Internship Report on ZTBL[3]

8/13/2019 Internship Report on ZTBL[3]

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INTERNSHIP REPORT

ZARAI TARAQIATI BANK LTD.

Submitted to:

Chairman

Department Of business Administration

Submitted By:

Name: SHABNAM NAZ

Roll # : Q575753

Registration #: 05-FID-0097

Mailing Address:Block No 10,Flat No 14, Cat-5,I-9/4 Islamabad

Contact #:0336-5013509

Date of Submission:

DEPARTMENT OF BUSINESS ADMINISTRATION

ALLAMA IQBAL OPEN UNIVERSITY


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ACKNOWLEDGEMENT

I have great sense of gratitude for the most Beneficent and Merciful Allah who has always

helped me in all matters of life .I tried but He rewarded me more than the tried.

I have deep feelings for whole of my family, in general, and for my Father, my Mother and my

elder brother, in particular .They have always soothed me, elevated me and their words and dua

has floated me in the deep seas of troubles. All of my successes are due to the prayers of my

family.

I am thankful to all of my teachers and my class fellows and friends whom cheerfulness and

guidance is an asset for me .I am especially thankful to the bank staff who has given me

opportunity to get precious practical knowledge and also for their guidance during my internship.

Without the help of all these I was not able to complete this report.

Shabnam naz


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Format of the Internship Report for MBA Finance

1. Title Page2. Acknowledgements

3. List of Contents

4. List of tables & illustrations, if any

5. Introduction

6. Objectives of studying the organization

7. Overview of the organization7.1 Brief history7.2 Nature of the organization

7.3 Business volume7.4 Number of employees7.5 Product lines

8. Organizational structure8.1 Main offices8.2 Comments on the organizational structure

9. Structure of the Finance Department9.1 Number of employees working in the Finance Department9.2 Finance & Accounting operations

10. Functions of the Finance Department10.1 Accounting system of the organization

10.2 Finance system of the organization10.3 Use of electronic data in decision-making10.4 Mobilization of funds10.5 Generation of funds10.6 Sources of funds10.7 Allocation of funds

11. Critical analysis of the theoretical concepts relating to practical experiences
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i.e. relate the theoretical concepts with your practical experience during your

Internship with the Finance Department11.1 Financial analysis (ratio analysis, horizontal & vertical analysis of theorganization for the last five years)11.2 Organization analysis with reference to the industries listed on the stock

exchange11.3 Behavior of the studied organization in allocation of various funds todifferent assets11.4 Future prospects of the organization

12. Short-falls/weaknesses of the Finance Department12.1 Critical analysis of the management patterns of the organization withreference to financial operations, weak areas that need to be improved.

13. Conclusions & recommendations for improvement

14. References & Sources used

15. Annexes

InstructionsThe report should be:

1.Double space typed on A4 size,

2.75 gram paper,

3.With bold headings & sub-headings,

4.With margins set as top,

5.Bottom & right 1 inch whereas left 1.5 inch.

6.These typed pages should be hard board binding in black color consisting of 25 to

30 pages.Latest Mailing Address, Roll Number, Registration Number & Telephone Number

should be clearly mentioned in the report.

HISTORY OF ZTBL


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The Zarai Taraqiati Bank Limited

(ZTBL)(formerly known as Agricultural

Development Bank of Pakistan) is thelargest public sector financial development

institution with a wide network of 27 Zonal

Offices, 9 Audit Zones and 352 branches inPakistan. The bank serves around half amillion clients annually and has over one

million accumulated account holders.

Pakistan is an agricultural country and more than 60% of its population is working related to

agriculture. A development in the agricultural sector will no doubt result in the development of

the whole country. To keep With a view to meet this basic need the Agricultural Development

Finance Corporation was set-up in 1951, and was entrusted with the task of providing financial

facilities for the development and modernization of agriculture, including: Forestry, Fishery,

Animal Husbandry, Poultry, Dairy Farming.

Later on the Agricultural Development Bank of Pakistan was also established in September

1957, under the Agricultural Development Bank Act. The Bank is to provide credit in cash or in

kind, warehousing and storage facilities to agriculturists, cooperative societies and other bodies,

of which the majority of members are agriculturists.

As the functions of the Agricultural Development Finance Corporation and Agricultural

Development Bank were similar and since both were working with capital provided by the

Government, they were merged into one organization known as Agricultural Development Bank

of Pakistan on February 18. 1961. The Agricultural Development Bank of Pakistan was a

banking company for the purpose of the Banking Companies Ordinance and the State Bank of

Pakistan Act.

On 14 December 2002 the Federal Government has converted the Agricultural Development

Bank of Pakistan (ADBP) into Zarai Taraqiati Bank Ltd (ZTBL) and the new venture has started

its operation with immediate effect. The new corporate structure redefines the banks statue as a

public limited company with an independent Board of Directors promulgated under the


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presidential ordinance which, aims at ensuring good governance, autonomy, delivering high

quality, viable and timely financial services to a greater number of clientele in the agricultural

and rural segment of the country with adequate returns to the stakeholder.

After this incorporation all the assets and liabilities of ADBP became the assets and liabilities of

ZTBL. This restructure was carried out with the aim to improve the working and role of bank in

the agricultural development.

The bank is completely owned by the government and it has head office in Islamabad.

Ownership Government

Type of Institution Specialized Bank

Established 1961

President & CEO Muhammad Zaka Ashraf

Equity 18.7 Billion (2009)Headquarters Islamabad, Pakistan

Total Deposits PKR 8.8 billion (as Dec.31st, 2009)

Total Disbursement PKR 77.7 billion (as Dec.31st, 2009)

Homepage www.ztbl.com.pk

ZTBL is providing affordable, rural and agriculture financial services to the rural Pakistan,

comprising 68 % of the total population. The Bank through a country-wide network of 352

branches is serving around half a million clients annually and over one million accumulated

account holders with the average loan size of around Rs.89,000.

Credit Rating

In August 2010, ZTBL continued to achieve AAA credit rating by JCR-VIS.

Year Entity Stand Alone Outlook2010 AAA/ A-1+ B+/ B Stable

2009 AAA/ A-1+ B+/ B Stable

The credit rating of the bank is due to the reason that bank enjoys sovereign guarantee of the

federal government that covers its debt obligations to State Bank of Pakistan (SBP) and ensures

safety of deposits under the Banks (Nationalization) Act 1974. The banks lending book is

largely funded through SBPs credit lines while contribution from deposits remains nominal.

ZTBL is actively exploring different options for resource mobilization including
http://www.ztbl.com.pk/http://www.ztbl.com.pk/http://www.ztbl.com.pk/


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bilateral/multilateral arrangements with financial institutions. In case these efforts materialize; it

would diversify the existing funding source of the bank, thereby reducing reliance on the SBP.

Nature of organization

Dedicated to serve the needs of the farming community, by delivering financial products and

technical services on a competitive and sustainable basis, in a convenient, efficient and

professional manner, leading to success of the Bank and the farmers.

Business Volume

To play effective role in the promotion of economic growth, by enhancing the availability of

credit to the agriculture sector, through reliable access to sustainable financing, special lendingprograms, technical assistance, and other products & services, and to promote career

development opportunities for increasing professionalism and technical proficiencies of

employees.

Develop and operate as a financially and operationally sustainable R.F.I of the country.

Assist rural community, particularly the small farmers, in raising their productivity and

income levels through timely delivery of credit, advisory and ancillary services.

Build ZTBL's image as a proactive, client friendly, financially & operationally

sustainable with indigenous product deployment.

Establish and provide backward and forward linkages to strengthen agri. value added

commodity chains.

Engage in public - private and wholesale - retail partnership to deepen outreach and

reduce operating cost.

To function as a rural commercial bank to mobilize rural capital formation and tocommercialize the agriculture sector by delivering the true value of credit to the client.

Provide a wide range of risk insurance products to its clients.

Open up its venues of operation to Domestic & International Banking Industry to avail

comparative advantages


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NO. Of Employees:

The general direction and superintendence of the affairs of the bank are entrusted to a 12

members Board of Directors consisting of a chairman appointed by the Federal Government, the

Federal Government officers from the Ministries of Finance and Food and Agriculture, four

officers of the four Provincial Governments and one non official nominated by each province.

One member on this board represents the State Bank of Pakistan also. However, at present the

bank has 7 directors including chairman. The bank also has a president appointed by the federal

government and a company secretary.

In ZTBL, the president supervises and directs the Chief Executive Officer who supervises and

directs the Head of Department, who then supervise and direct the officers under them. The

management hierarchy of bank is as follows;

Earlier the bank was functioning like a pure government institution and permission has to be

sought on every step for moving forward. Now the bank management board will be fully

empowered to run the affairs of the ZTBL.

More than 2,000 employees of the bank have opted for Voluntary Golden Hand Shake Scheme,

offered by the bank to its employees. Bank has established a task force for improving the

operational performance of the staff and it was monitoring the disbursement, recovery operations

and performance of field functionaries. The task force comprised 10-15 officers and each officer

will head a desk exclusively to monitor 3-4 regions. This task force will be responsible to

evaluate performance of each MCO, Manager and Regional Manager on the achievement of

banks policies regarding credit and recovery periodically.


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Board ofDirectors

Sultan Ali chaudhry

Chairman Board

Mr.Ihsan-Ul-Haq KhanPresident/ CEO

Mr.Muhammad Zaka

AshrafDirector

Mr.Abdul Wajid ArainDirector

Mr.Zafar IqbalDirector

Mr M Iftikhar Khan

mohmand

Director

Mr.M Yaqoob VardagDirector

Dr.Khalid Ahmed khokarDirector

Dr Amir Muhammad


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Brief Resume On Mr Ihsan ul Haq Khan President/CEO

All Pakistan ZTBL Officers Association (patriots) has welcomed the

appointment of a prominent banker Ehsan-ul-Haq Khan as President

of the Bank. Ehsan-ul-haq Khan is a seasoned banker having morethan 30 years experience in banking sector. He served Allied Bank

of Pakistan, NDFC and National Bank of Pakistan.

He was currently holding the post of Acting President/CEO of Small

& Medium Enterprises Bank (SME). The Association held an

emergency meeting on Saturday to discuss the appointment of new

President after the intervention of apex court. Addressing theofficers, Ghazanfar Ali, Secretary General of Patriots group lauded

the timely intervention of the Prime Minister Raja Pervez Ashraf

who in compliance with the Islamabad High Court Orders has

appointed Ehsan-ul-Haq Khan as permanent President/CEO ofZTBL


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A Brief Resume of director

Mr. Muhammad Zaka Ashraf

Present Portfolios

President/Chief Executive Officer, Zarai Taraqiati Bank Ltd.

Chairman & Chief Executive, Ashraf Group of Industries

Chairman, Pakistan Sugar Mills Association (Punjab Zone) from October, 2006 (Second

Tenure)

Chairman, Sugarcane Research & Development Company, Agriculture Department,

Government of Punjab

President, Petarian Association, Lahore

Patron-in-Chief Sindh Abadgar Welfare Association (Sindh)

Posts Held

Advisor to Chief Minister Sindh from 1989 to 1990

Member Executive Committee, Lahore Chamber of Commerce & Industry from October

2002 to September 2004


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Central Chairman All Pakistan Sugar Mills Association from October 2004 to October

2006

Vice Chairman of The Federation of Pakistan Chambers of Commerce & Industrys

Standing Committee on Food & Agriculture from January 2007 to December 2007

Academic Institutions

Member Board of Governors of Sadiq Public School, Bahawalpur, from 1st January 1989

Transformation of ZTBL to R.F.I of the country and road to excellence.

The conversion of ADBP into ZTBL had a conditionality of the Asian Development Bank

(ADB) loan framework as per which a restructuring exercise was initiated. The restructuring

process entailed ADBsRural Finance Sector Development Program (RFSDP) with the objective

to transform ZTBL into a sustainable Rural Finance Institution. It also included the up-gradation

of Information technology (IT) infrastructure for which funds from ADBs loan were to be

utilized.

Healthy and well-functioning rural finance markets are directly related to achieving the two key

national policy objectives of accelerating rural/agriculture growth and reducing poverty. The

realization of these objectives depends on the simultaneity of developments in rural finance and

non-financial markets to foster the creation of diverse sources of rural finance to build

sustainable financial institutions, and stimulate products and capital flows in the rural sector. For

this, rural finance must be seen as an integral part of equitable development within a framework

of macroeconomic stability.

For the majority, access to affordable rural finance services is also important to enable them to

compete in the post-World Trade Organization scenario. Inability to compete because of high

financial costs could reduce income of the majority of farmers and rural clients, particularly the

small and subsistence clients. Lack of access to affordable rural finance services will also

prevent the clients from switching to non-farm activities.


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The ZTBL restructuring plan covering the following;

Governance: establish an environment that facilitates good governance and

accountability;

Systems: modernize operations through use of technology, networking, and

communication tools;

Business processes:streamline products and delivery systems so as to reduce transaction

costs, simplify operations, and increase outreach;

Products and services:introduce products and services that are financially economically

viable;

Human resource development: improve standards and skills of management and staff

and strengthen training capacity; and

Information Technology:establish new hardware and software platform to support

MIS, accounting system including forensic accounting, and risk management functions.

The reforms shall establish ZTBL as a key R.F.I of the country. By expanding its private sectorrole, the bank aims to establish network of high tech rural and agri. financial services through

intermediations under public private participation and whole-sale -retail lending mechanism.

Branch Structure:

Head Office

Islamabad, Pakistan

Punjab Sindh Balochistan Khaber

Pakhtunkhaw

Gilgit

Balitistan


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Islamabad

13 BranchesKarachi

15 BranchesD.I. Khan

14 BranchesAbbottabad

7 Branches

Gilgit

7 Branches

Multan8 Branches

Hyderabad14 Branches

Turbat6 Branches

Mingora

15 Branches

D.G.Khan

6 BranchesMirpur Khas

14 BranchesQuetta

18 BranchesPeshawar

20 Branches

Sahiwal

15 BranchesSukkur

15 BranchesD.M. Jamali

7 Branches

Lahore20 Branches Larkana18 Branches

Gujranwala18 Branches

S.B. Nazirabad14 Branches

Bahawalpur

13 Branches

Faisalabad20 Branches

Sargodha16 Branches

Vehari

11 BranchesMuzafargarh

11 BranchesR.Y. Khan

7 BranchesMuzafar.Abad

10 Branches

27

Total Audit Zones 9

Total Branches 352

Total Zones


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Kissan Support Services Ltd.

Subsidiary of ZTBL

Kissan Support Services Ltd. Is a subsidiary of ZTBL which is established with a capital

investment of 100 Million to help ZTBL in the achievement of its objective and also to make

availability of trained human capital to the bank.

KSS Aim

To provide support staff to ZTBL & under take its non core activities.

KSS Operation

Kissan support services operates under its Memorandum & Articles of Association.

Objectives

The main objective of KSS are following:

To provide to the Bank all kinds of support staff and ancillary services

To plan, organize and establish training facilities to impart training to the banks staff

Drip Irrigation System to assist the bank clients in marketing of their product and provide

storage facilities

To assist the bank clients in marketing of their product and provide storage facilities


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To provide welfare services to the employees of the Bank including education, vocational

training, sports and recreation facilities

To invest any surplus money of the company not immediately required

To carry on any business, which may seem to the company capable of being conveniently

carried on

To liaison & establish contracts with agricultural research organizations for development

of efficient, effective and appropriate technologies

To carry on business of providing consultancy, advisory and other agency services and

support services to Zarai Taraqiati Bank Limited

To provide to the Banks clients quality products and services for efficient and improved

farming

Etc.

Services/Activities so far undertaken by KSS

Security Services to ZTBL

Recruitment/provision of staff

janitorial Services provided to:

ZTBL Head office buildings

Ztbl Farms

Staff college

Printing stationery office

AV Unit

Old record office


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Sports club

Warehouse

Management of Sports Activities

Management of Sports Activities

Photocopy Services

Day to day minor repair and maintenance of ZTBL HQ Buildings

ZTBL Locker Facility

Zarai Taraqiati Bank Ltd. apart from its core functional activity marked with country based agri-business, has started to serve its valued customers by offering lockers facility. Initially, thisfacility is being offered at following 11 branches:-

S.No Name of Branch

1 Islamabad Branch

2 Main Branch Lahore

3 Peshawar Branch

4 Gujranwala Branch

5 Faisalabad Branch

6 Multan Branch

7 Sahiwal Branch

8 Sargodha Branch

9 Khan Pur Branch

10 Shafi Court Branch

11 Main Branch Gulshan-e-Johar

Following are the approved rates for rent of lockers and key deposits against which lockers will

be allocated:

Type Specification Rent Per AnnumRent after grace

periodKey Deposit


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Small 6-1/2"x4-1/2"x23" Rs.1,200/- Rs.1,500/- Rs. 5,000/-

Medium 13-1/2"x4-1/2"x23" Rs.1,800/- Rs.2,250/- Rs. 10,000/-

Large 13-1/2"x8-1/2"x23" Rs.2,500/- Rs.3,125/- Rs. 15,000/-

Life Time Locker Facility

On lump-sum payment of locker rent for ten years entitle the lessee to avail the locker facility forlife time, without key deposit.

Products offered to Meet Finance Need of Farmers:

Zarai Taraqiati Bank Limited (ZTBL) is a specialized bank providing agricultural credit in rural

areas of the country. Pakistan is an agricultural country and near about 60% of its population is

working directly or indirectly related to agriculture industry. But instead of being an agricultural

country Pakistan is still not gaining benefits from this sector which it can gain. Some time we

even does not able to fulfill our food requirement and sometime we have bumper crop but does

not have facilities to store them properly, in this way we are wasting our resources. To gain

benefit from agriculture sector it is required to be modernized to increase the per acre production

and also to build warehouses to store. The main hindrance in the modernization of agriculture is

the unavailability of finance. The other financial institutions feel reluctant in giving finance to

farmers due to high level of risk in the production of this field. To facilitate farmers and to help

in modernization of agriculture sector the government has established this bank which is

contributing its part in achieving government objective from many decades. ZTBL is offering a

blend of products to fulfill the need of different types of customers.

Types of Loans Advanced

Short Term Loans


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Short term loans are loans for shorter period of less than a year. It includes, crop

production working capital loans recoverable in lump sum commencing after the

harvest/marketing of respective crops and within maximum period of 12 months.

Medium Term Loans

Medium term loans are for a period of more than a year but less than 5 years. In includes,

dairy farming and livestock etc. The installments of these loans are usually paid able in

quarterly or half yearly basis.

Long Term Loans

Long term loans are for a period of more than 5 years. These are development loans

which require large amount and also need some time to show its result in the shape of

better production. It includes loans for tractor, agricultural machinery, poultry farming,

godowns and orchard in yearly/half yearly installments within maximum period of 8

years.

Loan Schemes:

ZTBL is offering the following loan schemes to the farmers.

Supervised agriculture scheme:

Under this scheme agriculture loans are given for short, medium and long term loans up to Rs.

1.00 million per borrower/per case. The loans are sanctioned for In Fats, livestock, orchard,

tractor, agricultural machinery, tube well and irrigation facilities etc. under the scheme besides

provision of credit, information are provided to the farmers for planning the farm, production,

guidance for implementation of the scheme, marketing and repayment of loans.

Zarkhaiz (one window operation)

For timely and conveniently provision of credit to purchase inputs, loans are provided to the

borrowers under One Window Operation being conducted twice a week during Rabi and Kharif

seasons. Applications processed on the same day whereas sanction payments are made within

three days at Branch. For Rabi Crops one window operation from October to January and for

Kharif Crops from April to September each year which is extendable as per requirement of

particular area.


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Sada Bahar Scheme

For providing timely input loans for crops and working capital for poultry and fishery etc, the

Bank has launched a Sada Bahar Scheme. Assessment for inputs requirements for the whole year

is made at the time of first application. The amount so assessed is treated as Revolving Limitprovided it is within the security limit. The Managers are authorized to sanction such loan limits

up to Rs.O.500 million. Schemes main features are as under:

Revolving Credit Limit is fixed to cater production credit and ancillary requirements of

the farmers during one year period.

The documentation once completed remains applicable for three years with yearly

cleanup/renewal without any further documents.

The borrowers can draw the credit in lump sum or in installments according to his

requirement.

Like-wise he can repay in lump sum or in installments during the year when his cash

position allows him.

Pass Book containing transactions in his SBS Account is supplied to every borrower free

of cost.

Tea financing scheme

In order to increase the tea cultivation in District Mansehra, Swat, Mutta, Shangla par and Dir in

Malakand Division, tea financing scheme has been introduced which would not only save the

hard earned foreign exchange but would also help improve the socio-economic condition of the

inhabitants of the area. The salient futures of the scheme are given as under:

Maximum Credit Ceiling of Rs.60, 000/- per acre has been fixed.

Farmers owing land up to five acres are eligible to avail loans.

Credit will be given in 3 installments: first year Rs.30, 000/-, 2nd year Rs.15,000/-

3rd year Rs.15,000/- provided the disbursed loan is used properly.


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The credit would be repayable within 1 year with 6 years grace period with

prescribed markup of 9% per annum. Rebate of 1 % will be allowed in mark-up

on timely repayment and proper utilization of the loan.

Crop maximization project:

Ministry of Food, Agriculture and Livestock (MINF AL), Government of Pakistan has launched

Crop Maximization Project in 109 villages in various districts throughout the country to increase

the productivity/yield of crops. Under the project MINFAL has to provide funds of Rs, 299.893

million to ZTBL for disbursing loans to the project farmers for purchase of inputs. Till the time

funds of Rs.468 Million have since been received by the Bank for the purpose. These funds are

to be revolved for meeting input credit needs in the project villages till 30th June, 2014 after

which Bank will return the principal amount to MINFAL. Accordingly Credit needs of the

project farmers are being met by respective ZTBL branches through Village Organizations

formed for the purpose. Duly the currency of the project Bank is authorized to charge 4% per

annum mark-up on loans to project growers to meet its operational cost, however in case of

default Banks normal rate of return i.e. 9% p will be applicable.

PER ACRE CREDIT LIMITS

Major Crops

Wheat 16,000

Paddy (Rice) 19,000

Sugarcane 30,000

Cotton 21,000

Maize 20,000

Minor Crops

Overall Credit Limit Per Borrower Rs.1.000 Million

Sada Bahar Scheme under one window operation or otherwise Rs.0.500 Million


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Potato 36000 Bajra 11000

Tobacco 29000 Jawar 11000

Mustard Mung 11000 Gram 12000

Tomato 19000 Guara 3000

Mash 3000 Caster Oil 6000

Lentil 11000 Barlay 9000

Groundnut 14000 Berceme 4900

Sunflower 15000 Janter 4000

Soyabean 12000 Garloc 26000

Canola 13000Turmeric

25000

Rape Seed 11000 Ginger 30000

Til(Sesame) 12500 Lacern & Shaftal 4500

Suger beet 12000

Growing Agro Forest Tree

SNo. Trees 1st Year 2nd Year 3rd Year

1 Bamboo 34,000 8,000 3,000

Growing Orchards

S. No. Trees 1st Year 2nd Year 3rd Year 4th Year 5th Year

1 Mango 24,000 13,000 13,000 13,000 14,000

2 Citrus 21,000 12,000 11,000 13,000 13,000

3 Apple 23,000 12,000 12,000 12,,000 14,000

4 Banana 29,000 20,000 23,000 30,000 26,000

5 Jujuba 19,000 9,000 10,000 10,000 10,000

6 Guava 21,000 12,000 11,000 13,000 13,0007 Coconut 29,000 6,000 6,000 7,000 8,000

8 Palm Oil 18,000 6,000 7,000 7,000 7,000

9 Dated 33,000 12,000 11,000 12,000 13,000

Mature Orchard/Fruits crops

Pear 24000 Dates 31000


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Loquat 24000 Strawberry 25000

Plum 33000 Tea 60000

Apple 37000 Guava 24000

Papaya 22600 Pomegrante 33000

Almond 32000 Palm 22000

Coconut 21000 Olive Oil 13000Lichi 32000 Walnut 23000

Cherry 33000 Persimen 15000

Mango 37000 Zizi Phus(Bher) 25000

Apricot 31000 Melon 16000

Banana 37000 Water Melon 16000

Peach 32000 Musk Melon 16000

Citrus 34000

Types of Security:

Immovable Property:

Agricultural Land

Under Pass Book System 80%

Outside Pass Book System 70%

Under Alienability Certificate 66%

Commercial/Industrial Land under Pass Book 80%

Outside Passbook System

Urban Residential/Commercial Plots in all localities outside Pass Book 75%

Alienability Certificate 66%

Residential/Commercial Buildings 70%

Lease hold rights of a leased land of CDA/KDA with 99 years lease 70%

Moveable Property and Guarantees:

Unconditional Bank guarantee from scheduled Banks

Up to maximum amount of an un-conditional Bank guarantee after keeping sufficient

margin for un-paid mark-up, cost, charges and expenses.

Guarantee issued by Central or Provincial Government


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Full amount of loan plus return and other charges.

Government securities

85% of face value or market value whichever is less.

Defense Savings & FEB Certificates

75% of value of certificates presented as security.

Fix Term Deposits Receipts

85% of face value of deposits receipts.

NIT Units

80% of the face value or market value whichever is less.

Life Insurance policies

85% of surrender value

Pledge of Potatoes/Seed Potatoes price or market value which ever is less Up to

75% of Govt. support.

Personal Surety:

Against a bond with two sureties under General Credit and one surety in Special Schemes up to

Rs.25,000/- or Up to 50% of appraised value of properties of sureties.

Debt Equity Ratio

For Tubewell/Tractors/Implements/Attachments/Equipments

All kinds of

Tubewells/

Turbines

25%

Within 5 years in annual/bi-annual

installments commencing one year after firstdisbursement

New Tractor

No equity but10% of the loan is

to be needed in

PLS Account

Within 8 years in monthly/quarterly or half

yearly installments to be decided by Managerin consultation with borrower.


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Used Tractor,

Equipments/

attachments/

implements

and used tractor

-do-Within 5 years in monthly/quarterly or halfyearly installments to be decided by the

Manager in consultation with borrower.

Except Tubewell/Tractors/Implements/ Attachments/Equipments

Production Loan upto Rs.0.100 Million NIL

Land holding upto 25 acres/loan amount upto Rs.0.2 Million 15%

Land holding beyond 25 acres to 50 acres/loan amount beyond Rs.0.2 Million uptoRs.0.5 Million

25%

Land holding beyond 50 acres/loan amount beyond Rs.0.5 Million upto Rs.1

Million.

30%

Repayment Periods

S. No. Types of Loans Recovery Period

1 Short Term Loans Crop production working capital loans recoverable in lump sum

commencing after the harvest/marketing of respective crops and

within maximum period of 12 months.

2 Medium Term

Loans

Dairy farming and livestock etc. In yearly/half yearly/monthly

installments and within maximum period of 5 years.

3 Long Term Loans Tractor, agricultural machinery, poultry farming, godowns andorchard iIn yearly/half yearly installments within maximum

period of 8 years and. above.

Recovery Procedure

A) Recovery Schedule

Recovery schedule in each loan case as per terms of sanction of loan is fixed and

communicated to the borrowers after disbursement of loan.

In case of default or failure in repayment of any installment on due date the mark-up shallcontinue to be charged and last installment due to this may differ from the amount of

installments fixed at the time of disbursement.

b) Issuance of Notices

Demand noticeis issued before the due date of every installment.


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A Legal Noticeis issued one month after the due date informing the borrower that if the

amount is not repaid within next one month, further legal action will be taken to recover

the dues.

c) Legal Action

Legal action can be initiated against the defaulter if loan is not repaid even after expiry of

legal Notice period.

Where the court in bank's favour has decreed a case, account is to be settled by recovery

of amount from the auction of the mortgaged property.

The bank may purchase the mortgaged property if considered feasible to dispose it off

later on through auction or in any manner deemed fit for getting the best price.

The bank may dispose off the mortgaged properties of defaulters for satisfaction of its

dues with out intervention of courts under Financial Institutions (Recovery of Finances)

Ordinance 2001.Rescheduling of Loan Repayment Facility

d) Rescheduling of Loan Repayment Facility

ZTBL allows rescheduling of repayment of installments to its borrowers in order to

maintain credit discipline and to mitigate their genuine problems in real hardship cases

and in areas declared as calamity hit by the respective Provincial Governments

The Rescheduling facility is to be considered by bank on case to-case basis and is to be

allowed on borrower's request only.

The relaxation in recovery period shall not be allowed beyond one year in any case.

The borrowers shall have to execute a supplementary loan agreement on Non Judicial

Stamp Paper of appropriate value to give legal cover to extended period.

The borrowers shall have to pay the return for the extended period.

d) Down Payment for Rescheduling of Loans


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Rescheduling Number Rate of down payment as against due

installments to be rescheduled

1st 10%

2n

20%

3r

30%

Horizontal Analysis of Balance Sheet

Particulars 2011 2010 2009 2008 2007

ASSETS % % % % %

Cash & balances with

treasury banks 8.695 31.983 -18.724 -0.532

100

Balances with other banks 973.720 707.497 426.058 428.274 100

Lendings to financialinstitutions - - - -

-

Investments - net 77.413 166.845 97.724 349.899 100Advances - net 28.689 12.842 13.212 -2.595 100

Operating fixed assets 16.981 -11.432 -16.375 -29.360 100

Other assets - net -8.284 1.860 -10.364 -14.614 100

21.936 11.267 1.813 -0.098 100

LIABILITIES

Bills payable 210.675 98.915 39.962 19.402 100

Borrowings 0.000 0.000 0.000 0.000 100

Deposits and other

accounts 73.764 38.465 -7.681 -15.296

100

Sub-ordinated loans 0.000 0.000 0.000 0.000 100

Liabilities against assets

subject to finance lease - - - - -

Deferred tax liability - - - - -

Other liabilities 86.149 46.641 9.006 3.013 100

19.942 10.705 1.418 -0.086 100

NET ASSETS 32.729 14.307 3.948 -0.162 100

REPRESENTED BY

Share capital 5.500 0.000 0.000 0.000 100Reserves 404.287 162.741 66.838 13.928 100

Unappropriated profit 278.696 112.925 17.022 -18.478 100

30.315 10.222 2.245 -0.998 100

Surplus on revaluation ofassets - net of tax 260.729 400.125 164.838 78.773 100

32.729 14.307 3.948 -0.162 100


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Note:In this Horizontal Analysis the year 2004 is taken as a base year to calculate the change in

other financial years. All the columns are representing change with respect to 2007.

Vertical Analysis of Balance Sheet

Particulars 2011 2010 2009 2008 2007

ASSETS % % % % %

Cash & balances with

treasury banks 1.693 2.253 1.516 1.891 1.899

Balances with other banks 15.518 12.790 9.106 9.319 1.762

Lendings to financial

institutions 0.000 0.000 0.000 0.000 0.000

Investments - net 4.940 8.143 6.594 15.290 3.395

Advances - net 68.324 65.655 71.987 63.121 64.739

Operating fixed assets 1.117 0.927 0.956 0.823 1.164

Other assets - net 8.408 10.233 9.841 9.554 11.178

100.000 100.000 100.000 100.000 100.000

LIABILITIES

Bills payable 0.722 0.501 0.385 0.333 0.279

Borrowings 60.320 65.353 71.338 72.412 72.350

Deposits and other

accounts 6.385 5.512 4.012 3.736 4.407

Sub-ordinated loans 3.771 4.086 4.460 4.527 4.523

Liabilities against assets

subject to finance lease 0.000 0.000 0.000 0.000 0.000Deferred tax liability 0.218 0.152 0.011 0.000 0.000

Other liabilities 28.584 24.396 19.796 18.989 18.418

100.000 100.000 100.000 100.000 100.000

NET ASSETS 100.000 100.000 100.000 100.000 100.000

REPRESENTED BY

Share capital 74.223 83.179 89.669 92.606 91.682

Reserves 6.438 3.966 2.715 1.914 1.664

Unappropriated profit 19.339 12.855 7.616 5.480 6.655

100.000 100.000 100.000 100.000 100.000Surplus on revaluation of

assets - net of tax 2.847 4.584 2.669 1.876 1.048

100.000 100.000 100.000 100.000 100.000


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Horizontal Analysis of Profit & Loss

Particulars 2011 % 2010 % 2009 % 2008% 2007%

Mark-up/return/interest

earned 4.501 -13.362 -26.024 -15.825 0.000Mark-

up/return/interest

expensed 11.279 9.002 -10.618 -87.507 0.000

Net mark-

up/interest income 0.224 -27.473 -35.745 29.405 0.000

Provision against non-

performing loans andadvances -43.546 -9.279 -48.118 38.920 0.000

Provision/(reversal)for diminution in the

value of investment 27.355 -168.737 913.026 -158.617 0.000Write offs under

Government relief

packages 0.000 4286.557 15739.293 0.000 0.000

Bad debts written off

directly

-16.749 58.214 65.541 105.258 0.000

Net mark-up/interest

income afterprovisions 14.982 -101.980 -123.815 -36.551 0.000

NON MARK-

UP/INTERESTINCOME

Fee, commission and

brokerage income 82.822 -2.988 5.560 30.996 0.000

Dividend income 89.283 -64.283 7.133 7.133 0.000

Other income 514.594 509.536 486.610 -11.859 0.000

Total non mark-

up/interest income 506.732 500.567 478.468 -12.217 0.000

144.932 57.249 35.344 -30.120 0.000

NON MARK-UP/INTEREST

EXPENSES

Administrative

expenses 85.474 55.459 13.261 7.184 0.000

Provision against

other assets 12392.995 2574.166 54846.182 379.466 0.000


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Provision for stolen

fixed assets

Other charges

Total non mark-

up/interest expenses 98.750 58.105 73.490 6.965 0.000

241.700 55.455 -100.000 -107.828 0.000PROFIT BEFORE

TAXATION 241.700 52.854 -44.586 -107.828 0.000

Taxation -

Current 175.783 25.485 -56.772 -92.363 0.000

- Prior

years

-

Deferred -266600.000 2231120.000 189060.000 -12240.000 0.000

175.638 49.299 -54.893 -92.483 0.000

PROFIT AFTER

TAXATION 291.769 55.548 -36.775 -119.457 0.000

Unappropriated profitbrought forward 455.289 205.182 112.603 160.791 0.000

Profit available for

appropriation 346.096 105.262 12.854 -26.348 0.000

Transfer tostatutory reserve - - - - -

Transfer tocontingency reserve - - - - -

Profit caried

forward 346.096 105.262 12.854 -26.348 0.000

Basic earnings per

share (Rupees) 235.049 33.028 -43.548 -117.742 0.000

Note:In this Horizontal Analysis the year 2004 is taken as a base year to calculate the change in

other financial years. All the columns are representing change with respect to 2004.

Vertical Analysis of Profit & Loss

Particulars 2011 % 2010% 2009 % 2008% 2007 %

Mark-up/return/interest

earned 170.058 194.831 187.772 106.091 163.098

Mark-up/return/interest 70.058 94.831 87.772 6.091 63.098


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expensed


income 100.000 100.000 100.000 100.000 100.000

Provision against non-

performing loans and

advances 99.934 84.502 46.186 99.740 147.368Provision/(reversal) for

diminution in the value of

investment 0.066 -0.019 0.264 -0.012 0.043

Write offs under

Government reliefpackages 0.000 15.517 53.549 0.273 0.000

Bad debts written off

directly 0.000 0.000 0.000 0.000 0.000

100.000 100.000 100.000 100.000 100.000


income after provisions 34.539 -0.926 -12.946 66.804 73.574NON MARK-

UP/INTEREST INCOME

Fee, commission andbrokerage income 0.076 0.041 0.046 0.377 0.252

Dividend income 0.197 0.038 0.117 0.771 0.631

Other income 99.727 99.922 99.837 98.853 98.451

Total non mark-up/interest

income 100.000 100.000 100.000 100.000 100.000

NON MARK-

UP/INTEREST

EXPENSES 100.000 100.000 100.000 100.000 100.000

Administrative expenses 92.994 97.983 65.056 99.855 99.651

Provision against otherassets 6.934 1.866 34.937 0.494 0.110

Provision for stolen fixedassets 0.053 0.000 0.000 0.000 0.000

Other charges 0.019 0.151 0.007 0.145 0.000

Total non mark-up/interestexpenses 100.000 100.000 100.000 100.000 100.000

45.070 31.938 0.000 -3.619 32.306

PROFIT BEFORE

TAXATION 100.000 100.000 100.000 100.000 100.000

Taxation - Current 100.052 84.049 95.833 101.605 99.999


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- Prior years 0.909 1.103 0.000 0.000 0.000

- Deferred -0.961 14.848 4.167 -1.605 0.001

100.052 84.049 95.833 101.605 99.999

PROFIT AFTER

TAXATION 58.644 50.603 37.410 -17.641 66.776

Unappropriated profitbrought forward 41.356 49.397 62.590 117.641 33.224

Profit available for

appropriation 100.000 100.000 100.000 100.000 100.000

Transfer to statutory

reserve 0.000 0.000 0.000 0.000 13.355

Transfer to contingency

reserve 0.000 0.000 0.000 4.096 0.000

Profit caried forward 100.000 100.000 100.000 100.000 100.000

Interpetation of Horizontal and Vertical Analysis

Markup/ Return/ Interest Earned

Markup/return/interest earned is the amount which the bank earns from its primary function oflending money to its customers. Increase in this income shows that bank is growing, the reason

of this growth can be either the increase in customer base or in the increase of rate of lending.

When I compare the markup/return/interest earned by the bank in the past 5 years it shows thatthe bank has improved its primary function in recent years. The year from 2008 to 2010 shows a

decline in this income which is a clear sign that in that specific years the bank performance was

not satisfactory, the reason of this performance can be the political unrest in the country due to

which sufficient attention couldnt be given to banks working or it can be result of large NPLs.

In the notes related to markup/return/interest earned it shows that the bank is earning a major part

of its income from the loans given to customers, the bank has less focus of investment. However,it is earning a handsome amount from the placement which it has made with other banks.

Markup/Return/ Interest Expensed

Markup/Return/ Interest Expensed is the expense of bank on taking deposits and borrowings

from the SBP. This expense shows an increase as compared to previous years which shows that

banks cost of deposits and borrowings has been increased. This increase can be due to tworeasons, it can be due to increase in the amount of deposits and borrowing or it can be due to

increase in the rate the bank offered on deposits and on borrowing from SBP.


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In the notes it shows that bank is paying a large amount on borrowing from the SBP rather than

on the deposits. It can be due to two reasons that either bank has deposits in the current account

on which it has to pay no or less cost or it is due to less deposits. From the amount of deposits inthe balance sheet it is clear that the deposits of bank are not of significant amount as compared to

borrowing. I also know that bank is working manly on the amount borrowed from SBP rather

than on deposits collected from the general public and institutes. An increase inmarkup/return/interest expensed is not a bad sign if the markup/return/interest income is alsoincreasing, however if the increase in expense is more than the increase in the income than it will

be a negative sign. From the vertical analysis of Profit and Loss account it is clear that the

income is much more than the expense which shows that the bank has cushion to confront withother expenses incurred due to secondary functions of the bank which is a positive sign.

Net Markup/Interest Income

It is the income which the bank is earning after paying the markup/return/interest expensed.From the horizontal analysis of the profit and loss it is clear that there are many ups and downs

in this income which is result of decline in the markup/return/interest income of the bank. But in

the year 2008 it shows recovery and it is increased as compared to previous two years of 2006and 2007.

When I look net income in terms of amount in the profit and loss accounts of last five years I

find it positive and a handsome amount to bear the other expenses of the bank. Because thehorizontal analysis is showing result by taking 2007 as a base year that is why in the year 2009

and 2010 it shows negative sign which means that in these two years the net income of the bank

has been decreases as compared to year 2007. But in the year 2011 it again shows recovery.

Provision again Non-Performing Loans

This shows the cost bank is charging to it P&L account against those loans which may become

bad debts; almost all banks try to reduce this cost. This shows the customer base of the bank towhich bank is lending, the lesser the cost the better and trustworthy client base the bank has.

Horizontal analysis of P&L A/C shows the decline in the recent years in this provision which is apositive sign for the bank. Which shows that banks credit and recovery departments has

improved their workings.

Provision/ (reversal) against diminution in the value of investmentThis shows any provision required to charge or reverse for the investment made by the bank. An

increase in the provision shows that the investments of the banks are declining in value which

will definitely result in loss and if the provision made before is reversed it shows that the valueof the investment is increasing.

The horizontal analysis of the P&L account shows that the provision created by the bank is

reduced in 2008 as compare to 2007 which is a positive sign. The reason of large provision in

2007 can be due to uncertainty in the stock market etc.

Write offs under Government Relief Packages

ZTBL is a government bank due to which the government can ask it to give relief to loanees ofparticular regions of category which also increase the cost for the bank. The flood of 2012 is


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expected to increase this cost in this financial year too because a large number of farmers have

been effected with this flood and they are not in the situation to return their borrowed amount to

the bank. For the year 2011 there is not any amount which is asked by the government to writeoff but in the year of 2010 and 2009 there is some amount which banks directly written off on

the instructions of the government.

Net markup/ Interest income after provisionsThis is net income after charging provisions. An increase in this income is a positive sign which

can be due to two reasons that either the net markup/return/interest income has increased or the

provision required to be charged by the bank is reduced due to less number of NPLs loans. So, ifthe net markup/interest income after provision is increasing it is a positive sign because the bank

will have more amounts to pay its other expenses like admin expenses etc. and it will result in

more Gross Profit.

Non Markup/Interest IncomeIt is the income which the bank in earning from its secondary functions. An increase in this

income is also a positive sign it shows that the bank is also making its secondary functionsprofitable. The secondary functions shows the amount earned from the commission charged in

the services offered by the bank, the dividend income etc.

But this income may also have a portion of income gained by the bank by the sale of scrap or oldmachinery etc. It is not a positive sign if this income is larger part of total non markup/interest

income. Because, the bank will not have the scrap to sale in all years and having larger part of

this income of sale of scrap will definitely depicts that the banks profitability can be affected inthe coming years. However, if the bank has sold old machinery and in the meanwhile new

machinery is added in the assets of the bank than it will be a positive sign because it will show

that the bank is working on BMR (Balancing, Modernizing and Restructuring) which will result

in better performance.

The profit and loss account of the bank is showing an increase in the non markup/interest income

which is a positive sign. The vertical analysis of the profit and loss shows that other income isthe larger part in non markup/interest income and from the notes it is clear that in the other

income, the amount recovered which has been written off previously is making a bigger portion.

Recovering a previously written off loan is a positive sign because it is causing an increase in theincome of the bank.

Non Markup/Interest Expenses

It consist on the expenses bank payed for admin expenses and some other expenses. But theadmin expenses is usually a large part of this non markup/interest expenses and also it is most

important expenditure to have a look upen because it shows that whether the bank is utilizing its

human capital efficiently or not. A larger admin expenses is not a negative sign if it is also

increasing the income of the bank. However, if the percentage change in the increase in theadmin expenses is more than the percentage in the increase in the income than it is a negative

sign beacause is paying more to increase its income. Almost all banks try to control this income

so that to increase their income.


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The ratio of Admin Expenses to Deposits is used to check the cost bank is facing on collecting of

deposits which is the main source of money bank required to lend to others to make income.

However, in ZTBL the bank relies on borrowing from SBP more than on deposits so theefficiency of admin expenses can not be judge from the ratio of admin expenses to deposits. So,

it is difficult to say anything about the cost of admin expenses.

From the horizontal analysis it is clear that the admin expenses has been increased in 2011 butthe profit of the bank is also increased so it is not a negative sign. By looking in the notices of

financial statement it is found that admin expenses consists on a number of expenses, salaries of

the staff no doubt a major a part of it but other expenses like traveling expenses, motor vehicalcost of repairing etc are also effecting this cost a lot. Because I know that the MCO scheme has

become a major part of the banks working so increase in the cost of traveling, rapairing is not a

surprise.

Profit before TaxationThe profit before taxation has been significantly increased in the recent years, the financial

statement for the 2012 is still not available on internet nor in print format but some key factswhich has been published by the bank for the 2012 shows that bank continues making profit in

year 2012 also. When I look in the previous year it found that the profit before taxation is 2.5

times more than it was in 2007. However, the increase in the profitiability is not constant there

are ups and downs in it. Like in 2008 and 2009 the profit of the bank has been decresed ascomapred to 2007 and in 2010 it again started increasing and this continues till 2012 which have

result of more than 2 Billion.

TaxationDue to increase in the profit the tax has been also increased, it is almost doubled in the last 5

years like the profit of the bank which has been also doubled. So, it not a negative sign. By

compare the increse in the profit before tax and the increase in tax, I come to know that theincrease in the tax is less than increase in profit which can be due to two reason that whether the

rate of tax is not increased as the income of the bank or the bank is managing its tax efficiently.

Profit after TaxThe after tax profit of the bank continued to increase in the recent years which is a good sign and

also shows that bank has improved its working a lot than few years before. The profit for theyear 2010 is almost 300% more than the 2007 which show that the profit of the bank is tripled in

last five years. The same trend continued in 2012 in which the bank also made a record profit.

Interpetation of Horizontal and Vertical Analysis of Balance

Sheet

Cash and Balance with Treasury Banks

It shows the amount placed with SBP in order to fulfill the requirement of banking companies

ordinance, 1962. There is a decline in the amount with respect to previous year, the reason of itcan be the decrease in the volume of deposits due to which the bank is not required to maintain

higher placement with SBP. However, the deposits also show an increase in it, so the reason of

this decrease in the cash and balances with treasure bank is uncertain. One other can be this that


36/87

the bank has placed higher amount with SBP than required in the previous year and that is why

in this year the bank has withdrawal the money from its account with SBP.

Balances with other BanksHorizontal analysis of Balance sheet shows significant increase in the placement with other

banks. It is not a good sign if the placement is in ideal state and is not generating any revenue forthe bank. However, from the notes of ZTBL it is clear that the bank has placed amount withother banks in the accounts which are giving markup to the bank.

Placing money with other institutions is not a good thing for any bank when does on a large scalebecause it cannot generate enough money to compensate the opportunity cost the bank is bearing

on not investing or advancing this money to its customers. However, the case of ZTBL is

different. It borrows money from SBP at fewer rates and lends it to farmers. The rate it charges

to farmers is less than the prevailing rate in the market (currently 9%) so by depositing moneywith other financial institution it can earn more than the rate it is offering to its clients. Because it

is an institute developed just for the improvement of agricultural sector so the banks main focus

is on lending rather than investing.Investments-netThere are ups and downs in the amount of investment made by the bank in the previous five

years. From the notes to the account it is clear that bank usually invest in less risky investment

like Market Treasury Bills and Pakistan Investment Bonds. The less risky investment will resultin less gain on investment but here the return on investment is not the main focus of the bank.

The money the bank owns is largely consist on the borrowed money from SBP, so the bank

cannot use the borrowed money in a more risky adventure.

Advances-net

The bank continues to increase the amount of advances to facilitate more and more farmers every

year. The data of 2009 shows a record increase in lending to farmers; the bank has disbursed77.7 Billion rupees in 2012 as compared to 70.7 Billion in 2011. The percentage increase in the

horizontal analysis also shows this continuous increase in the trend of advancing.

Operating Fixed AssetsThe assets of the bank are also increased in 2011 and in 2012 the president of the bank also

announced to increase it further by constructing new buildings. Increase in the fix assets showsthat the bank is optimistic about its future.

Borrowings

It is the amount which bank has borrowed from SBP. There is no change in this loan from 2007the reason is that neither SBP has given new loan to ZTBL nor ZTBL has returned any principal

amount of loan back to SBP due to which the amount of loan borrowed remain unchanged.

ZTBL and SBP is now negotiating on terms and conditions of returning principal amount in 15

equal installments.

Deposits

Deposits are the backbone in any bank operations because the primary function of any bank is totake deposit from depositors and then lend it again to other who needs it. But as I have written


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before ZTBL does not rely on deposits more like any other bank. However, in recent years the

bank is trying to shift its dependence from SBP to other resources and due to this it starts

increasing its deposits by marketing. But the efforts in this respect is still need improvements asthe products offered by ZTBL is not as attractive as offered by other commercial banks.

Share CapitalIn 2011 the bank has issued bonus shares to increase its paid up capital. The reason of thisincrease can be the requirement of SBP to maintain a minimum equity level. Currently the paid

up capital of the bank is 12.5 Billion.

ReservesReserves are made for the development of the organization or for the contingencies which can

affect in the future. There is continuous increase in the reserves of the bank from last five years

which is a good sign. These reserves also include the statutory reserve requirement according tobanking companies ordinance, 1962.

Surplus on Revaluation of Assets-Net of TaxIt is surplus amount which is the bank expect to get if it will sell these assets. The market

conditions never remain certain; the price of anything can rise or fall in matter of second. This is

the reason that organizations use to revalue their assets to record their value according toprevailing market rates. The revaluation of fixed assets also helps banks in raising their equity

which result in more lending power of the bank.

ConclusionAlthough the bank needs improvements in many fields, the overall performance of the bank is

satisfactory. The bank has made many efforts in the recent years and it is clearly visible in the

result of its financial statements. The reduction in NPLs is also a positive sign and willdefinitely result in good performance. Besides a government institution the bank has made before

tax profit of 4.9 Billion which is great achievement. If the process of improvement continues

than it can make more profit in the upcoming years and its success will also result improvementin financing facilities to people of rural area.

Key Financial Trends of 2009

According to Japan Credit Rating Agency on August 2010


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Note:The following is the extract from the report of Japan Credit Rating Agency issued onAugust 2010 showing the new credit rating of ZTBL.

Balance sheet footing of the bank was higher at year-end 2009 at Rs. 113.6b. Net advancesincreased to Rs. 83.6b (2008: Rs.69.b) representing a higher proportion of total assets at 74% at

year-end 2009. While various new loan products have been launched been launched by the bankin 2009, Sada Bahar Scheme has remained the flagship product of the bank. For all newborrowers of crop production loans, Awami Zarai Scheme (AZS) has been launched by the bank;

outstanding balance against this scheme may also show increase over time. To ensure proper

utilization of loan, the bank has incorporated a wholly owned subsidiary to make arrangementfor in-kind lending to farmers.

The IT infrastructure of the bank has improved considerably over time. With the implementation

of various applications at branch-level to consolidate loan disbursement & recovery data,

monitoring of lending activities has improved, though there may still be a need to furtherstrengthen the loan recovery mechanism. Gross infection has declined from16.7% in 2008 to

15.8% in 2009; however there is still need for further strengthening the recovery mechanism. Netinfection hovered at prior years level at 11.5%. Net NPLs in relation to Tier-1 capital stood atalmost 57% at year-end 2009. ZTBL has arranged crop loan insurance for wheat, cotton,

sugarcane, rice and maize. As the insurance coverage is enhanced, the risk of loss in case of

calamities will be reduced.


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Growth in loan portfolio during 2009 absorbed some of the liquidity held by the bank. Liquid

assets to total borrowings and deposits declined to 27%. The bank has made efforts to enhanceits deposit base, though these continue to represent a small proportion of the total resource

78base. The bank had outstanding borrowings of Rs. 54.5b from SBP at year-end 2009. The

terms of restructuring of SBP debt have yet to be finalized, which would have significantimplications for the risk profile of the institution. The bank has so far not made any interest or

principal payments against these credit lines. While there is some cushion available to the bank

in terms of markup differential receivable from the GoP vis--vis interest payable to SBP,liquidity profile may be significantly compromised if payment is required against the principal

portion. One of the proposals under consideration entailed debt to equity swap, which if

finalized, would support capitalization levels and facilitate in furthering the governmentseconomic objective pursued through the bank.

Credit Risk

Gross advances of the bank considerably grow over 2011, with year-end outstanding balance of

Rs. 89.4b (2008: Rs. 77.8b). Loan disbursements of around Rs. 78b were made by the bank inthe outgoing year.

Loan disbursement target for fiscal year 2012 was Rs. 80b. ZTBL is used as an arm by theGovernment, with disbursement target stipulated as part of the annual budget process. For FY10,

22.7% of the loan disbursement target pertained to development loans, while remaining was for

production loans. All targets are allocated by SBP.

While various new loan products have been launched by the bank, Sada Bahar Scheme has

remained the flagship product of the bank. Loan products launched in 2011 include, Green

Tractor Scheme, Crop Productivity Scheme and Rural Development Scheme.

Green tractor scheme is specifically for the province of Punjab and entails subsidy of RS.200,000 per unit for 10,000 tractors. Banazir tractor scheme is applicable to all areas of Pakistan.

On receiving complaints from borrowers regarding non-cooperative attitude of tractor dealers, a

tractor delivery system has been developed through KSSL in the outgoing year.

Awami Zarai Scheme (AZS) has been launched by the bank for all new borrows of production

loans, pertaining to inputs required at the time of crop cultivation. As per the scheme, agriculture

inputs will be supplied by KSSL to farmers in lieu of cash. Quantity of input needed for each


40/87

crop on a per acre basis has been predetermined by the bank. The farmers will be provided a

specific quantity of inputs according to cultivable land.

The purpose of AZS is to ensure proper utilization of loan proceeds. Crop productivity scheme is

specifically for financing of fertilizer. Rural development scheme has been launched to provide

assistance for dairy, poultry, sheep and goat farming in the rural areas of AJ&K; especiallyearthquake affected areas.

The bank has also setup a pilot project for a model village in collaboration with ministry of food

& agri./ provincial agri. Departments. Crop loan insurance has been made compulsory by SBPfor wheat, cotton, sugarcane, rice and maize financing. To facilitate loan insurance, the bank has

to pay the premium for subsistence farmers, which is subsequently reimbursed by GOP on a half

yearly basis. ZTBL has arranged crop loan insurance with Adamjee insurance company limited

(AICL). Premium is charged @ 1.3% of loan sanctioned.

The implementation of software applications has facilitated monitoring of lending activities at

branch level. The need for strengthening the collection mechanism however remains, as may beascertained form the portfolio quality indicators.

NPLs increased to Rs. 14.2b (2011: Rs. 13b) during 2012. During the out-going year, an amount

of Rs. 2.6b was charged off against provisions as per the prudential regulations, with cumulativebalance of charged off loans standing at Rs.34.98b at the end of December 2011. This amount

was lower than the balance of Rs. 36.30b at the end of December 2008, on amount of recoveries

of 4.29b made against charge off amount.

At year-end 2012, gross infection in the loan portfolio of the bank remained high at 15.8%

(2011: 16.7%). The overall agriculture loan portfolio of the banking sector had gross infection of

16.1% (2011:15.3%) at end-December 2011. Around 52 %( 2008: 47%) of NPLs were classifiedas OAEM at year-end. On account of this,, provisioning coverage against total NPLs Is low. Net

infections (NPLs adjusted for specific provisioning only was 11.5% (2011:11.2%).

Minimum recovery target set by the bank entails 90.8% of current dues and 75% of past dues. In

2012, recovery of 91% was achieved against current dues, while 72.4% recovery was made

against past dues. Recovery targets are monitored on a branch-wise basis; in branches whereoverall recovery is less than 75% loan approval authority is retracted.

The bank held fixed income securities of Rs. 6.7b at December 2011, increasing form Rs. 4.5b at

the end of the preceding year. Of these, only Rs. 283.65m was placed in COIs whiles remainingcomprised government paper, credit risk associated with which is considered minimal. COIs are

also placed with counterparties of sound risk profile. In addition to the above, the bank has Rs.

100m invested in a wholly owned subsidiary.

Market RiskNet investments of the bank increased to Rs. 7.2b (2010: Rs. 5.1b) at end- December 2011.Around 73% of net investments comprised short-term treasury bills. Price risk on the same is

considered low. Fixed-rate long term PIBs represented 14% of net investments. These carry

markup rates in the range of 12-13% and have maturities between Aug-Dec11. Recent increase


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in benchmark rate is expected to have reduced the market value of fixed income instruments held

in the portfolio. However, the bank has both the intent & ability to hold these to maturity.

Investment in equities at cost was maintained at Rs. 100.6m, comprising exposure in unlisted

securities amounting to Rs. 10.5m. Investment in unlisted securities has been fully provided for

various reasons. Investment in listed equities of Rs 89.3m had a market value of Rs 537m.

LiquidityTotal borrowings and deposits of the bank where higher at Rs. 63.2b (2010:Rs. 59.9b) at year end 2011 with increase in deposit to Rs. 8.75b (2010: Rs 5.43b). Borrowings were maintained at

Rs. 54.5b at year-end 2009.

Liquidity profile of the bank declined in relation to 2010, with liquid assets to total borrowing

and deposits reducing to 27 %( 2010:36%).

Depositors of the bank are primarily individuals. Proportion of current and saving accounts in thedeposit mix was maintained at 94%. Since deposits still comprise a small proportion of funding

mix; improvement in the deposits does not have a material impact on the cost of funding for thebank.

The bank had outstanding borrowings to the tune of Rs. 54.5b from SBP at year-end 2011. These

borrowings were obtained to provide finance to clients for agriculture. At the time of

reorganization of ADBP into ZTBL, these credit lines were restructured and a moratorium wasgiven to ZTBL according to which it had been allowed to repay SPB debt in 15 years (in 30bi-

annual installments) with a grace period of 3 years starting from July 2003 and the last payment

was supposed to be of Rs. 3.20b, representing the subordinated loan. At the time of restructuring,

the bank had proposed to cap the markup on these borrowings at 2.3558 %( 12 month t-bill rateas at July 01, 2003) for five years but the matter had not been acceded to by the SBP. Since then,

various restructuring proposals have been discussed by the bank with the ministry of Finance andSBP, though an agreement on this issue has still to be achieved. The bank has not made anyprincipal repayment on the premise that the restructuring terms have not been finalized. These

loans are secured by way of federal government guarantee.

Presently, the bank is accruing interest expense on these at varying rates. Three credit lines

amounting to Rs. 1.577b carry interest rate of 4% p.a. while remaining thirty two lines

amounting to Rs. 48.597b are based on PLS subject to maximum share of profit to SBP ranging

from 4-10% p.a. markup on subordinated loan is being charged at weighed average yield of t-bills of 12 months maturity. No return however has been actually paid by the bank, with a total

payable of Rs. 19.54b having been accrued by December 32, 2011. Any plan requiring

immediate payment of the either the interest expense or principal may place significant stress onthe bank, as it does not have the required liquidity. However, the bank also has markupdifferential of Rs. 17.74b receivable from the government. This amount is not recognized on

books. There are also other amounts recoverable from the government in lieu of relief packages,

with outstanding balance of Rs. 956.27m at year-end 2011.


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ProfitabilityReturn on markup bearing assets declined to 9.8% on account of decline in high-yielding lending

to financial institutions. Nevertheless, interest income of the bank increased to Rs. 8.7b (2010:Rs 8.5b) attributable to overall higher average markup bearing assets during 2009. Net interest

income of the bank also depicted an increase to Rs. 5.1b (2010: Rs.4.98b). Cost of funding

hovered at 6%, thus spreads declined to 4%. Cash outlay has not been made by bank for paymentof interest on borrowings, and interest in only being accrued on books.

Non interest income of the bank was higher at Rs. 38.2 m attributable to increase in dividend

income on investments. Other revenues primarily comprising recoveries on charged off loanamounts was Rs. 4.3b (2010: Rs 4.8),|" taking total revenues, net of financial charges, to Rs.

11.2b (2010: Rs. 10.4b).

Administrative expenses of the bank inclined to Rs. 5.2b (2010:Rs. 4.5b), in line withinflationary trends in the economy. While salary expense experienced growth of 12% staff

strength of the bank was rationalized to 5,352(2010: 5,370).

In December 2010, the bank had introduced SR-2010, a retirement benefit scheme for its

employees. A significant proportion of employees switched to SR 2011 from their existing

pension scheme in 2010 The scheme was re-opened in 2011 and 1,097 Executives/officers of the

bank opted for SR-2010, resulting in an expense of Rs. 677.8 to bank in 2011.

Incremental provisioning against non-performing loans declined to Rs. 563 (2010: Rs. 1.9b). The

bank posted profit before tax of Rs. 4.6b (2010: Rs. 3.99b) for 2012.Profit for 2011 was reduced to Rs. 1.8b (2010: Rs. 2.6) after adjustment of tax expense of Rs.

2.8b (2011: Rs. 1.4b) which pertained to current and prior year.

Capitalization

As of December 31, 2011 equity of the bank was higher at Rs. 18.7b (2010: Rs. 16.9b),exceeding the minimum capital requirement of Rs. 6b mandated by SBP. Capital Adequacy

Ratio of the bank was slightly lower at 21.7% (2010: 22.9%). Net NPLs to Tier 1 capital stood at

57% at end-December 2009. If the proposal of loan conversion into equity materializes, it willprovide considerable momentum to capitalization of the institutions.

Quick View of ZTBLs Performance till 2009


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SWOT Analysis

Strengths

ZTBL has brand name in agricultural loaning.

It is first and large financial institution established in Pakistan to promote agricultural

financing.

The bank has more than 350 branches throughout Pakistan and has presence in all the

provinces of the country which enables it to capture and facilitate a large number of

customers.

The bank8 enjoys sovereign guaranty of Federal Government that covers its debt

obligation to State Bank of Pakistan.

The Bank has the most experienced and the least experienced staff, which is a good

combination of experienced heads and exuberance of youth.

The bank has ability to launch successful products for agricultural industry due to know

how of the agricultural system of the country.


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Mobile Credit Officer is the unique concept which is helping in remaining more near to

its customers and also helps in recovery. Concept like these helps bank in safeguarding

itself in the risky adventure of financing to small farmers.

Weaknesses

ZTBL have not introduced any Islamic product in financing. Islamic banking is becoming

popular in these days and to sustain and increase the number of customers every bank is

felling need to start offering Islamic Products. This ZTBL requires noticing this changing

trend.

In spite of the presence of technology many jobs are done manually. Almost all other

banks operations have been computerized but ZTBL is still working on manually written

ledgers etc.

Like other Government institutes the red tap dilemma also exists in ZTBL.

The staff is not motivated because the promotion mechanism is based on experience

rather than on the performance of the employees. This is the reason that usually

employees stop giving their full efforts after knowing the reality that their performance

pays a less role in their success.

The average loan disbursement amount is 85,000 to single person which is not a big

amount. Usually the loan obtained by the loanee can be used to meet working capital

requirement only it cannot be used to fulfill the dream of modernizing of agriculture

sector.

There is a lack between the planning of head office and the reality of environment

because the staff at high level have little know how of the real situation on the ground.


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The infrastructure of the bank is also based on old style; the bank is not refurnishing its

branches like the other banks have done in this decade.

The situation at branch level is not good, there is lack of even furniture, fans etc.

Opportunities

The bank started computerizing its operation which if completed will result in increase ofthe bank performance. The impact of computerization can be seen from the result of

recovery of 2009 which is 89%. The computerized system helps bank in reducing fraud.

Due to increase in the government attention toward the agriculture sector it is expected tosee the role of the bank increasing in the near future. As a result of different steps takenby the government regarding the betterment of the agriculture, small borrowers are

attracted to get the financing and to start business. So, the ZTBL has an opportunity to

attract the customers by giving them more attracted schemes.

They have wide area network in all over the Pakistan, so ZTBL can make it possible thefast delivery of funds to rural areas.

The flood of 2010 is challenge for the whole country. Because the most effected peopleare farmers so the bank has a chance to increase its reputation by utilizing its full

resources to help them. It is also expected that the relief which the government may

provide to them will also be delivered through the bank in the form of relaxation to theloanees.

Threats

The biggest threat in the banking sector is the continuous downfall of the countryeconomy since the last few years.

Sudden rise and fall in the trade and industry conditions and stock exchange business ofthe country also adversely affect the growth of banking sector.

The default ratio of customers who are availing the credit facilities from the ZTBL canrise due to the economic recession in the country.


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Government type of working style is also a threat to the bank which requires to bechanged to keep the banking growing.

Many commercial banks also started agriculture loaning scheme so it is expected that in

the future the farmers will have more choices to have finance from which will definitelyaffect the customer base of the bank.

Political unrest is also a threat for the bank because it is a government owned bank andthe change in government can result a change in the strategy of the government which

can affect the plan made by the bank.

Natural Calamities is also a problem, the bigger part of the bank customers relies on theenvironmental condition. Almost whole of the agriculture industry have threat from the

changing environment conditions. The example of 2010 flood is still in front of us those

who are affected are unable to pay their loans back.

Ch. 5: Assignments I handled during my Internship.

Organogram of Islamabad Branch


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Redemption of loan

On the payment of all the dues by the loanee (principal + interest), he can free his land (or anyother security provided) from any charge created by bank for the purpose of loan. For this

purpose he will have to present the following documents:

Application for redemption

Stamp Paper of rupee 20

Last receipt of amount paid

Cheque book (if issued)

When the loanee provides these documents to assistant officer (Or any officer appointed for

these sort of work), the assistant officer asks the peon to bring the Loan Case File of theborrower. After the file is received by the assistant officer, he checks the documents that whether

all the documents are there in the file. Then he makes required entries in the Passbook. These

entries usually made on the page 28 and 30. The example of entries is given below.

The following entries are made on page 28.

The entire loan including

interest has been paid by theloanee.

See page number 16 and

block number 3 for detail.

(Here page number 16 showsthe number and date of last

charge created against theland of loanee in the favor ofbank)

The following entries are made on page 30.

ZTBL Islamabad Branch

See page number 18 andblock number 8 for detail.

(Page number 18 is usuallythe page where the detail of

land mortgaged has been

given, it include the area ofland, khatoni number etc)

After these entries the officer then sends the file to Manager for signature. On approval from theManager for the Redemption Application the assistant officer attaches all afore said documents

with in the file and record in the File Movement Register that file has been moved from the

record room for the redemption purpose.


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Than the file is send to AMO (Assistant Manager Operation) for further process. The loanee is

given the date of next week to collect his Passbook. During this period AMO checks the record

of the loanee to confirm that the entire due amount with respect to that particular loan has beenpaid and then he signs to give approval to assistant officer to issue Passbook to the loanee. The

AMD (Assistant Manager) and Manger both also sign the notice issued in the name of Patwari

and Tehsildar that the land can be transferred to the loanee as the loan has been fully paid byhim.

Then file again comes to the assistant officer, he checks the signature both in the notice and

Passbook and then stamped both. Now the Passbook is ready to issue. Before issuing Passbookthe officer record that passbook is issued to the loanee in the Dispatched Register. On the

issuance of Passbook to the loanee, the officer verifies that the person receiving the documents is

the original owner of the land which is mortgaged with the bank. After getting the Passbook, the

loanee goes to Patwari and Tehsildar for the change of record back to his name.

The one thing which is interesting here is obtaining Stamp Paper from the borrower. This is not a

requirement but bank has made it practice so that if in the near future, it finds that some amountis still due by the borrower than it can write on the stamp paper whatever it wants and then can

claim the due amount from the borrower. This is precautionary measure adopted by bank

because once the Passbook issued to the borrower and the land again transferred to his name, the

bank will be in no position to recover any amount which is unexpectedly left due.

The redemption process in short can be described as the following:

Submission of Application

Acceptance of application by manager

Record of file in the File Movement Register

Entries made in the passbook

File send to AMO for checking of loan status

On approval from AMO, the Manger and Assistant manger signed the notice to issue

Passbook

The passbook dispatched to loanee with notice to Tehsildar to transfer land back to his

name

After the land is transferred to the loanee name, if he wishes he can withdraw the amountfrom his current account and can close his account.

Usually the loanees do not redeem their land because they want to avoid the cost and wastageof time when in the future they again have to gain loan from the bank. So, they usually

remain the land in the name of the bank even after they have paid the whole loan amount.

During my internship I have seen people who has paid loan more than 10 years ago but theycame to bank after such long time to redeem their land and the reason behind their redeem


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was that they want to transfer it to someone others name otherwise they may not come for

redeem.

I have also seen one of the clients who has paid loan in 1985 but his land is still in the name

of the bank and they have not redeemed it. After the death of the client his sons came to

know that the land could not be transfer to their name because it is still mortgaged against theloan which their father had paid in 1985. So, at that time they reach bank for redemptionbecause the bank always maintained record so their file found from the record room after

little efforts. All this shows the confidence the people has on the bank and also shows that in

practical life anything can happen.

Opening of Current Account

In the ZTBL, the current account usually opened only when the person comes there for a loan.On the approval of loan, his sanctioned amount is usually credited to his current account. The

procedure of opening of Current Account is not very complicated. The following are the mainpoint in the opening of a new account:

Acquiring original CNIC

Filling the Current Account Form

Filling of Know Your Customer

Filling of Current Account Card

Registering name in the Current Account Register, (Issuance of A/C No.)

Filling of deposit slip of starting amount

Signing by AMO and Manager

Issuance of Cheque book

Opening account in the ledger of bank

1: Acquiring Original CNIC

It is mandatory to check the original CNIC of the person before opening of current account. In

the ZTBL it is routine to open account when manager sanctioned and signed the amount of loan.Because at that stage it becomes essential to have an ac

Internship Report on ZTBL[3]

Documents

Transcript of Internship Report on ZTBL[3]