Bushra Internship Nbp

ContentsEXECUTIVE SUMMARY......................................................................................................4

Sec:1.........................................................................................................................................7

INTRODUCTION....................................................................................................................7

BRIEF HISTORY OF NATIONAL BANK OF PAKISTAN...................................................7

SUMMARY OF ACHIEVEMENTS AND GROWTH OF NBP..............................................9

SUMMARY OF DIFFERENT FUNCTIONS:.......................................................................11

Sec:2...................................................................................................................................13

OVERVIEW OF ORGANIZATION..................................................................................13

Sec:5.......................................................................................................................................27

OPERATIONS OF THE ORGANIZATION..........................................................................27

DEPARTMENTS...................................................................................................................27

DEPOSITS.........................................................................................................................29

PRODUCTS LINE.............................................................................................................29

Fixed Deposit Account (Time Deposits)..........................................................................31

Foreign Currency Account..............................................................................................32

PRODUCTS...........................................................................................................................33

National Income Daily Account (NIDA).........................................................................34

NBP Saibaan...................................................................................................................35

NBP Advance Salary.......................................................................................................35

NBP Cash & Gold...........................................................................................................36

Students Loan Scheme.....................................................................................................36

NBP Karobar- President’s Rozgar Scheme....................................................................37

CORPORATE ADVANCES..............................................................................................38

Cash Finance..................................................................................................................38

Running Finance/ Overdraft...........................................................................................38

REMITTANCES................................................................................................................39

Demand Drafts................................................................................................................39

Travelers Cheques..........................................................................................................39

Foreign Remittances.......................................................................................................40

Swift System....................................................................................................................41

Mail Transfer..................................................................................................................41

Telegraphic Transfer......................................................................................................42

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Pay Order.......................................................................................................................42

Sec:6.......................................................................................................................................55

xiv) Islamic Banking......................................................................................................58

MY EXPERIENCE................................................................................................................60

How to Open an Account................................................................................................60

Classification of Deposits...............................................................................................60

Current Account or Demand Deposits............................................................................60

Partnership Account.......................................................................................................61

Procedure and Requirements for Opening Partnership Account....................................61

Limited Companies Account...........................................................................................61

Welfare Account..............................................................................................................62

Individual Account..........................................................................................................62

Saving Account...............................................................................................................63

Fixed Deposit Account....................................................................................................63

REMITTANCES............................................................................................................64

Clearing..........................................................................................................................64

Clearing House...............................................................................................................64

Functions of Clearing Department in Branch..................................................................64

Difference between Government and Bank Draft................................................................64

Banking Division.....................................................................................................................79

HUMAN RESOURCE MANAGEMENT..............................................................................79

SVP / Regional HR Chief, Regional Office, Multan...........................................83

PSO to Regional HR Chief......................................................................................83

Sec7:...................................................................................................................................86

SWOT ANALYSIS OF NATIONAL BANK OF PAKISTAN..........................................86

ORGANIZATIONAL STRENGTHS.............................................................................86

THREATS......................................................................................................................90

LIQUIDITY RATIOS..................................................................................................92

RETURN ON EQUITY RATIO.........................................................................................98

RETURN ON ASSETS......................................................................................................98

Comments.....................................................................................................................101

Comments.....................................................................................................................102

SUMMARY..................................................................................................................104

PESTEL ANALYSIS...........................................................................................................110

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PESTEL ANALYSIS IN NBP..............................................................................................110

Economical...........................................................................................................................111

Sociological..........................................................................................................................112

Technology...........................................................................................................................112

Environment.........................................................................................................................113

Legal.....................................................................................................................................113

competitor analysis…………………………………………………………………………………………………………..114

sec:8.………………………………………………………………………………………………………………………………..120

THEORY VS PRACTICAL………………………………………………………………………………………………………121

Sec: 9....................................................................................................................................123

FUTURE PROSPECTS OF NATIONAL BANK OF PAKISTAN.....................................124

Sec: 10..................................................................................................................................125

RECOMMENDATIONS......................................................................................................125

CONCLUSIONS..................................................................................................................127

REFRENCE…………………………………………………………………………………………………………………………128

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EXECUTIVE SUMMARY

This report is about my internship program with National Bank of Pakistan. In

this comprehensive report, I have discussed about every major aspect of the

bank, which I observed and perceived during my internship program. In this

report you will be able to find the detail about the bank, right from its

incorporation to the current position. Along with it, the processes, policies and

procedures of the bank are also discussed in detail.

As the main purpose of internship is to learn by working in practical

environment and to apply the knowledge acquired during the studies in a real

world scenario in order to tackle the problems using the knowledge and skill

learned during the academic process.

National Bank of Pakistan maintains its positions as Pakistan’s premier bank

determined to set higher standards of achievements. It is the major business

partner for the Government of Pakistan with special emphasis on fostering

Pakistan’s economic growth through aggressive and balanced lending policies.

I have completed my Internship at National Bank of Pakistan District Court

Branch Multan (0374). I have started my six week internship on and got

training regularly in various departments of the bank up to

I have explained the working process of the departments that I have worked in

as well as the departments functioning there. I worked in the following

departments; Deposit, Advances, Foreign Exchange, Accounts Opening, Bills

& Remittances, Clearing Section, Government Section.

After my Internship at National Bank of Pakistan, I am of the view that, the

bank has historically been the financial arm of the government and has enjoyed

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the blessings of state support in the form of huge public-sector funds and

deposits.

The bank has to ensure that, quality of human resource is needed to register

marked measureable improvement both in terms of skills and productivity.

NBP, being the only lending arm to the government for public sector

development, should design, develop and deliver products and services for

economic growth. NBP should provide sustainable financing for growth of

industries of critical national importance such as energy, education, healthcare,

transport, shipping, Research and Development. NBP should identify new

venues for financing for economic growth- curbing poverty and unemployment

OBJECTIVES OF STUDYING THE ORGANIZATION

The primary purpose of this study is to fulfillment of the requirements for the

degree of MBA. For this connection each student of this particular course is

required to undertake training in a relevant organization selected by them, for a

period of 6-8 weeks.

The secondary purpose of this internship is to understand how the theoretical

knowledge can be applied to the practical situations and examine an

organization’s financial issues and identify its opportunities/ problems and also

suggest corrective measures. This internship is also very necessary to gain

confidence and become aware of the mechanism of an organization. As an

internee I want to achieve following objectives during my internship and

organization study:

1. To familiarize with a business organization.

2. To familiarize with the different departments in the organization and

their functioning.

3. To enable myself to understand how the key business process are

carried out in organization.

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4. To understand how information is used in an organization for

decision making at various levels.

5. To relate theory with practice.

6. I was also keen to gain professional experience in an actual testing

environment.

7. I want to develop my skills in the application of theory to practical

work situations.

8. To develop my attitude conducive to effective interpersonal

relationships.

9. To acquire good work habits and sense of responsibility.

10. To enhance my learning experience by application of fundamental

concepts previously learned.

11. To observe, analyze and interpret the relevant data competently and

in a useful manner.

12. To develop my interpersonal communication.

13. I want to enhance my knowledge of the discipline of banking

administration.

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Sec:1

INTRODUCTION

BRIEF HISTORY OF NATIONAL BANK OF PAKISTAN

The history of National Bank of Pakistan is part of Pakistan’s struggle for

economic independence. National Bank of Pakistan was established on

November 9, 1949 under the National Bank of Pakistan Ordinance, 1949 in

order to cope with the crisis conditions which were developed after trade

deadlock with India and devaluation of Indian Rupee in 1949. Initially the

Bank was established with the objective to extend credit to the agriculture

sector. The normal procedure of establishing a banking company under the

Companies Law was set aside and the Bank was established through the

promulgation of an Ordinance, due to the crisis situation that had developed

with regard to financing of jute trade. The Bank commenced its operations

from November 20, 1949 at six important jute centers in the then, East Pakistan

and directed its resources in financing of jute crop. The Bank’s Karachi and

Lahore offices were subsequently opened in December 1949. The National

Bank of Pakistan came forward to establish its offices in the Cotton growing

areas and extended credit facilities liberally in order to restore stability to the

market. In 1951, the country was once again faced with a crisis in the cotton

trade when prices was crashed and touched the lowest level since independence

following the cessation of hostilities in Korea. The bank in collaboration with

the cotton board provided the necessary Credit facilities to the trade and the

crisis was tided over. The nature of responsibilities of the Bank is different and

unique from other banks/financial institutions. The Bank acts as the agent to

the State Bank of Pakistan for handling Provincial/Federal Government

Receipts and Payments on their behalf. The Bank has also played an important

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role in financing the country’s growing trade, which has expanded through the

years as diversification took place.

The National Bank of Pakistan has its headquarters in Karachi, Pakistan. The

bank operates 1249(2008) branches in Pakistan and 22(2008) overseas

branches. Under a trust Deed, the bank also provides services as trustee to

National Investment Trust (NIT) including safe custody of securities on behalf

of NIT. The National Bank of Pakistan has assets worth Rupees 737976.44

million on September 30, 2008.

National Bank of Pakistan is today a progressive, efficient, and customer

focused institution. It has developed a wide range of consumer products, to

enhance business and cater to the different segments of society. Some schemes

have been specifically designed for the low to middle income segments of the

population. These include NBP Karobar, NBP Advance Salary, NBP Saibaan,

NBP Kisan Dost, and NBP Cash n Gold.

The National Bank of Pakistan has implemented special credit schemes like

small finance for agriculture, business and industries, administrator to Qarz-e-

Hasna loans to students, self employment scheme for unemployed persons,

public transport scheme. The Bank has expanded its range of products and

services to include Shariah Compliant Islamic Banking products. For the

promotion of literature, NBP recently initiated the Annual Awards for

Excellence in Literature. NBP will confer annual awards to the best books in

Urdu and in all prominent regional languages published during the defined

period. Patronage from NBP would help creative work in the field of literature.

The Bank is also the largest sponsor of sports in Pakistan. It has provided

generously to philanthropic causes whenever the need arose.

It has taken various measures to facilitate overseas Pakistanis to send their

remittances in a convenient and efficient manner. In 2002 the Bank signed an

agreement with Western Union for expanding the base for documented

remittances. More recently it has started Electronic Home Remittances Project.

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This project introduces technology based system to handle inward remittances

efficiently, by ensuring that the Bank's branches keep a track of the remittance

received from abroad till its final receipt.

A number of initiatives have been taken, in terms of institutional restructuring,

changes in the field structure, in policies and procedures, in internal control

systems with special emphasis on corporate governance, adoption of Capital

Adequacy Standards under Basel II framework, in the up gradation of the IT

infrastructure and developing the human resources.

National Bank has earned recognition and numerous awards internationally. It

has been the recipient of The Bank of the Year 2001, 2002, 2004 and 2005

Award by The Banker Magazine, the Best Foreign Exchange Bank –– Pakistan

for 2004, 2005, 2006 and 2007, Global Finance, Best Emerging Market Bank

from Pakistan for the year 2005, Global Finance, Kisan Time Awards – 2005

for NBP's services in the agriculture field. It is listed amongst the Region's

largest banks and also amongst the largest banks in South Asia 2005, The

Asian Banker. It has also been presented a Recognition Award –– 2004 for

having a Gender Sensitive Management by WEBCOP AASHA besides other

awards.i

SUMMARY OF ACHIEVEMENTS AND GROWTH OF NBP

The precise summary of National Bank of Pakistan regarding its countrywide

and overseas operations is as fallows:

1949 National Bank of Pakistan (NBP) was established under the

National Bank of Pakistan Ordinance 1949 and was 100% govt.-owned.

NBP acted as an agent of the Central Bank wherever the State Bank did

not have its own Branch. It also undertook Government Treasury

operations. Its first branches were in jute growing areas in East Pakistan.

Offices in Karachi and Lahore followed.

1950 NBP established a branch in Jeddah, Saudi Arabia.

9

The Bank in 1950 had one subsidiary ‘The Bank of Bahawalpur’ on

December4, 1947 by the former Bahawalpur State

1955 By this time NBP had branches in London and Calcutta.

1957 NBP established a branch in Baghdad, Iraq.

1962 NBP established a branch in Dar-es-Salaam, Tanganyika.

1964 The Iraqi government nationalized NBP's Baghdad branch.

1965 The Indian government seized the Calcutta branch on the outbreak

of hostilities between India and Pakistan.

1967 The Tanzanian government nationalized the Dar-Es-Salaam

branch.

1971 NBP acquired Bank of China's two branches, one in Karachi and

one at Chittagong. At separation of East Pakistan NBP lost its branches

there. NBP merged with Eastern Mercantile Bank and with Eastern

Bank Corporation.

1974 The government of Pakistan nationalized NBP. As part of the

concomitant consolidation of the banking sector, NBP acquired Bank of

Bahawalpur (est. 1947).

1977 NBP opened an offshore brain Cairo.

1994 NBP amalgamated Mehran Bank (est. 1991).

1997 NBP's branch in Ashgabat, Turkmenistan commenced operations.

2000 NBP opened a representative office in Almaty, Kazakhstan.

2001 State Bank of Pakistan and Bank of England agree to allow only 2

Pakistani banks to operate in the UK. NBP and United Bank agreed to

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merge their operations to form Pakistan International Bank, of which

NBP would own 45% and United Bank 55%.

2003 NBP received permission to open a branch in Afghanistan.

2005 NBP closed its offshore branch in Cairo.

NATURE OF NATIONAL BANK OF PAKISTAN

National Bank of Pakistan was incorporated in Pakistan under the National

Bank of Pakistan Ordinance, 1949 and is listed on all the stock exchanges in

Pakistan. The bank is engaged in providing commercial banking and related

services in Pakistan and overseas. The bank operates 1,249 (2007:1,232)

branches in Pakistan and 22 (2007:18) overseas branches (including the Export

Processing Zone branch, Karachi). Under a Trust Deed, the bank also provides

services as trustee to National investment Trust (NIT) including safe custody of

securities on behalf of NIT.

The nature of responsibilities of the Bank is different and unique from other

banks/financial institutions. The bank also handles treasury transactions for the

Government of Pakistan as an agent to the State Bank of Pakistan for handling

provincial/Federal Government receipts and payments on their behalf. The

National Bank of Pakistan has also played an important role in financing the

country’s growing trade, which has expanded through the years as

diversification took place.

SUMMARY OF DIFFERENT FUNCTIONS:

The bank is providing all banking services of mercantile and commercial

banking permissible in the country, which include:

Accepting of deposits of money on current, fixed, saving, term deposit

and profit and loss sharing accounts.

Borrowing money and arranging finance from other banks.

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Advancing and lending money to its clients.

Financing of projects, including technical assistance, project appraisal

through long term/ short term loans, term finance and musharika

certificates, etc.

Buying, selling, dealing, including entering into forward contracts of

foreign exchange.

Financing of seasonal crops like cotton, wheat, rice, sugar cane, tobacco,

etc.

Receiving of bonds, valuables, etc. for safe custody.

Carrying on agency business for any description other than managing

agent, on behalf of clients including Government and local authorities.

Generating, undertaking, promoting, etc. of issue of shares and, bonds

etc.

Transacting guarantee and indemnity busines

Joint venturing with foreign dealers, agents and companies for its

representation abroad.

Participating in “World Bank” and “Asian Development Bank’s” lines

of credit.

Providing personalized Hajj services to intending Hajjis

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Sec:2

OVERVIEW OF ORGANIZATION

VISION

To be recognized as a leader and a brand synonymous

with trust, highest standards of service quality,

international best practices and social responsibility.

MISSION

NBP will aspire to the values that make NBP truly the Nation’s Bank, by :

Institutionalizing a merit and performance culture.

Creating a distinctive brand identity by providing the highest

standards of services.

Adopting the best international management practices.

Maximizing stakeholder’s value.

Discharging our responsibility as a good corporate citizen of Pakistan and

in countries where we operate.

CORE VALUES

Highest standards of Integrity.

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Institutionalizing teamwork and performance culture.

Excellence in service.

Advancement of skills for tomorrow’s challenges.

Awareness of social and community responsibility.

Value creation for all stakeholders.

GOALS

To enhance profitability and maximization of NBP share through

increasing leverage of existing customer base and diversified range of

products.

Excellence in Direction

Excellence in Growth

Excellence in Performance

Excellence in Management

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Sec:3Sec:3

MANAGEMENT OF ORGANIZATIONMANAGEMENT OF ORGANIZATION

Management is a distinct process consisting of activities of planning,

organizing, actuating and controlling performed to determine and accomplish

stated objectives with the use of human being and other resources.

MANGEMENT SYSTEM

The management has two types.

Centralized

Decentralized

Centralized Management tends to concentrate decision making at the top of

the organization

Decentralized disperses decision making and authority throughout and further

down the organizational hierarchy.

NBP have a centralized type of management because all the decisions are

taken by the top management.

MANAGEMENT STRUCTURE

CENTRAL BOARD

The general superintendent and direction of the affairs and business of the bank

shall be entrusted to the central board which may exercise all powers and

things as may be exercised or done or done by the bank and or not by this

15

ordinance expressly directed or required to be done by the bank in general

meeting.

The Central bank consists of the following directors namely:

Managing director

President

MANAGING DIRECTOR

The Managing director appointed by the central government under section 16,

nine directors is directed in local or special meeting by the share holder in the

following manners. The share holder registered in a branch, register maintained

for an area mentioned in sub section (5) of section 8, shall elect from amongst

themselves, such number of directors for that area as may be decided before

election by the central government having regard to the proportion which that

share capital subscribed by the share holders of that area bears to the whole.

Provided that shareholders registered in branch register maintain at Dacca shall

elect from among themselves at least two directors.

Three directors appointed by the central government, provided that total

number of elected directors representing the area for which the decca register is

maintained shall not be less than three.

PRESIDENT

The president of a Central board shall be appointed by the central government

from among the directors.

LOCAL BOARD

The local board shall be established for the area mentioned in sub section (5) of

section B, one each at Karachi ,Dacca and the Lahore ,and shall without

prejudice to the powers conferred by the sections 12, have power ,within the

16

prescribed limits generally to transact all usual business of the bank. A local

board should consist of following members namely;

The Managing director

One member appointed by the central board from amongst the

directors elected by the share holder register in the branch register of

the area.

Two members appointed by the central government from the area in

which the local board is situated.

Three members elected in local or special board meeting from

among themselves by the shareholder register in the branch register

of the area.

The Managing director shall be appointed by the central government for a

period not exceeding five years and on such salary and terms and condition of

the service as the central government may determined.

NEW MANAGEMENT STRUCTURE

The previous management was removed by the bank nationalization ordinance

1974. The general direction and superintendent of the affairs and business of

the banks vests in the Executive board consisting of President (Chief executive)

and five senior executives of the bank. The federal government in 1980

constituted a board of directors comprising the president and the members of

executive board of the bank and two additional members one representing the

ministry of finance and the other Pakistani banking council.

Thus therefore, all nationalized commercial banks are controlled by the

Pakistani banking council being subject to State bank of Pakistan regulation as

well. The federal ministry is responsible for bank operations in the ministry of

finance. Recently by the order of president of Pakistan, banking council of

Pakistan is removed.

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BOARD OF DIRECTORS

An executive board composed of six senior executives of the bank and the

president who is also the chief executive supervises the affairs and business of

the bank, called the Board of Directors.

MANAGEMENT COMMITTEE

Also there is a Management Committee consisting of nine senior executives of

the bank, called the members and the president who is also the chairman of the

committee.

TRAINIG AND MANAGEMENT DEVELOPMENT WING

National bank of Pakistan has its national and development centers and 4 staff

collages at: -

Karachi

Lahore

Peshawar

Islamabad

In these centers and staff colleges, the banking training is provided to the

officers, managers, and to potential managers. It arranges courses and seminars

for middle and higher management in all. Each year almost 1500 persons

receive training over there.

CORPORATE INFORMATION

Board of Directors

Syed Ali Raza Chairman & President, Chief executive

officer

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M. Ayuub Khan Tarin Director

Ibrar A. Mumtaz Director and SEVP and Group Chief,

Human Resources Management &

Administration Group

Tariq Kimrani Director

M. Arshad Chaudhry Director

Sikandar Hayat Jamali Director

Mian Kausar Hameed Director

AUDIT COMMITTEE

M. Ayuub Khan Tarin Chairman

Ibrar A. Mumtaz Chairman

Tariq Kimrani Chairman

M. Arshad Chaudhry Chairman

Mian Kausar Hameed Chairman

AUDITORS

Ford Rhodes Siddat Hyder &Co. Charterd Accountant

M. Yousuf Adil Saleem & Co. Charterd Accountant

LEGAL ADVISORS

Mandviwala & Zafar Charterd Accountant

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SENIOR MANAGEMENT

Qamar Hussain Chief Operating Officer & Head of Credit & Risk

Management

Masood Karim Shaikh SEVP & Group Chief, Corporate & Investment

Banking GroupShahid Anwar Khan SEVP & Group Chief, Overseas Banking Group

Dr. Asif A. Brohi SEVP & Group Chief, Operations Group

Amer Siddiqui SEVP & Group Chief, Commercial & Retail

Banking Group

Muhammed Nusrat Vohra SEVP & Group Chief, Treasury Management

Group

Dr. Mirza Abrar Baig SEVP & Group Chief, Human Resources

Management & Administration Group

Imam Bakhsh Baloch SEVP & Group Chief, Audit & Inspection Group

Ziaullah Khan Senior Executive Vice President

Nabi Bakhsh Soomro SEVP & Group Chief, Islamic Banking Group

Ekhlaq Ahmed EVP & Secretary Board of Directors

Tajammal Hussain

Bokharee

EVP & Group Chief, Special Assets Management

Group

Nadeem Anwar Ilyas EVP, PSO to the President & Group Chief,

Compliance Group (A)

Naeem Syed EVP & Divisional Head-Project Management

Office & Core Banking Applications

Aamir Sattar SVP & Financial Controller/ Divisional Head,

Financial Control Division

Atif Hassan Khan SVP & Group Chief (A) Information Technology

Groups

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OVERSEAS MANAGEMENT

R.A. Kaleemi SEVP & Chief Representative, Canada Office

M. Rafiq Bengali SEVP & Regional Chief Executive, Americas

RegionShahid Anwar Khan SEVP & Group Chief, Overseas Banking Group

Dr. Asif A. Brohi SEVP & Group Chief, Operations Group

Amer Siddiqui SEVP & Group Chief, Commercial & Retail

Banking Group

Muhammed Nusrat Vohra SEVP & Group Chief, Treasury Management

Group

Dr. Mirza Abrar Baig SEVP & Group Chief, Human Resources

Management & Administration Group

Imam Bakhsh Baloch SEVP & Group Chief, Audit & Inspection Group

Ziaullah Khan Senior Executive Vice President

Nabi Bakhsh Soomro SEVP & Group Chief, Islamic Banking Group

Ekhlaq Ahmed EVP & Secretary Board of Directors

Tajammal Hussain

Bokharee

EVP & Group Chief, Special

Nadeem Anwar Ilyas EVP, PSO to the President & Group Chief,

Compliance Group (A)

Naeem Syed EVP & Divisional Head-Project Management

Aamir Sattar SVP & Financial Controller/ Divisional Head,

Financial Control Division

21

Sec:4Sec:4

ORGANIZATIONAL NETWORKORGANIZATIONAL NETWORK

REGISTERED & HEAD OFFICE

Head office of NBP in NBP Building, I.I. Chundrigar Road, Karachi, Pakistan

which is “the city of lighting” in Urdu “Uroos-ul-Bilad” which was also the

first capital and ancient place of Pakistan. It carried out its successful journey

to make it an “Asian Tiger”.

SHARE REGISTERATION OFFICE

THK Associates (Pvt.) Ltd.

Shares Department, Ground Floor,

State Life Building #3,

Dr. Ziauddin Ahmed Road,

Karachi, Pakistan.

SHARE CAPITAL

Issued Capital

The bank was setup with an issued capital of Rs.1.5 million.

Authorized Capital

Authorized capital of National Bank of Pakistan in 2000 was Rs.25

Billion.

Issued, Subscribed, and Paid-up Capital

Issued, subscribed and paid-up capital in year 2008 was 10763702260

22

BRANCH NETWORK

Presently the Bank is divided into 10 Groups headed by SEVPs/EVPs. 9

Regions reporting to as many Regional Chiefs and 15 Single Branch Zones

headed by Zonal Chiefs; 12 corporate branches and 1,254 domestic branches

headed by Branch Managers control its field operations.

With the geographical development of its branches, the Bank has been able to

extend its services to a much larger number of Pakistanis all over the country.

Today it has more than 8.5 million accounts.

Bank maintains its presence in all the major financial centers of the world

through its 21overseas branches and 4 representative offices. Of these, three

representative offices have recently been set up at Tashkent (Uzbekistan), Baku

(Azerbaijan) and Almaty (Kazakhstan) to take advantage of the emerging

opportunities in CIS countries.

Apart from having a vast branch network, Bank is at the forefront in the

acquisition and application of new technologies in every aspect of its banking

facilities. It has acquired leased telephone lines for on-line banking. The Bank

has 12 Regional Computer Centers to cover various on-line and batch system

requirements of branches and controlling offices. Bank has also a presence on

the Internet. It has modernized its services by installing Automated Teller

Machines (ATMs) called "CASH LINK" at selected branches and presently 17

ATMs are operational in major cities.

GLOBAL NETWORK

18 Overseas Branches

5 Representative Offices

1 overseas Subsidiaries

23

Joint Venture.

Overseas Branch Network:

Paris

Baku

Seoul

Kabul

Tokyo

Osaka

Dhaka

Bahrain

Bishkek

Kowloon

Ashgabat

Jalalabad

Frankfurt

Chittagong

New York

Hong Kong

Washington D.C.

KEPZ Offshore Banking Unit, Cairo

Oversea Representative Offices

Baku

Beijing

Toronto

Chicago

Tashkent

Oversea Subsidiary

CJSC Almaty, Kazakhstan

24

DOMESTIC NETWORK

1254 Domestic Branches

6 domestic Subsidiaries

29 domestic regional offices

Domestic Subsidiaries

NBP Capital Ltd.

Taurus Securities Ltd.

NBP Exchange Company Ltd

National Bank Modaraba Management Co.

National Agricultural and Storage company Ltd.

Cast – N- Link Products Ltd

Joint Venture

United National Bank Ltd., UK

(Economic Indicators Pakistan, Published by Economic

research Wing NBP, Head Office Karachi)

25

ORGANIZATION CHART

26

27

President

Senior Executive Vice-President

Executive Vice-President

Senior Vice-President

Vice-President

Assistant Vice-President

Bra

nch

Hie

rarc

hy

Officer Grade 1

Officer Grade 2

Officer Grade 3

Senior Assistant

Assistant

Driver

Peon

Sec:5

OPERATIONS OF THE ORGANIZATION

In NBP,different departments are dealing with several important functions.The

list of departments are as follows:

DEPARTMENTS AT NBP

There are several departments in NBP, following is the detail according to the

department functions and their product lines.

DEPARTMENTS

Banking procedures are divided between various departments. Different

departments do their jobs in occurrence with the bank policies. In National

Bank of Pakistan each branch is divided into various departments depending on

their size and volume of business. Head of department manages each

department & officials of the branch follow procedures. The departments

working within National Bank of Pakistan main branch are as under:

ACCOUNT OPENING

A customer willing to open the account in the bank must fill firstly the account

opening forms (prescribed format issued by the bank).

The nature of account can be single, joint, sole proprietor, partnership, etc. The

condition of account varies in each case.

For Individual / Sole Proprietorship

A part from account opening form it requires NIC and passport size

photograph.

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For Partnership

Bank further requires partnership deal and certified copy of partnership

mandate.

For Limited company

The following documents must be available like, copy of certificate in

corporation, memorandum, articles of association, and list of director,

copy of board resolution, copy of NIC to the directors and latest copy of

forms.

The open account it is also mandatory to have an introducer, who introducer you

(customer) on his behalf and should already holds is accounts in the same branch.

PAYMENT OF CHEQUES

Due to efficient staff personal computer, it saves great time of customer and as

mention earlier the signatures are matched to minimize the fraudulent activities.

CHEQUE BOOKS

The Cheque requisition receipt is delivered to the Cheque issuance section, from

where authorized persons will issue checkbooks. There are various checkbooks

such as 10, 25, 50 and 100 pages/leaf. The customer is also liable to pay fixed

charges on the receipt of checkbooks in the form of excise duty.

CLEARING DEPARTMENT

In clearing department, clearinghouse is a devise, which enable banker to settle

cheques and other instruments, drawn on each other.

National Bank of Pakistan is the member of SBP Clearing House and receives

cheques, Demand Draft and other negotiable instruments for the presentation of

its payment and also provides excellent services for clearing cheques and other

inter bank obligations between the banks.

29

In this way different banks get cheques drawn by the customers on one another.

So, to off set the inter-bank claims 14 branches of SBP are providing clearing

facility for scheduled banks. The State Bank of Pakistan merely debit or credit the

balances of banks whose accounts and services are maintained with it. It easier

for member banks to adjust their claims against each other in the books of the

state bank.

DEPOSITS

The National Bank of Pakistan offers to their clients a variety of Deposit

Schemes with personalized services at competitive rates of interest. Any

Pakistani citizen can open his/her account for any deposit scheme at any of its

Branches strategically located throughout Pakistan. The Bank with its huge

network of 1243 branches garners savings from both the rich and the poor in

urban as well as rural areas. Even a poor farmer in a remote village, with his

meager annual income, feels secure to safe keep his minuscule savings in

National Bank of Pakistan, Because National Bank of Pakistan has a long

heritage of trust and professional commitment.

PRODUCTS LINE

Current Deposits

These are payable to the customer when ever they are demanded. When a

banker accepts a demand deposit, he incurs the obligation of paying all cheques

etc, drawn against him to the extent of the balance in the account. Because of

their nature, these deposits are treated as current liabilities by the banks.

Bankers in Pakistan do not allow any profit on these deposits, and customers

are required to maintain a minimum balance, failing which incidental charges

are deducted from such accounts. This is because Current Deposits may be

withdrawn by the depositors at any time, and as such the bank is not entirely

free to employ such deposits. Current Accounts/ Basic Banking accounts are

opened, on proper introduction and submission of required documents along

30

with initial deposit prescribed from time to time. Basic banking accounts are

opened for an individuals (single or joint) only whereas current accounts are

opened for individuals (single or joint) Charitable institution, provident and

other funds of benevolent nature of local bodies, autonomous corporations,

companies, associations, educational institutions, firms etc. and in all other

cases where the accounts are to opened under the order of a competent court of

law. No profit is paid on the balances of current/basic banking accounts. The

bank is authorized to deduct service charges (incidental charges) on current

accounts levied through its half yearly schedule of charges, in case the average

balance falls below the minimum balance as prescribed by the bank. No

balance maintenance condition is applied on basic banking account.

PLS Saving Deposits

In Pakistan a Savings Deposits Account can be opened with a very small

amount of money, and the depositor is issued a cheque book for withdrawals.

Profit is paid at a flexible rate calculated on six monthly basis under the Interest

Free Banking System. There is no restriction on the withdrawals from the

deposit accounts but the amount of money withdraw is deleted from the amount

to be taken for calculation of products for assessment of profit to be paid to the

account holder. It discourages unnecessary withdrawals from the deposits. In

order to popularize the scheme the SBP has allowed the Savings Scheme for

school and college students and industrial labour also. The purpose of these

accounts is to inculcate the habit of savings in the constituents. As such, the

initial deposits required for opening these accounts are very nominal. iiNBP

charge Rs.500 for opening of PLS Savings deposits.

The salient features of profit and loss sharing and saving accounts of NBP are

as fallows:

1. These accounts can be opened by individuals in their own single or joint

name. The PLS savings account can also be opened for provident fund

31

or other benevolent funds of companies, firms, organizations, NGO’s

and educational institutions.

2. PLS saving account can be opened with a minimum amount of Rs.500/-

only

3. To share in the profit a minimum balance of Rs.500/- must be

maintained in the account. The minimum balance on sixth and last of

month will qualify for the profits. The profits will be calculated on the

basis of monthly minimum balance for the periods of six months i.e.

from January to June and July to December

4. The head office of NBP determines the profit or loss on PLS saving

deposits and advice its branches the rate and time of distribution of these

profits.

5. There shall be no restrictions on maintaining the maximum balance in

PLS saving account.

6. On the first day of Ramzan each year the Zakat at the rate of 2.5% will

be deducted from these deposits on the balance of that day. But if

depositors affix an affidavit of Zakat deduction along with account

opening form or he is a non-Muslim, no Zakat will be deducted from his

account.

Fixed Deposit Account (Time Deposits)

The deposits that can be withdrawn after a specified period of time are referred

to as Fixed or Term Deposits. The period for which these deposits are kept by

the bank ordinarily varies from three months to five years in accordance with

the agreement made between the customer and the banker. Profit/Return is paid

to the depositors on all fixed or Time deposits, and the rate of profit/Return

varies with the duration for which the amount is kept with the banker. By

lending out or investing these funds, the bank earns more than the Profit/Return

32

that it has to pay on them to the depositors. iii By giving an advance notice to

the bank the deposit can be withdraw from the bank before the expiry of the

period. Fixed deposit accounts have higher rate of interest as compare to other

accounts. The rate of interest rises with the length of period and the amount of

deposit. The bank grants to the depositor a fix deposit (FDR) which is not

transferable to any other person. The silent features of fixed deposit account of

NBP are as fallows

1. The PLS term deposit are opened for individuals in their own single or

joint names, companies firms and other organizations.

2. The PLS term deposit receipt are issued for any amount. There is

minimum or maximum limit or deposits in a single term deposit

account.

3. PLS term depositors may be allowed some facilities against the security

of these receipt credits, after making “Lien” on the relevant receipt and

subject to recovery of service charges.

4. Under term deposit scheme the depositors not cease to earn the profit

immediately, after the respective maturity date.

Foreign Currency Account

Government of Pakistan has introduced many important reforms in Foreign

Exchange Control in the country since February, 1990, for the purpose of

strengthening the Foreign Exchange Reserves. One of these reforms relates to

foreign currency accounts, which can be opened in United States Dollars,

Pound Sterling, Euro and Japanese Yen in any of the authorized branches of

commercial banks throughout the country.iv Foreign currency accounts are

opened, on proper introduction and submission of required documents along

with an initial deposit prescribed from time to time. Rates of return on foreign

currency deposits are subject to fluctuation as determined in accordance with

State Bank of Pakistan directives and will be paid on six monthly basis whereas

33

the return on term deposit/SNTD will be paid on maturity or as prescribed by

SBP. The bank shall have no responsibility for or liability to the account

holders for any diminution due to taxes imposed or depreciation in the value of

funds credited to the account whether due to devaluation or fluctuation in the

exchange rate or other wise.

PRODUCTS

NBP Premium Aamdani

NBP Premium aamdani is a retail product of the bank. The amount of

investment required for this account is Rs. 20,000/-to Rs. 5,000,000.The

investment period is 5 years. Zakat and withholding tax will be deducted as per

rules. In NBP premium aamdani, the account holders have benefit of free

demand draft, pay order; free cheque book and NBP cash card (ATM+Debit).

The Financing facility is available up to 90% of the deposit value.v Profit paid

every period as follows:

34

Period Profit

Rates

1st year 7.50%

2nd years 8.50%

3rd years 9.50%

4th years 10.50%

5th years 11%

NBP Premium Saver

NBP Premium saver is a retail product of the bank. The minimum saving

balance of Rs. 20,001 and a maximum balance of Rs. 300,000 are required for

opening a premium saver account. Two debit withdrawals allowed in a month

and no limit on number of deposit transactions. The profit is calculated

monthly and Paid on half yearly basis. Free NBP Cash Card (ATM + Debit)

facility is available to account holder.vi

National Income Daily Account (NIDA)

The scheme of National income daily account was launched in December 1995

to attract corporate customers. It is a current account scheme and is part of the

profit and loss system of accounts in operation throughout the country.

Deposits in the NIDA accepted on the condition that the depositor shall always

maintain a minimum balance as prescribed by the bank in his account. In the

event however, that any depositor wishes to withdraw the amount and the

balance in his account is less than the required amount, the account will be

converted to the ordinary PLS SB account for the purpose of calculating profit.

Advances

National Bank of Pakistan plays a pivotal role in translating the government's

development plans in terms of growth in industrial, commercial and

agricultural sectors in Pakistan. Accordingly the Bank has formulated its Credit

Policy under the guidelines of SBP-the Central Bank of Pakistan. In normal

circumstances the bank has consider following factors in view before framing

financing policies.

Capital position

Risk and profitability of various types of financing

Stability of deposits

35

Economic conditions

Influence of monetary and fiscal policies

Ability and experience of bank personnel

Credit needs of the area served.

PRODUCT LINE

NBP Saibaan

The NBP Saibaan is retail product of the bank. It has different product items

which are home purchase, home construction, home renovation and purchase of

land plus construction. If anyone has a Home Finance Facility outstanding with

another bank he can have it transferred to NBP through a hassle-free process. vii

A brief description of these products is as fallows.

TYPE OF

ADVANCE

Financing

Amount

Financing

Period

Debt to equity

Ratio

Home Purchase (House or

Apartment)

Rs. 35 Million 3 to 20 years 85:15

(maximum)

Home

Construction


(maximum)

Home

Renovation


(maximum)

Purchase of land Plus

Construction

Rs.35 Million 3 to 20 years 80:20

(maximum)

NBP Advance Salary

The NBP Advance salary has been the flag-ship product for NBP. NBP

Advance Salary, the leading personal loan product of the country, is

maintaining its inimitability ever since it was launched. This was only possible

due to its swift growth and remarkable loan disbursement of over 118 billion.viii

You can avail up to 20 net take home salaries with easy repayment

36

installments. Its hassle free acquisition with no prior formalities and easy

availability in a short turn around time is attributed as the most distinguishing

features of the product. The product is offered countrywide. The terms and

conditions of NBP Advance salary is shown on next page:

NBP Cash & Gold

With NBP’s Cash & Gold, the customers meet their need for ready cash

against their idle gold jewelry. The rate of mark up is 13% p.a. This product

has following featuresix

Facility of Rs. 7,000 against each 10 grams of net contents of gold

No maximum limits of cash

Repayment after one year

Only gold ornaments acceptable

Weight and quality of gold to be determined by NBP's appointed

schroffs

No penalty for early repayment

Students Loan Scheme

Pursuant to the announcement made by the Federal Finance Minister in his

2001-2002 budget speech, a Student Loan Scheme (SLS) for Education was

launched by the Government of Pakistan in collaboration with major

commercial banks of Pakistan (NBP, HBL, UBL, MCB and ABL). Under the

Scheme, financial assistance is provided by way of Interest Free Loans to the

meritorious students who have financial constraints for pursuing their studies in

Scientific, Technical and Professional education within Pakistan. The Scheme

is being administered by a high powered committee comprising Deputy

Governor, State Bank of Pakistan, Presidents of the commercial banks and

representative of Ministry of Finance, Government of Pakistan. x

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NBP Karobar- President’s Rozgar Scheme

The solution of Pakistan’s major socio-economic problems primarily lies in the

development and growth of small & micro businesses. These will not only

provide employment opportunities to ever-growing population demand but will

also become the catalyst for breaking the vicious circle of poverty. In this

regard, NBP has developed a full range of Products under the President’s

Rozgar Scheme with a brand name of “NBP KAROBAR”. The scheme will be

offered to eligible young and literate citizens of Pakistan, falling within an age

group of 18-40 years having a minimum qualification of Matriculation (except

for females in the PCO/Tele-center product). The eligible borrowers will be

required to make a down payment of 15%. Asset and Life & Disability

insurances will be mandatory under this scheme. The 15% down payment will

include 1st year’s asset insurance premium. However, the cost of life and

disability insurance will be borne by GOP. The mark-up rate for the 1st year

will be 12% and for the subsequent years it will be 1 year KIBOR + 2%. Fifty

percent (50%) of this rate will be paid by the customer i.e. 6% and the balance

of 6% will be borne by GOP. Additionally, first 10% of the losses under the

scheme will be taken-up by GOP. Initially, under the President’s Rozgar

scheme, NBP will offer following products:

a) NBP Karobar Utility Store (under a Franchise with Utility Stores

Corporation)

b) NBP Karobar Mobile General Store (without USC Franchise)

c) NBP Karobar Transport

d) NBP Karobar PCO

e) NBP Karobar Tele-center

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CORPORATE ADVANCES

Cash Finance

This is a very common form of borrowing by commercial and industrial

concerns and is made available either against pledge or hypothecation of goods,

produce or merchandise. In cash finance, a borrower is allowed to borrow

money from the banker up to a certain limit, either at once or as and when

required. The borrower prefers this form of lending due to the facility of paying

markup/services charges only on the amount he actually utilizes. If the

borrower does not utilize the full limit, the banker has to lose return on the un-

utilized amount. In order to offset this loss, the banker may provide for a

suitable clause in the cash finance agreement, according to which the borrower

has to pay markup/service charges on at least on self or one quarter of the

amount of cash finance limit allowed to him even when he does not utilize that

amount.

Running Finance/ Overdraft

This is the most common form of bank lending. When a borrower requires

temporary accommodation his banker allows withdrawals on his account in

excess of the balance which the borrowing customer has in credit, and an

overdraft thus occurs. This accommodation is generally allowed against

collateral securities. When it is against collateral securities it is called “Secured

Overdraft” and when the borrowing customer cannot offer any collateral

security except his personal security, the accommodation is called a “Clean

Overdraft”. The borrowing customer is in an advantageous position in an

overdraft, because he has to pay service charges only on the balance

outstanding against him. The main difference between a cash finance and

overdraft lies in the fact that cash finance is a bank finance used for long term

by commercial and industrial concern on regular basis, while an overdraft is a

temporary accommodation occasionally resorted to.

39

Demand Finance

When a customer borrows from a banker a fixed amount repayable either in

periodic installments or in lump sum at a fixed future time, it is called a “loan”.

When bankers allow loans to their customers against collateral securities they

are called “secured loans” and when no collateral security is taken they are

called “clean loans”.

The amount of loan is placed at the borrower’s disposal in lump sum for the

period agreed upon, and the borrowing customer has to pay interest on the

entire amount. Thus the borrower gets a fixed amount of money for his use,

while the banker feels satisfied in lending money in fixed amounts for definite

short periods against a satisfactory security.

REMITTANCES

Demand Drafts

The National Bank of Pakistan provides demand drafts at very reasonable rates

with safety, speedy and reliable way to transfer money. Any person whether an

account holder of the bank or not, can purchase a Demand Draft form a bank.

Travelers Cheques

They are generally issued for the convenience of person travelling abroad, but

some Pakistani banks issue them in Pakistan currency also for use within the

country as well. Before issuing, the bankers receive an amount equal to the face

value of the cheques, and also charge a small commission. The travelers’

cheques are for fixed amount and are treated as Order cheques payable only to

the purchaser whose specimen signature appears on each traveler’s cheque

itself. Foreign currency travelers cheques are issued and encashed in

accordance with the provisions of the Exchange Control Regulation Act, 1947.

While making payment, the paying banker must insist that the holder signs in

his presence.xi

40

Letter Of Credit

Letters of credit are very useful instruments in facilitating commercial relations

between businessmen at various places. Letter of credit state the limit of the

credit and the time during which it is held at the disposal of the grantee, but

they are neither negotiable nor transferable. Letter of credit may be revocable.

There are many kinds of letter of credit such as Revolving credit, Back to Back

credit, Claused credit etc. NBP is committed to offering its business customers

the widest range of options in the area of money transfer. If you are a

commercial enterprise then our Letter of Credit service is just what you are

looking for. With competitive rates, security, and ease of transaction, NBP

Letters of Credit are the best way to do your business transactions.

Foreign Remittances

To facilitate its customers in the area of Home Remittances, National Bank of

Pakistan has taken a number of measures to:

Increase home remittances through the banking system.

Meet the SBP directives/instructions for timely and prompt delivery of

remittances to the beneficiaries.

The new features of NBP foreign remittances include:

The existing system of home remittances has been revised/significantly

improved and well-trained field functionaries are posted to provide

efficient and reliable home remittance services to nonresident Pakistanis

at 15 overseas branches of the Bank besides United National Bank (the

joint venture between NBP and UBL in UK)., and Bank Al-Jazira, Saudi

Arabia.

Zero Tariffs: NBP is providing home remittance services without any

charges.

41

Strict monitoring of the system is done to ensure the highest possible

security.

Special courier services are hired for expeditious delivery of home

remittances to the beneficiaries.

Swift System

The SWIFT system (Society for Worldwide Inter bank Financial

Telecommunication) has been introduced for speedy services in the area of

home remittances. The system has built-in features of computerized test keys,

which eliminates the manual application of tests that often cause delay in the

payment of home remittances. The SWIFT Center is operational at National

Bank of Pakistan with a universal access number NBP-PKKA. All NBP

overseas branches and overseas correspondents (over 450) are drawing

remittances through SWIFT. Using the NBP network of branches, we can

safely and speedily transfer money for our business and personal needs.

Mail Transfer

A Mail Transfer is a form of remittance in which the amount remitted by a

customer or a non-customer is directly credited to the account of the

beneficiary with another branch. Move your money safely and quickly using

NBP Mail Transfer service. And NBP also offer the most competitive rates in

the market. They charges Rs 50/- exchange rate and RS 75/- postage charges on

issuing mail transfer. When the money is not required immediately, the

remittances can also be made by mail transfer (MT). Here the selling office of

the bank sends instructions in writing by mail to the paying bank for the

payment of a specified amount of money. Debiting to the buyer’s account at the

selling office and crediting to the recipient’s account at the paying bank make

the payment under this transfer. NBP taxes mail charges from the applicant

where no excise duty is charged. Postage charges on mail transfer are actual

42

minimum Rs. 40/- if sent by registered post locally Rs.40/- if sent by registered

post inland on party’s request.

Telegraphic Transfer

Telegraphic Transfer is a form of remittance, which is advised by telegram,

telex or fax machines. The fundamental principles of such transfer are

otherwise identical with the Mail Transfer. It is the message, which is sent from

one branch to another on the order of payer to payee through wire. It is one of

the quickest means to transfer fund through the use of telex/fax/internet or

cable. Payment to the beneficiary is affected directly by the drawee office

upon identification or through credit into beneficiary’s bank account. As such

remitting office is not required to issue any instrument payment to the remitter

for delivery to the beneficiary.

Pay Order

NBP provides another reason to transfer your money using our facilities. NBP

pay orders are a secure and easy way to move your money from one place to

another. And, as usual, NBP charges for this service are extremely

competitive. The charges of NBP are very low all over the Pakistan. It charges

Rs 50/- for NBP account holders on issuing one payment order, and charges Rs

100/- for NBP non-account holders on issuing one payment order. It charges Rs

25/- for students on payment of fees of educational institutions. If some one

want a duplicate of payment order they charges Rs 100/- for NBP account

holders and Rs 150/- for non account holders.

FORIEN EXCHANGE DEPARTMENT

FOREIGN EXCHANGE IS AN IMPORTANT DEPARTMENT IN

BANK SYSTEM. IN THE FOREIGN EXCHANGE DEPARTMENT

ALL THE OPERATIONS OF THE BANK ARE DONE IN THE SAME

WAY AS IN ALL OTHER DEPARTMENTS OF THE BANK THIS

DEPARTMENT ALSO INVOLVE IN DEPOSITS, REMITTANCES

43

AND ADVANCES BUT THE DIFFERENCE WITH OTHER

DEPARTMENT THAT THE FOREIGN EXCHANGE DEPARTMENT

DEALS IN FOREIGN CURRENCY RATHER THEN IN LOCAL

CURRENCY. FOR OPENING OF ACCOUNT IN FOREIGN

EXCHANGE THE MINIMUM BALANCE REQUIRED IS $100.THIS

DEPARTMENT IS JUST LIKE CASH DEPARTMENT IN LOCAL

CURRENCY. IN THIS DEPARTMENT, THE DEALING IS MADE

IN FOREIGN CURRENCY.

IN NATIONAL BANK OF PAKISTAN, FOUR CURRENCY

ACCOUNTS ARE AVAILABLE:

US Dollar

Pound Sterling

Japanese Yen

Euro

FUNCTION

The department performs the following functions:

Account opening

Account closing

Inward/outward remittance

Issuance of traveler cheques

IMPORT AND EXPORT SECTION

Export Section

A term used for goods and articles commodities sent from the country to

another. Exports in Pakistan are done by the following four modes. These

modes are:

Advance Payment

44

Document Against Acceptance

Collection

Under L.C

Advance Payment

In this type of export the importer is making the payment in advance. This

shows the height of confidence between importers after the shipment is

completed then the bank sends and E-form to SBP stating the export being

made.

Document against Acceptance (D/A)

Consignment is given to the auction house with out any order. A trust receipt is

being made issued. Amount is given to the exporter when the goods are being

sold or if the auction houses are not able to give the exporter the required

money then gave to return the goods in full to the exporter. This payment is

made after a specific period of time on which both the parties had agreed i.e.

30, 60, 90, 120, 180, days. If neither the payment is made nor the goods are

returned the importer (auction house) are treated as criminal under section 420

of criminal act in Pakistan.

Collection

Under this type of exports, bank has no liability, buyer and seller sets the rules

for this type of export. Only documents are rooted through the bank and also

payment is received through the bank. It is done with the prior arrangement

between the buyer and seller firm order. Payment is made by the draft, when

the bank received the documents through other bank the payment is made.

The exporter produces the following documents with the bank at the time of

export.

Export license

Airway bill or bill of lading

45

Invoice

Packing list

Certificate of chamber of commerce

Insurance of goods

In this type of export payment can be made in parts.

Under Letter Of Credit

Bank receives an L.C from the importer for exporter of goods. In this class of

LC the exporter with that listed in the LC makes the payment after a specific

period of time bank checks all the documents provided. If no error then

payment is being made else vice verse. The payment in this type of export is

made in full else specified, partly payment may be made when both the parties

agrees. After receiving the LC and checking all the documents the officer is

issuing an approval sheet. The bank provides the bill of exchange.

Exporters provide the following documents to the bank.

Bill of lading or air way bill

Invoice

Packing list

Certificate of chamber of commerce

Insurance

Document of Export

Following documents are required for export

Financial documents

Shipping documents

Miscellaneous documents

Commercial document

Original Invoices of the transaction for sale.

Bills of Exchange drawn on the importer by the exporter

46

Bills of Lading from the shipping company along with the details

Insurance documents

Exporter is known to the Bank and is a bonafide businessman and customer in

Pakistan. He has made arrangements with realization of the export proceeds,

which must be made within 120 days from the date of the shipment of the

goods.

IMPORT SECTION

Letter of Credit

A letter of credit is defined as under “Undertaking by the importer’s bank to

exporter that the draw in accordance with terms and conditions of the credit,

will be honored if presented with in the validity of the credit.”

It is a conditional undertaking by the Bank to make payment to the exporter if

he fulfills the terms of credit by presenting the required documents to the bank

in his country. In fact LC is a legal document on behalf on which the payment

made by the importer’s bank to the exporter’s bank.

National Bank of Pakistan is providing this service to its customers who have

an account with the branch and other businessmen too. This facility has been

recognized as a modern banking activity of all commercial banks that are

included in the list of 6000 Banks internationally.

Information in LC Document

The name of the local company, which is importing the goods

The name of foreign company, which is exporting the goods

The details of the goods to be transacted including the amount, quality,

mode of packing etc.

The total amount of the LC

The number of days for which the LC is valid

The name of the banks, who are regulating all these dealings

47

The name of the carrier which will be used for the shipment of the goods to

the importer

The bill of shipment number

Parties involved in a letter of credit

There are normally six parties involved in a letter of credit:

Buyer (known as the importer or consignee)

Buyer’s Bank (known as opening, or paying bank)

Seller (known as the exporter, or beneficiary)

Seller’s bank (known as advising, confirming, negotiating bank)

Carrier (known as the shipping company)

Insurance Company

Opening of LC

For opening of LC the following documents are required by the bank.

Application or bond

Order or invoice or indent

Insurance (must according to Pakistan rules)

Liability endorsement of customer

An L.C is issued after opening of the letter of credit it is sent to the negotiating

bank.

AUDIT DEPARTMENT

Every organization has certain rules and regulation and it functions keeping in

mind those rules. NBP follows the prudential regulations given by the State Bank

of Pakistan. So, in order to check whether the organization is going on right track,

there is an Internal Audit and Inspection Department.

48

FUNCTION OF AUDIT

The main function of audit is to monitor the implementation of policies, rules,

regulations, and prescribed procedures with a view to ensure improved

operations. It maintains check and balance on behalf of management. This in

turns calls for a high standard of professional skills and judgments on part of

Auditors.

There are different types of audit that are done like internal audit, external audit,

financial audit, pre-penalty audit, special assignments audit (staff problems,

disputes, expenditure exceeds etc). It is basically the audit department who

performs all these functions.

Core Objectives of Audit

Existence of audit ensures moral pressure on staff of the organization. If

audit is conducted regularly and effort is well timed, the working staff is

always on alert and keeps doing the job properly.

Detection and prevention of errors and mistakes such as omission

commission compensatory, incorrect valuation of assets.

See that the financial control on paper is practically applied.

Detect and prevent fraud.

Audit Techniques Adopted By NBP

Audit techniques may differ from organization to organization depending upon

the size, complexity and volume of transactions. Following broad - based audit

NBP Auditors while conducting inspection of branch observe techniques and

procedures.

Audit should be surprise

Physical verification

Confirmations

49

Advances

Deposits

Income and expenditures

Audit of day to day affairs

Reconciliation of head office and clearing audit

External Audit

It is the requirement of State Bank of Pakistan that every pubic or private limited

company should have an audit once in a year by professional auditors. This is

done to verify the accounts, so that the true picture of the company is revealed to

government, loan lending institutions, shareholders and general pubic.

Internal Audit

Internal audit is an independent appraisal activity within an organization for the

review operations as a tool to management. NBP internal audit department fulfils

its responsibilities by doing audit two stage:

Pre-audit

Post audit

Pre-Audit

Pre-audit is done on daily basis. It is a sort of clearance or approval. Every thing

is checked by the internal auditor such as: dues amounts, cheques, legal cases,

vouchers, salaries and allowances, repairs and maintenance expenses, inventory

checking, repayment schedules. Apart from it, auditor also goes for a weekend or

surprise visit to any department and can ask for any document.

Audit a Voucher

The record in banks is maintained through vouchers. Every voucher is first pre-

audit. Things like date, issuing person, amount, and sign, supporting bills or

documents are checked. If the voucher is cleared then Cheque is made. In case,

50

the auditor has arrangements he will ask for clarification from the concern

department.

Audit a Cheque

There are certain things that are checked while auditing a Cheque such as:

branch name, amount in figures and words should be same, no over writing,

signing authority. No Cheque is withdrawn without audit. Auditor also checks

that whether the amount is entered correctly in the books of accounts or not.

Auditor signs daily opening and closing balance of accounts.

Post Audit

Post audit is a final confirmation test, which checks the occurrence of

transactions. It is done twice in a year by the audit team. One period commencing

from January 1st. Post audit is done of the branches and the head office.

Branch Audit

In NBP branches there are three facilities available deposit, lockers and advances.

There are altogether 1250 branches of which audit is done. There are different

things, which are checked during inspection. Some mistakes are on the spot

rectified, others are noted so that the top management knows about the affairs of

the branch. The things, which are checked, are:

Deposits & profit targets

Cash department

Key movement register

Account reconciliation statement

Banker's account

Customer services

Expenditure control

Very serious irregularities

Routine lapses

51

There are different registers maintained in branch for the purpose of recording

transactions, which are checked:

Cash receipt & payment register

Cash transfer register

Key movement register

Deposit & advances register

Rent payment register

Sundry creditors register

Income & expenditure register

Lockers attendance register

Daily statement of affairs

Every type of vouchers

In registers, assets are shown with red color and liabilities with blue color.

The audit team notes the objections and prepares a report which is given to

branch manager so that he will reply about the objections. This compliance is to

be submitted by the branch manager within 15 days.

Confidential report having important observations is send to Managing Director.

A letter related to the inspection report is send by Banking Department to Branch

Manager asking to take prompt actions against some serious irregularities.

Then branch sends its compliance to the head office. In the end, if all the

compliance are done and the management is satisfied then letter of assurance

from manager comes to the Head Office ensuring that mentioned objections will

not be practiced in future.

Check of Lockers

Following things or information regarding lockers may check by the auditors:

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Agreement numbers of locker should be in serial number. Information

regarding locker holder such as their names, rent dues, date of issue of

lockers is properly maintain or not.

Register in which the locker holder sign before and after the use of the is

properly maintain or not.

To check the register whether and customer issue locker without key

deposit.

To check practically how many lockers are vacant?

Checking of sealed envelope in which the keys of vacant lockers enclosed

and verify by open few vacant lockers and assure that lockers are vacant.

After the inspection, the auditors generate a report in which the findings /

objection of the auditors and manager's justification is mention. It includes

information regarding the above mention queries and their performance. After

that the summary of this report is forward to the head office. After studying the

report by the internal audit department, they concise the summary and the report

to the M.D of the NBP. The irregularities found in the report must be rectifying

by the branch and letter is issue to the branch with objections written in the letter.

If the branch cannot remove the irregularities quickly then the letter of assurance

is sign from the branch in order to affirm that the efforts will continue until they

rectify irregularities.

PERSONNEL DEPARTMENT

Human Resources play an imperative role in the success of any organization. An

organization, can never reach at its benefit without efficient individuals even if it

has disproportionate financial resource most of organizations. Today are focusing

on training of their existing employees and herd hunting for intelligent people by

offering high wages and strong compensation package. NBP also provides

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training to its employees. It has its own Training College. The newly recruited

employees are provided training in the Main Branch at Staff College.

NBP also should to its employee's abroad for special training. These training's

includes seminar conferences and workshops on different issues relating to the

banking sector and financial institutions. NBP selects its employees for abroad

training according to their expulsive and performance in their respective fields.

CREDIT MANAGEMENT DEPARTMENT

Credit department's means function is to provide short-term finance to the

industries, chiefly to the sugar mills and cotton mills for running finance against

the effective pledge. The terms and conditions of the pledge are as follow:

For individual 20% margin is kept, meaning the client has to keep 80% of

the borrowed amount as pledge.

For companies 75% of borrowed amount is kept as security, meaning

companies has to keep 75% of the borrowed amount as pledge.

To check the credit worthiness of the clients through CIB I and CIB II

reports are received from State Bank of Pakistan, which defines the credit

worthiness of the client and its concerns.

Credit worthiness reports are also received from the other banks and a

physiological survey is due, because a company’s position may be very good

but its future viewpoint is not satisfactory, as loan received now would be

returned in future so it is necessary to conduct the future performance survey

before going to finance any client.

ADMINISTRATION DEPARTMENT

This department performs the function of over all maintenance of the

organization and has the maximum employees as compared to other departments.

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On average the functions of this department includes, given that parking and

transportation facilities to the employees. The transportation facilities are only for

the female employees and the top management. This department is also

responsible for arranging the lunch and tea for all the employees of NBP. For

lunch, NBP's Administration Department maintains a canteen within the premises

of the organization and the administration department is handling all the matters.

This department is also accountable for the purchase, erection and upholding /

patch up of organizational location. This department settles so all the matters

about rent. The department is responsible for the purchase and maintenance of

furniture and other luxuries such as ACs etc. for all the departments of NBP all

the computers, for the computers department and for all other department are

purchased and maintained by this department.

Administration department purchases the all the stationary and other supplies that

are available in the stockroom and are issued to each department on their

application. This department also arranges for the printing of security stationary

material such as checkbooks of vouchers, files, schemes certificates etc.

This department is also responsible for the security matters of the organization.

Entirely, their security team that includes May security guards etc is handled by

this department. This department also handles the other lower staff such as peon's

etc.

Administration department is the most important department of NBP, which

performs all the little but important functions of the organization and performs the

activities to coordinate the activities of the entire department.

55

Sec:6

INTERNSHIP PROGRAM

A BRIEF INTRODUCTION OF THE BRANCH WHERE I DID MY

INTERNSHIP

Name of Branch National Bank of Pakistan, Main Branch Multan

Branch Code 0374

Branch Category I

Branch Rating C

Region Multan

Region Code 08

TRAINING PROGRAM

Introduction of all the Departments

There are many different departments in National Bank of Pakistan:

i) Deposit

Customers keep their savings in PLS Saving Accounts and

businessmen save their money in bank Current Accounts. NBP gives

profit on saving accounts and special saving accounts i.e. Premium

Saving Accounts and NBP Premium Amadni Certificates for one to

five year’s period.

ii) Advances (Credit department)

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NBP give loans to the borrowers for different purposes. These loans

are given for various sectors for different periods. Small Finance,

Cash Finance, Agriculture Finance, Cash & Gold Loan, Personal

Loans, Demand Finance, Running Finance, Corporate Finance,

Export Import Financing, House Building Finance (Saiban) and NBP

Karobar Scheme etc.

iii) Government Payments

National Bank of Pakistan is functioning as an agent of SBP. All

types of Government Payment i.e. Pension, Salaries, Grants, Zakat,

Benevolent Fund, Treasury Refund and Taxes Refund proceed

through the bank.

iv) Government Receipts

In this department all types of Government receipts i.e. Revenues,

Taxes, Abyana, Agriculture Tax, Government Fees, EOBI Funds and

Utility Bills are deposited. This way NBP is serving great job of

revenue collection.

v) Remittances

Another important department in the bank is remittances. People

send their money to the other persons and organizations through

various way i.e. Bank draft, Telegraphic Transfer, Mail Transfer,

Coupons, Govt. Draft and Western Union Money Transfer etc. It

works both inward and outward.

vi) Bills

Customers collect their money/amount through bills. They present

their cheques, drafts and other bills for collection within the city and

out of the city through mail.

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Now a days Online Banking is becoming more popular for this

purpose but the branch where I got training is still not have this

facility.

vii) Cash Department

National bank deals Government treasury on behalf of State Bank of

Pakistan. There are Chest, Sub-chest and Non-chest branches in the

bank. SBP supplies currency notes to the bank and monitors its cash

flow. Cash In charge and other cashiers deal with cash receipt and

payment in the bank.

viii) Compliance

Role of branch compliance department is to reconcile the prescribed

frequencies, investigate long pending reconciliation item, and ensure

correct treatment every half-year and clearing system service branch-

in major cities. Internal control is the integration of the activities,

plans, attitudes, policies and efforts of the people of the bank

working together to provide reasonable assurance that the

organization will achieve its objectives and mission.

ix) Agriculture Department

Agriculture Credit Department is playing a vital role in development

the economy of Pakistan. Commercial banks being the greatest

mobilizer of savings in the country with their large network of

branches play important role in financing agriculture. The National

Bank of Pakistan has also been trying to ensure that loans are

disbursed to genuine agriculturists within a reasonable time and that

the bank turns down no viable loan request.

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ix) Human Resources Management

Human Resources Management Department works for the

betterment of the employees. Enhances skills, training management,

service benefits, wages, medical facilities, staff loans are basic

functions of this department.

x) Information Technology Department

Bank’s data collection and information system run by Regional Data

Collection Center. This department manages staff training programs

regarding computer.

xi) Online Banking

This department is functioning only in online branches in the bank.

This is a fast track banking system in modern banking. NBP is also

trying to enhance this facility for their customers.

Retail & Commercial

This is the department that boosts the profitability of the bank.

National Bank becomes the largest profit-earning bank of the country

by introducing personal loans i.e. NBP Advance Salary Scheme and

Saiban Scheme.

xii) FBR Collection Department

NBP is playing great role for collection of FBR (CBR)

taxes/revenue. A separate counter is established at branch level to

facilitate the taxpayers.

xiv) Islamic Banking

The year 2007 marked the first year of Islamic banking

operations. During the year under review, in addition to active

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participation in various Sukuk transactions, two more Islamic

banking branches at Lahore and Peshawar started operations. NBP’s

plans for the year 2008 include opening of Faisalabad and Rawalpindi

branches with the focus on growing organically by opening more

standalone Islamic banking branches, utilizing NBP’s existing

branch network of 1,200 plus conventional branches and looking

into strategic acquisitions for expansion in this field.

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MY EXPERIENCE

ACCOUNT OPENING

I have spent my 1st week in account opening section and I learnt about what are

the prerequisites of opening an account of individuals, minors, shaky hand

signature persons, and different company’s account opening procedure and

essentials. Brief discussion is given below.

How to Open an Account

The applicant is provided with a copy of rules and an application form to open

an account. This form is filled by the applicant in a manner prescribed and

duly singed by the applicant. An existing account holder of the bank must

introduce the application. A copy of ID card is attached with the specimen

signature card. The application is presented at the branch with the initial

amount of deposit for credit of his account. The amount is entered in the

passbook and is singed by the responsible officer of the bank; finally a

Checkbook is issued to the account holder, for withdrawal purpose.

Classification of Deposits

The deposits can be classified under three main heads.

Current Account

Saving Account

Fixed Deposit

Current Account or Demand Deposits

Current account or demand deposit can be withdrawn by Cheque or transferred

to someone else by the depositor at any time without prior notice to the bank.

This account can be opened with a minimum of Rs.500/. In such case the bank

61

does not allow any interest on it, because such deposits are meant for short

period and can be withdrawn without any prior notice. Current account can be

opened by or through.

Partnership

Limited Companies Account

welfare Account

Individual Account

Partnership Account

The assets of partnership are held partners of the firm, or by one of its member

acting on behalf of all members as trustees for all of them. A partner has an

implied prior by law to open an account on behalf of his partnership firm, but

not on his individual name. The bank only honors that Cheque which confirms

to the mandate given to it by all the partners.

Procedure and Requirements for Opening Partnership Account

Names of all partners are taken with their specimen signature.

Instructions for operation are obtained from each partner.

Signature of authorized partner is obtained.

A letter of partnership, signed by all partners is obtained.

In case a partner who was not authorized to operate the account is now

authorized by all partners. Thus the authority letter is obtained.

Limited Companies Account

Before opening an account for a limited company the following documents are

obtained.

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The true copy of the certificate of incorporation.

True copy of the certificate of commencement of business (only in case

of public limited company).

Three copies of the memorandum and article of Association.

True copy of the resolution of the Board of Director regarding conduct

of the account.

Procedures and Requirements for Opening a Limited Company Account

The certificate of incorporation and commencement certificate of

business should be called in original which are returned after inspection.

The specimen signature of the director named in the resolution

authorized should be obtained on specimen card.

In case the company is taken-over by the Government fresh instruction

are obtained from the managing director appointed by the government.

Welfare Account

The Associations and welfare unions open such accounts.

Requirements for Opening Welfare Account

No registration certificate is needed but only a paper containing registration of

the Association is sufficient.

Individual Account

Any individual can open individual account. Following are some requirements

to be fulfilled by the individual in order to be able to open an account with a

bank.

Requirements for Opening an Individual Account

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National ID Card

Introducers reference

Rs.500/- as initial amount to be credited to his account.

Procedure is the same as explained earlier in this chapter.

Saving Account

In saving account the basic purpose is to mobilize the saving trend in the lives

of people and to enable people to draw money within certain limits.

In saving account at NBP the customers are not allowed to draw a big amount

at once without any notice. Moreover Zakat will be deducted only from the

amount which remains in the bank from first day of the month till last day of

the month the customer is bound to follow the rules and regulations of the

bank. Saving accounts can be opened in following shapes.

Individual account

Joint account

Fixed Deposit Account

Fixed deposit account is also called Term Deposit Receipt (TDR). In case of

fixed deposit account, the time of the account is in accordance of the different

fixed deposit schemes offered by the bank and according to wishes of the

customers. The customers cannot withdraw money from his/her account in

accordance and compliance of terms decided by the bank and the customer. In

this depositor have specific amount for specific period. Depositor will with

draw all amount at once. Another terminology in fixed deposit account is the

Special Notice Time Deposit (SNTD) that means that money will be deposited

for 7 or 30 days. Withdrawal will be on notice and profit will be according to

rules. No profit will be given if the withdrawal will be before date of maturity.

64

REMITTANCES

Clearing

Every bank performs the function of paying and collecting. The Cheque drawn

on other bank by the customers of the bank is collected by the bank for or

without charging fee is called clearing. Most important thing is that all

transactions in clearing department are on Cheques not on cash. The bank

through the clearinghouse (State Bank of Pakistan) performs the function of

clearing.

Clearing House

A clearinghouse is a place where the representative of all banks get together to

settle the payment and receipts of Cheques drawn on each other.

Functions of Clearing Department in Branch

To accept transfer, transfer delivery and clearing Cheques from the

customers of the branch and to arrange for their collection

To arrange the payment of Cheque drawn on the branch and give

Cheque for collection to any other branch of NBP. or any other member

or sub-member of local clearing house.

To collect amounts of Cheque drawn on members of local clearinghouse

sent for collection by NBP branches, not represented at the local

clearinghouse.

Difference between Government and Bank Draft

The bank drafts are issued to any customer on request. While

government drafts are issued to any department of government.

65

Bank drafts are issued by any branch of the bank, whereas the

government drafts are issued only by authorized branches, who deal in

treasurer business of the country government.

Through bank draft one can get the amount from any bank but in case of

government draft only the authorized section can deal and is able to

issue cash.

Mail Transfer

It is an order to pay a specified sum of money to the person named in the

instrument. It sent by surface mail or airmail. The issuing bank charges a

commission of issuance, which is, called MT rate.

Demand Draft

Money could be sent from one place to another place by means of demand

draft. A demand draft is an order instrument by the issuing bank requiring the

other branch of the bank to pay a specified amount of money to the person on

presentation of the draft in the specified branch. A draft can be obtained by a

person who wants to send money by paying the amount of the draft and

commission to the housing bank, and can be sent by post to the person needed

to be paid.

ADVANCES DEPARTMENTS

In advances I have cleared my concepts about the basic terms used in financing

and the brief introduction about the products offered by the bank to its

customers. Basic terms are as follows:

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TERMINOLOGIES USED

Mark Up

Under the Non-Interest Banking system the rate return on Bank’s Finance is

generally expressed in terms of “so many paisa per 1000 per day” instead of so

much percent per annum.

Bank continues to charge the rate of mark-up mutually agreed upon between

the bank and the fiancée but charging of mark-up on mark-up is strictly

prohibited.

Purchase Price

Financing is made on the basis of purchase and sale of goods for which a buy-

back agreement is executed. The amount of finance made or to be made is

supposed to be the Purchase Price for the bank, which generally the amount of

the limit.

Sale Price/Marked-Up Price

Under the buy-back agreement, the fiancée agrees to re-purchase the asset from

the bank, after a specified period, against payment of the total amount which

consists of the following:

1. Bank’s total finance

2. Mark-up for the finance period

3. Mark-up for the grace period, if any

4. Mark-up for the cushion period

Documents are executed for the Sale Price/Marked-up Price.

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Finance Period / Transaction Period

The period from the date of finance to the date of full and final adjustment of

the finance is the finance period/transaction period which may be expressed in

number of days, number of months or number of years.

Cushion Period

This is a period of 210 days, the calculation which starts from the date

succeeding the date of adjustment. This is a period in addition to the finance

period allowed to the customer to compensate the bank in case the finance is

not adjusted in time. The bank cannot charge any mark-up beyond this period

and has to take legal recourse, if necessary.

Margin

Finance is generally allowed against asset to cover only a certain percentage of

the value of the assets. This simply means that the fiancée may enjoy the

benefit of finance up to 75% of the value of the asset if there is a condition of

margin of 25% irrespective e of the fact that there is room in the limit.

Grace Period

Grace period is related to the installment-based finances. To facilitate the

fiancée for utilizing the asset for which the finance is to be made, a specific

period is allowed after expiry of which the installment period begins.

The length of the grace peri8od depends upon the nature of the asset and the

circumstances.

Grace period is generally expressed in number of months.

Collateral

A collateral Security is give in addition to the Principal /Primary security.

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Lien

Lien is the right to retain property belonging to another until a debt due from

the borrower is liquidated. This is a possessor lien.

A possessor lien is of two kinds: Particular & General.

A particular lien is the right to retain goods in respect of which the debt was

incurred. For example, a carrier has a lien on goods entrusted for

transportation; a watchmaker has a lien on watches left for repair in respect of

the cost thereof.

A general lien is a right to retain not only for a debt incurred for particular

goods but also for the general balance due.

Thus banker’s solicitors, stock brokers, in certain circumstances may have a

lien on client’s securities etc., for all moneys due.

Mortgage

A mortgage is defined in section 58(a) of the Transfer of Property Act as the

transfer of an interest in specific immovable property for the purpose of

securing the immovable property for the purpose of securing the payment of

money financed, an existing or future debt or the performance of an

engagement which may give to pecuniary liability. A mortgage which remains

valid only for 12 years is a charge which a borrower gives to a lender upon a

part or the whole of his property.

1. Legal Mortgage

2. Equitable Mortgage

Against a legal mortgage a banker has a right to dispose of the property without

reference to the court of law if the borrower fails to repay the dues payable by

him whereas in case of equitable mortgage the banker has to obtain the

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sanction from the court of law for realizing the debts from the disposal of

property.

MARKETING DEPARTMENT

I have learnt about credit memorandum structure which prepared on the basis

of information provided by the companies for the avail of facility.

This is completely about the business related activities and big changes in past

and present.

In the credit Memorandum general over view is taken in the following key

point to assess the business and their past relations to the bank branch:

It is clearly stated that what is being requested, purpose and nature of

facility.

Analysis of securities against the facility which the customer wants to

avail.

It is also evaluated the source of repayment.

Buyer’s and suppliers dynamics are also discussed

About the risks and how the customer try to mitigate them.

Management assessment is also done, in these assessment weaknesses

and strengths of management are listed in terms of their, integrity of

length and type of experience.

Financials of company is also discussed in this section. In these net

sales, cost of goods sold, as a % (percentage) of year to year basis.

Trends in operating profit. Evaluated non cash and non production

expenses. Comments on working capital required and quality of assets.

Also summarizing the major reasons affecting the cash generating

during the period.

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Also mention critical success factors, risks and mitigations. What are the

policies of company to meet them?

At the end of memorandum brief conclusion is given about the

organization which wants to avail the facility.

On the basis of this basic information credit proposal is made which is sent to

HOK for approval of loan or specific facility. This credit proposal contains

90% information of credit memorandum.

After approval of credit proposal, this is handed over to the credit

administration department. In this department I have learnt about basic

concepts about what is credit memorandum and credit proposals and their brief

prerequisites.

CREDIT ADMINISTRATION DEPARTMENT

I learnt about credit maintenance on the Basis of approved credit proposal. This

is totally deal with the securities, collaterals Drawing Power etc. Key Points are

as follows about which I spend my time to understand and discuss them with

my supervisor of CAD department.

Objective of the department is to check the balances with are maintained

with regards correct utilization of credit facility.

Its responsibility is to keep custody of credit files, ensuring that all credit

files are kept under department’s custody.

Its main functional responsibility is to keep all collateral i.e. shares,

Govt securities, mortgage documents etc.)As per bank standard

operating procedure.

I have learnt about monthly credit administrate up dates which includes

list of overdue, list of expired documents and insurance policies.

71

I have learnt in department about basic loan documents such as letter of

pledge, letter of hypothecation, agreement for sale, and personal

guarantee of mortgages.

I have also seen the process of scrutinizing the documents which are

received from customers.

Also discussed with my supervision of handing over the facility if some

documents are kept uncollected on the permission of RGM.

In the monitoring process, pledged goods stored in the Bank’s godown

that guards are posted accordingly. The sign boards of Bank are

permanently fixed and displayed at ware houses..

Also periodic reports of value, quantity, quality weight are obtained

from customer and duly verified by Bank’s staff.

I have also learnt about the credit files that each borrower must have a

credit files. All credit files must be kept in locked in the CAD.

IMPORT (FOREIGN TRADE)

I have spent two weeks in this department. One is in Import. During the 4 th

week I have learnt Pre requisites. Sectors of import procedure of L/C about the

different types of L/Cs, procedure of import etc. all these are briefly discussed

with the in charge foreign exchange, listed and briefly mentioned below:

Category of Import

Imports are classified into the following categories:

Commercial Sector Importers

A firm organization, person, or institution registered as an importer under the

registration order 1993, is called commercial importer.

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Industrial Sector Importer

An industrial unit is registered as an importer in order to meet its own import

requirements under the registration order 1993

Public Sector Importers

Organizations owned by the government also require to imports certain

commodities as per their requirement. Their letter of credit is routed through State

Bank.

Procedure for Establishment of L/C

Only authorized branches can open L/C, however application can be received at

any branch of NBP. Authorized branches require that approval and margin of

such application be obtained.

The importer requests the bank for establish meant of L/C on specific formal IB-8

along with following documents.

L/C Form Ib-8

This form contains an undertaking that the importer would purchase the import

documents from the bank as Ill as to retire the document with in 20 days. It bears

adhesive court stamp of the amount as prescribe by provincial government from

time to time. It contains the following information:

Name and addresses of importer and exporter.

Amount in foreign currency.

Terms of credit: DA or DP and shipment.

Description and origin of goods.

Port of loading and discharge.

Shipment last date

Insurance cover note/number

Import registration number

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Documents required or any other condition etc.

Performa Invoice/Indent/Purchase Order

It is a quotation of the seller containing the description and specification of

goods, price and terms of sale. Sometime the seller has their agent in the

country of import. The agent is called indenter. He is registered with export

promotion bureau. Purchase order is acceptable to the bank provided the seller

duly confirms the same.

Insurance Cover Note

All the goods imported under L/C must always be insured and a Pakistani

insurance company must issue insurance. Insurance cover is based on the

following points:

It is issued in the name of the issuing Bank A C importer.

The rider should provide for cover against war and SR & CC.

Port of shipment and destination.

Amount of insurance policy i.e. LC amount plus 10% which should be

with in per party risk limit of insurance company as approved by bank.

Description of goods should be the same as mentioned in L/C.

Some time an open insurance policy is obtained wherein various types of

goods are specified. In such case, the endorsement is made at the time of

each import on the insurance policy of the amount involved. The

endorsements are made until the full an ailment of the amount.

ACCOUNTS DEPARTMENT

The function of account department is to keep the main accounts of the

transaction from the day to day as for as they affect the liabilities and assets of

the bank and is earning and expenditure. The double entry system of

74

accounting is employed by which accounts are maintained in such a way that

every transaction is recorded in two accounts, viz. The “debtor” and “creditor”

accounts

The main function of the accounts departments of a branch are as follows

Balancing and maintenance of books.

Preparation of statement.

Balancing and Maintenance of Books

For the purpose of maintaining the record unto date usually account officer

maintain the following two books.

1. Cash Book cum General Ledger.

2. Income & Expenditure Ledger.

By balancing the cash book, the means that all transactions, (Cash, Clearing

and Transfer) have properly been recorded and there is no mistake in any of the

vouchers.

The following are the steps to balance the cash book.

1. Arrangement of vouchers.

2. Preparation of supplementary.

3. Preparation of summary.

4. Arrangement of totals of the summary with the totals of transfer book.

Voucher System

There are three categories of transaction viz, cash transaction, transfer

transactions, and clearing transaction. For arranging vouchers, the following

steps should be taken:

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The vouchers should be stored out main-head of account-wise and where a

main-head has got it’s sub-head-wise.

Again the credit vouchers should be separated from the debit vouchers.

The credit vouchers should be placed over the debit vouchers.

The credit and debit vouchers should be arranged in the serial order of the

account numbers given in the respective ledger. This is done only in respect of

C.D and S.B account.

Preparation of Supplementary

1. Supplementary should be prepared for C.D and S.B separately ledger

wise.

2. For Pak A/C separate supplementary should be prepared.

3. For the remaining vouchers, which are called the general vouchers of the

branch, separate supplementary should be prepared. However, while

preparing supplementary from the general vouchers, it should be

remembered that since these vouchers pertain to various main heads

given in the cash book-cum-general ledger, therefore, for cash main-

head, separate supplementary is to be prepared.

4. Now the accounts of vouchers pertaining to different main-heads and

sub-heads should be jotted down on separate sheets.

5. The amount of debit and credit vouchers should be jotted won on the

right and left hand sides of sheet, respectively.

6. The totals of debit and credit then should be struck on each sheet.

7. The total number of credit and debit vouchers should be mentioned on

the sheet.

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Preparation of Summary

After having written the supplementary, a summary is prepared or a separate

sheet. On the left hand side of it, the total of debit side of cash supplementary

will be jotted down and on the right hand side of each supplementary will be

written. Arrangement of total summary with the total transfer book

1. At the close of the business hour, the total of both sides of transfer book

are struck. Both sides agree with each other.

2. A grand total should be struck which should agree with the totals of the

summary.

3. The total of clearing and transfer delivery are also to add in the transfer

book.

Preparation of Statement

In fact, the statement submitted to the head office, serve the purpose of

financial barometer of the branches. Though these statement people sitting in

the head office watch the progress of the branch and suitably guide it wherever

and whenever necessary. Figures contained in these statements from the basis

of top management decision.

STATEMENT OF AFFAIRS

This statement is prepared on the printed performs with the help of the figures

contained in the cash book cum general ledger. This is the most important

statement because it reflects the detailed as well as the consolidated position of

a branch at a particular data. It is also called as a balance sheet of the branch

prepared on daily basis.

How to Prepare a Statement of Affairs

The preparation of this statement is the jotting of figures from the cash book

cum general ledger to statement to affairs. This statement should be prepared in

77

triplicate. The first copy should be forwarded to the Head Office, second copy

to the respective Zonal Area Office and third copy be kept for branch’s records.

Liabilities Side of the Statement of Affairs

1. C.D Accounts Ledger

Science in the cash book cum general ledger, figures are shown ledger

number wise separately but in the statement of affairs, a consolidated

figure is to be shown, therefore, strike a total of figures of all the C.D

ledgers shown in the cash book cum general ledger.

2. S. B. Deposits

In the statement of affairs, saving deposits are to be shown separately for

checking and non-checking accounts.

3. S. N. T. D

To jot down the figures form cash book cum general ledger in the

respective columns of statement of affairs.

4. Sundry Deposits

The figures given under various sub-heads of sundry deposits should be

added together and then placed in the statement of affairs in the

respective column.

5. Call Deposits

The amount in cash book cum general ledger should be written in the

statement of affairs against the respective column.

78

6. Bills Payable

Add the figures of all the sub-heads under bills payable in the cash book

cum general ledger and then put it against the column of bills payable

given in the statement of affairs.

7. Bills for Collection

The amount of documentary bills (supported by RR/TR etc.) and clean

bills (cheques etc.) sent by bank on behalf of the customers only for

collection and not for the purpose of giving any sort of advance against

them.

8. Pak Account/M.O Account

On the both sides are (liabilities and assets) Pak A/C and M.O A/C in

the statement of affairs. In some big cities in Pakistan where the bank

has a considerable number of branches, for passing different entries of

cash, transfer delivery or clearing, the M.O A/C is used whereas for all

other entries Pak A/C is used.

9. Income Account

This is the last item given in the statement of affairs under liabilities side

and the balance shown against this item in a consolidated form in the

cash book cum general ledger represents the grand total of all the sub-

heads of income as appearing in the income & expenditure ledger.

ASSETS SIDE OF THE STATEMENT OF AFFAIRS

Cash On Hand

The balance shown in the cash book cum general ledger should be copied out

in the statement.

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Balance with NBP

Main branches of different cities have to maintain their accounts with SBP and

where there is no branch of SBP, then with NBP for the settlement of Inter

Bank Transaction.

Agreement of Liabilities and Assets Sides

The assets are always equal to liabilities i.e. all the amount of debit balance

should be equal to the amount of credit balance, therefore, the total of

liabilities and assets arrived in the respective columns of the statement of

affairs agree with each other.

Banking Division

Banking division is the major division for any bank either commercial or

industrial. The banking division of NBP performs various banking

operations, hence is the sources of quick income for it. This division

comprises of various departments and their activities such as, selling

different investment schemes, life insurance policies, dealing in the capital

market and money market, providing short term finance, and working

capital finance to industries.

This division includes following departments:

1. Banking operations department

2. Investment and Banking department

3. Credit management department

HUMAN RESOURCE MANAGEMENT

As in future I have decided to select HRM as my major subject, so that’s why I

have spent 2 weeks at HR department and observed all the functions in detail

which are as follows:

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Major Functions of HR department

Following are the functions of HR Management and Administration

department,

National Bank of Pakistan, Regional office Multan.

1. Human Resource Planning:

Human Resource Planning is conducted by the HR department. They

assess the existing number and nature of staff and then post them at

needy branches according to the requirement of that branch.

2. Recruitment of Staff:

At NBP, recruitment of permanent staff is centralized and all

recruitments are made by their Head Office Karachi. This type of

recruitment is being made in following areas:

a. Security Guards

b. Janitorial Services

c. Sale & Marketing staff for retail products.

3. Transfer of Employees:

All transfer and posting of employees among the branches is made

by HR department keeping in view the staff requirements at different

branches.

4. Job Rotation:

Function of job rotation is also performed by the Regional office

Multan.

Normally, when an employee completes three years at a particular

seat, he rotates to another seat.

81

5. Human Resource Development & Training:

HR department analyze the day to day requirement of SBP

regulation for different Banking activities, and plans for training

development of staff.

This training may also be based upon introduction of new Banking

produces and competition with rival Banks.

6. Performance Appraisal:

HR department also performs the function of performance appraisal

of employees on yearly basis.

At the close of every year confidential reports (ACR) of each and

every employee is written by HR department.

7. Promotion of Employees:

HR department performs the function of promotion. Normally NBP

promotes its employees after every three years on the basis of their

past performance, availability of vacancies in each grad quota

approved by Ministry of Finance, for each grad,

8. Lay Offs:

Lay off function is also performed by HR department. NBP is a

govt. owned organization and its employees retire at attainment of

age of 60 years.

However, in 1998 and 2002 the NBP announced the Golden Hand

Shake schemes and almost 5000 and 3500 employees separated from

Bank services in these respective years.

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9. Health & Safety:

HR department arranges for medical facilities to its employees.

There are several hospitals on banks panel and employees can avail

medical facilities from these hospitals. Hospitals bills are paid by HR

deptt. after proper verification.

10. Disciplinary Cases:

HR department deals with all disciplinary cases of employees. These

disciplinary cases include:

a. Fraud Forgery

b. Unauthorized leaves

c. Insubordination

d. Misconduct of finances

e. Violation of procedure & policy

11. Equal Employment Opportunity:

NBP provides equal employment opportunity to men & women. HR

department is responsible to implement this policy, too.

12. Personnel Information System:

HR department is responsible to keep and maintain complete data of

each and every employee. This data includes his personal data as

well as professional data and being used to place right person for the

right job.

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ORGANIZATIONAL STRUCTURE OF THE HUMAN RESOURCE

MANAGEMENT (HRM) DEPARTMENT

REGIONAL OFFICE OF NBP MULTAN

MY EXPERIENCE

During my internship, I practically observed almost all the functions of

Human Resource Management, which were already theoretically studied by

me. For instance, I inquired about Human Resource Planning and

Recruitment process of NBP; which is centralized.

84

SEVP / Group Chief, HRM & AG, NBP Head

Office Karachi

SVP / Regional HR Chief, Regional Office, Multan

PSO to Regional HR Chief

No.2 in HRM Department

Incharge

Disciplina

iry Cases

Incharge Staff Benefit

Incharge Staff Loan

Incharge Accounts of R.O.

Incharge Litigation & Ind. Relations

Incharge Inward / Outward

Mail

The Head Office Karachi analyzes the staff requirement on the basis of

input / feed back received from its twenty nine regions. Then it advertises

the Job Opening in all leading news paper and after test / interviews, the

recruitment is made by NBP.

The newly appointed employers are undergone by an intensive training of

six months at NBP Staff Colleges as well as practical training in the

branches. Thereafter, they are posted at Branches / Regions / Head Office,

as per requirement. All policies of Human Resource Management are made

by Head Office Karachi and the Regional HR Department are supposed to

implement the HR polices, in true letter and spirit. For example,

(i) All human resource development and training schedules are formulated

by Head Office, the Staff Colleges are arranged for training and Regional

Offices nominate employees to attend the training sessions.

(ii) The strategy for promotion of employees is also formulated by Head

Office. Regions provide evaluation sheets of each and every employee to

Head Office. After detail study of number of employees in each

grade/cadre, the Head Office announces the promotions of employees,

which may be 10%, 20% or 30% in each grade/cadre.

Requirement Analysis (Purpose of internship / study)

Purpose of my internship was to study practically the Human Resource

Department of National Bank of Pakistan, Regional Office Multan in order

to examine that how different functions of HR are being performed by

them.

Data Gathering

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I used following techniques for data gathering during my internship at

NBP: -

1. Personal Interviewing

2. Documents (such as duty list of employee etc.)

3. Observations

4. Books / Internet

System Design

The design of my study is ‘Descriptive’. Whatsoever, I have observed

during my internship, I have described in detail in the report.

Implementation

The final stage of any study is implementation. Implementation means the

application of study results. My internship is a ‘Descriptive’ study and only

facts are described in my report. Some weaknesses have also been

discussed along with recommendations to overcome them.

SHORTFALLS / WEAKNESSES OF HRM DEPARTMENT

1. Delays due to centralized system. i.e. Head office conveys guidelines and

HR Department proceeds accordingly.

2. No flexibility in the rules and regulations.

3. High level of confidentiality.

86

Sec7:

ANALYSIS

SWOT ANALYSIS OF NATIONAL BANK OF PAKISTAN

SWOT an acronym that stands for strengths, weaknesses, opportunities and

threats. SWOT analysis a careful evaluation of an organization’s internal

strengths, weaknesses as well as its environmental opportunities and threats. In

SWOT analysis the best strategies accomplish in organization’s mission by:

1. Exploiting opportunities and strengths.

Neutralizing its threats and avoiding its weaknesses.

ORGANIZATIONAL STRENGTHS

A skill or capability that enables an organization to conceive and implement its

strategies

More equity.

Being the pioneer of banking in Pakistan, NBP is one of the oldest banks

and is the richest in experience.

NBP focuses on consumer banking by lucrative schemes, products and

services suiting best to the wants and demands of the customers.

The band is always on the look to improve its services both to the domestic

as well as overseas customers.

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Human resources development and introduction of new technology towards

modern banking.

24 hours cash access and safe payment products for high value transaction.

NBP instant financing products for customers wanting instant loan facilities

NBP branches.

Having potential to encounter the competitive environment in the market.

Customer enjoys the services at the residential localities.

NBP one of the largest financial institutions of Pakistan with eight million

of customer base NBP holds 24.6% share of time and demand deposits in

the country. Local currency deposits comprise 67% of bank's total deposits

while foreign currency deposits account for the rest.

NBP has an extensive domestic branch network of 1265 (according to the

latest data) branches located all over Pakistan. The Bank also has a

presence in 22 international locations including the USA, United Kingdom,

Europe and the Far East.

NBP is working as right arm government of Pakistan as it is responsible for

all claims of government for recovery as well as payment. All depositor of

NBP are in relief that their money security is guaranteed by government of

Pakistan.

It acts as an agent of the Central Bank wherever the State Bank does not

have its own Branch.

WEAKNESSES

88

A skill in capability that does not enable an organization to choose and implement

strategies that supports its mission

NBP staff especially at lower considers their work as burden. They usually

waste time in other task a part in performing their duty. Using government

property for there own need. They are reluctant to accept change brought by

latest restructuring efforts.

The general out look and interior layout of branches are not as required

according to modern banking

NBP bearing up large burden in running those branches, which are not

producing any income but keep on adding expenditure.

NBP is far behind in offering modern banking facility like automated teller

machines then other commercial bank in Pakistan as very few branches in all

over country have this facility.

NBP has very few on line branches. While from remaining branches data

gathering is time consuming, and not fool proof. Quantum of settlement within

different branches is pending because of this updating daily record is becoming

very difficult.

Customers have to fallow long lengthy procedure for opening of account as

well applying for debt. Which discourage most of the people to invest in NBP.

Slow down in advances growth in the short term as NBP focuses on quality

customers in the markets.

Extremely burden on employees due to work pressure.

No coordination among the employees.

89

Discrimination in services to customers with large and small accounts.

Inconsistency in efficiency and working atmosphere due to the largest of

branches.

Sense of insecurity in the employees serving at low profitable branches due

to the right sizing.

Victim of political, legal and socio-cultural pressures.

OPPORTUNITIES

In area that, if exploited, may generate high performance.

In opportunity exist, in form of opening of ladies banking section within the

branch, which is entirely a new idea and it, will attract customer.

Growing policies of government on business and commerce sector provide

NBP opportunities to take advantages of these policies to meet efficiently

with the business people to solve their problems with the instant cash and

financing facilities.

Customer feedback on different products and accounts has really improved

the bank performance and encourage the atmosphere for other future

policies.

NBP also has an opportunity to expand its new technological advancement

like, online bank and internet banking facilities in order to serve the

customers more efficiently.

E-banking facility is also a new opportunity which is a flourishing business

in foreign countries and can also be here, if NBP takes the initiatives.

90

Due to efficient and veteran management group, NBP can also improve

well and expand its foreign operation successfully.

NBP provide opportunity to utilize its skills and efficiencies in leasing

business.

Setting of target for of making at least 500 branches country wide on line.

Closing of all those branches, which are burden on NBP.

Comprehensive training programs has been develop to up grade the core

banking skills of the existing staff as well as integrate high quality hiring.

To improve the motivation of staff a merit-based culture is being promoted.

Through overhauling the manpower recruitment preservation and

performance appraisal system.

THREATS

An area in the environment that increases the difficulties the organization’s

achieving high performance.

Facing more competition by foreign banks in the market.

Also the increasing operation of private banks.

Highly attractive and advance services by foreign banks to their customers.

The threat of inconsistency and government policy regarding to business

and economics sectors, specially political and regional situation which

makes the environment uncertain.

Growing global technological advancement.

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Strict regulation by government over credit facilities to the customers as

well as to meet the prudential.

Loss of confidence of overseas customers due to freezing of accounts.

Major threats NBP facing is from its competitor especially from

denationalized commercial bank. In which MCB is on the top of the list,

The Bank provides 24 hour banking convenience with the largest ATM

network in Pakistan covering 15 cities with over 100 ATM locations.

Retail banking and consumer banking resulting in the products such as

credit cards, housing finance and automobile finance lending to small

individual consumers, and purchases of automobiles, housing, and

consumer goods are generally made on a cash basis. These are causing

another threat, if not counter will result in significance loss of customers

Now banks are using technology which covers the distance no matter how

far away any one, through a satellite based, on-line real-time banking

system and by offering telephone banking, electronic funds transfer, E-

Banking and other modern facilities.

CONCLUSION

From SWOT analysis we can conclude that the management of the bank should

adopt systematic planning for the bank growth, introduced new schemes NBP has

more customers as compare to other banks, if they given proper attention to every

customer then if in few years it will be the leading bank of the country.

RATIOS ANALYSIS

92

Some of the different types of ratios that can be calculated from data in the

financial statements and used to evaluate a business include:

Liquidity ratios

Activity ratios

Profitability ratios

LIQUIDITY RATIOS

Liquidity ratios measure a business’s ability to cover its obligations, without

having to borrow or invest more money in the business. The idea is that there

should be sufficient cash and assets that can be readily converted into cash to

cover liabilities as they come due. One of the most common liquidity ratios is:

Current Ratio = Current Assets / Current Liabilities

Ratio 2006 2007 2008 2009 2010

Current Ratio 1.07 Times 1.15 Times 1.14 Times 1.19 Times 1.16Times

Current Ratio in 2006 was 1.07 and continuously increase to 2009 at 1.19 as

compared to Current ratio of 1.16 Times in 2010. Current assets basically includes

cash with treasury bank, cash with other banks, lending to financial institutions,

investments - (short term), short term advances-net, deferred taxes, other assets-

net. Current liabilities include bills payables, Borrowings, Short Term Deposits,

Liabilities against Subject to Finance Lease – (Short Term) and other Liabilities

that are due within one year. This ratio could also be seen as a measure of working

capital – the difference between current assets and current liabilities. A company

with a lot of working capital will be in a better position to expand and improve its

93

operations. On the contrary, a company with negative working capital does not

have sufficient resources to meet its current obligations, and therefore is not in a

position to take advantage of opportunities for growth.

SOLVENCY RATIOS

Solvency ratios are measures to assess a company’s ability to meet its long-term

obligations and thereby remain solvent and avoid bankruptcy. Two general,

overall solvency ratios include:

Solvency Ratio = Total Assets / Total Liabilities

Ratio 2006 2007 2008 2009 2010

Solvency Ratio 1.0847

times

1.1481times 1.1510

times

1.1440

times

1.1417

Times

In the above ratio total assets are divided with the total liabilities of the series of

the years. In 2006 the ratio is 1.0847 times and it increases to 1.1481 in 2007. In

2010 it becomes 1.1417 times. This increase shows that Total Assets are

increasing.

Solvency Ratio = Net Worth (Total Capital or Equity) / Total Liabilities

Ratio 2006 2007 2008 2009 2010

Net worth to Total

Liabilities

0.0912times 0.1467times 0.1481times 0.1440

times

0.1417

times

94

In the above ratio Net worth is divided with the total liabilities of the series of the

years. In 2006 the ratio is 0.0912 times and it increases to 0.1467 in 2007. In 2010

it becomes 0.1417 times. This decrease is due to the increase in Current

Liabilities mainly Deposits which is a good sign for bank.

DEBT RATIO

Another ratio that can tell how much a company relies on debt to finance its assets

is:

Debt Ratio = Total Debt / Total Asset

Ratio 2006 2007 2008 2009 2010

Total Debt / Total Assets 84.41% 84.58% 87.26% 87.41% 87.58%

Debt Ratio in 2006 is 84.41which increases to 87.58 in 2010. This constant

increase in debt ratio is due to increase in liabilities as compared to assets of NBP

which shows that there is need to broaden the base of advances.

Traditionally, both short-term and long-term debts and assets are used in

determining this ratio. In general; the lower a company’s reliance on debt to

finance its assets, the less risky the company.

The debt to equity ratio is a measure of a company’s leverage – how much

financing it has in the form of debt as compared with how much it has invested in

the business.

DEBT-EQUITY RATIO

95

Debt-equity Ratio = Total Liabilities / Total Owners’ Equity:

Ratio 2006 2007 2008 2009 2010

Debt to equity Ratio 5.418 5.484 6.851 6.944 7.055

Debt to equity Ratio also increasing from year to year. In 2006 it was 5.418 and

goes to 7.055 in 2010

SHORT-TERM DEBT RATIO

Short-term Debt Ratio or Quality of Debt = Short-term Debt / Total Debt

Ratio 2006 2007 2008 2009 2010

Short-term Debt / Total Debt 80.17% 79.25% 79.53% 78.23% 80.41%

Short-term Debt Ratio is parallel to 2006 to 2010.

A lower value for this ratio would indicate less concern for installments coming

due within a year.

There are other ratios intended to assess a company’s capacity to cover its debt

repayments and financing costs. One of these ratios measures how interest expense

is being covered by the net income the company is generating:

INTEREST EXPENSE COVERAGE RATIO

Interest expense coverage = profit before interest & taxation/ Interest expense

Ratio 2006 2007 2008 2009 2010

96

Profit before taxation/

Interest expense1.833times 1.846times 1.886times 1.906times

1.922

Times

Interest expense coverage ratio increases from 2006 to 2010. This shows that

financial position of NBP is strong.

This ratio is also called Number of Times Interest Earned, and represents how

many times the net income generated by the company, without considering interest

and taxes, covers the total interest charge. The higher the ratio the more solvent is

the company.

Another similar ratio often used to measure a company’s capacity to cover its

fixed charges is:

Capitalized interest is the amount of interest on a loan to finance a project or

acquisition of fixed assets that has been capitalized and included as part of the cost

of the project or asset on the balance sheet. You will probably need to see the

notes to the financial statements to find this figure.

ACTIVITY RATIOS

Many useful gauges of operations can be calculated from data reported in the

financial statements. For example, you can determine the average number of days

it takes to collect on customer accounts, the average number of days to pay

vendors, and how much of the operation is effectively being financed with

payment terms extended by vendors.

Accounts Receivable Turnover = Total Sales / Average Accounts Receivable

Ratio 2006 2007 2008 2009 2010

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Accounts Receivable Turnover 1.50 1.95 1.913 1.937 1.983

In this ratio account receivable turn over in 2006 is 1.50, in 2007 1.95 and in 2010

is 1.983 which shows you the average duration of accounts receivable for credit

sales to customers is increasing. This in turn can be expressed in terms of the

collection period, as follows:

Average Collection Period = Days in Year / Accounts Receivable Turnover

Ratio 2006 2007 2008 2009 2010

Average Collection Period 243 Days 187 Days 190 Days 178 Days 184 Days

Collection period shows that it decreases from 2006 to 2007 but increase in 2008

decrease in 2009 and slight increase in 2010.

PROFITABILITY RATIOS

One of the most common profitability ratios is the profit margin. This can be

expressed as the gross profit margin or net profit margin, and it can be expressed

by company, by sector, by product, or by individual unit. The information reported

on the income statement will enable you to determine the overall profit margin. If

additional breakdowns are provided, more detailed margins can be calculated.

NET PROFIT MARGIN

Net Profit Margin = Net Income / Total Revenue

Ratio 2006 2007 2008 2009 2010

Net

income/Total

34.58% 38.18% 25.65% 19.85% 22.53%

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income

Net Profit Margin has increased in 2006 to 2007 but it decreased in 2008 and 2009

19.85. Last year it has also improved at 22.53 %.

Other commonly used ratios are returns, expressed as return on investment or

equity, return on assets, and return on capital employed. These ratios measure a

company’s ability to use its capital, or its assets, to generate additional value.

RETURN ON EQUITY RATIORETURN ON EQUITY RATIO

Return on Investment (ROI) or Return on Owners’ Equity = Net Income / Average

Owners’ Equity

Ratio 2006 2007 2008 2009 2010

Net income/Capital 16.521% 16.446% 15.016% 14.769% 13.668%

Return on Owners’ Equity is decreasing by year to year and reached to 13.668 in

2010 from 16.521 in 2006

RETURN ON ASSETSRETURN ON ASSETS

Return on Assets (ROA) = Net Income / Average Total Assets

Ratio 2006 2007 2008 2009 2010

Net income/Total Assets 2.569% 2.551% 1.913% 1.859% 1.697%

Return on Assets is also decreased from year 2006 to 2010.

99

RETURN ON CAPITAL EMPLOYED

Return on Capital Employed (ROCE) = Net Income Before Interest and Tax / Capital

Employed (Total Assets minus Current Liabilities)

Ratio 2006 2007 2008 2009 2010

Net income before income

& taxation/Net Assets35.318% 36.496% 41.116% 37.689% 39.600%

EARNINGS PER SHARE

Earnings per Share = Net Profit After Tax and Dividends / Weighted Average number of

Ordinary Share

Ratio 2006 2007 2008 2009 2010

Profit After Tax /

Ordinary Shares15.43 21.62 17.48 13.05 13.05

Earning per Share in 2006 is 15.43 and increase in 2007 at 21.62. This ratio

decreases in 2008, 2009 and remains same in 2010.

100

HORIZONTAL ANALYSIS (BALANCE SHEET)

PARTICULARS 2006 2007 2008 2009 2010

Cash and Balance with treasury

banks

158.94 90.55 132.32 159.66 162.14

Balances with other banks 206.11 128.42 168.26 155.14 97.97

Lending to financial institutions 35.11 54.38 76.86 71.04 141.4

Investments 87.08 94.45 84.20 126.83 191.94

Advances 137.31 166.72 196.01 211.61 177.6

Other Asset 96.22 125.61 142.26 141.22 223.4

Operating Fixed Asset 102.94 105.57 108.30 29.01 284.4

Defer tax Asset - - - - -

Total Asset 117.22 123.18 135.43 161.52 179.15

Liabilities

Bills payable 131.25 31.67 192.94 128.47 459.8

Borrowings from Financial 66.89 52.84 70.63 66.01 229.5

Deposits and other accounts 117.71 117.17 126.89 149.63 179.5

Subordinates loan - - - - -

Liabilities against leased Asset 41.48 40.44 32.18 81.60 641.6

Other Liabilities 98.80 101.12 114.67 118.36 184.8

Defer Tax Liabilities - 748.94 400.60 8.55 -

Total Liabilities 114.82 113.70 125.32 145.37 180.08

Net Asset 154.14 274.86 294.22 421.75 172.84

Represented By

Share Capital 60.54 143.99 83.33 198.71 227.7

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Reserves 136.71 151.89 170.64 86.97 180.6

Unappropriated profit 156.23 328.50 543.90 768.91 394.03

Total 139.28 207.54 292.51 381.99 286.9

Surplus revaluation of asset 187.07 404.03 305.91 498.05 64.77

Total Representation 154.14 274.86 294.22 421.75 172.8

HORIZONTAL ANALYSIS

International accounting standards call for the presentation of comparative

financial statements that gives the current years and past year’s financial

information. A common starting point for studying such statements is horizontal

analysis, which begins with the calculation of monetary amount changes and

percentage changes from the previous to the current year. The percentage change

must be calculated to show how the size of the change relates to the size of the

amount involved.

Horizontal analysis is an easier way of comparing the performance of two

different financial statements either within the same bank or accounts of the other

entities within the same bank. Horizontal analysis involves line by line comparison

of the financial figures from two different sets of accounts.

The exhibit below shows how horizontal analysis can be conducted:

BALANCE SHEET ANALYSIS OF NATIONAL BANK AT 31 DECEMBER

2005 TO 2010

The main categories of assets are usually listed first and are followed by the

liabilities. The difference between the assets and the liabilities is known as equity

102

or the net assets or the net worth of the bank and according to the accounting

equation, net worth must equal assets minus liabilities.

Another way to look at the same equation is that assets equal liabilities plus

owner's equity. Looking at the equation in this way shows how assets were

financed: either by borrowing money (liability) or by using the owner's money

(owner's equity). Balance sheets are usually presented with assets in one section

and liabilities and net worth in the other section with the two sections "balancing".

Records of the values of each account or line in the balance sheet are usually

maintained using a system of accounting known as the double-entry bookkeeping

system.

A business operating entirely in cash can measure its profits by withdrawing the

entire bank balance at the end of the period, plus any cash in hand. However,

many businesses are not paid immediately; they build up inventories of goods and

they acquire buildings and equipment. In other words: businesses have assets and

so they can not, even if they want to, immediately turn these into cash at the end of

each period. Often, these businesses owe money to suppliers and to tax authorities,

and the proprietors do not withdraw all their original capital and profits at the end

of each period. In other words businesses also have liabilities

In financial accounting, a balance sheet or statement of financial position is a

summary of a person's or organization's balances. Assets, liabilities and ownership

equity are listed as of a specific date, such as the end of its financial year. A

balance sheet is often described as a snapshot of a bank financial condition of the

four basic financial statements, the balance sheet is the only statement which

applies to a single point in time.

HORIZONTAL ANALYSIS (INCOME STATEMENT)

YEARS 2006 2007 2008 2009 2010

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http://en.wikipedia.org/wiki/Financial_statements

http://en.wikipedia.org/wiki/Financial_year

http://en.wikipedia.org/wiki/Ownership_equity

http://en.wikipedia.org/wiki/Ownership_equity

http://en.wikipedia.org/wiki/Liabilities

http://en.wikipedia.org/wiki/Asset

http://en.wikipedia.org/wiki/Financial_accounting

http://en.wikipedia.org/wiki/Liability

http://en.wikipedia.org/wiki/Asset

http://en.wikipedia.org/wiki/Double-entry_bookkeeping_system

http://en.wikipedia.org/wiki/Double-entry_bookkeeping_system

http://en.wikipedia.org/wiki/Account

http://en.wikipedia.org/wiki/Accounting_equation

http://en.wikipedia.org/wiki/Accounting_equation

http://en.wikipedia.org/wiki/Net_worth

http://en.wikipedia.org/wiki/Net_assets

Interest Earned 92.86 223.37 362.77 452.60 263.04

Interest Expense 102.68 318.56 634.85 888.72 438.3

Interest Income 107.11 198.01 291.17 337.94 185.4

Provision against Non-

Performing Advances

101.02 285.81 422.05 376.31 286.5

Provision for Diminution -97.50 109.44 72.65 -6.05 -12.06

Bad debts Written Off 29.78 295.72 2088.46 7251.02

62.72 2299.88 3358.93 1127.88 448.2

Interest Income after

Provision

110.77 #VALUE! 282.39 271.30 157.6

Non-mark-up /Interest Income

Commission 113.20 16.88 253.82 353.10 195.5

Dividend Income 53.57 8.37 33.68 17.68 63.98

Income from FOREIGN 152.92 152.57 152.81 189.61 183.3

Gain on securities 31.12 11428.23 8472.77 25534.90

Other Income 135.99 170.23 181.76 217.00 13.7

Total Interest Income 104.36 45.73 62.17 123.82 187.09

Interest Expenses

Administrative Expense 109.26 126.78 175.28 214.74 234.05

Write-Off -8.04 60.86 41.01 42.81 74.64

Other Charges 190.07 128.44 472.27 316.85 188.09

Total Interest Expenses 100.32 121.73 165.21 201.63 231.04

Profit before Taxes 110.78 205.85 320.65 305.09 128.12

Taxation-Current 144.12 252.91 1713.90 2579.03 137.4

-Prior Year 122.65 34.79 19.71 192.98 -85.48

-Differed 48.62 231.80 107.01 81.15 -701.6

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69.57 207.15 282.77 266.76 107.9

Profit after Taxes 135.58 218.82 171.50 327.79 138.19

Share minority interest 203.43 419.87 -637.47 1213.53

Profit to shareholders 135.01 217.26 3404.31 320.85

Un appropriated profit/loss 224.24 0 19.03 0 363.1

260.21 297.41 466.11 445.38

EPS 13.66 172.61 270.53 203.86 60.6

HORIZONTAL ANALYSIS OF INCOME STATEMENT

Horizontal analysis of income statement Net mark up/Interest income was

continuous increasing in 2005, 2006, 2007, 2008 and 2009 which was 100%,

104.36%, and 45.73%. 62.17% and 123.82%.

In case with items of net mark up/ Interest income. Fee, Commission and

brokerage income, Dividend Income, Income from dealing in foreign currencies,

other income was increasing and decreasing every year.

The total income before interest expenses and taxes increased, in 2005 which was

100% which was increased in 2006 and go to 100.32%. In 2007 it was 121.73%

and in 2008 it was 165.21% which was 35.26% increased from the previous year.

It was also increased in 2009 and go to 201%. That’s shows that perform in well

manners.

Where total income increased total expenses were also increased Items of Total

non mark up interest expenses such as Administrative expenses, other charges

show the constant growth every year. This shows that organization is not paying

proper attention.

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Profit & loss before taxation is 100% in 2005 which was increased in 2006, 2007,

2008 as 110.78%, 205.85%., 320.65% But in 2009 profit of the bank decreased

and reached at 305.09%.

Profit after taxation was 100% in 2005 which is constantly increasing as

135.58%, 218.82%, 170.50%and 327.799 in 2006, 2007, 2008 and 2009.

If we see the income statement of national Bank we will find firm is growing and

improving every year. But horizontal analysis of income statement shows the

decreasing ratio few years and show increasing ratio few years. Overall the bank

performing well to the satisfaction of client and in stable position.

VERTICAL ANALYSIS (INCOME STATEMENT)

Ratio

2006 2007 2008 2009 2010

Amount is

in %

Amount is in

%

Amount is

in %

Amount is

in %

Amount is

in %

Mark-up/return/Interest Earned 100.01 110.33 109.62 119.12 173.8

Mark-up/return/Interest Expense 31.32 34.35 34.13 39.90 88.9

Net mark-up/Interest Income 68.70 76.53 75.49 79.22 84.9

Provision against Non-Performing

loans & Advances7.24 8.01 7.70 11.13 13.7

Provision for Diminution in value of

Investment0.89 -0.81 -1.78 - -

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Provision against off balance sheet

obligations- - - - -

Bad debts Written Off - - - - -

8.35 7.28 5.94 11.12 19.5

Net mark-up/Interest Income after

Provision60.35 69.25 69.55 68.09 45.69

Non-mark-up /Interest Income

Fee, Commission and brokerage

income24.35 16.13 15.38 15.98 18.9

Dividend Income 6.08 5.63 7.24 7.69 2.16

Income from dealing foreign

currencies4.82 3.95 3.34 2.46 4.3

Share of profit from a joint venture - - - - -

Gain on sale of securities 4.47 2.93 5.52 4.9

Unrealized loss on revaluation of

investments classified as held for

trading

- - - - -

Other Income 4.18 0.58 1.57 4.2

Total non mark-up/Interest Income 39.65 30.75 30.45 31.91 34.6

100.00 100.00 100.00 100.00 100.00

Non Mark-up/Interest Expenses

Administrative Expense 42.39 36.75 34.07 33.46 51.4

Other Provisions Write-Off - 0.65 - - 0.29

Other Charges - - 0.52 - 0.23

Total Mark-up/Interest Expenses 42.59 37.60 34.13 33.90 52.01

Profit before Taxes 57.41 62.40 65.87 66.10 47.98

Taxation-Current 22.20 23.43 21.77 19.58 19.32

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-Prior Year 4.05 -3.60 1.33 0.92 -15.9

-Differed - 0.95 - 0.76 4.0

0.00 20.78 21.26 13.4

Profit after Taxes 29.81 41.62 42.61 44.84 34.51

Unappropriated profit b/f 28.16 35.64 48.50 75.56 119.2

Transfer from surplus on revaluation

of fixed assets0.22 0.14 0.10 0.09 0.23

28.37 35.64 48.50 75.65

Profit Available For Appropriation 58.18 77.26 91.11 120.48 154.02

Statutory reserve -5.96 - - - -

Capital Reserve - - - - -

Revenue Reserve - - - - -

Reserve for issue of bonus of shares -4.70 - - - -

Proposed cash dividend -3.53 -

Un appropriated profit c/f 43.99 77.26 91.11 1,204.68 -

Comments

NBP has earned less revenue in terms of interest as compared to 2008 and 2007. It

means that the profitability of NBP is not satisfactory as compared to previous

years. Expense has incurred in 2009 in term of interest expense as compared to

other years.

There is decrease of almost 3% in 2009 in terms of interest after provision that is

the gross profit. Bad debts are recovered and less writ off in 2009, which means

that NBP has recovered its accounts and that is a good sign. Earning per share of

NBP is decreased in 2009 because of the industry downfall that came into being

from the assanation of Benazir Bhutto.

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VERTICAL ANALYSIS (BALANCE SHEET)

Ratio

2006 2007 2008 2009 2010

Amount is in

%

Amount is in

%

Amount is in

%

Amount is

in %

Amount is in

%

Cash and Balance with

treasury banks17.07 12.32 12.38 12.45 11.15

Balances with other banks 9.00 5.37 6.40 4.92 2.93

Lending to financial

institutions1.90 2.82 3.62 2.82 2.2

Current Asset 0.00 0.00 0.00 0.00 0.00

Investments 27.00 27.12 22.03 27.66 29.11

Advances 39.91 46.53 49.77 44.70 46.13

Other Asset 3.46 4.14 4.27 4.07 5.16

Operating Fixed Asset 1.66 1.64 1.52 3.40 2.5

Defer tax Asset

Total Asset 100.00 100.00 100.00 100.00 100.00

Liabilities 0.00 0.00 0.00 0.00 0.00

Bills payable 1.30 0.30 1.67 0.93 0.77

Borrowings from Financial

institution2.00 1.52 1.84 1.43 1.94

Deposits and other accounts 84.15 80.22 79.02 77.66 80.39

Subordinates loan - - - - -

Liabilities against assets

subject to Asset lease0.00 0.00 0.00 0.00 0.00

Other Liabilities 4.17 4.32 4.19 4.05 4.45

Defer Tax Liabilities 0.01 0.77 0.38 0.67 -

Total Liabilities 91.64 87.13 87.10 84.74 87.58

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Net Asset 8.36 12.87 12.90 15.26 12.41

Represented By 0.00 0.00 0.00 0.00 0.00

Minority Interest 0.00 0.00 0.00 0.00 0.00

Share Capital 0.89 1.02 1.12 1.07 1.29

Reserves 1.95 2.34 2.19 2.07 2.3

Unappropriated profit 1.66 2.89 5.05 5.95 6.3

4.50 6.26 8.35 9.09 10.05

Surplus revaluation of asset 3.86 6.61 4.55 6.17 2.3

Total Representation 8.36 12.87 12.90 15.26 12.4

Comments

Cash and balances with other banks has increasing and decreasing value. As

networking capital is increased, NBP has also increases its cash. Total assets of

NBP have increased from 2006 to 2009 and it’s the highest value in 4 years.

Liabilities of NBP have decreased which is satisfactory and increases the worth of

the NBP. share capital has increased and is at satisfactory level. NBP has gained

good surplus on revaluation of assets which is a good sign of the good will of the

NBP bank.

PESTEL ANALYSIS

Like any other organization pest analysis is important for banks as well.in this

analysis we consider banks from various environmental factors which are as

follows:

Political

Environmental

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Sociological

Technological

PESTEL ANALYSIS IN NBP

Political

AS NBP is a government bank so it has got some extra edges as compared to other

commercial banks. NBP is working as right arm government of Pakistan as it is

responsible for all claims of government for recovery as well as payment. All

depositor of NBP are in relief that their money security is guaranteed by

government of Pakistan.

It acts as an agent of the Central Bank wherever the State Bank does not have its

own Branch.

It is also having the advantages of being a government bank but it has to face the

following issues:

Employment practices, Unions, Associations.

Political Interference and harassment.

Incidents of high taxation on banking industry

Economical

In recent years banks have higher interest rates because of the high default rates

over the last few years. Liquidity of banks is a worry but nothing is happening in

the interbank market. At the same time, banks are trying to build their balance

sheets back up.if we talk about NBP being a GOVT bank it is being affected by

the economic conditions of the country.the bank is facing some issues regarding

economic conditions which are as follows:

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Constraints in mobilization of public savings because of inflation.

Staff cost.

Operating costs

Bad debts

Sociological

People are less trusting of banks and the public now see banks as power and

money hungry institutions who messed up society - doubt it's all true. Publicity is

not all that good either; bank bonuses are taxed at 50% in order to deter paying

them, but banks are still paying them in order to try to keep their star players

within their organisation.but if we talk about national bank than being a govt bank

it is trusted by people specially those who are traditional ones.beside this factor

NBP is facing some issues which are as follows:

Inadequate human resources.

Cultural strain to savings.

Defaulter’s lobby.

Declining education and work ethics.

Inadequate accountability.

Adequate empowerment.

Technology

If we talk about technology then it then there have been things like the PIN entry

device, online banking, etc. nothing all that new. There have been credit cards

issued before the boom. at the moment, R&D is looking up new forms of

investments (we call that financial innovation) to get more business, when

confidence in the financial industry is restored. Things are rather slow in this area

as well, except for the fact banks are now opening on Saturdays as well as on

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weekdays. if we talk about NBP then it is not that much technically settled yet

they are more trusting on keeping records in registers but NEW SAP system is in a

process of implementation. other issues are:

Inadequate communication infrastructure.

Inadequate computer facilities.

Inadequate IT training.

Environment

Banks don't have much effect on the environment; in fact I think I have heard a

few banks are actually helping various trusts and various welfare centres. Under a

trust Deed, the bank also provides services as trustee to National Investment Trust

(NIT) including safe custody of securities on behalf of NIT. Some schemes have

been specifically designed for the low to middle income segments of the

population. These include NBP Karobar, NBP Advance Salary, NBP Saibaan,

NBP Kisan Dost, and NBP Cash n Gold.

The National Bank of Pakistan has implemented special credit schemes like small

finance for agriculture, business and industries, administrator to Qarz-e-Hasna

loans to students, self employment scheme for unemployed persons, public

transport scheme. The Bank has expanded its range of products and services to

include Shariah Compliant Islamic Banking products. For the promotion of

literature, NBP recently initiated the Annual Awards for Excellence in Literature.

NBP will confer annual awards to the best books in Urdu and in all prominent

regional languages published during the defined period. Patronage from NBP

would help creative work in the field of literature. The Bank is also the largest

sponsor of sports in Pakistan. It has provided generously to philanthropic causes

whenever the need arose.

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Legal

Legal issues include stricter regulations and there have been quite a few court

cases with a few banks because shareholders lost money (not that all of these cases

actually get much of a fight).if we talk about NBP they follow rules and have got

many cases in court due to the several defaults by the parties and individuals.

Competitor analysis

National Bank of Pakistan is the largest commercial bank of Pakistan. The bank handles treasury transactions on behalf of the government of Pakistan as an agent to the State Bank of Pakistan. The bank has a network of 1,232 branches in Pakistan and 18 overseas branches including the Export Processing Zone Branch.National Bank of Pakistan provides commercial banking and related services to individuals, corporate entities, and government in Pakistan and internationally. It provides saving accounts, home financing, personal loans, ATM and debit cards, financing facility for stock investors, cash against gold, agriculture farming program, Internet based home remittance service, and personal accident insurance. The company also offers Islamic banking services, which include deposit schemes, such as current deposit scheme, and profit and loss sharing deposit scheme. In order to know further about the performance of Nbp,we compare it with its competitors. Some of Competitors of nbp are:

MCB Bank Ltd. United Bank Limited Habib Bank Limited MCB Bank Ltd.

MCB Bank Ltd.MCB is one of the leading banks of Pakistan with a deposit base of Rs. 431 Billion and total assets over Rs. 550 Billion. Incorporated in 1947, MCB soon earned the reputation of a solid and

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conservative financial institution managed by expatriate executives. In 1974, MCB was nationalized along with all other private sector banks.

MCB Bank Limited, with more than 60 years of experience as one of the leading banks in Pakistan, was incorporated on July 9 in 1947. The bank has journeyed remarkable tenure of more than half a century of competitively edged and well positioned heights of success by deploying quality banking, heads on technological developments, professionally leading management and prudent and ethical work methodologies. MCB was nationalized along with other private banks in 1974 as part of Government of Pakistan's economic reform movement and was later privatized to Nishat Group lead consortium in 1991.

Since privatization, MCB's growth has been phenomenal. Today, MCB in one of the largest foreign banks in Sri Lanka, the first bank in Pakistan to launch Global Depository Receipts (GDR) in 2006, has strategic foreign partnership with May bank of Malaysia which holds 20% shares in MCB through its wholly owned subsidiary Mayban International Trust (Labuan) Berhad since 2008, has international indirect regional presence in Dubai (UAE), Bahrain, Azerbaijan, Hong Kong and Sri Lanka and serving through a domestic network of over 1,130 branches and 600 ATMs across Pakistan with a customer base of 4.5 million (apprx.)

MCB is reputed as one of the most sound financial institution and as one of the leading banks in Pakistan with a deposit base of PKR. 462 bln (apprx.) and total assets of PKR 605 bln (apprx.). The bank is versed as one of the oldest and most responsible banks in Pakistan and has played pivotal role in representing the country on global platforms while being one of the few institutions that are recognised and traded in the international market.

The bank has also been acknowledged though prestigious recognition and awards by Euromoney, MMT, Asia Money, SAFA (SAARC), The Asset and The Asian Banker.

The bank along with its subsidiaries is engaged in providing commercial banking and related services to retail clients, and small and medium enterprises in Pakistan, Asia Pacific and the Middle East. It offers various deposit products, including fixed deposits, savings deposits, term deposits, current

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accounts, margin accounts and foreign currency accounts. As of December 31, 2007, it operated 1,020 branches, including eight Islamic banking branches in Pakistan and six branches outside Pakistan. Global Markets Direct’s MCB Bank Ltd. - Financial and Strategic Analysis Review is an in-depth business, strategic and financial analysis of MCB Bank Ltd.. The report provides a comprehensive insight into the company, including business structure and operations, executive biographies and key competitors. The hallmark of the report is the detailed strategic analysis of the company. This highlights its strengths and weaknesses and the opportunities and threats it faces going forward.

United Bank Limited

United Bank Limited (UBL) is one of the largest banks in Pakistan. The company is principally engaged in providing retail banking, investment banking, treasury banking and corporate banking services to the individuals and corporate customers. UBL operates through four business segments namely, Corporate Finance, Trading and Sales, Retail Banking and Commercial Banking. The company operates through a wide network of 1,112 domestic and 17 overseas branches. It principally operates in Pakistan and has operations in Bahrain, China, Iran, Kazakhstan, Oman, Pakistan, Qatar, Switzerland, United Arab Emirates, the UK, the US and Yemen. Global Markets Direct’s United Bank Limited - Strategic Analysis Review is an in-depth business and strategic analysis of United Bank Limited. The report provides a comprehensive insight into the company, including business structure and operations, executive biographies and key competitors. The hallmark of the report is the detailed strategic analysis of the company. This highlights its strengths and weaknesses and the opportunities and threats it faces going forward. UBL achieved a profit after tax of Rs 11.2 billion which is 21% higher than the corresponding period last year and translates into earningsper share of Rs 9.12 (2009: Rs 7.51). On a consolidated basis, UBL achieved a profit after tax of Rs 11 billion, an increase of 16% over2009. UBL's strong internal capital generation resulted in a Rs 6.1 billion(14%) increase in Tier 1 Capital, despite keeping Risk Assets flat.Consequently, the unconsolidated Capital Adequacy Ratio (CAR) ofthe Bank improved from 13.2% in December 2009 to 14.5% inDecember 2010. The Tier-1 CAR of the Bank has also improvedfrom 9.0% in December 2009 to 10.3% in December 2010. On a consolidated basis, the CAR improved to 15.0% in December 2010(December 2009: 14.0%) while Tier-1 CAR improved from 9.5% in December 2009 to 10.4% in December 2010. The commitment to continuously create value for its customers, employees and local communities is a major priority of UBL. In 2010,the Bank provided support of over Rs 80 million for CSR initiatives principally in the areas of education, health

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care and community development. UBL's efforts in the field of CSR were also acknowledged by the Pakistan Center for Philanthropy (PCP), an independentorganization, as one of the largest donors to charitable causes inPakistan.UBL, as a “Contributing Sponsor” of the Karachi Education Initiative(KEI), contributed Rs 40 million to this cause. This initiative aims to set up a world class School of Business and Leadership in Karachi. Additionally, Rs 3.9 million were also donated to other organizationsoperating in the field of education, including The Citizens' Foundation and the Lahore University of Management Sciences.In the areas of health and community development, UBL contributedover Rs 10 million to the Edhi Foundation, SOS Villages of Pakistan, Marie Adelaide Leprosy Centers, Special Olympics Pakistan, The Police Hospital Fund and Friends of Burns Center.

Habib Bank Limited

Habib Bank Limited commonly referred to as "HBL" and head-quartered in Habib Bank Plaza, Karachi, Pakistan, is the largest bank in Pakistan. The bank has a network of over 1450 branches in Pakistan and 55 branches worldwide.Habib Bank stands to gain from a possible deal as it would get some of the best customers who have very good credit history, the official said. He added that the Citibank had already cleared its portfolio of risky loans. After Pakistan was born in 1947, Habib Bank, at the urging of Governor-General Jinnah, moved its headquarters to Karachi, Pakistan's first capital. This gave Karachi its first commercial bank of the newly formed Pakistan. The Habib family owned and managed the bank until the Pakistan.

The HBL Board met on April 15, 2011 at Karachi and announced its results for the first quarter of 2011. HBL's consolidated Pre-tax profit for the first quarter of 2011 is Rs.7.7 billion and the profit after tax is Rs. 5 billion showing an increase of 23% and 31% respectively over the corresponding quarter last year. This translates into an earning per share of Rs. 4.95 for the quarter.For the year 2010,Deposit growth for the year has been 14.3% and the net asset growth of the bank has been 27.2% over 2008. HBL�s consolidated Pre-tax profit for 2009 is Rs. 21.4 billion and the profit after tax is Rs. 13.4 billion, which translates into an earning per share of Rs. 14.70.

The Bank announced a final cash dividend of Rs. 6.00 per share (60%) and bonus shares of 10%.

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Financial highlights of nbp and competitors.

Name of the

bank

Assets Advances Deposits Equity

National Bank

of Pakistan

1035024680 477506564 832151888 103762310

MCB Bank Ltd.

567533 254522 431372 76150760

United Bank Limited

698785 368692 550646 60181

Habib Bank Limited

34478466 1272066 186966167 10018800

conclusionTop

Some businesses think it is best to get on with their own plans and ignore the competition. Others become obsessed with tracking the actions of competitors (often using underhand or illegal methods). Many businesses are happy simply to track the competition, copying their moves and reacting to changes.

Competitor analysis has several important roles in strategic planning:

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• To help management understand their competitive advantages/disadvantages relative to competitors

• To generate understanding of competitors’ past, present (and most importantly) future strategies

• To provide an informed basis to develop strategies to achieve competitive advantage in the future

• To help forecast the returns that may be made from future investments (e.g. how will competitors respond to a new product or pricing strategy?

By keeping in view above data a we come to the conclusion of competitor analysis

that national banks deposits, assets, advances and equity is increasing year by year

gradually.it depicts its strong position.it also shows the trust of people on this

bank,this trust is crucial for the stability of any business. Further if we consider its

branches it has th highest branches compared with the other banks that are 619

branches in Pakistan.it has very wide network and provide best services.

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Sec: 8

THEORY VS PRACTICAL

i

iiRefrences

Annual reports of the National Bank

Previous reports on National Bank.

Existing documents of National Bank.

Annual report of the State Bank of Pakistan

James C. Van Horne, John M. Wachowicz, Jr. “Chapter # 6 Financial Statement

Analysis”, Financial management 10th Edition, 121-157

Richards, Verlyn D, and Eugene J. Laughlin. “A Cash Conversion Cycle Approach

to Liquidity Analysis” Financial management 9, 32-38.

The Professionals’ Academy of Commerce (PAC), “Introduction to Financial

Accounting” 3-10.

Lawrence J. Gitman “Chapter # 3 Financial Statements, Taxes, Depreciation and

Cash Flow” Principles of Managerial Finance 9th Edition, 78-84.

Employ handbook of National Bank prepared by Human Resource Division of

National Bank

Officials of Accounting, Finance and MIS department of National Bank of

Pakistan.

Officials of Internal Audit department of National Bank of Pakistan.

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During Internship it was my prime objective to furnish my knowledge (Theory) to

various practical situations. The practical work presents an analytical problem

while relating theory with practice. As a result, analysis of practical versus theory

requires a distinct approach. This part of report is the essence of the internship, as

this will help to better understand the working environment of the bank by finding

the relationship between what is written in the books and what is actually going on

in fields. The theory written in the books in cases is not implemented as it is. In

iii

iv

v

vi

vii

viii

ix

x

xi

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some cases theory is implemented with a little modification but in other cases

theory has nothing to do with practice.

In accounting, banks don’t prepare worksheet, but part of worksheet is prepared

like trial balance. The securities for the loans are handled in the same way as

theory says like mortgage, pledge, hypothecation, advances against insurance

policies or liquidation procedure is the same. There is some difference lies in types

of loans in bank that is theory talks about four or five types of loans that is cash

finance, overdraft, loans etc., but in practice there are some more types used by

bank like running finance, demand finance etc. All other concepts of remittances,

bills, foreign exchange deposits, letters of credit are in accordance with theory

almost. A bank's balance sheet is different from that of a typical company. You

won't find inventory, accounts receivable, or accounts payable. Instead, under

assets, you'll see mostly loans and investments, and on the liabilities side, you'll

see deposits and borrowings.

CONCLUSION

To me, Theory gives the direction to understand the processes and the

terminologies going across the World using best business practices in a broader

view covering each and every aspect of possible business scenarios. On the

contrary practical life is specific, enclosed in a jar.

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Sec: 9

FUTURE PROSPECTS OF

NATIONAL BANK OF PAKISTAN

National Bank of Pakistan maintains its position as Pakistan's premier bank

determined to set higher standards of achievements. It is the major business

partner for the Government of Pakistan with special emphasis on fostering

Pakistan's economic growth through aggressive and balanced lending policies,

technologically oriented products and services offered through its large network of

branches locally, internationally and representative offices. The forward-looking

management of NBP is a firm believer in focusing on niches where there is critical

mass and to create products that meet that demand.

National Bank of Pakistan is gearing up to the challenges faced by the domestic

banking industry due to innovations and advances in the international banking

world, which is the consequence of globalization. The bank wishes to effectively

utilize the financial assistance being extended by the Government of Pakistan for

banking sector reforms aimed at reducing operating costs and improving

profitability. National Bank of Pakistan is distinct from other banks in that it has a

nonprofit and service oriented motive, which has manifested itself in the area of

salary deposits of government employees and payment of utility bills. The bank

renders these services across the country reaching as far as the remotest regions;

from our northern borders to the Arabian Sea. These services do not contribute

towards the earnings of the bank; rather they put pressure on bank’s resources.

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Nevertheless, the bank is committed to serving small savers and the general public

of the country. National Bank of Pakistan is everyone’s bank and does not only

serve corporate customers. To extending and targeting research to improve bank

earnings, through customer focus of bank’s commercial and corporate branches,

and by enhanced efforts towards the development of human capital, the bank shall

very soon transform from a bureaucratic organization to a fast paced, modern, and

competitive bank. In conclusion, the National Bank of Pakistan have the vision,

which will enable it to achieve even better results, safeguard the interest of their

customers and to assist them in their march towards progress and prosperity in

future.

The National Bank of Pakistan is confidence that tomorrow we will be…

Leaders in our industry

An organization maintaining the trust of stakeholders.

An innovative, creative and dynamic institution responding to the changing

needs of the internal and external environment

NBP’s current management has boarder vision. They have taken steps to improve

customer services, streamline internal procedure and creating a delectating climate

for technology initiative.

Reorganizing efforts going on in the NBP has open many opportunities for NBP to

grow. For instance to achieve objectives NBP have taken following measures.

Setting of target for of making at least 300 branches country wide on line.

Closing of all those branches, which are burden on NBP.

Management to offer specialized services to major corporate including

advisory and debt syndication introduces the concept of relationship manager.

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Comprehensive training programs has been develop to up grade the core

banking skills of the existing staff as well as integrate high quality hiring.

To improve the motivation of staff a merit-based culture is being promoted.

Through overhauling the manpower recruitment preservation and performance

appraisal system.

The actions taken by current management provide a great opportunity for NBP for

making it future prosper and can make NBP not less than any modern

commercialize bank in Pakistan.

The Management of NBP assess that the Internal Control environment is showing

signs of improvement as compared to previous years in all areas of the bank. The

bank is endeavoring to further refine its internal control design and assessment

process as per guidelines issued by the State Bank of Pakistan Accordingly, Bank

is making all possible effort to improve the professional skills and competency

level of the staff through need based training programs and our valued customers

for their support and continued confidence in NBP.

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Sec: 10

RECOMMENDATIONS

The National bank of Pakistan should be fully prepared in its management

of financial crises and its business continuity planning, within the standing

committee framework, and should work with others to strengthen national

crises management preparations.

The bank should improve the quality of training of its employees and the

integrity, controls and efficiency of its systems, processes and financial

reporting.

The bank should improve its recruitment, retention and development and to

reform the Bank’s pension scheme.

The bank should renegotiate the Bank’s long term financial framework and

to overhaul the Bank’s financial system.

The Bank should improve IT capability in the analytical areas and to

develop a medium term strategy for banking and market operations.

The National bank of Pakistan should monitor the impact of its operations

on the environment, which is mainly through the use of power and the

generation of waste.

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NBP, being the only lending arm to the government for public sector

development should design, develop and deliver product and services for

economic growth.

The bank should provide support to the Micro, Small and Medium

enterprises thereby reducing unemployment and helping to create a more

equitable distribution of wealth.

The NBP should adopt modern banking tools and techniques. Quality

leadership, clear vision, investment in IT infrastructure and human resource

development.

The bank should develop software for pension disbursement.

As for as Islamic Banking environment is concerned the management and

employees of NBP should work together for basic research for discovering

their own laws, developing theories or concepts for the better direction of

their own business environment according to Quran & Sunnah.

The branches should reduce its large expenses in order to increase the value

of the bank.

The NBP should strengthen incentives and accelerate a results-oriented

training and communications programs for management and staff.

The National Bank of Pakistan should implement a financial inclusion

program to meet the needs of underserved economic subsectors, including

outreach programs to meet the requirements of the agriculture, housing,

SME and microfinance sectors.

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The National Bank of Pakistan should introduce a framework for

consolidated supervision and reorganize the regulatory architecture to allow

better regulation and supervision of financial control division of bank.

CONCLUSIONS

The National Bank of Pakistan plays a key role in the strategic national

development. The bank has historically been the financial arm of the

government and has enjoyed the blessings of state support in the form of

huge public sector funds and deposits.

In contract to other banks populating the FSI sector, NBP is mandated to

uphold public interest. It is critical too as all other banks and NBFIs in

public sector have been closed down or merged with NBP.

In contract to other banks populating the FSI sector, NBP is mandated to

uphold public interest. It is critical too as all other banks and NBFIs in

public sector have been closed down or merged with NBP.

The current management of National Bank of Pakistan was hired purely for

their international experience, business orientation to turn around a purely

public institution into a sustainable and commercially viable bank serving

public interest along the lines of a large modern commercial bank.

The National Bank of Pakistan has effective budgeting system in place.

Annual budget of the bank is approved by the Board and monthly

comparisons of actual results with the budget are prepared and reviewed by

the senior management.

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The National Bank of Pakistan has a comprehensive framework of written

policies and procedures on all major areas of operations such as Credit,

Treasury Operations, Finance, Internal audit and Compliance approved by

the Board.

The National Bank of Pakistan provides sustainable financing for growth of

industries of critical national importance such as energy, education,

healthcare, transport, shipping, Research & development.

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Bushra Internship Nbp

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