bills etc. in
the Globus system in respect of cash, clearing and transactions have been completed in
each of cash, clearing and transfer scrolls. A system generated abstracts to the Federal
and Provincial Governments payment will be obtained from Globus system. The
consolidated total of cash column will be agreed with the total showing by the Treasury
cash division. The total under the column Clearing will be agreed with the total figure of
the Inward Clearing Report of the clearing house/ NIFT. The figure in the Transfer
column of the abstract will agree with the figure of transfer scroll. In case there is any
difference in Public Account unit will be checked through instruments. After all the
figures have been agreed with the cash and transfer vouchers to the Federal and
Provincial Government accounts will be prepared.

98
9.1.2 Observations & Identify Problems

During the internship I have observed many problems in banking division which are as
follows:

The most important issue I have identify was that there are three counters of
FBR in banking division whose only purpose is to generate Challan form and do
not perform any other work. If they only have to generate the Challan form than
that forms may be generated by the SBP why these counters are made?
SBP receive tax and they also make entry in the system of FBR and at the day
end SBP also do the balancing. Firstly the banking division is doing their
accounting and balance. Then they are doing accounting and balance of FBR
System. Accounting and balance of FBR system are not the responsibility of
State Bank of Pakistan. SBP is the banker of the government not the accountant.
Bank work is to receive money and make payment. Balancing is not the work of
the bank it is he work of the accountant. SBP (BSC) instead of being a banker
also working as an accountant.
If I talk about on the FBR end there is no counter check about the amount for
which Challan have been generated. SBP make entry in their system about the
amount which they have received. FBR does not cross check either actually that
amount which is exactly received. This is biasness.
The next problem is that there centralized system regarding the balancing in SBP
(BSC). Each department who deduct tax send a consolidated figure to the
banking division banking division do the balancing of these amount also which
increase the work load on banking division.
The other problem of banking division is related to noise. Because of very noisy
and rushy place, it would decrease the performance of the employees. They feel
irritated most of the time.
The next problem which I observed is related to metal tokens which are given to
the general public for their turn. In modern days I don't think anyone using that
kind of a token.

99
 The next problem I observed is related to clearing. There is a large number of
clearing on the daily basis. And their entries are entered in both the system firstly
in Federal Board of Revenue (FBR) Payment System and secondly in SBP
System (Globus). This dual effort causes more time and I think one employee is
being wasted here for doing this effort.
The next problem I observed is that Barcode Readers are still not used in State
Bank of Pakistan especially in Banking Division where it needed the most. Now a
day the entries of Challan are entered in the system twice. By using barcode
readers the entries once entered is only need to scan then all the details will
automatically display on the other system. It will reduce the double effort.
The next problem I observed is related to transfer. No interface is available for
transfer. For transfer manual inputting is still used. Redundancy is available in the
transfer. That should be reduced.

9.1.3 RECOMMENDATIONS

FBR counters should not only generate Challan form but they should also do the
counter cheque at the day end. FBR should do balancing at their own end. At the
day end the Challan which they have generated reconcile it with the entry that
SBP made in their system. When FBR do balancing it automatically cross check
on the amount for which they have generated the Challan.
Now the systems are centralized in State Bank of Pakistan. They should be
decentralized. Every department has to do accounting and balance at their end.
It will helpful in the smooth flow of operations and reduce the work load on
banking division.
The electronic display should be used to facilitate customers.
Banking division should develop an interface to reduce the double effort for
transfer. Although the interface is already available for clearing. That should be
implemented on transfer which will be beneficial.
Barcode readers should be used in Banking Division. That will reduce the
workload of employees. The barcode reader can be used by the officer who is on

100
 the counter and also by an officer who is making entry in FBR system instead of
entering data. State Bank of Pakistan is currently working on it.
By developing an interface for transfer. It will save the work of one person which
will be utilized in some other work.
There should be a separate room for counting machine. Because it create noise
and may affect the employee performance.
Human resource should be utilized in an effective manner because redundancy
of work create monotony there should rotation of employee from one counter to
the other it may help to break out their monotony
Proper staff backup should be provided to every unit in case of their absence,
rotation, and transfer. So other employees can perform effectively at their post.
LED's placed in banking division should be used to facilitate customers. By telling
the public about the procedure of tax and other procedures.

9.1.4 Conclusion
The core responsibilities of the State Bank of Pakistan
go beyond the conventional functions of a central bank, by including the economic
growth objective in its statue, supporting the development of new financial institutions to
promote financial intermediation. The State Bank of Pakistan is to promote monetary
and financial stability and foster a sound and dynamic system, so as to achieve
sustained and equitable economic growth and prosperity in Pakistan. Its primary
functions include issue of notes, regulation of financial system, lender of last resort and
conduct of monetary policy. As I know that SBP BSC is the subsidiary of State Bank of
Pakistan which is executing its operation and functions on its behalf. The prime focus of
the report is on the mechanism of Income Tax, to find out the flaws in the operations
and give recommendations accordingly.

9.2 Interaction with officers came from Head Office

During the third week of my internship two officers came from Head Office, Karachi,
Miss Saima and her Assistant. They interact with internees to know how their internship
is going on and what the opinion internees have about SBP-BSC, Lahore. After that

101
Miss Saima said that all the internees would be divided into 3 groups and different
activities would be performed by the each group.

1st Activity
The first activity was that all internee within their group write down the
interest/hobbies that internee have individually and then match his interest with the
other group member and then group make a list and write down the common interest of
all the group members. The purpose of this activity was to know either internees have
interaction with each others or not.

2nd Activity
The second activity was each member of every group write down the
name of things which are required or necessary for survival if the internee has to live on
Moon for 3 days individually and then every group make a list and write down and write
down the things which the group members write individually with mutual consent. The
purpose of this activity was to teach the internees that when you work as a team you
learn new things, new ideas, share your knowledge and sometimes in team work you
are not able to act upon each idea but you should give respect to the other person
opinion. In team work member may come with great idea but all time it is not possible to
act upon that idea, team common interest is preferred. In all circumstances team work is
not preferred for example if you want to a work immediately you would like to perform it
individually instead perform it in team.

3rd Activity
The last activity was that two internees one by one read a paragraph.
Miss Saima said that on the reading of 1 st internee all the internees listen him carefully
and on the reading of 2nd internee all the internee show careless attitude talk with each
other and at the end miss asked from the internee whose were reading how they feel
while reading. The 1st internee said that intension encourage him and 2 nd one said that
when everyone was talking she felt insult and she got confused. The purpose of this
activity was to teach the internees that when someone is talking the best way to show
respect is to listen him carefully.
With these activities the session with Miss Saima and her Assistant ended. I leant a lot
from this session.
9.3 Prize Bound Draw
I attended a Prize Bound Draw which held in SBP-BSC,
Lahore. On 15 August 2016, in SBP-BSC, Lahore was 15th Prize Bound draw of the
denomination of 100 rupees Prize Bound. The Prize Bound is called Student Welfare

102
Prize Bound. The Prize Bound of 100 Rupees was discontinued in 1999 and again
continue in 2012.

Prize Bound Included in draw

A to CR series were included in the draw. All the
Prize Bounds incudes in draw, which was bought two months before the draw. Although
prize bound can be buy at any time but in draw only those will include which bought two
months before the draw and other will include in the next draw. Those Prize Bound
which bought till 14 June 2016 were eligible for the draw.

The Prize Bound Draw ceremony started by reciting the Holy Quran verses. After that it
was told that which bounds are eligible for draw and series of bounds which are
included in the draw. After the receipt of Holy Quran the DCM of Prize Bound Division
said that at 9 am we start the draw. On the denomination of 100 Rupees Bound the
detail of Winning Prizes is as follow

Amount of
Prizes No of Prizes
Prize Money

1st 1 Rs. 700000

2nd 3 Rs. 200000

3rd 1199 Rs. 1000

Prize Bound draw is held by the Prize bound draw committee and open to the general
public. Winning prize bounds are drawn through Hand Operated draw machines, which
are operated by special children in front of committee member and general public
attending the draw ceremony. The draw machines are checked by present Officers,
DCM of Prize Bound Division, Currency Officers and any person among the public
which is present who want to check the machine can check it. There were 4 machines
on which Winning Prize has to be drawn.
Hand Operated Draw Machines
Hand Operated Draw Machines are used for
constitution of winning members of Prize Bound at all the centers of SBP-BSC (Bank).
These machines are manufactured at Heavy Mechanical Complex, Taxilla. Machines
are very simple and easy to operate. There are three main components of the machines

103
 Handle
Disk
Glass Covered Window

There are 10 digits in each disk from 0 to 9 all the digits around the rod rotate
simultaneously, freely and independently when handle pulled by the operator. In front of
Machine when operator pulled it 6 winning digits appear.

The 1st prize is drawn on first machine. The 2 nd prize is drawn on remaining three
machines and the 3rd prizes are drawn on the machines. When 1 st and 2nd prizes are
drawn these Prizes are called from Right to Left and Left to Right after that 3rd Prizes
are only called from Left to Right. When Number is called one officer write it on a list,
one write in the file, one enter it in the computer and 2 more officer write it on the
papers. At the end of the draw they match with each other either there is any
discrepancy or not. If any number is drawn two times than an additional number is draw.
A TV Channel named Koh Noor telecast this Prize Bound draw live.

The result of the draw show and save in the following

Write on the paper
Show on multimedia
Microsoft Excel
On white board sheet are placed and write on it

Draw schedule is displayed at the field offices, official website of central Directorate of
National Savings and at SBP website. The draw list is available to the general public.
Official draw list is available on the next day of the draw which can also be downloaded
from SBP_BSC and CDNS Website.
Draw procedure continue till 1 pm and after when all prizes are drawn prize ceremony
come to the end. I learn a lot from this draw.

9.4 Visit of Pakistan Mint

During the last week of my internship Sir Mansha arranged the
visit of Pakistan Mint for all the internees. The details about Pakistan Mint and
Production process of coins are as follow

104
In Pakistan Mint coins of Rs 1, 2, 5 are made. The making of coin of Rs 10 is in
process. It will come in the market within 6 months. Coins making is the prime job of
Pakistan Mint, but other than that Civil and Military Awards, Postal Stamps, Medals and
Distinctions for boards and universities are also made at Pakistan Mint.

Pakistan Mint is actually developed by British during 1942 in Lahore due to threat of
attack in Calcutta and Mumbai. The intension was that when this threat removed they
transfer it to the Calcutta but in 1947 Pakistan came into being and this Mint came in
Pakistan part. The structure of Pakistan Mint and machines are since 1942. No change
is made in the structure Pakistan Mint.

Production Process of Coins

In Pakistan Mint the process of making coins and
departments which I saw is as follow
Melting Department
Engraving Department
Die Department
Rolling and Cutting Department
Annealing Department
Stamping Department
Examining Department

Melting Department
In this Department Alloy at 1100 degree is melted. Now a days
Aluminum alloy and others alloy are used for making coins. Aluminum alloy is melted
and after this Aluminum dried up is converted into ingots. Thickness of the ingots is kept
according to the standard which is 20mm, this is because it is to be forwarded into
rolling machines which accept standard width.

There were used to bronze coins and now converted into Aluminum alloy. This is
because there are two values of a coin. One is face value and other is metal value.
Face value must be larger than the metal value in production process in order to remain
it cost efficient.
The thing which I observed in Melting Department was that there were lot of heat and
noise but none of the employees were wearing protective clothes and earplug.

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Then the officer take the internees toward the next section which was Maintenance
section and whose is not directly related with production process its purpose is to
maintain the Mint and Machines. It is just like a workshop.

Engraving Department
This department actually deals with design of the coins.
Design is verified and approved by Ministry of Finance, modification are made if they
purpose some. According to these design different models are made and by carefully
resizing the design master die is made.

Die Department
In this department the die is made which play a key role in the
production of the coins. Die making is made with the help of Srew Press Machine. This
machine copy the design and from the model and make it on the die.

Rolling and Cutting Department

The output of the melting department is bring in
this department. Ingots made in the melting department work as input for rolling and
cutting department. Ingots are passed through different rollers in order to achieve the
required thickness of the metal. When ingots are passed through rollers, ingots got
thicker and their width also increase. When required thickness is achieved, ingots are
passed to the cutting presses where ingots are converted into the coins and the ingots
which remain after coins are made again sent in melting department.

Annealing Department
There are different continue processes in this department
Edge Making
Washing and Drying
Coins made through cutting press have sharp edges, to smoothen those edges edge
marking is done. Edges of coins are smoothened through automatic machines. After
that these coins are forwarded for washing, Soda ash and caustic soda is used for
washing the coins after washing coins are dried in dryer machines.

Stamping Department

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 When coins come from Annealing department, through master
die coins are stamped. Master dyes are installed in the pressers and those press
machines are used for stamping the coins. Final coins are prepared after stamping.

Examining Department
In this department coins are examined through conveyer belt
to sort out the defective pieces. After examining these coins are counted on machines
and are packed into the bags on which two seals are imposed. One is from the
employee of Pakistan Mint and other is from SBP_BSC, employee.

The Officer of Pakistan mint Showed to all the internees different medals which are
made in Pakistan Mint.
With this the visit at Pakistan Mint completed and all the internees come back to the
bank. I learn a lot through this visit.

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9.5 Problem I observed at bank
The problems which I observed at bank are
as follow
Inadequate on job training to the employees
Not proper maintenance of bank library
Frustrated employees in prize bound division
For internees staff is unable to give time
No practical work done by internee
Slow growth process at officer level
Age gap among employees sometimes create problems
Internet facility is not available for all the employees
Employees feel hesitation in job rotation

9.6 Recommendations

Gives employees adequate on the job training

Bank library should be updated and proper maintenance is required and librarian
backup should also available
Training should be given to the employees that they should keep calm
themselves when they are dealing with the public
When internees come for internship Staff should give time to them for clearing
their concepts
Realize to the employees that job rotation purpose is to learn them new and
versatile skills and increase knowledge which may help to reduce their hesitation
There should be friendly atmosphere among employees which may help to
reduce problem which arises due to age group differences

9.7 Feedback
In the last but not the least this internship built good traits in our
personality, and also the awareness about the banking system and its units. Although a
period of six weeks of internship is not enough to learn the complex operations of State
Bank of Pakistan BSC but I have made efforts to learn them to some extent. The
internship training provides a platform to obtain better knowledge about central bank
operations and to get experience for practical stage.

9.8 References

www.sbp.org.pk

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www.Sbpweb.org.pk
History of State Bank of Pakistan (Janhua, 2004)
Supervisor Mr. Saad, Sir Ali Tareen
Banking Division Manual
Notes, interaction with employees

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