7/31/2019 NBP 1

1/77

We are living in a time of extraordinary change.

The ecological and economic threat is looming large

on the entire sphere of Pakistanis economy. Pakistani

firms must design and make better products andservices and should find better ways to market them.

What was once regarded enough is no longer

competitive. What were once limitless resources are

now to be used more efficiently. Today an

organization is on the leading edge, or it is on the

bleeding edge.

I have learned the lessons perhaps the hardest

way, that is, though my mistakes. I have tried my best

to peep into the generic as well as real cumulative

problems faced by the pioneer of banking industry in

Pakistan but that degree of objective analysis proved

to be of little use since this bank is firmly entrenched

in the claws of red tapism and royal bureaucracy.

Page 1 of 77

7/31/2019 NBP 1

2/77

Several chapters have been inducted in the

report but they seem to be very conventional in

nature giving supplementary justification to the fact

that NBP is the most conventional of the conventional

bank.

Muhammad Umar Ashraf

Roll#240

Without the encouragement and help of my fellow

students, I perhaps would not have been able to write what I

have written, it would be virtually an unending list of persons

who helped me in one way or other but then it would be

great injustice on my part not to mention the names of those

who provided me with the much sought after information-

moral support and cooperation.

People belonging to various walks of life contributed in

one way or other, but teachers who heads this illustrious

which in real terms provided me with foundation on which

Page 2 of 77

7/31/2019 NBP 1

3/77

Inshallah, I will build my career much to the pride of my

institution and my respected teachers.

I am greatly indebted to Prof. Shahid Hussain Nadeem

who in reality provided basic guidelines for the production of

this report.

I am thankful to the staff of City Branch of NBP and

specially that of their manager, which provided me with all

the information they could provide me with.

In Terms of Return on Capital

The Banker, London

Page 3 of 77

7/31/2019 NBP 1

4/77

The Banker, Londons Award

Winner for Two Consecutive Years

Global Finance, USA

INTRODUCTION

BANKS AND SCOPE OF BANKING

WHAT IS BANK?

A bank is an institution for the custody, loan or exchange of

money for sanctioning credit, for transferring funds by domestic foreign

Page 4 of 77

7/31/2019 NBP 1

5/77

bills of exchange. It is a pipeline through which currency moves into and

out of circulation.

As it is clear from the definition of banking, the main activity or

function of banking is borrowing and lending of money with a margin of

gain. However, as far as the present day banking is concerned, there

are a number of different banks, set up under specific different

objectives, performing various functions.

BANKING IN DEVELOPING SOCIETIES

In the developed societies, the banks do not have to make

many efforts in mobilizing savings, as it has become a second habit withthe people. The commercial banks are financing the short and long term

capital needs of the business. The loans and discounts of commercial

banks include real state mortgages and long term loans, which extend

to as long a period as ten years. These banks also administer estates,

acts as insurance agents and underwriters, provide brokerage services

and implement domestic as well as foreign economic polices of the

government.

Commercial banks in developing countries have to make

vigorous efforts of resource mobilization at all levels. However, with the

passage of time the commercial banking operations are under going

remarkable qualitative change. In Pakistan for instance, banking

facilities are being extended to the un-banked places. Planned effortsare being made to enhance the supply of bank advances to the new

priority sectors in consonance with the present day socio-economic

needs.

Page 5 of 77

7/31/2019 NBP 1

6/77

7/31/2019 NBP 1

7/77

have to play an important role in promoting capital formation, in

controlling speculation in maintaining a balance between requirements

and availability and in direction physical resources in to desired

channels. In advanced countries of the world like America, Japan,

Germany, the rate of capital formation ranges from 12% to 25% of their

Gross National Product. Whereas in Pakistan the rate of saving has

varied from 5% to 8% only. In order to accelerate the rate of economic

development the Government has been acquiring foreign capital. The

banks by launching a vigorous campaign both in the villages and cities

can mobilize the idle savings and can increase the rate of investment.

The country thus becomes independent of foreign capital, which in fact

has let us down on almost all the crucial happenings in the country.

This deficiency of capital accumulation is due to so many reasons

like, lower per capital income, disparity of wealth, unorganized banking

system, ineffective fiscal measures etc. One reason of this capital

deficiency is the non-adoption of modern marketing tools, such as

market research, sales organization, sales training, sales management,

advertising etc. for attracting deposits.

HISTORICAL BACKGROUND OF NBP

The story of NBP is part of our struggle for economic

independence. When we won political independence, Nona Pakistanis,

mostly Hindus controlled our economy. East Pakistan was spared from

massive migration but its economy was also, being dependent on

Calcutta, badly hurt. Most bankers and business experts left Pakistan

and the economic life was brought to a standstill, these mostly branches

Page 7 of 77

7/31/2019 NBP 1

8/77

of Imperial Bank of India were only in partial operation with skeleton

staff.

Banking & Finance - HistoryIt was decided that Reserve Bank of India would act as the

common monetary authority of both countries up to September 1948.

But this arrangement did not prove well. In August 1947, we were given

a first installment of Rs.200 million (20 crore) as our share, leaving a

balance of Rs.550 million (55 crore) but it was not paid when asked for.

In October 1947 there was fighting in Kashmir, when India

refused to give us the amount of Rs. 55 crore if we did not give up allinterest in Kashmir, which we refused. In response, Reserve Bank of

India refused to make even an advance for ways and means. Despite

that India had to pay our 50 crore, (the remaining 5 crore still remains

unpaid). There was a controversy on establishment of our central bank

because we had no experience or expertise but it was resolved and SBP

was created, 3 months ahead of schedule, on July 1, 1948, which was

the last public appearance of the Quaid-e-Azam. SBP claimed its

share of Assets of Reserve bank of India against the Indian currency

retired from Pakistan, but this 50 crore India disputed and virtually

refused to settle this dispute up till now.

In 1949 (September) U.K. devalued its currency, India followed

suit but we did not. India said we had contravened the agreement ofkeeping both currencies at par. We said we had not done that, India had

done it arbitrarily without consulting us. On October 3, 1949, the two

central banks were to announce the new par value of both currencies

but India denied a day earlier. India also froze our trade - balance

Page 8 of 77

7/31/2019 NBP 1

9/77

surplus that is still an unsettled dispute. India also withdraws the

Marwari merchants who were employed annually for movement of jute

crop by financing it. There being no jute industry, prices fell sharply,

foreign banks and foreign merchants stood aside and an agrarian unrest

was threatening.

Two Ordinances were, therefore, issued.

1. Jute Board Establishment Ordinance &

2. NBP Ordinance dated 08.11.1949

NBP was established on 20.11.1949 to provide finance to suitable

parties. NBP stood behind jute trade, SBP stood behind NBP and the

government stood behind SPB. Speedy it was such that 6 branches

came into being at once and the doubts on our ability to handle this

situation were dispelled for ever Now, as the Jute Board and NBP were

in the field, the foreign merchants and bankers also rushed in to get

their share in the business and consequently NBP had to lay out much

less finance than it could. Mr.Ghulam Farooq was chairman Jute Board &

Mr. Mumtaz Hassan was chairman NBP. Until June, 1950, NBP remained

exclusively in jute operations, thereafter-

other commodities were also taken-up. After that Mr. Zahid Hussain,

Governor SBP assumed additional charge also as chairman NBP's Board

of Directors, & Mr. Muhajir became its first M.D.

In 1952 NBP replaced Imperial Bank of India. This arrangement

was negotiated by Mr. Mumtaz Hassan as Acting Governor of SBP.

In 1962 when Mr. Mumtaz Hassan became MD (He had already

served NBP for 10 years as its Chairman of government Director), the

number of branches had increased from 6 to 239 and deposits from

Rs.5 crore (50 million) to 106 crore (one billion & 60 million), profit,

Page 9 of 77

7/31/2019 NBP 1

10/77

from 3 million (3 Lac) to 21 million (2.1. crore) and the staff increased

from 380 to 7091, as compared to 1949-50. In Dec. 1966 its 600th

branch was opened raising the deposits to 2.31 billion. and staff to 14,

963. Up to 1965, the shareholders had received 225% of their original

investment. Now its has more than 21549 employees 1537 branches

and Rs.208283 million deposit.

MANAGEMENT

An Executive Board composed of six Senior Executives of the

Bank and the President who is also the Chief Executive supervises theaffairs and business of the Bank.

CAPITAL

The authorized capital of the Bank is Rs.2500 million divided into 100

million ordinary shares of Rs.10 each. After nationalization, all the

shares held by persons other than the Federal Government or

Corporations i.e., owned and controlled by the Federal Government was

considered as transferred and vested in the Government.

GROWTH AT A GLANCE(2006-2010)

Page 10 of 770

100,000

200,000

300,000

400,000

500,000

2006 2007 2008 2009 2010

TOTAL ASSETS

7/31/2019 NBP 1

11/77

Page 11 of 77

0

100,000

200,000

300,000

400,000

2006 2007 2008 2009 2010

DEPOSIT

0

50,000

100,000

150,000

200,000

2006 2007 2008 2009 2010

ADVANCES

7/31/2019 NBP 1

12/77

Page 12 of 77

0

5,000

10,000

15,000

20,000

2006 2007 2008 2009 2010

SHAREHOLDERS EQUITY

PRE-TAX PROFIT

0

1,500

3,000

4,500

6,000

7,500

9,000

10,500

2006 2007 2008 2009 2010

7/31/2019 NBP 1

13/77

Page 13 of 77

AFTER TAX PROFIT

0

1,000

2,000

3,000

4,0005,000

2006 2007 2008 2009 2010

EARNING PER SHARE

0

2

4

6

8

10

12

2006 2007 2008 2009 2010

7/31/2019 NBP 1

14/77

CATEGORIES OF SHARE HOLDERSAS AT DECEMBER 31, 2010

PARTICULARS SHAREHOLDERS

SHAREHOLDING

%AGE

Govt. ofPakistan

1 1203327 .29%

Page 14 of 77

RETURN ON ASSETS (PRE TAX PROFIT )

0

1

1

2

2

3

2006 2007 2008 2009 2010

7/31/2019 NBP 1

15/77

President ofPakistan

2 319554 .07%

State Bank ofPakistan

1 308536637 75%

Directors AndChildren

2 2200 .0005%

Associatedcompanies

2 9130 .0022%

NIT & ICP 5 2159401 .52%

DFI, NBFI &BANKS

41 21374555 5.2%

Insurance

Companies

12 5575629 1.4%

Modarabas 30 11054886 2.7 %

General Public(Local)

9291 35451030 8.7%

GeneralPublic(Foreign)

339 863835 .21%

Others 159 23792001 5.8%

Total 9885 410342185 100%

BRANCHES

The Bank had a network of 1531branches in the country and

28 branches in foreign countries. These countries are as follows:

1) - United States of America

2) - United Kingdom

3) France

4) - Germany

Page 15 of 77

7/31/2019 NBP 1

16/77

5) - Africa, Middle East Region

6) - Bahrain

7) - Asia Pacific Region

8) - Japan

9) - Republic of Korea

10) - Central Asian States

11) - Bangladesh

12)-Peoples Republic of China

13) - Pakistan.

Page 16 of 77

7/31/2019 NBP 1

17/77

ORGANIZATION CHART OF NATIONAL BANK OF

PAKISTAN

DESIGNATIONS FOR HIGHER LEVEL OFFICERS

PRESIDENT

SENIOR EXECUTIVE VICE PRESIDENTGRADE 22

EXECUTIVE VICE PRESIDENTGRADE 21

VICE PRESIDENTGRADE 20

ASSISTANT VICE PRESIDENTGRADE 19

GRADE I OFFICERGRADE18

GRADE II OFFICERGRADE 17

GRADE III OFFICER(GRADE 16)

Page 17 of 77

7/31/2019 NBP 1

18/77

MANAGEMENT STRUCTURE

The structure of National Bank of Pakistan is shown in the

organizational chart. As the chart shows the top governing body of

National Bank of Pakistan is the board of directors. The board of

directors elects a president who then heads the executive board of

directors which comprises of provincial chiefs and division heads etc.

BOARD OF DIRECTORS

The board of directors is the supreme governing body of National

Bank of Pakistan. it comprises of a government representative, Pakistan

Banking Council Nominee, Nominee of corporate sector and three

directors from National Bank of Pakistan.

EXECUTIVE BOARD OF DIRECTORS

The Executive Board of Directors comprises of the four provincial

chiefs, the three directors from Board of Directors, and the divisionheads. These people run the organization. They are answerable to the

president and the president is answerable to the Board of Directors.

STRUCTURE OF A PROVINCIAL HEAD OFFICE

A provincial head office is headed by a provincial chief. As the

organizational chart shows that under a provincial head office there are

regional offices. In Punjab there are about nine regional offices. Under

each regional office there are two or three zonal offices and under each

office there are fifteen to twenty branches.

Page 18 of 77

7/31/2019 NBP 1

19/77

CORPORATE INFORMATION

BOARD OF DIRECTORS Syed Ali Raza(Chairman & President)Dr. Waqar Masood Khan

Iftikhar Ali Malik

Muhammad Arshad ChaudhySyed Shaftat Ali Shah JamoteM. Zubair MotiwalaSikandar Hayat JamilMuhammad Khalid Malik

AUDIT COMMITTEE Muhammad Arshad Chaudhry(Chairman)Syed Shafqat Ali Shah JamoteM. Zubair Motiwala

AUDITORS M. Yousaf Adil Saleem & CoChartered AccountantsTaseer Hadi Khalid & CoChartered Accountants

LEGAL ADVISORS Mandiviwala & ZafarAdvocates & Legal Consultants

REGISTERED & HEAD OFFICE NBP BuildingI.I.Chundrigar Road,Khi

REGISTERED & SHARE REGISTRATIONOFFICE

THK Associates (Pvt.) Ltd.Shares Department, Ground

Floor Sheikh Sultan TrustBuilding No. 2 Beaumont

Road, Karachi Pakistan.

Page 19 of 77

7/31/2019 NBP 1

20/77

MISSION STATEMENT

To make the Bank comparable and competitive with all

International standards in performing, quality of operations, quality of

staff, quality of financial strength and quality of products and services.

Objectives & missions are the means to reach some beneficial

end. No one can achieve any target before setting it firstly.

So in the same way National Bank has some objectives, which

it is trying to achieve. Following are some of them:

To maximize profit

To provide all sort of banking services.

To serve the humanity in all parts of the world through its

network of branches throughout the world.

To satisfy customers beyond their expectations by providing

personalized effective & efficient services in best & possible

manner.

To serve Pakistan better in order to give socio-economic uplift.

To provide the maximum profit to depositors by achieving sound

profitable growth.

To develop & enhance its system & technology.

To train its staff.

Providing information & advice to its customers.

Providing facilities of foreign currency accounts.

Page 20 of 77

7/31/2019 NBP 1

21/77

PRESIDENT MESSAGE

It gives me great pleasure to announce thatNational Bank of Pakistan is gearing up to thechallenges faced by the domestic banking industrydue to innovations and advances in theinternational banking world, which is theconsequence of globalization.

The bank wishes to effectively utilize thefinancial assistance being extended by the

Government of Pakistan for banking sector reformsaimed at reducing operating costs and improving profitability.

National Bank of Pakistan is distinct from other banks in that ithas a nonprofit and service oriented motive, which has manifested itselfin the area of salary deposits of government employees and payment ofutility bills. The bank renders both of these services across the countryreaching as far as the remotest regions; from our northern borders tothe Arabian Sea. These services do not contribute towards the earningsof the bank; rather they put pressure on our resources. Nevertheless,we are committed to serving small savers and the general public of the

country.

By extending and targeting our research to improve bankearnings, through customer focus of our commercial and corporatebranches, and by enhanced efforts towards the development of humancapital, we shall very soon transform the bank from a bureaucraticorganization to a fast paced, modern, and competitive bank.

In conclusion, I firmly believe that we have the vision, which willenable us to achieve even better results, safeguard the interest of our

customers and to assist us in our march towards progress andprosperity in future.

S. Ali Raza

Chairman & President

Page 21 of 77

7/31/2019 NBP 1

22/77

FIELD OF ACTIVITIES

FOREIGN EXCHANGE

The branches of the Bank in foreign countries handled the

export business and import business.

National Bank of Pakistan started a joint venture in

collaboration with the Bank of Al-Jazira. Its head office is at Jeddah and

also includes twelve other branches. National Bank of Pakistan as a

trustee of the National Investment Trust Limited, and also operates a

subsidiary for the promotion of agricultural production named the

National Agriculture Limited.

SERVICES PROVIDED BY NATIONAL BANK OF PAKISTAN

National Bank of Pakistan provides following main services to

its customers:

It acts like a financial intermediary between importers and

exporters.

It provides services in share of deposits, advances guarantees etc.

Full and efficient services of foreign trade.

Better computer system through which statement of accounts of

a client could be made.

Page 22 of 77

7/31/2019 NBP 1

23/77

NBP SAIBAAN

National Bank of Pakistan (NBP) has

announced the launch of a housing scheme

to cover all sections of the society withmonthly income starting from as low as Rs.

5000/- per month*. *(Conditions apply)

Branded as 'NBP Saibaan (Housing forall), the scheme offers a maximum loan of Rs 10 million in accordancewith the debt burden criterion. Loans are available for HomeConstruction, Home Purchase and Home Improvement. For HomeImprovement Loans the maximum amount is Rs. 2.00 Million.

Home Construction and Home Purchase loans can be repaid overa period of 20 years, whereas the repayment period for HomeImprovement loan is 15 years.

FUNCTIONS OF NBP

The National Bank of Pakistan performs two types of function. It

acts as an ordinary commercial bank, and at places where there are no

branches of State Bank of Pakistan it represents Pakistan, that is why itcannot be privatized. As a commercial bank it performs the following

functions.

1. Accepting of deposits of money on current account, saving, term

deposit and other profit and loss sharing accounts.

2. Borrowing money and arranging finance from other banks.

3. Advancing and lending money to it's clients.

4. Financing of projects including technical assistance, project `

appraisal through long term/short term loans.

Page 23 of 77

7/31/2019 NBP 1

24/77

5. Buying, selling, dealing and discounting of bills of exchange,

promissory notes, drafts, bill of lading, other instruments of

securities etc.

6. Foreign exchange business.

7. Financing of seasonal crops like cotton, wheat, rice,

8. Receiving of bonds, scripts, valuable etc. for safe custody.

9. Carrying on agency business of any description other than

managing agent on behalf of clients, including government

and local authorities.

10. Generating, undertaking, promoting etc. of issue of shares,

bonds.

11. Transacting guarantees and indemnity business.

12. Undertaking and executing trusts.

13. Making investments in other banking companies.

14. Joint venturing with foreign dealers, agents and companies for

its representation abroad.

15. Participating World Bank's and Asian Development bank's lines of

credit.16. Utility services.

17. Providing Hajj services to intending Hajis.

18. Agent to State Bank of Pakistan for collecting

19. Payment of pension on behalf of provincial and central

governments.

20. Treasury business.

21. Gold finances.

Page 24 of 77

7/31/2019 NBP 1

25/77

PRODUCT / SERVICE MIX OF NATIONAL BANK

Product of a bank includes all those services, which a customercan use effectively in has general and business live.

NBP Main Branch, Lahore offer a wide range of bankingservices to public and private sector corporations, partnership,individuals and others. However, there are some basic services whichNBP at present offered to his customers include:

Receipts f customer deposits. Collection of his cheques drawn on other banks. Making payments through cheques drawn on it. Making remittances

Foreign trade services.

At present NBP offering the following financial services andinvestments options to customers.

1- Deposits2- Advances3- Foreign Services

DEPOSITS

To receive deposits is a basic function of all commercial banks.

Commercial banks do not receive these deposits for save keeping

purpose only. But they accept deposits as debts. When a bank receives

a deposit from a customer becomes the creditor and the bank a debtor.

When the bank receives the amount of deposit as a debtor, it becomes

the owner of it. It may, therefore, use it as it deems appropriate. But

there is an implicit agreement that the amount owned would be paid

back by the bank to depositor n demand or often a specified time.

Deposits are the lifeblood of a bank and their classification is

based on the duration and purpose for which the deposits are to be kept

at the bank before the depositors can withdraw them. At present NBP

accepts deposits in bother local & foreign currencies and provides a

Page 25 of 77

7/31/2019 NBP 1

26/77

variety of accounts where these sums are put in at the desire of the

customers.

LOCAL CURRENCY DEPOSITS

In local currency (PKR) the following type of accounts are available at

the bank

1-Current Account

2-Saving A/c

3-Short term deposits

4-Fixed deposit receipts

CURRENT ACCOUNT

These are payable to the customer whenever they are

demanded. The bank treats these deposits as current liabilities. No

profit is given on these accounts and there is no restriction of minimum

balance to be kept in these accounts.

SAVING ACCOUNT

In such types of account, the depositors are normally allowed

to withdraw a limited amount of money only twice a week.

FIXED DEPOSIT RECEIPTS

In these accounts the amounts are deposited for fixed period

which may be 1 month, 3 months, 6 months and 1 year.

SHORT TERM DEPOSITS

Page 26 of 77

7/31/2019 NBP 1

27/77

In these accounts the amounts are deposited for fixed period

but shorter than that of fixed deposit receipts, which may be 7 days,

and 30 days.

FOREIGN CURRENCY DEPOSITS

At present NBP Main Branch accepts US$, GBR, YEN and DM in

shape of foreign currency deposits. For these foreign currency deposits

bank has offered the following accounts.

1-Foreign Currency Accounts.

2-Foreign Currency Saving Accounts.

FOREIGN CURRENCY CURRENT ACCOUNTS

In these accounts depositors can deposit a sum of money in

any of the above mentioned currencies. The depositor can also withdraw

any amount subject to he availability of the amount. No profit is given

on these accounts and no restriction as per the minimum balance

required.

FOREIGN CURRENCY SAVING ACCOUNTSNBP pays the interest that is earned on the sums available in

the accounts by making investments.

ADVANCES

Advances are the major source of earning income for

commercial banks; it is the interest charged on the money lend to

customers. Bank advances to customers are made either by way of loan

or by overdraft on current account.

FOREIGN SERVICES

Page 27 of 77

7/31/2019 NBP 1

28/77

Following is the list of major foreign services provided by NBP

to its customers: e .g:

a- Documentary Letter of Credit

b- Bills of Negotiation

c- Foreign Services

d- Bills for collection

DOCUMENTARY LETTER OF CREDIT

A documentary letter of credit may be defined as an authority

issued by the opening bank on behalf of the importer in favor of the

exporter with the stipulation that the drafts drawn there under will be

duly honored provided that the terms and conditions as mentioned there

in are duly compiled with.

With respect to the documentary credit the following types of

documentary letter of credit are offered by NBP;

Revocable LC

Irrevocable LC

Confirmed LC

Transferable LC

Back to back LC

Stand by LC

Sight LC

Usance LC

BILLS FOR NEGOTIATION

Page 28 of 77

7/31/2019 NBP 1

29/77

In some cases the exporter is not willing to wait for the proceeds

of collection to be remitted. In such cases exporter requests the Bank to

negotiate the bills i.e. he sends the documents to Bank. In this case

Bank examines the documents and arranges them with the

requirements mentioned in the Letter of Credit. When bank satisfied it

pays to the exporter. Now Bank has the right to collect the proceeds on

his own behalf from the importers Bank

NBP performs the functions of both the exporters and the

importers Bank as per its customers status.

BILLS FOR COLLECTION

The exporters and bank receives the documents from the

exporter, examines and dispatches them to the importer, s bank. The

importer, s bank confirms these, as per the requirements stated in the

letter of credit. If founds correct gets the amount from the customer,

advice the exporter ,s bank about the receipt of payment and in the

end makes the payment to the exporters bank.

REMITTANCE

It includes local and foreign currency fund transfer. NBP also

provide the facility to its customers in remitting funds from one place to

another place. The remittance (between two countries). At present bank

provides the following instrument that facilitates the transfer of funds.

TT ( telegraphic Transfer)

DD (Demand Draft)

PO (Pay Order)

UNMATCHED BANKING FACILITIES

Page 29 of 77

7/31/2019 NBP 1

30/77

Deposit security, Guaranteed by Government of Pakistan

Highest rates of return to attract the savings.

Lowest rates on exports and other borrowings.

Largest contribution towards Government and Semi- GovernmentRequirements.

Agent of the State Bank of Pakistan handling Treasury Functions,

receipts of Taxes & other Revenues.

Handling of salaries and pensions of federal/ provincial employees

and defense personnel.

Utility Bills collections.

Hajj arrangements. Sale and encashment of Prize Bonds through its 266 authorized

branches.

Sale and encashment of Defense Savings and Special Savings

Certificates.

Safe Deposit Lockers for customers.

Rational Human Resource Management.

NBP ATM SERVICES FOR YOUR CONVENIENCE

Cash withdrawal according to your cyclic limit.

Transfer of funds between PLS Savings Account and Current

Account of the same customer through the same ATM Card.

Account Balance Inquiry.

Instant mini- statement of account listing the last 15 transactions

in account. Request for a new Cheque book which might be

collected by the customer from the branch.

HOW MUCH CASH CAN BE WITHDRAWN

Page 30 of 77

7/31/2019 NBP 1

31/77

There is a 24 hours cyclic cash withdrawal limit imposed on all ATM

cards. Withdrawal limits depend on the type of customers.

PIN (PERSONAL IDENTIFICATION NUMBER) MAILER

A pin mailer issued to the ATM card holders carries the PIN number

in a sealed envelope. Card holder is required to keep the PIN number

in a safe place as all the operation on the ATM is carried out through

the same.

FUNCTIONS OF NBP AS A REPRESENTATIVE

OF STATE BANK OF PAKISTAN

1. Collection of cheques and bill of exchange for its customers.

2. Paying insurance premium, rent or other obligations of the

customers.

3. Collecting interests due, dividend pensions and other sums due

to customers.

4. Transferring of money from place to place.

5. Acting an executors, trustees for the customers.

6. Providing safe custody and jewelry documents or securities.

7. Issuing of travelers cheques and letter of credit to give credit

facilities for travel.

8. Purchasing shares for the customers.

9. Accepting bills of exchange on behalf of customers.

10. Undertaking foreign exchange business.

11. Furnishing trade information and tendering advice to customers.

12. Formulating operation policy guidelines for the banks.

Page 31 of 77

7/31/2019 NBP 1

32/77

13. Laying down performance criteria for banks and taking steps for

ensuring their observance.

14. Evaluating the performance of the banks in the context of

operational guidelines issued to the banks.

15. Determining the areas of coordination of the banks.

16. Formulating schemes under section of the act.

17. Making recommendations to the federal government for the

appointment of the president and members of the executive

board.

18. Analyzing and appraising financial statement including balance

sheets and profit and loss accounts of banks and appointment of

auditors of the bank.

19. Conducting such surveys, inquiries and appraisals as may be

necessary for the purpose of this act.

20. Exercising and performing such powers and functions of the

federal government under the act and such other functions as

the federal government may assign to it.

21. Establishing a research department or conduct banking researchand in particular study overseas banking operation and

problems of the agricultural financing.

22. Establishing a central training institution for improving bank

services.

23. Coordinating the planning of the operations of nationalized

commercial banks, and exercising general overall checks on the

cost of their operations.

Page 32 of 77

7/31/2019 NBP 1

33/77

DEPARTMENTS

CLEARING DEPARTMENT

Nearly all the banks provide a wide variety of services to their

depositors. One valuable service provided is that of clearing. Clearing

department also plays an important role in performing the activities of

the bank.

The basic function of clearing department is to provide services

to customers in collection of their cheques of other banks, whether they

are in city or outside the city. The customer can get the money in his

account at NBP from the cheques drawn on another bank. The bank

accepts the cheque in the clearing which it is drawn through the clearing

house i.e., State Bank of Pakistan.

FIXED DEPOSITS

In this type of account a certain amount is deposited for a certain

period such as six month, two years or longer. A fix deposit receipts is

issued in the name of the depositor. The officer in charge and the bank

manager sign the receipt. A notice is given to the depositor on a

prescribed form two weeks before the FDR falls due, requesting the

depositor to withdrawn his money or to renew his deposits. The interest

allowed on fixed deposit varies with the period for which the deposits

are made.

Page 33 of 77

7/31/2019 NBP 1

34/77

SHORT TERM DEPOSIT

Application for short-term deposit is taken on form F-486 and the

amount on form F-88. The amount of such deposits will be credited to

short term deposit account. Rate of interest allowed by bank on short-

term deposit is advised by the head office from time to time and are laid

down in section XII of supplement No.1.

CALL DEPOSITS

Branch may accept call deposit from local bank or from other on

such rates on interest as may be prescribed by the head office from

time to time through controlling office. These deposits will be credited to

call deposit account in the favor of government and semi government

department should also be credited to call deposit account.

SAVING ACCOUNTS

Saving account is opened by the client through an application on

the printed form available from the bank as per instructions mentioned

thereon. An existing account holder in the same branch must verify thesignatures of the new applicant.

Application must be accompanied an amount of Rs.500/- in cash

of PLS account, and Rs.1000/ in case of current account.

A copy of national identity card must be attached with the

application how along with the specimen signature card signed by the

applicant.

ARTICLES IN SAFE CUSTODY

Page 34 of 77

7/31/2019 NBP 1

35/77

Application for articles in safe deposits taken from the depositor

on form of 175 signature of the depositor should be verified by the

supervising official the number of the relative safe deposits noted

thereon on the application form filed in serial order in a separate file

which should be kept in the strong room overnight. Particulars of

articles taken into safe deposit will be recorded on the safe deposit

register.

CLEARING

We can define clearing as, the transfer of funds from one branch of

bank to the other branch of the same bank or the other bank on whichthe instrument is drawn, without involving cash through State Banks

clearing house or we can say in other that cheques which can not be

cashed at the ash counter of the bank.

CLEARING HOUSE

It is of the service provided by central bank i.e., State Bank of

Pakistan to the other commercial banks. SBP acts as a clearing house. A

representative of each bank represents his bank in the clearing house.

A clearing house is an association of commercial banks set up in a

given locality for the purpose of interchange & settlement of credit

claims.

The SBP maintains the accounts of the NBP like other

scheduled banks and debits the account of the drawee bank and credits

the presented bank which is NBP in that case.

TYPES OF CHEQUE

Page 35 of 77

7/31/2019 NBP 1

36/77

Some specific types of cheque are being entertained in the

clearing department of NBP Main Branch, Lahore.

These types of cheque are:

1) - Local cheque

2) - Out station cheque

3) - In house cheque

1) - LOCAL CHEQUE

By local cheque we mean collection of cheque from the banks

which are the members of the clearing house and which are located

within the city.

2) - OUT STATION CHEQUE

By out station cheque we mean collection of cheque from the

banks which are situated outside the city. It means that presenting bank

and the bank on which the cheque is drawn are not situated in the same

city.

3) - IN HOUSE CHEQUE

In house cheque are drawn on one branch of NBP and

presented to another branch of NBP such cheques are marked with

transfer stamp.

TYPES OF CLEARING

Page 36 of 77

7/31/2019 NBP 1

37/77

Clearing department deals with the two type of the clearance.

These are stated below:

1) - Inward clearance

2) - Outward clearance

INWARD CLEARANCE

Cheque drawn on NBP and presented to other Banks or handed

over to NBP agent in clearing house. That is inward clearance for NBP.

So inward clearing results in outflow of funds to collecting bands

reducing the balance in the clearing account.

OUTWARD CLEARANCE

Similarly cheque which are drawn on other bank and presented

to NB Main branch, Lahore are known as outward clearance for NBP

Main Branch. So outward clearing results in inflow of funds from paying

bank into the clearing account maintained with clearing house

increasing the balance in the clearing account.

Outward clearing thus may be:

Local clearing

Outstation clearing

Excess of outward clearing over inward clearing produces a net

increase in the clearing account balance. Excess of inward clearing over

outward. Clearing produces a net decrease in the clearing account

balance. The first case is referred to as favorable clearing & the second

case as unfavorable clearing.

Page 37 of 77

7/31/2019 NBP 1

38/77

REMITTANCE DEPARTMENT

Remittance is the monitory transfer from one place to another

place or from one country to another country to fulfill the requirements

of the customers by the order of the customer.

Remittance Department at NBP Main Branch Lahore can be

divided into two sections due to its activities.

1) - Local Remittance

2) - Foreign Remittance

LOCAL REMITTANCE

Local remittance section deals with remittance ( incoming and

outgoing but only in local i.e., Pakistan rupee and within Pakistan.

Local remittance includes the following eight functions in NBP:

a) - Transfer through pay order

b) - Transfer through demand draft

c) - Telegraphic transfer

d)- Issuing of SBP cheques

e) - Mail transfer

f) - Local / internal transfer

g) - Preparation of balance certificates.

Page 38 of 77

7/31/2019 NBP 1

39/77

ACCOUNTS DEPARTMENT

The main function of the accounts department of NBP is to

maintain general ledger accounts and after the business hours the

function of the accounts officer is to close books.

FUNCTIONS

There are many other important functions performed by accounts

department of NBP. So I ma going to discuss these functions in three

steps:

-General Ledger;

-Voucher system;

-Types of voucher used.

GENERAL LEDGER:

It is the prime record of the branch reflecting its assets and

liabilities and serves as the master control of accounting system of the

branch. It consists of only those accounts, which are authorized by the

head office.

VOUCHER SYSTEM:

Voucher is a written authorization sued in approving a

transaction for recording and payment.

Voucher is a system, which is generally designed to provide

strong internal control over the transaction, which take place

during the business hours.

Page 39 of 77

7/31/2019 NBP 1

40/77

Whenever a transaction takes place in any department of

the bank.

One debit and one credit voucher is prepared. At the end of

the day, these vouchers are collected and recorded i.e.,

Debit vouchers are used in two cases:

When ever any expense is incurred.

When a depositor withdraws some amount from his account

The account of the customer is debited with the amount and debit

voucher is prepared.The format of the debit voucher includes:

-Name of branch

-Date

-Branch No.

-Account No.

-Transaction Code

-Amount and other details (Narration)

CREDIT VOUCHERS:

There are two types of transaction in which credit vouchers are used.

When a depositor deposits any amount in his account

because the liability of bank.

Any income received by the bank e.g. bank draft.

Different types of credit vouchers are used.

Page 40 of 77

7/31/2019 NBP 1

41/77

Now in second set these three important functions of Account

department of NBP are described briefly.

1. All expenses vouchers are routed ask through Accounts

Department.

2. Preparation of various statements.

3. Preparation daily activity report at the end of each day.

EXPENSE VOUCHER

All the expense vouchers passed by each department are routed

through accounts department. These expenses include:

a) Salaries given to all employees of the bank

b) Wages

c) Rent

d) Lease installments

e) Insurance - vehicle

f) Insurance - cash

g) Utility Bills

h) Medical allowances (reimbursed)

i) Cash carrying charges etc.

SALARY STRUCTURE

Salary included

Bonuses

These bonuses are credited after every six months i.e.

June and December. These are first and second profit

bonuses and are equal to one month's basic salary.

Page 41 of 77

7/31/2019 NBP 1

42/77

Allowances:

Allowances included house allowances, transport allowance

and utility allowance.

Provident Fund:

Provident fund is provided to each employee on his

retirement. Contribution by employer and employee

is 8.3%.

Preparation of statements:

Second major functions of accounts department are thepreparation of various statements. These statements

are:

1) - Weekly Statements:

These weekly statements are sent at first to NBP head office

Karachi.

2) - Monthly Statements:

These monthly statements are sent at first to NBP head

office Karachi and then these statements are sent to head office affairs

in consolidated form. All vouchers and statements signed and approved

by manager accounts or who has authority to sign on behalf of the bank

and whose signatures appear in one of the banks book of specimen

signatures or a person who has authority to sign internal vouchers and

records extent of its authority will be made by the country manager.

Page 42 of 77

7/31/2019 NBP 1

43/77

Preparation of Daily Activity Reports:

It is also duty of accounts department to prepare

daily activity report at the end of each day. It

includes the details of the following:

A) - loans transactions

B) - general Ledger transactions

C) - Foreign currency related transactions

D) - fixed deposits transactions

All vouchers prepared by different relative departments on computer.

In third and last step the following functions of accounts department of

NBP are described as follows:

Approval of daily expenses voucher

SBP balance

Tax returns

Budgeting

Forward Cover Fee

Debit Balance Calculation

Pay order/telegraphic commission transfer

Deposit entry

Depreciation

Result/budget

Head office report

Trial balance

Commitment return

Sources and uses

Activity report

Statistics of activity

Page 43 of 77

7/31/2019 NBP 1

44/77

Monthly assets and liability

Liquidity 1, 2, 3, 4, 5 years

Excise duty balancing EOM/EOY Print files floppy

Customer's/internal A/c statements

Computer complete back up

Quarterly statements size wise

FCY interest reporting

FCY interest checking

Service Charges A/c to be dormant

Letters to customers

Classification of deposits

List of deposits

A/c opening and closing

Staff loans

A/c blocked and unblocked

Monthly resident and non resident

Zakat Calculations.

ACCOUNTING PROCEDURE IN NBP:

1. Various departments use debit and credit voucher for

recording the transactions.

2. Accounting department receives the departmental journal

from the departments to gather with all the vouchers.

3. Verify correction of total of all into departmental entries in

departmental journals.

4. Sort vouchers into general ledger a/c order debit separately

from debit for each account.

Page 44 of 77

7/31/2019 NBP 1

45/77

5. From departmental journals add all debits and all credits for

each general ledger account and write total for each account in

relative account and extend new balances.

6. Prove debit and credit totals to department journal total.

Write total obtained from machines list for each contingent

accident in general ledger and up data balances.

7. Date and sign general ledger and obtain signature of an

officer.

8. Place general ledger includes leaf binder in chronological

order.

Page 45 of 77

7/31/2019 NBP 1

46/77

ADVANCES DEPARTMENT

1. Loans

2. Cash Credit

3. Overdraft

1. LOANS

Monetary assistance by a financial institution to a business some

financial problems such as to finance fiscal assets, working capital,

bridge finance, etc. The loans are granted by the bank in lump sum, so

this type called fixed or demand loans. Interest is charged on the whole

amount of a fixed loan.

The borrower withdraws whole the amount of loan. This type of

loan is normally granted against security of gold and documents.

In case of demand loans against gold or documents, a demand

promissory note for the amount of loan is taken from the borrower.

Loans are granted under:

Loan against Gold

Under this type of loan which is granted to the borrower.

The Head Cashier estimates the value of Gold or Gold ornaments

through an agent (Gold smith) and keeps a margin of 40 to 50 per cent.

After the opening the gold loan account a token is given to the borrower

which is a bank receipt.

Page 46 of 77

7/31/2019 NBP 1

47/77

On repayment of loan, the gold or ornaments held as security for

it, together with the demand promissory note duly discharged is

returned to the borrower and his receipt for the gold ornament taken in

the demand loan ledger. This receipts states that the ornaments

returned are complete and in order. Part delivery of ornaments is given

against part payment of a loan but care is taken that the ornaments still

in the banks possession fully covers the balance of the loan outstanding.

The interest on gold loan is to be applied with quarterly rests.

Loan against pledged of stock:

In case of advancing such types of loans, the following precaution

is kept in the mind:

a) Stock pledged must be readily saleable.

b) Products should be readily saleable.

c) Advance should be within the borrows means.

2. CASH CREDITORUnder such cash credit account is opened in the name of the

customer who borrows from the bank.

Customer is granted a loan up to a certain limit which is

sanctioned by the head office, which he draw when he requires interest

is charged on the amount actually utilized by the customer. In order to

avoid the danger of idle fund, the bank charges are certain rate of

interest, even if the customer does not withdraw any amount.The credit is usually given against the securities of goods or

merchandise as follows:

Page 47 of 77

7/31/2019 NBP 1

48/77

Advances against Pledge Stock in

Trade or Products:

When a cash is granted against the pledge of stock or product,

cash credit form is taken, from the certain products or stock, but the

actual pledge is created when the stock or finished product are placed

under the bank's lock and key or the document of title are duly

endorsed to the bank by the borrower.

Hypothecation of stock on Finished Products

The difference between pledge and hypothecation is that

under a pledge the borrower's goods are placed in the bank's possession

under own lock, whereas, under a hypothecation, they remain in the

possession of the borrower or guarantor and

are merely charged to the bank under documents signed by them.

Even though the documents empower the bank to take

possession of the goods hypothecated, but it is possible that the

borrower may actually resist any attempt.

Mortgages of property:

Title deeds of immovable property is accepted by the bank

only as collateral security or alternatively as unauthorized security.

3. OVER DRAFTS:

When the bankers permits his customer to overdraw upon his

current account up to a certain limit, it is called overdraft facilityprovided buy the bank. The customer is charged with the interest for

the amount he has actually overdrawn from the bank. The customer is

free to take the overdraft facility up to the limit whenever he needs

Page 48 of 77

7/31/2019 NBP 1

49/77

and he can at any time return back the advance to the bank by

deposited the amount with the bank.

There are two types of overdrafts:

Unsecured Overdraft:

Under such type of overdraft the bank rely upon the personal

security of the customer or customers mentioned on the customer's

account.

Secured Overdraft

Under this type of overdraft the bank allows his customer to

withdraw more than his deposits after giving security against the

amount overdrawn. The securities against which the amount is

withdrawn may or Government or other first class.

Page 49 of 77

7/31/2019 NBP 1

50/77

CASH DEALING DEPARTMENT

The following books are maintained in the Cash Department:

1. Receiving Cashier Bank

2. Paying Cashier Book

3. Token Book

4. Scroll Book

5. Cash Balance Book

When cash is received in counter, it is entered in the Scroll Book

and Receiving Cashier Book. At the close of the day, these are balanced

with each other.

When the cheque or any negotiable instrument is presented at

counter for payment, it is entered in the token book and token is issued

to the customer. The token and the Cashier makes entry in the paying

book and payment is made to payee. At the close of day, the Token

Book and Paying Cashier Book is balanced.

The consolidated figure of receipt and payment of cash is entered

in the cash balance book and drawn closing balance of cash.

Opening balance of Cash + Receipts Payments = Closing Balance.

This is very important department. All the books maintained in this

department are checked by an officer.

Page 50 of 77

7/31/2019 NBP 1

51/77

WORK DONE BY ME

Major activities performed during my internship program are as

follows;

ACCOUNT OPENNING DEPARTMENT

In this department, I gain the practical knowledge about opening

account. This department deals with opening current and saving

account for its customers and all matters regarding thereof. The

customers opening current and saving accounts can be categorized as

following.

-Individual

-Firm

-Company

-Trust

-Staff

-Others

OPENING ACCOUNTS

In order to open an account, first of all the customers have to fill

a form prescribed by the bank. The person is required to bring some

reference or introduction for opening the account. Introducer may be

the person who has any account with NBP.

Some important information regarding introducer e.g. the name

and account number of the introducer is written on the space provided

on the specimen signature card. Then in order to find out whether he is

a true introducer or not, a letter is sent to him thanking him for this

introduction so that anything wrong may come into notice.

Page 51 of 77

7/31/2019 NBP 1

52/77

There are different requirements for different types of accounts

and accountholders.

DEPOSITSThe procedure undertaken upon receiving deposits from the

customers is as follows:

Examining the deposit slip to ensure that the name and the

account numbers are clearly indicated.

Counting the cash and cheques and agree the total with the

amount on the deposit slip.

After that the pay in slip is validated for cash transaction

and transfer and clearing transfer as appropriate before the

counterfoil is handed over to the customer.

Cheques signed by directors, partners or employees of a

company, drawn in favor of them and credited in their account

in the bank are to be scrutinized.

WITHDRAWALS

Cheques can withdraw amount. The withdrawals can be made

only at the branch where the account is maintained. The officer under

his full signature authorizes all cash withdrawals. No third party

withdrawal is permitted. In current account, the bank does not offer

any interest. We can deposit or withdraw any amount during banking

hours.

Page 52 of 77

7/31/2019 NBP 1

53/77

ISSUANCE OF CHEQUE BOOK:

The accountholders request for the new cheque book by

presenting the requisition slips along with the authority letter to the

concerned office. His signatures are verified before giving him a new

cheque book. The presence of the accountholders is compulsory to get

a new cheque book. But if he sends a third person to get his cheque

book then the procedure is as follows;

An authority letter is given to the third party by the accountholders.

The accountholders verify the signature of the third person on that

authority letter.

The bank officer gets the signature of that third person to confirm

whether he is the same to whom the accountholder has sent.

The bank issues the new cheques book and authority letter is kept

buy the bank.

CLEARING DEPARTMENT

In this department, I have worked for two weeks. Main branch

receives the cheques from all of its branches and makes the lots of

these cheques again. Main branch sends these cheques to the state

bank of Pakistan where a clearinghouse exits. In this clearinghouse the

representatives receive their cheques and go back to their bank's main

branch. Then the main branch sends these cheques to their relevant

branches where the validity of these cheques is verified and the

accounts of the relevant clients are affected.

The statement of clearing was submitted before 1.00 P.M. daily.

The whole procedure of clearing is completed within two days.

Page 53 of 77

7/31/2019 NBP 1

54/77

REMITTANCES DEPARTMENT

I worked in this department for one week. This department deals

in transfer of money from one place to another or country by:

-Demand drafts

-Mail transfer

-Telegraphic transfer

In this department internees are advised only to observe the

working of transfer of money from one place to another place of the

country by the above modes of transferring money. During my stay inthis department I observed that how demands draft be issued. The

procedure is as follows.

First the bank receives a written request from the customer to

issue a bank draft. The written request is either in banks standard form

or separate paper signed by the applicant enclosed with cash or cheques

covering the amount of the draft and other charges of the bank.

While issuing a bank draft it is necessary that the draft should be

free from alternations. All the details must be written clearly in ink.

After issuance a demand draft it is handed over to the applicant and its

advice containing the particulars of the draft is sent to drawer branch

with its necessary information and payment of the draft is make on its

presentation.

Page 54 of 77

7/31/2019 NBP 1

55/77

FINANCIAL ANALYSIS

NATIONAL BANK OF PAKISTANINCOME AND EXPENDITURE ACCOUNT

HORIZONTAL ANALYSIS

ITEMS 2010 2009 INCREASE(DECREASE)

%AGE

Markup/Interest

earned

19452317 27126839 (7674522) 28.29%

Markup/Interestexpenses

6735579 14698507 (796928) 54.17%

Net Mark upInterestIncome

12716738 12428332 288406 2.32%

Provisions 2619043 2109678 509365 9.9%Non Mark upInterestIncome

17345934 15527746 1818188 19.84%

Non Mark upinterestExpenses

7863083 9164787 1301704 14.20%

Staff WelfareFund

474143 318148 155995 49.03%

Profit BeforeTax

9008708 6044811 2963897 49.03%

Profit AfterTax

4198103 2253385 1944718 86.30%

Profit

Available ForAppropriation

7650586 4469268 3181318 71.18%

Page 55 of 77

7/31/2019 NBP 1

56/77

NATIONAL BANK OF PAKISTANBALANCE SHEET

HORIZONTAL ANALYSIS

Assets 2010 2009 INCREASE(DECREASE)

%AGECHANGE

Cashbalanceswith othertreasurybanks

59420502 55531453 3889049 7%

BalancesWith Other

Bank

24154070 35878101 (11724031) 32.67%

Lending toFinancialInstitutions

30213352 21716802 8496550 39.12%

Investments 166195619 143524971 22670648 15.78%Advances 160990265 140547374 20442891 14.55%Other Assets 21946846 27489021 (5542175) 20.16%OperatingFixed Assets

8939483 8115131 824352 10.16%

LIABLITIES 2010 2009 INCREASE(DECREASE)

%AGECHANGE

Bills payable 5496738 3365744 2130994 63.3%BorrowingFromFinancialInstitution

16493514 10032135 6461379 64.4%

Deposits 395568490 362865637 32702853 9%LiabilitiesAgainst

Leasing

41117 74059 (32934) 44.48%

Otherliabilities

26080400 29682837 (3602437) 12.14%

Deferred Taxliabilities

595864 2846186 (2250322) 79.06%

Page 56 of 77

7/31/2019 NBP 1

57/77

REPRESENTEDBY

2010 2009 INCREASE(DECREASE)

%AGECHANGE

Share capital 4103422 3730384 373038 9.9%

Reserves 813312 7144326 988986 13.84%Un AppropriatedProfit

5897163 3404593 2492570 73.21%

Surplus 9450117 9656960 (206843) 2.14%

NATIONAL BANK OF PAKISTANBALANCE SHEET (ASSETS)

VERTICAL ANALYSIS

ASSETS 2010 %AGE 2009 %AGECash BalanceWith Othertreasurybanks

59420502 13.72% 55531453 12.83%

Balance Withother Banks

24154070 5.58% 35878101 8.29%

Lending toFinancialInstitution

30213352 6.98% 21716802 5.02%

Investments 166195619 28.39% 143524971 33.16%

Advances 160990265 37.19% 140547374 32.47%

Other Assets 21946846 4.07% 27489021 6.35%

Operating FixAssets

8939483 2.06% 8115131 1.88%

Total Assets 471866937 100% 432802853 100%

Page 57 of 77

7/31/2019 NBP 1

58/77

NATIONAL BANK OF PAKISTANBALANCE SHEET (LIABILITIES)

VERTICAL ANALYSIS

LIABLITIES 2010 %AGE 2009 %AGEBills Payable 5496738 1.19% 3365744 0.78%BorrowingsFromFinancialInstitution

16493514 3.56% 10032135 2.32%

Deposits 395568490 84.37% 362865637 83.84%

LiabilitiesAgainst Assets

Of leasing

41117 8.87% 74051 0.017%

Otherliabilities

26080400 5.63% 29682837 6.86%

Deferred textLiabilities

595864 0.13% 2846186 0.66%

Share Capital 4103422 0.89% 3730384 0.86%

UnAppropriatedProfit

5897163 1.27% 3405493 0.08%

Reserves 8133312 1.756% 7144326 1.65%

Surplus onRevaluationof Assets

9450117 2.04% 9656960 2.23%

Total 463355031 100% 432802853 100%

Page 58 of 77

7/31/2019 NBP 1

59/77

RATIO ANALYSIS

RETURN ON TOTAL ASSETS

ITEMS 2010 2009

Profit After tax 4198103 2253385

Total Assets 471860137 432802853

Return On Total Assets 0.889% 0.52%

0

0.2

0.4

0.6

0.8

1

%AGE

2010 2009

Years

Comments:

This ratio is increased from .52% in year 2009 to0.889% in year 2010.which is a sign of good performance.

Page 59 of 77

7/31/2019 NBP 1

60/77

7/31/2019 NBP 1

61/77

NET PROFIT MARGIN

ITEMS 2010 2009

Profit after Tax 4198103 2253385

Mark up, Interest 6735579 14698507

Net profit Margin 62.32% 15.33%

0

10

20

30

40

50

60

70

%AGE

2010 2009

Years

Comments

Net Profit Margin in year 2010 has increased from 62.32 %

to 15.33% in year 2009. This shows that there is good performance ofthe bank.

Page 61 of 77

7/31/2019 NBP 1

62/77

EARNING PER SHARE

ITEMS 2010 2009

Profit After tax 4198103 2253385

Total No. Of Shares 410342185 3730384

Earning Per Share Rs.10.23 Rs.6.04

0

2

4

6

8

10

12

Rupees

2010 2009

Years

Comments

This is very important ratio for shareholder and investorhere in this case EPS has increased to Rs.10.23 from Rs.6.041 which is

very good for shareholders and investors.

Page 62 of 77

7/31/2019 NBP 1

63/77

COST OF LENDING

ITEMS 2010 2009

Interest Income 19452317 27126839

Total Advances 160990265 140547374

Cost of Lending 12.08% 19.3%

0

5

10

15

20

%AGE

2010 2009

Years

Comments:

This ratio show the cost bear by the bank while lending themoney. Here cost of lending has decreased from 19.58% to 12.08% in2010. Which is positive sign for the bank?

Page 63 of 77

7/31/2019 NBP 1

64/77

LIQUIDITY OR SOLVENCY RATIOS

LOAN TO ADVANCE RATIO

ITEMS 2010 2009

Total Loans 16493514 10032135

Total Advances 160990265 140547374

Loan to Advance Ratio 10.24% 7.14%

0

2

4

6

8

10

12

%AGE

2010 2009

Years

Comments

Lower the ratio is better for lending institutions. In this case ratiois increased to 10.24 from 7.14%. Which is not better for bank .Itshows that bank loans have increased as compared to its advances.

Page 64 of 77

7/31/2019 NBP 1

65/77

LOAN TO TOTAL ASSETS

ITEMS 2010 2009

Total Loans 16493514 10032135

Total Assets 471860137 432802853

Loan to Total Assets 3.49% 2.32%

0

0.5

1

1.5

2

2.5

3

3.5

%AGE

2010 2009

Years

Comments

It shows the empirical relation between loan and assets ofbank. Here this ratio has increasing trend which shows poorperformance of bank.

Page 65 of 77

7/31/2019 NBP 1

66/77

CASH TO DEPOSIT:

ITEMS 2010 2009

Cash 83574572 91409554

Deposits 395568490 362865637

Cash to Deposits 21.13% 25.19%

19

20

21

22

23

24

25

26

%AGE

2010 2009

Years

Comments

This ratio shows that how much cash is available to meetthe demand liabilities of depositors. Here this ratio has decreased from25.19% to 21.13%.

Page 66 of 77

7/31/2019 NBP 1

67/77

CURRENT RATIO

ITEMS 2010 2009

Current Assets 410352146 190159854

Current Liabilities 5496738 3365744

Current Ratios 74:1 57:1

0

10

20

30

40

50

60

70

80

%AGE

2010 2009

Years

Comments

As the table shows that current ratio of NBP is higher thanstandard of 2:1.Here in this that is a good sign and it reflect to theliquidity position if NBP.

Page 67 of 77

7/31/2019 NBP 1

68/77

PROPRIETRY RATIO

ITEMS 2010 2009

Share Holder Fund 18133897 14279303

Total Assets 471860137 432802853

Proprietary Ratio 3.84% 3.3%

33.13.23.33.43.53.63.73.8

3.9

%AGE

2010 2009

Years

Comment

It is the ratio of funds belonging to shareholders to the totalassets of the company. In this case this ratio has increased from 3.84%to 3.3% which is better for bank.

Page 68 of 77

7/31/2019 NBP 1

69/77

FIXED ASSET TO LONG TERM DEBT RATIO

ITEMS 2010 2009

Long Term Debt 16493514 10032135

Fix Asset 8939483 8115131

Ratio 1.84:1 1.24:1

0

0.5

1

1.5

2

%AGE

2010 2009

Years

Comments

The debt equity ratio should be 1:1 and of this ratio is less than 1 itmeans that company has followed the imprudent the policy of using the shortterm funds for acquiring fixed assets.

In this case this ratio is above than standard for both two years. This

means that company is utilizing its long term debts efficiently.

GENERAL RATIOS

Page 69 of 77

7/31/2019 NBP 1

70/77

COST OF BORROWINGS

ITEMS 2010 2009Mark up Paid 6735579 14698507

Deposits 395568490 362865637

Cost of Borrowing 17.02% 4.06%

0

5

10

15

20

2530

%AGE

2010 2009

Years

z

Comments

It is a comparison between mark up paid and deposits, thelower the mark up paid is better for institution. In this case this ratio isincreasing from 4.06% to 17.02%.Which in a negative sign for the performance of the bank.

ADMIN. EXPENSE TO DEPOSIT

Page 70 of 77

7/31/2019 NBP 1

71/77

ITEMS 2010 2009

Admin. Exp. 7806735 9137779

Deposit 395568490 362865637

Ratio 1.97% 2.52%

0

0.5

1

1.5

2

2.5

3

%AGE

2010 2009

Years

Comments

It shows the cost incurred to manage and collect the deposits.Here it is decreased from 2.52% to 1.97%. Which shows be

Page 71 of 77

7/31/2019 NBP 1

72/77

SUGGESTIONS & RECOMMENDATIONS

Although NBP is included in ten top most banks of the world

equity as well as assets wise, but for the further improvement in various

sectors may recommendations to the bank would be as follows:

PLANNED AND HEALTHY COMPETITIONS

NBP should become very specific about its competitors, so that it

can understand who its competitor is in the first degree and who is in

the second degree. Then the first-degree competitors should be

watched closely.

FORMATION OF A RESEARCH CELL

A research cell should continuously try to gather information

about the present action so its competitors and expected future actions.

So in this way more effective strategies can be formulated.

REWARD SYSTEM

The performance reward linkage should be make strong as it is

said, "A happy employee delivers more than he receives from the

organization." The NBP should also try to make its employees happier.

Page 72 of 77

7/31/2019 NBP 1

73/77

There is immediate need, to reconstruct the personnel

policies. Selection should be through newspaper

advertisements. In this way more intelligent, efficient

and qualified staff can be formulated.

It is strongly recommended that N.B.P. should go for

computerization rather than manual work, which is

very slow and time, consuming process. In this age

N.B.P. even does not have a partially computerized

system where as other new competitor banks are now

going towards on-line banking services.

Govt. should take keen interest to recover its bad

debts, which can improve its financial position.

In case of giving the loans, it is necessary to check

the repute of customer towards loan repayment. Bank

shouldnt advance the money to those people who are

addict of rescheduling of loans due to their political

influences. Instead providing loans to these persons,

loans must be advanced to the well-reputed

businesses and industries having good record of loan

repayment.

Along with the officers, the training must also be

given to the clerical staff. Because of N.B.P. are

running on manual system and the training of its staffdirectly improving their efficiency of work.

Page 73 of 77

7/31/2019 NBP 1

74/77

Present training program for its officers is need to be

improved, as this program instead of improving the

efficiency of officers is merely a burden for the bank

in the form of heavy T.A. , D.A. and cost.

Working conditions must be improved for the

employees. Bank will definitely get more benefits after

some expenditure on the working conditions as it

improves efficiency and productivity of the

employees.

N.B.P. should flourish certain marketing plans toattract the customers by giving them certain

incentives and beneficial schemes to the customers as

other competitor banks are doing so.

There is also a need of proper recruitment and

selection program. New young talent should be

introduced to inject the new ideas.

Deterioration in efficiency is mostly due to promotion

without merit. So promotions must be awarded on

merit and also when due.

Special attention should be given to the behavior of

the employees towards the customers, as customer is

the most important person for any bank.

There are many employees who are working on ad-

hoc basis creating dissatisfaction. The deserved

should be made permanent employees.

Page 74 of 77

7/31/2019 NBP 1

75/77

Political influences in the bank should be eliminated.

To motivate the employees of the bank, regular

bonuses and incentives should be given to them.

There must be a friendly environment among all the

employees as it enhances the trust and sincerity.

NBP should be focusing its attention towards the

share of traveler cheque.

Branch manager should be trained in the field of

selling to serve better according to the expectation of

customers.

The recruitment policy should be fair and transparent.

Management should increase the branch limit of

expenditure to fulfill the necessary expenditure of

personnel relation.

Page 75 of 77

7/31/2019 NBP 1

76/77

CONCLUSION

Almost all the ratios show a positive trend which indicates that

profitability, solvency and liquidity position of bank is sound. It means

that the organization (NBP) is working progressively and the

management is performing its role in a very good manner.

Page 76 of 77

7/31/2019 NBP 1

77/77

BIBLIOGRAPHY

History of Banking Industry

Available at (http://en.wikipedia.org/wiki/Banking_industry ) accessed 25th of

August]

Pakistan Banking Industry

Available at (http://ezinearticles.com/?The-Pakistan-Banking -Industry---An-

Overview&id=708009) [accessed 25th of August]

Vision of National Bank of Pakistan

Available at (http://www.nbp.com.pk/vision)

Information about yarn

Available at (http://www.nbp.com.pk)

I specially thanks

Mr. Sohail Abbas Manager

Mr. M. Aslam Bhutta Manager operation

Mr. Nasir Abbas Cash officer

Mr. M. Zubair Credit officer

Mr. Gazanfer Abbas Deposit incharge

Mr. Raza Gillani ATM In charge

http://en.wikipedia.org/wiki/Banking_industryhttp://ezinearticles.com/?The-Pakistan-Banking%20-Industry---An-Overview&id=708009http://ezinearticles.com/?The-Pakistan-Banking%20-Industry---An-Overview&id=708009http://www.nbp.com.pk/visionhttp://en.wikipedia.org/wiki/Banking_industryhttp://ezinearticles.com/?The-Pakistan-Banking%20-Industry---An-Overview&id=708009http://ezinearticles.com/?The-Pakistan-Banking%20-Industry---An-Overview&id=708009http://www.nbp.com.pk/vision