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The Bank of Khyber.

Major Objectives

The Bank of Khyber (BOK) was formed through a NWFP Provincial Assembly Act known as "The Bank of Khyber Act 1991" passed in the month of June of that year. The Bank was formally launched on November 1, 1991 and its first branch office commenced commercial operations on University Road, Peshawar on December 22 of the same year.

The Bank of Khyber Act was based on the provisions of the 1973 Constitution which permits provinces of the country to conduct banking business within the province through organisations controlled by it. Consequently the Bank of Khyber was the second provincial bank established in the country after the Bank of Punjab, established in 1989.

The major objective behind the establishment of the Bank is to provide the much-needed banking facilities to traders and industrialists of the region and to augment the agricultural, industrial and economic development of the province. Other objectives include creation of employment opportunities in the rural areas of the province; to guide and assist overseas workers from the province to profitably invest their savings in the province; utilisation of funds generated by the Bank in agro-based, hi-tech and export-oriented projects; and to eventually pave the way for the establishment of a stock exchange in the province.

The Authorised capital of BOK is Rs. 1.00 billion. The Paid-up capital of the Bank has been established at Rs. 300 million out of which the 51 per cent share of the NWFP Government (Rs. 153 million)is currently subscribed. The balance 49 per cent of the Paid-up capital shall be offered to the general public through a floatation on the country's stock exchanges during the year 1993.

Certain international agencies and overseas banks like the International Finance Corporation (IFC) - an affiliate of the World Bank - and Interbank of Turkey have indicated their interest in taking up shares in BOK's equity. Negotiations are continuing with them and these institutions may be brought into the bank's equity by downward adjustment of the equity percentages of the NWFP Government and the general public. Discussions with these International institutions have also focused on the possibility of long-term Lines of Credit for financing economic development projects in the NWFP.

Since currently only the NWFP Government share of the Bank's Paid-up capital is subscribed. BOK has thus far been operating on only 51 per cent of its subscribed capital. Although the results achieved during the year 1992 are reasonable, even better results could have been obtained had the Paid-up capital been fully subscribed.

The Bank currently has 13 operational branches throughout the province covering all Division Headquarters of the province. In Peshawar five branches, located in important commercial areas, are operational. BOK currently aims at opening branches in the remaining district headquarters and commercial centres of the province and the year 1993 is expected to see considerable progress in this regard. The first 1993 branch shall be opened in the Hattar Industrial Estate which is the largest industrial estate in the province.

Based on the Recruitment Plan devised by the Bank, hiring of personnel was to be carried out in two stages: in the first stage only experienced staff were to be employed and in the second stage freshly qualified graduates/post-graduates in the related fields would be recruited.

Presently, the total strength of officers is 90 which will be gradually increased with the opening of new branches. All officers recruited have a minimum of 5 year's experience in banking. Thus merit has been the only criterion in the selection of personnel.

The Bank has adopted an all-officer cadre and as such the Bank has employed clerical or non-clerical staff only on contract basis. This policy has started paying dividends as various operational targets set at the beginning of 1992 have been surpassed and all activities have been conducted in a smooth and efficient manner.

Hiring of freshly qualified graduates/post-graduates constitutes the second stage of BOK's recruitment. Induction of such qualified personnel shall be conducted by way of competitive exams and interview. Arrangements for recruitment of qualified but inexperienced staff have been completed and the permission of the NWFP Government is awaited to proceed further in this regard. The new staff will cost less and can be trained according to a plan based on the requirements of the bank.

As far as the training of personnel is concerned external training facilities are being utilised till such time as an internal training institute is established. The average number of personnel in a branch is 4 officers well-trained in their responsibilities.

BOK is maintaining six types of deposit accounts which contribute towards overall deposit mobilisation. These are:-

* Current deposits

* Call deposits

* Profits and loss saving deposits

* Profit and loss term deposits

* Profit and loss notice deposits

* Sundry deposits

The rates offered on these accounts are very competitive and in accordance with market conditions. At present average rates of profit range from 5.5 per cent per annum to 15.5 per cent per annum depending upon the duration of the deposits and the type of accounts.

The total deposits, as on December 31, 1992, were Rs. 1209.64 million which exceeded the budgeted target of Rs. 1000 million set at the beginning of the year. Based on present trends, the deposits' target for 1993 has been projected at Rs. 1800 million. The present average cost of deposits is approximately 9 per cent.


BOK is actively pursuing development of business actively at the gross-root level. For this purpose the Bank has adopted simple procedures for facilitating financial requirements of small entrepreneurs. A working arrangement has been reached with the Agriculture Light Engineering Project (ALEP), a joint venture of the Government of NWFP and the Swiss Government whereby financial assistance will be provided by BOK to small projects jointly appraised by BOK and ALEP.

Discussions have also been held with FMO, a Dutch Finance Company, for extension of a credit line to BOK for facilitating long-term credits to small projects. Further negotiations with FMO are expected to be held in the near future.

Foreign Trade

Until such time as the Bank of Khyber receives permission from the State Bank of Pakistan for direct transaction of foreign exchange and international trade business, BOK is conducting this business through arrangement worked out with Scheduled and International Banks working in the country.

Future Scenario

North-West Frontier Province is a land of geographical diversity ranging from glacial mountain ranges in the North to arid and semi arid regions in the South. This geographical diversity holds out substantial potential for development of agriculture, forestry, agro-based industries, minerals and mineral-based industries, hydroelectricity, tourism etc. The Bank of Khyber being the first NWFP-based bank shall endeavour to assist in the development of sound businesses in these areas through financial assistance and technical support. Being a financial institution of a unique character and distinct profile in this province, the Bank of Khyber expects to be intricately involved in the development of the latent but economically feasible potential of the land in the years to come.

The opening up of the Central Asian republics for trade and investment has placed Peshawar in international limelight as it lies on a very important trade route to these regions. As the Afghan conflict slowly subsides Peshawar's importance as a point of entry to the region is expected to increase due to which international organisations interested in doing business with the republics shall consider it practical and expedient to locate themselves in this city. It is expected that this will result in significant economic advantages for Peshawar and NWFP. It is expected that the Bank of Khyber will be found prepared and advantageously positioned to exploit these benefits in favour of the province and the country.
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Title Annotation:Special Section: Industrial Finance; Pakistani banking industry
Author:Ahmed, Bashir
Publication:Economic Review
Date:Jun 1, 1993
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