NBP - A Report

Internship Report on National Bank of Pakistan

CHAPTER # 1

“WHAT IS BANK? & IT’S IMPORTANCE”

WHAT IS A BANK?

DEFINITIONS OF BANK

WHY BANK IS IMPORTANT?

TYPES OF BANKS

EVOLUTION OF BANKING

University of Sargodha 1


What is a Bank?What is a Bank?

ORIGIN OF THE WORD "BANK":ORIGIN OF THE WORD "BANK":

There are many definitions of the word "Bank" even the standard encyclopedias and

law books find it difficult to state exactly what a Bank is. There have been many

attempts by different writers to explain the exact significance of the term BANK. Here

some of the definitions are quoted as follows.

The bank Means:The bank Means:

The word “Bank” has been derived from the words ‘Banco’, ‘Bancus’ or ‘Banque’ all of

which means a bench. The early bankers transected their activities on benches in the

marketplace.

Definitions:Definitions:

Dr. Hart:

"A banker is one who, in the ordinary course of his business honors cheques

drawn upon him by persons from and from whom he receives money on current

accounts."

Holder:

"The modern banker is primarily a dealer in credit.

Samuelson:

"Commercial banks provide certain services for customers and in return receive

payments from them."



Gilbert:

"A bank is dealer in capital or dealer in money. He in an intermediary party

between the borrowers and the lenders."

Banking Companies Ordinance 1962: Section 5 (b) defines:"Banker means a person

transacting the business of accepting, for the purpose of lending or investment, of

deposits from the public, and withdrawal by cheques, drafts, order of otherwise and

include any post office saving banks."

Comprehensive definition of the bank is:

"A bank is a financial institution which deals with money and credit. It accepts deposits

from individuals, firms and companies at a lower rate of interest and gives at higher

rate of interest to those who need them. The difference between the terms at which it

borrows and that at which it lends forms the source of its profit. A bank, thus, is a profit-

earning institute.

Why Bank is important?Why Bank is important?Banks play very important role in the economic life of the nation. The growth of the

economy is closely related to the soundness of its banking system. Although banks

create no new wealth but they borrow, exchange and consume wealth. In this way, they

become very effective partners in the process of economic development. Modern banks

are very useful for the utilization of the resources of the country.

The basic role of the banks is to encourage the habit of savings among the people and to

mobilize these savings for the investment purpose. Banks deposit surplus form the

public and then advance this surplus in the form of loans to the industrialists,

agriculturists, businessmen and unemployed people under different schemes so that

they set up their own business. Thus banks help in capital formation



If there are no banks, then there would be concentration of wealth in few hands and the

great portion of capital of the country would remain idle. In the fewer developing

countries rate of saving is very low and due to this, rate of investment and rate of

economic growth remains very much low. We can take bank just like a heart in the

economic structure and the capital provided by it is like blood in it. As long as the blood

is in circulation, the organs will remain sound and healthy. If the blood were not

provided to any organ then that organ would become useless. So if the finance is not

provided to agriculture sector or to industrial sector, it will be destroyed.

Loan facility provided by the bank works as an incentive to the producer to increase

production. Banks provide transfer of payment facility, which is cheaper, quicker, and

safe. Many difficulties in the international payment have been overcome and volume of

transactions has been increased. These facilities are very much helpful for the

development of trade and commerce.

Types of BanksTypes of Banks

The banks are classified according to their spheres of activities. The main types of banks

are as under:

Central Bank

Commercial Bank

Exchange Bank

Saving Bank

Agricultural Bank

Industrial Bank

Cooperative Bank



Evolution of BankingEvolution of Banking

It has not so far been decided as to how the word bank originated. Some authors opine

that this word is derived from the words ‘Bancus’ or ‘Banque’ which mean a bench. The

explanation of this origin is attributed to the fact that the Jews in Lombardy transacted

the business of money exchange on benches in the market place. Other authorities opine

that the word ‘Bank’ is derived from the German word ‘Back’ which means ‘Joint stock

fund, later on, when the Germans occupied major part of Italy, the word ‘Back’ was

Italianized into ‘Bank’. Authors quote Babylonians (few quotes Chinese’s) who

developed banking system as early as 2000 B.C.



CHAPTER # 2

“INTRODUCTION TO NBP”

HISTORY OF NBP

VISION

MISSION

CORE VALUES

GOALS

CORPORATE INFORAMTION

FINANCIAL HIGHLIGHTS-2008

BOARD OF DIRECTORS

SIX YEAR PERFORMANCE AT A GLANCE

ACHEIVMENTS & AWAERDS-2008

ORGANIZATIONAL CHART

ORGANIZATIONAL STRUCTURE



History of NBPHistory of NBPIn 1949 (September) U.K. devalued its currency, India followed suit but Pakistan did

not. India said we had contravened the agreement of keeping 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 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

National Bank of Pakistan was established on November 9, 1949 under the National

Bank of Pakistan Ordinance 1949 in order to cope with the crisis conditions which

were developed after trade deadlock with India and devaluation of Indian Rupee in

1949. Initially the Bank was established with the objective to extend credit to the

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

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

of an Ordinance due to the crisis situation that had developed with regard to financing

of JUTE trade. The Bank commenced its operations from November 20, 1949 at six

important jute centers in the East Pakistan and directed its resources in financing of

jute crop. The Bank’s Karachi and Lahore offices were subsequently opened in

December 1949. The nature of responsibilities of the Bank is different and unique from

other banks/financial institutions. The Bank act as an agent to the State Bank of

Pakistan for handling Provincial/Federal Government Receipts and Payments on their

behalf.



Mr.Ghulam Farooq was chairman Jute Board and 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, and Mr.M.A.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 bln & 60 mln), profit

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 bn. and staff to 14, 963. Up to 1965, the shareholders had received

225% of their original investment. Now it has more than 21549 employees 1537

branches and Rs.208283 million deposits.

The Bank has also played an important role in financing the country’s growing trade,

which has expended through the years as diversification took place. Today the Bank

finances import/export business to the tune of Rs.62.17billion, whereas in 1960

financing under this head was only Rs.1.54billion.

The field is being de-layered to improve customer services and enable faster decision

making. As a result of this de-layering zones have been eliminated and the numbers of

regions have been increased. Organizational hierarchy at the regional level has been

restructured and operational and business activities have been completely separated.

This separation will improve communication, decision making and promote teamwork.



VisionVision

To be recognized as a leader and a brand synonymous with

trust, highest standards of service quality, international best

practices and social responsibility.



Mission

NBP will aspire to the values that make NBP truly

the

Nation’s Bank, by: Institutionalizing a merit and performance culture

Creating a distinctive brand identity by providing the highest

standards of services

Adopting the best international management practices

Maximizing stakeholders

Discharging our responsibility as a good corporate citizen of Pakistan

and in countries where we operate



Core ValuesCore Values

• Highest standards of Integrity

• Institutionalizing a teamwork and performance culture

• Excellence in service

• Advancement of skills for tomorrow’s challenges

• Awareness of social and community responsibility

• Value creation for all stakeholders



GoalsGoals

To enhance profitability and maximization of NBP share

through increasing leverage of existing customer base and

diversified range of products.



Corporate InformationCorporate InformationBOARD OF DIRECTORS

Chairman & President Syed Ali Raza______________________

Mohammad Ayub Khan

Sikandar Hayat Jamali

Mian Kausar Hameed

Ibrar A. Mumtaz

Tariq Kirmani

Mohammad Arshad Chaudhary

AUDITORS

Chartered Accountants Ford Rhodes Sidat Hyder & Co.

Chartered Accountants M.Yousaf Adil Saleem & Co.

LEGAL ADVISORS

Advocate and Legal Consultants Mandiwala & Zafar

Registered & Head Office NBP Building

I.I Chundrigar Road, Karachi, Pakistan.

WEBSITE www.nbp.com.pk



Financial Highlights – 2008Financial Highlights – 2008(Rs. in Million)

Authorized Capital 10,000

Paid-up Capital 8,970

Shareholders’ Equity and Reserves 81,367

Deposits 624,939

Advances-Net 412,987

Investments-Net 170,822

Total Assets 817,758

Pre-Tax Profit 23,001

After-Tax Profit 15,459

No. of Branches 1,276

No. of Employees 15,204



Board of DirectorsBoard of Directors

From Left to Right (Top): Mr. Tariq Kirmani, Mr. Ibrar A. Mumtaz, Mian Kausar Hameed

(Bottom): Mr. Muhammad Ayub Khan Tarin, Syed Ali Raza (Chairman &

President) Mr. Sikandar Hayat Jamali

Six year performance at a glanceSix year performance at a glance



2003 2004 2005 2006 2007 2008

Total Assets 468972 553231 577719 635133 762194 817758

Deposits (in million) 395492 465572 463427 501872 591907 624939

Advances (in million) 161266 220794 268839 316110 340677 412987

Investments 166196 149350 156986 139947 210788 170822

shareholders equity 18134 24900 37636 53045 69271 81367

Pre-Tax Profit (in million)

9009 11978 19056 26311 28061 23001

After Tax Profit (in million)

4198 6195 12709 17022 19034 15459

Earning Per Share (Rs.)

5 7 14 19 21 17

Return on Assets 2.00% 2.40% 3.40% 4.30% 4.00% 3.00%

Number of Branches 1199 1226 1242 1250 1261 1276

Number of Employees 13272 13745 13824 14019 14079 15204



Achievements In 2008Achievements In 2008



NBP has received several awards from both local and foreign institutions of

repute during 2008 including “Bank of the Year” award given by the “The

Banker” magazine.

“Best Foreign Exchange Bank in Pakistan” awarded by “Global Finance”.

Net interest income increased by 10.2 % to Rs. 37.1 billion from the

corresponding period last year owing mainly to volume growth.

In this backdrop NBP’s top line (operating revenue) increased by 13% from Rs.

47.2 billion in 2007 to Rs. 53.5 billion in 2008.

Pre-tax profit has reduced to Rs. 23.0 billion, a decrease of 18.9% over last year

mainly on account of higher provision charge which increased due to the bank’s

policy of prudently providing for against non-performing loans.

Earnings per share reduced by 18.9% to Rs. 17.23 in 2008

Pre-tax return on equity stood at 30.5%, whereas pre-tax return on assets stands

at 3.0% while cost to income ratio at 0.35 remained one of the highest amongst

the Pakistani banks.

Non-interest income shows growth of 21.2 % mainly due to increase in fee,

commission, exchange and other income. This growth is impressive since the

contribution of capital gains on sale of securities declined from Rs. 2.3 billion in

2007 to Rs. 0.4 billion in 2008.

Fee income increased by 17%.

Advances increased by Rs. 72.7 billion or 21.3% mainly in corporate sector on

account of financing related to energy and power.

Provision charge against advances & other assets increased by Rs. 6.8. billion

from Rs. 4.9 billion in 2007 to Rs.11.7 billion in 2008 reflecting the greater stress

on some sectors in our portfolio.

By year end, the deposits increased by 6% or Rs.33 billion. Bank’s current and

saving accounts ratio stands at 58% and remains one of the highest in the

banking sector.

Corporate loans showed an impressive increase of more then 28% in 2008.

The bank’s retail strategy focuses on its extensive branch network and

leveraging the customer base.



The bank’s product and services are offered to address the need of both the farm

and non farm sectors. We expanded our operations in 2008 and 11 more branches across Pakistan

were opened in 2008 taking the branch network to 1254. NBP has a well defined

strategy for branch expansion to enter the untapped markets and to strike a

balance between its rural and urban coverage.

In year 2008 NBP increased its number of overseas branches from 18 to 22.

With the increase in the popularity of Islamic banking, NBP’s Islamic banking

operations have good potential for growth in future.

In 2008 NBP was among the very few organizations that realized the growing

pressure of higher inflation on its employees’ salaries and therefore allowed a

15% increase as dearness allowance.

In 2008, NBP inaugurated its own built Sports Club at Clifton, Karachi offering

state of the art sports facilities.

In 2008 NBP inaugurated its own built Sports club at Clifton Karachi offering state of the art sports facilities

We remain committed to our Vision, Mission & Core values and our strategies for the future.

After tax earning per share for the year 2008 is Rs. 17.23.

NBP Organization ChartNBP Organization Chart PRESIDENT



SENIOR EXECUTIVE VICE PRESIDENT

GRADE 22

EXECUTIVE VICE PRESIDENT

GRADE 21

VICE PRESIDENT

GRADE 20

ASSISTANT VICE PRESIDENT

GRADE 19

GRADE I OFFICER

GRADE 18

GRADE II OFFICER

GRADE 17

GRADE III OFFICER

GRADE 16

Organization StructureOrganization Structure




Manager Credit Processing

Processing

Manager Credit Operation

Operation

Chief Operation Manager (CRA)

Chief Manager

Manager FEX* Manager JB* Manager Admin

Manager Compliance

Compliance

FEXExportImportRemittanceF/C A/C

InquiryDepositsBillsClearingUtilitiesAccountsCash/ChestGovt. Collection

ReconciliationDispatchDead StockSecurityStaff Welfare

Audit /Inspection

To sign all Br. Returns Money laundering .etc

[Sections] [Sections] [Sections]

*FEX Foreign Exchange*JB Journal Banking


CHAPTR # 3

“NBP PRODUCTS”

ADVANCE SALARY

NBP KISAN TAQAT

NBP PREMIUM AAMDANI

NBP ISLAMIC BANKING

NBP PREMIUM SAVER

NBP PROTECTION SHIELD

NBP CASH CARD

NBP INVESTOR ADVANTAGE

NBP KISAN DOST

NBP PAKREMIT

NBP SAIBAAN

NBP KAROBAR

NBP ONLINE AASAN BANKING

NBP CASH N GOLD



NBP ProductsNBP Products

NBP Advance Salary NBP Kisan Taqat

NBP Premium Aamdani NBP Islamic Banking

NBP Premium Saver NBP Protection Shield

NBP Cash Card NBP Investor Advantage

NBP Kisan Dost NBP PakRemit

NBP Saibaan

NBP Karobar

NBP Online Aasan Banking

NBP Cash n Gold


http://nbp.com.pk/KissanTaqat/Index.htm

http://nbp.com.pk/advancesalary/index.htm

http://nbp.com.pk/Islamic/index.aspx

http://nbp.com.pk/Margin/Index.htm

http://nbp.com.pk/cashcard/index.htm

http://nbp.com.pk/KisanDost/Index.htm

http://nbp.com.pk/Saibaan/index.htm

http://nbp.com.pk/Karobar/index.htm

http://nbp.com.pk/Online/index.htm

http://nbp.com.pk/CashnGold/index.htm


NBP Advance SalaryNBP Advance Salary

Easy installments of 1 to 60 months at your choice. No minimum income collateral & insurance charges required. Quick processing and fastest disbursement. For permanent employees of Government, Semi Government and

Autonomous bodies receiving salary from NBP accounts.

NBP Cash CardNBP Cash Card

Use an ATM through out Pakistan. Use it as debit card in any of the outlets with ORIX POS machine. Cash withdrawal up to Rs, 20000/- per day. Account Balance Enquiry. Mini Statement (Only at NBP ATM). PIN Change facility (Only at NBP ATM).


http://nbp.com.pk/advancesalary/index.htm

http://nbp.com.pk/cashcard/index.htm

http://nbp.com.pk/Saibaan/index.htm


NBP SaibaanNBP Saibaan

Home Purchase. Home Construction. Home Renovation. Purchase of Land + Construction. Balance Transfer Facility (BTF).

NBP Kisan Dost NBP Kisan Dost

Competitive mark-up rate. Quick and easy processing Delivery al the farmer’s doorstep. Technical guidance to farmers Wide range of financing schemes for farmers. Finance facility up to Rs.500, 000/- for landless farmers against personal

guarantee. Financing available against pass book, residential/commercial property,

gold ornaments and paper security. Loan facility on revolving basis for three years (renewable on yearly basis

without documentation and approval).


http://nbp.com.pk/KisanDost/Index.htm


NBP Premium Aamdani NBP Premium Aamdani

Earn up to 15.50% p.a +. Minimum deposit of Rs.5000/- with no maximum limit for 5 years. Free Demand Draft, Pay Order and Cheque Book. Convenience of NBP online Aasan Banking (for online banking customers). Free NBP Cash Card (ATM+Debit). Running Finance facility up to 90%. Profit paid every month as follow:

Year Profit rates (%)

1st 12.50

2nd 13.50

3rd 14.00

4th 14.50

5th 15.50

NBP Cash & GoldNBP Cash & Gold

Rate of mark-up 12% p.a. Facility of Rs. 7,000 against each 10 gms of net contents of gold. No maximum limits of cash. Repayment after one year. Roll over facility. Only gold ornaments acceptable. Weight and quality of gold to be determined by NBP's appointed scruffs.


http://nbp.com.pk/Karobar/index.htm


NBP KarobarNBP Karobar

If you are aged between 18 and 40 years, you could be eligible for easy financing for self employment in the categories below:

NBP Karobar Utility Store

NBP Karobar Mobile Utility Store

NBP Karobar Mobile General Store

NBP Karobar Transport

NBP Karobar PCO/ Tele-Centre

ghjj

NBP Online Aasan BankingNBP Online Aasan Banking

Balance Enquiry

Statement of Account

Stop payment

Cash withdrawal through cheque

Cash deposit to own and third party account

Transfer of funds to own and third party account


http://nbp.com.pk/Islamic/index.aspx


NBP Islamic BankingNBP Islamic Banking

NBP is proud to expand its range of products and services by including Shariah Complaint Banking Products, available through dedicated Islamic Banking Branches. Each Islamic Banking Branch is fully equipped to cover all aspects of Islamic financial transaction. Valuing your adherence to your faith, NBP now provide a premium choice for you in meeting your financial needs, free of RIBA.

NBP Premium SaverNBP Premium Saver

Earn up to 8.50% p.a + Minimum saving balance of Rs. 20,001/- & a maximum balance of Rs. 1 million. Free NBP Cash Card Convenience of NBP online Aasan Banking (for online banking customers). Two debit withdrawals allowed in a month & no limit on number of deposit

transactions. Profit calculated on monthly and paid on half yearly basis.

NBP Protection shield NBP Protection shield



No medical required No documentation Premium Debit Auto facility & choice of deactivation Insurance coverage in case of accidental death i.e.

o Riots o Strikeso Civil Commotiono Acts of terrorismo Natural Calamities (e.g. Earthquake, Flood, Cyclone etc.)

NBP Kisan TaqatNBP Kisan Taqat


http://nbp.com.pk/KissanTaqat/Index.htm


NBP PakRemit NBP PakRemit

PakRemit is an internet based Home Remittance Service. This service is available to U.S. residents for sending money to their family and friends in Pakistan. One must have a valid US Dollar account with a U.S. bank or a US Dollar credit or debit card in order to remit funds through this channel.

Remitters in USA can log on to our user friendly website, www.pakremit.com and easily remit funds to Pakistan from the comfort of their homes, in a matter of minutes.

The service is fully secure with advance encryption application and is available for use 24 hours a day, 7 days a week. Fees and exchange rate have been set at competitive levels and the remitters have the ability to track delivery of funds as well.

NBP Investor Advantage NBP Investor Advantage

Financing Facility for Stock Investors

• Comfortable environment for trading• No security requirement, except for the customer’s equity• Customer’s equity freely available for investment• Equity acceptable in cash or approved shares

CHAPTER # 4


http://nbp.com.pk/Margin/Index.htm


“NBP SERVICES”

INTERNATIONAL BANKING

DEMAND DRAFT

MAIL TRANSFERS

PAY ORDERS

TRAVELER’S CHEQUES

LETTER OF CREDIT

COMMERCIAL FINANCE

FOREIGN REMITTANCES

SWIFT SYSTEM

SHORT TERM INVESTMENTS

EQUITY INVESTMENTS

N.I.D.A

AGRICULTURAL FINANCE

CORPORATE FINANCE

HELPLINE

NBP servicesNBP services



International BankingInternational Banking

Demand DraftDemand Draft

Mail TransfersMail Transfers

Pay OrdersPay Orders

Traveler’s ChequesTraveler’s Cheques

Letter of CreditLetter of Credit

Commercial FinanceCommercial Finance

Foreign RemittancesForeign Remittances

SWIFT SystemSWIFT System

Short Term InvestmentsShort Term Investments

Equity InvestmentsEquity Investments

N.I.D.AN.I.D.A

Agricultural Finance Agricultural Finance

Corporate FinanceCorporate Finance

HelplineHelpline

International BankingInternational Banking



National Bank of Pakistan is at the forefront of international banking in Pakistan which

is proven by the fact that NBP has its branches in all of the major financial capitals of the

world. Additionally, we have recently set up the Financial Institution Wing, which is

placed under the Risk Management Group. The role of the Financial Institution Wing

is:-

To effectively manage NBP's exposure to foreign and domestic correspondence

Manage the monetary aspect of NBP's relationship with the correspondents to

support trade, treasury and other key business areas, thereby contributing to the

bank's profitability

Generation of incremental trade-finance business and revenues

NBP offers:

The lowest rates on exports and other international banking products

Access to different local commercial banks in international banking

Demand DraftDemand Draft

If you are looking for a safe, speedy and reliable way to transfer money, you can now

purchase NBP's Demand Drafts at very reasonable rates. Any person whether an

account holder of the bank or not, can purchase a Demand Draft from a bank branch

Mail TransfersMail Transfers

Move your money safely and quickly using NBP Mail Transfer service. And we also offer

the most competitive rates in the market

Pay OrdersPay Orders



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

orders are a secure and easy way to move your money from one place to another. And,

as usual, our charges for this service are extremely competitive.

Traveler’s ChequesTraveler’s Cheques

Negotiability:Pak Rupees Traveler's Cheques are a negotiable instrument

Validity: There is no restriction on the period of validity

Availability:At 700 branches of NBP all over the country

Encashment: At all 400 branches of NBP

Limitation: No limit on purchase

Safety: NBP Traveler's Cheques are the safest way to carry our money

Letter of CreditLetter of Credit

NBP is committed to offering its business customers the widest range of options in the

area of money transfer. If you are a commercial enterprise then our Letter of Credit

service is just what you are looking for. With competitive rates, security, and ease of

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

Commercial FinanceCommercial Finance

Our dedicated team of professionals truly understandsOur dedicated team of professionals truly understands

the needs of professionals, agriculturists, large andthe needs of professionals, agriculturists, large and

small business and other segments of the economy.small business and other segments of the economy.



They are the customer's best resource in making NBP'sThey are the customer's best resource in making NBP's

products and services work for them.products and services work for them.

Foreign RemittancesForeign Remittances

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

Bank of Pakistan has taken a number of measures to:

Increase home remittances through the banking system

Meet the SBP directives/instructions for timely and prompt

delivery of remittances to the beneficiaries

New Features:

The existing system of home remittances has been revised/significantly improved and

well-trained field functionaries are posted to provide efficient and reliable home

remittance services to nonresident Pakistanis at 15 overseas branches of the Bank

besides

United National Bank (the joint venture between NBP and UBL in UK)., and Bank Al-

Jazira, Saudi Arabia.

Zero Tariffs: NBP is providing home remittance services without any charges.

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

Special courier services are hired for expeditious delivery of home remittances

to the beneficiaries.

SWIFT SystemSWIFT System

The SWIFT system (Society for Worldwide Inter bank Financial Telecommunication)

has been introduced for speedy services in the area of home remittances. The system



has built-in features of computerized test keys, which eliminates the manual application

of tests that often cause delay in the payment of home remittances.

The SWIFT Center is operational at National Bank of Pakistan with a universal access

number NBP-PKKA. All NBP overseas branches and overseas correspondents (over

450) are drawing remittances through SWIFT.

Using the NBP network of branches, you can safely and speedily transfer money for our

business and personal needs.

Short Term InvestmentsShort Term Investments

NBP now offers excellent rates of profit on all it's short term investment accounts.

Whether you are looking to invest for 3 months or 1 year, NBP's rates of profit are

extremely attractive, along with the security and service only NBP can provide

Equity InvestmentsEquity Investments

NBP has accelerated its activities in the stock market to improve its economic base and

restore investor confidence. The bank is now regarded as the most active and dominant

player in the development of the stock market. NBP is involved in the following:

Investment into the capital market

Introduction of capital market accounts (under process)

NBP's involvement in capital markets is expected to increase its earnings, which would

result in better returns offered to account holders.

N.I.D.AN.I.D.A

National Income Daily Account The scheme was launched in December 1995 to

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

loss system of accounts in operation throughout the country.



Agricultural Finance Agricultural Finance

NBP provides Agricultural Finance to solidify faith, commitment and pride of farmers

who produce some of the best agricultural products in the World.

Agricultural Finance Services:

“I Feed the World” program, a new product, is introduced by NBP with the aim to help

farmers maximize the per acre production with minimum of required input. Select

farms will be made role models for other farms and farmers to follow, thus helping

farmers across Pakistan to increase production.

Agricultural Credit:

The agricultural financing strategy of NBP is aimed at three main objectives:-

Providing reliable infrastructure for agricultural customers

Help farmers utilize funds efficiently to further develop and achieve better

production

Provide farmers an integrated package of credit with supplies of essential inputs,

technical knowledge, and supervision of farming.

Agricultural Credit (Medium Term):

Production and development

Watercourse improvement

Wells

Farm power

Development loans for tea plantation



Fencing

Solar energy

Equipment for sprinklers

Farm Credit:

NBP also provides the following subsidized with ranges of 3 months to 1 year on a

renewal basis.

Operating loans

Land improvement loans

Equipment loans for purchase of tractors, farm implements or any other

equipment

Livestock loans for the purchase, care, and feeding of livestock

Production Loans:

Production loans are meant for basic inputs of the farm and are short term in nature.

Seeds, fertilizers, sprayers, etc are all covered under this scheme.

If you require any further information, please do not hesitate to e-mail us.

Corporate FinanceCorporate Finance

Working Capital and Short Term Loans:

NBP specializes in providing Project Finance – Export Refinance to exporters – Pre-

shipment and Post-shipment financing to exporters – Running finance – Cash Finance –

Small Finance – Discounting & Bills Purchased – Export Bills Purchased / Pre-

shipment / Post Shipment Agricultural Production Loans



Medium term loans and Capital Expenditure Financing:

NBP provides financing for its clients' capital expenditure and other long-term

investment needs. By sharing the risk associated with such long-term investments, NBP

expedites clients' attempt to upgrade and expand their operation thereby making

possible the fulfillment of our clients' vision. This type of long term financing proves the

bank's belief in its client's capabilities, and its commitment to the country.

Loan Structuring and Syndication:

National Bank's leadership in loan syndicating stems from ability to forge strong

relationships not only with borrowers but also with bank investors. Because we

understand our syndicate partners' asset criteria, we help borrowers meet substantial

financing needs by enabling them to reach the banks most interested in lending to their

particular industry, geographic location and structure through syndicated debt

offerings. Our syndication capabilities are complemented by our own capital strength

and by industry teams, who bring specialized knowledge to the structure of a

transaction.

Cash Management Services:

With National Bank's Cash Management Services (in process of being set up), the

customer's sales collection will be channeled through vast network of NBP branched

spread across the country. This will enable the customer to manage their company's

total financial position right from your desktop computer. They will also be able to take

advantage of our outstanding range of payment, ejection, liquidity and investment

services. In fact, with NBP, you'll be provided everything, which takes to manage your

cash flow more accurately.

Helpline (0800-80080)Helpline (0800-80080)

For all NBP Product Enquires



Complaint Resolution

Tele-sales

Tele-collection

CHAPTER # 5

“NBP DEPARTMENTS”

CASH DEPARTMENT

DEPOSIT DEPARTMENT

ADVANCES DEPARTMENT

BILLS & REMITTANCES DEPARTMENT

ESTABLISHMENT DEPARTMENT

FOREIGN EXCHANGE DEPARTMENT

CLEARING DEPARTMENT

GOVT. RECEIPTS & PAYMENTS DEPARTMENT

ACCOUNT OPENING & CLOSING DEPARTMENT



Departments in NBPDepartments in NBP

Cash Department

Deposit Department

Advances Department

Bills & Remittances Department

Establishment Department

Foreign exchange Department

Clearing Department

Govt. Receipts & Payments Department

Account Opening & Closing Department



CASH DEPARTMENTCASH DEPARTMENT

The cash department is that through which all the receipts and payments of bank are made. Also

the bank’s cash record remains with this department. There are two types of books used in this

department.

1. Cash Receipts Book.

2. Cash Payment Book.

Cash Receipt Book:

In which the cashier records the entry when some one comes to deposit some amount. The

client’s pay in slips and the cashier the amount according to the pay in slip, sort outs the notes,

puts a signature, stamps it and record in his book. After stamping the slip the cashier returns the

pay in slip to the customer. Then customer goes to the another bank officer, he again record this

voucher into his cash scroll and returns one part of the pay in slip to the customer and keeps the

other part for the record.

Cash Payment Book:

When some client comes to the branch to withdraw some amount from the account, after

getting the token from deposit section he goes to the cashier, cashier checks his token and

cheque which is referred to him from deposit section. The cashier makes to him required

payment and receives the token from the customer. After recording all the cheques in his book

he returned the cheques in to the deposit section.



DEPOSIT DEPARTMENTDEPOSIT DEPARTMENT

All types of cash transactions are deled under this section. Now we see the types of accounts,

which are opened in this section.

Types of Deposits:

Depositors can open the following types of accounts with the National Bank of Pakistan:-

Current account

P.L.S. saving account.

P.L.S. Term Deposit Account.

BBA

Call Deposit

PLS SNTDR

NIDA

Premium Saver

Premium Aamdani

Foreign Currency Account/deposit

A brief introduction of these accounts is given below.

CURRENT ACCOUNT

The current account is opened for the parties approved by the branch operations

manager include individuals, proprietorship/partnership liability/Ltd.



companies/charitable accounts etc.

1. No profit is paid by the bank on deposit maintained by the customers in current

account.

2. Unlimited withdrawals from current accounts are allowed.

3. No zakat is deducted from the current account irrespective of amount.

4. Half-yearly statement of accounts is provided to the customers free of charge. Any

customer may request supply of statement of account more frequently against usual

bank charges.

5. Certain amount of service charges at the rate prescribed by the bank is recoverable

if the monthly balance is below Rs.5, 000/= except exempted accounts.

6. Standing instructions from constituents to make periodical remittances on their

behalf or to effect payment of insurance premia, house rent, school fees, club

subscription, charitable donations, etc., falling due at regular intervals, are accepted

by the bank on terms which can be ascertained on application.

The bank reserves the right to refuse or withhold payment of any cheque(s) drawn

on an account which has not been operated upon during the preceding five years

or more. Payment of such cheque(s) may be made by the bank in its discretion if

the cheque(s) is/are presented personally by the account holder(s) who may be

required to establish his/her or their identity to the satisfaction of the bank provided

fifteen days notice in writing is given in advance to the bank before the presentation of

such cheque(s). If payment of any such cheque(s) is permitted by the bank, the account

thereafter may be allowed to be operated in the normal way.

1. The amount is marked dormant if not operated upon for six month.

2. The account is transferred to inoperative account if not operated upon for one year.

3. If the account is not operated for continuous ten years the balance is classified

unclaimed and transferred to SBP.

4. The account holder is entitled to avail the ATM card facility in current account.

PLS SAVINGS ACCOUNT



Not more than one PLS Saving account is opened in any one name, but this does not

prevent a person from opening more than one account in his/her name for more than

one child or jointly with other persons.

The profit or loss earned or incurred on PLS Saving Account will be credited or debited

as determined by the Bank at its sole discretion on the basis of its net working results at

the end of each half-year/year, within a reasonable time from the date of the close of

half-yearly/yearly Books of Accounts of the Bank. The account holder shall be intimated

separately. Calculation of products on PLS savings Account will be made for each

calendar month on the lowest credit balance of an account between the close of

business on the 6th day and the last day of the month. If, however, the balance is less

than Rs.100/- the product will be nil. Service charges on PLS Saving Accounts must be

deducted from, PLS Saving Accounts including dormant, inoperative and unclaimed

whose credit balance below the amount of Rs.5000/= Exact rate of charges etc; revised

from time to time vide Circulars of Tariff of Banks Charges.

PLS Saving Account holder shall reimburse the Bank with any claim in respect of losses,

if any, on the basis of half yearly closing of the banks book of accounts. The Bank will

be within its rights to debit the PLS Saving Account for the amount(s) of such

claims/charges in settlement of the business accounts of the Bank.

There is no restriction on maintaining the upper limit of deposit and withdrawals of

amount and numbers of cheques from PLS saving account.

The Bank may accept for collection only cheques and other instruments payable to the

account holder himself/herself at his/her risk. All cheques and other instruments

should be crossed before they are paid in for credit of accounts. Unclear items, though

credited in the passbook, shall not be drawn against. Even if such items are credited

and/or allowed to be drawn against, the bank shall have a right to debit the

Customer’s accounts, if these

are not realized. The Bank will take care to see that the credit and debit entries are

correctly recorded in the account, but in case of any error, the Bank shall be within

its rights to make the correct adjusting entries without notice and recover any

amount due from the account holders. The Bank shall not be liable for damage, loss,

etc., consequent upon such errors.



Any change in the address of the account holder should be immediately communicated

to the Bank. No responsibility will be accepted by the Bank for delay, non-delivery etc.

The Bank reserves to itself the right to close, without previous notice, any account

which in its opinion is not satisfactorily operated upon, or for any other reason

whatsoever which it shall not be incumbent on the Bank to disclose to the account

holder.

The Credit Balance in the Account which is being closed due to un-satisfactory

operation shall be remitted to the account holders through crossed payment order on

the address on the Bank record. The account holder is entitled to avail the ATM Card

facility in PLS Savings Account.

PLS Savings Account not operated upon for ten years shall classify as unclaimed deposit

which should be surrendered. The bank would be within its rights to debit their

accounts for the account(s) of such claim/charges in settlement of business accounts

of the bank The profit/loss, earned/incurred on PLS Savings accounts will be

credited/debited as determined by the bank at its sole discretion on the basis of its net

working results at

the end of each half year/year, within a reasonable time from the date of close of half-

yearly/yearly Books of Accounts of the bank under intimation to the account holders

The Special PLS Savings Account is opened for pensioners and has all the

characteristic of the PLS Savings Account.

PLS TERM DEPOSITS

PLS Term Deposits are accepted by the Bank with sums not less than Rs.1,000/- from

individuals (single and joint) firms (proprietorship/ partnership) Limited Companies,

Autonomous Corporations, Charitable institutions, Associations, Educational Institutions, Local

Bodies, etc. against the issuance of non-transferable receipts in acknowledgement of

PLS Term deposits received.

Applications for PLS Term deposit receipts will be taken on form F-559 and the amount

of deposit will be received on form F-88, which is in the form of a voucher. The

application forms when filled in and signed by the depositors shall be filed in order of

progressive number of accounts.



When an application is received or a deposit is renewed by letter the application form

and the voucher will be filled under the authentication of an authorized officer. Money

received on term deposit shall be credited to PLS Term Deposit Account in the general

ledger and will be dealt with according to the procedure. PLS Terms Deposit Accounts in

multiples of Rs.1, 000/- will be accepted for 3 months and above as under:

For 3 months

For 6 months

For 1 year

For 2 years

For 3 years

For 4 years

For 5 years and above

The PLS Term Deposits would be eligible for sharing profit/loss with the Bank at the

rate to be determined by the Bank in its sole discretion and the bank’s decision in this

behalf will be final and binding on the

depositors. Term Deposit will be received for 3 months and above and will normally be

payable on the date of maturity. Weightage on the rate of return will be given to

deposits of longer maturity.

When a receipt is to be issued in the names of two or more persons, they should be

asked to clearly indicate in the space provided for the purpose in the application

form F-559 whether they wish the deposit to be repayable to both or all of them

jointly or to either or any of their number. If they do not wish to make any provision

as to the mode of repayment of the deposit, the relative space in Form F-559 should be

struck off.

The provision, if made, will be recorded in the Term Deposit Register B-25 against the

relative deposit lodged in the joint names of the depositors. The officials signing a PLS

Term Deposit receipt must initial such additions as “both or survivor”, “either or

survivor”, on the receipt as well as in the Term deposit register. Term deposit accounts

may be opened in the names of minors jointly with their guardians. Receipts for Term



deposits may be granted only on the Bank’s engraved form F-559 that must be

kept in the custody of the joint custodian of cash or an officer authorized by the

operations manager. Full particulars must be entered on the forms as well as on the

stubs. The books containing stubs of all Term deposit receipts returnable to the Bank

must be kept in the strong room (if fire-proof) or in a fire-proof safe. Deposit receipts

must be issued free from alterations.

BASIC BANKING ACCOUNT (BBA)

Basic Banking Account is opened with initial deposit of Rs.1,000/- subject to change

from time to time, for individuals (single or joint) category of customers only

1. It is a checking account and cheque book will be issued as in case of other Current

/PLS Savings Accounts

2. No profit is paid on the balances of Basic Banking Accounts.

3. No balance maintenance condition is applied on Basic Banking Accounts. The BBA

is exempted from levy of service charges prescribed for not maintaining monthly

average minimum balance as contained in Tariff of Bank's Charges

4. In case where balance in BBA remains 'nil' for a continuous six-month period the

Bank is authorized to close the account

5. Maximum two deposit transactions and two cheque withdrawals will be allowed

free of charge, through cash/clearing in a month

6. In case a third cheque is presented for payment or request for domestic remittances

of fund (i.e., issuance of Payment Order / Demand Draft / Telegraphic Transfer) is

received, the same will be allowed by charging a fee of Rs. 50/- for the

transaction, whenever prescribed in Tariff of Bank Charges. No subsequent

withdrawals from the Basic Banking Account will be allowed during a month.

7. The Account holder is entitled to avail ATM Card facility against his/her Basic

Banking Account subject to completion of requirements set forth for issuance of

ATM Card. No charges will be recovered for issuance of ATM Card and no fee will

be charge for ATM withdrawals from the bank's own ATMs. Withdrawal from

BBA through ATM machines of other banks will be subject to recovery /

deduction of representative/

other bank charges prescribed for such ATM transactions



8. The statement of account will be issued twice in a year and shall be dispatched

to the given postal address in Account Opening Form or to be made available for its

collection individually as advised by the account holder in the account opening form

PREMIUM SAVER ACCOUNT

The Account is opened with an initial deposit of Rs.20,000/- subject to change from

time to time, for individuals single or joint category of customers only.

A It is a checking account and cheque book will be issued as in case of other Current /

PLS Savings Accounts

B The balance in account is subject to a condition of maintaining minimum monthly

balance of Rs.20,000 to avoid levy of service charges prescribed for not

maintaining monthly minimum balance as contained in Tariff of Bank's Charges

C In case where monthly minimum balance in Product Accounts falls below Rs.20,000,

no profit for the month will be paid to the depositor.

D A higher rate of profit as per Bank discretion will be paid to depositors maintaining

deposit below the mark of Rs.300, 000 as compared to depositors maintaining

higher deposits in the product account.

E Maximum two debit transactions in a month will be allowed free of charge. In case of

3rd debit transaction, profit for the month will be forfeited.

PREMIUM AMDANI

Account is opened with minimum investment amount of Rs.20, 000/- for five years

subject to change from time to time

Investment in NBP-Premium Aamdani Certificate can be accepted up to

Rs.5, 000,000/-. Investor is allowed to invest additional amount in the multiples

of Rs.5, 000/=.

Bank shall have a right to allow or otherwise request made by the certificate

holder for reinvestment. In case no written request for renewal is made, upon its

maturity the deposit will earn profit at the rate declared for savings banks

deposits.



In case the certificate is presented for encashment before its maturity date,

Bank reserves the right to adjust and recover any differential profit earlier paid.

The financing facility against pledge of Premier Saver Certificates will be

admissible as per Bank's policy and SBP Prudential Regulations.

Investment and profit accrued shall be subject to deduction of withholding tax

and zakat as per rules.

The Bank reserves the right to add or alter any or all of the rules governing the

product and these shall be binding on all depositors.

NATIONAL INCOME DAILY ACCOUNT (NIDA) The existing Account Opening Form F-559 for Individual Limited Companies,

Partnership Firms, Autonomous and Semi-Autonomous bodies may be used

substituting the words “Current Account” (wherever appears in the Account Opening

Form) with the words “National Income Daily Account” (NIDA).

The National Income Daily Account (NIDA) is opened with a minimum ofRs.250, 000/-.

The National Income Daily Account (NIDA) will be eligible for sharing

profit/loss with the bank at the rate to be determined by the Bank at its sole

discretion and the Bank’s decision in this behalf will be final and binding

on the depositors.

Deposits in the National Income Daily Account (NIDA) accepted on the condition

that the depositor shall always maintain a minimum balance ofRs.250, 000/- in

his/her account. In the event however, that any depositor wishes to withdraw

the amount and the balance in his/her account is less than the required

amount of Rs.250,000/- the account will be converted to the ordinary PLS

Savings Account and for the purpose of calculating profit the following mode

will be adopted:

On balances of Rs.250,000/- and above profit to be calculated on average

daily balances at the rate offered on PLS Savings Bank Deposits which can be

changed from time to time by the Bank.



On deposit of Rs.10 million and above, but below Rs.50 million 1½% above

the PLS Savings Bank Rate.

On deposits of Rs.50 million and above 2% above PLS Savings Bank Rate. On deposits of very large amount special rate may be considered by the Bank,

will be acceptable to the depositor.

On balance below Rs.250, 000/- profit to be calculated on minimum monthly

balance as being done on existing PLS Savings Accounts.

Payment of profit will be on half-yearly basis, with no limits on withdrawals and

no notice period required.

It is checking account and cheque book will be issued as in case of other PLS

Savings Accounts.

SPECIAL NOTICE TERM DEPOSIT RECEIPT (SNTDR)

Applications for PLS special notice term deposits will be taken on form F-559 and the

amount of deposits will be received on Form F-88. PLS Special Notice Term Deposit

Receipts will be issued on form F-491 (amended) for all moneys lodged with the

Bank in notice deposits mentioning therein the notice period (7 days and 30 days) and

the rate of interest admissible. The amount of such deposit will be credited to PLS

short-term deposit account. Receipts issued will be recorded in a section of Term

Deposit Register B-146 or a separate Register B-146 may be put to use for the purpose.

In the application form submitted by the depositors, it should be clearly that the

deposit for 7 days or 30 days notice is desired under PLS scheme and returns

on these deposits shall be payable by the bank at the end of June or December, as

the case may be.

Investment and profit accrued shall be subject to deduction of withholding tax

and zakat as per rules.

The particulars of SNTDR receipts should be entered in a separate portion of

the existing STD register evidencing issuance of receipt under PLS scheme.

Specimen signature cards of the depositors are to be obtained in the usual

manner.

The rates of profit payable on PLS special notice deposits are governed under

inter-bank agreement and advised by Head Office from after every six months.



Payment of profit may be allowed to holders of PLS Special Notice Term Deposits

of 7 and 30 days on maturity before declaration of half- yearly profit against

their written undertaking to refund excess amount in case profit is declared at

the rate lower than paid to them subject to with holding tax of 10%.

CALL DEPOSIT

PLS Savings Accounts Opening Form F-559 (revised) may be used after affixing on

top of the form rubber stamp mentioning “PLS CALL DEPOSITS” Branches may

accept Call deposits from local banks or from others on such rates of profit as may be

prescribed by Head Office from time to time.

These deposits will be credited to PLS call deposit account in the computerized

General Ledger to which account moneys, repayable on demand computerized lodged

by banks and others, otherwise than on current or savings accounts, will also be

credited and receipts granted to the depositors on the banks engraved PLS call

deposit receipt form F-99. Deposits made by persons in favor of Government, Semi-

Government departments and Government autonomous bodies should also be credited

to PLS call deposit account and the operations manager or authorized officer will give

receipts made out in the names of such officer(s)-account the tendered(s).

Foreign Currency Account/Deposit

1. Foreign currency accounts are opened, on proper introduction and submission of

required documents along with the initial deposit prescribed from time to time.

2. Rate of return on Foreign currency Deposit are subject to fluctuation as

determined in accordance with State Bank of Pakistan directives and will be paid

on six monthly basis.

3. The bank shall not be liable to account holders/depositors of foreign currency in

the event of any restriction imposed by the SBP on withdrawal of funds or due to

enforcement of any new law or directive of the SBP.

4. Term Deposits will be automatically renewed for a like period and amount

including or excluding return as per instruction of the depositor.



5. Premature withdrawal of term deposit is allowed but the rate of return payable

will be immediate preceding period prevailing at the time of issue or encashment

which ever is lower and will be paid for completed months only.

GOVT. RECEIPT & PAYMENT DEPARTMENTGOVT. RECEIPT & PAYMENT DEPARTMENTGovt. Receipt & payment includes different types of work. Now we see one by one:

Utility Bills:

National Bank accepts the following types of utility bills:

Electricity Bills

Telephone Bills

Sui Gas Bills

Procedure:

The cashier in cash section receives utility bills. The cashier posts the amount of bill in

respective scroll and at the end all the amount of collected bills is transferred to the

respective account. Then representative of the concerned department collects the

amount in the shape of M.T. (Mail Transfer). The bank takes the collection commission

of Rs. 2 per bill from each type of bill.

Federal and Provincial Tax:

It includes:

Income Tax

Central excise Tax

Sales Tax

Provincial Excise Duty

Provincial Motor Duty

Professional Tax

Provincial property Tax



Procedure:

The customer deposits two or three copies of tax Performa with cash or through

transfer. The cashier enters this Performa in govt. scroll and one copy returned to the

customer. At the end of the day a summary is prepared and the total amount is credited

to the relevant head.

Disbursement of Pension:

National bank is fully authorized to disburse the pension to the Govt. and Army retired

personnel.

Procedure:

For the distribution of pension the branch maintains the pension register. In order to

get the pension, first the pensioner submits his pension voucher with his pension book

that voucher sent to the cash department for the payment to the pensioner after posting

into his account.

ESTABLISHMENT DEPARTMENTESTABLISHMENT DEPARTMENTIn National Bank establishment department works for the maintenance of different type

of the expenses and for the provision of funds for different activities in the branch. The

manager of this department has two types of register.

1. Charges account register.

2. Suspense accounts register.

Charges Account Register:

In the charges account register following accounts are maintained:

Basic salary:University of Sargodha 56


This account deals with the salaries of the employees within that branch when bank

have to pay the salary of any employee the amount of salary is debited to the charges

account.

Allowances:

Under this head different allowances are paid to employees. But these are attached with

salary and paid with the salary.

Provident fund:

It is deduction from the employee’s salaries, which is paid out at his retirement.

Medical attendance

When some employees suffer from any disease the bank allocate fund for him and this

amount is debited to charges account of the patient.

Honorarium to staff:

Those types of funds, which are not part of salary, like bonus profit.

Staff welfare:

To improve the efficiency, the bank provides some special facilities and the fund is

provided from the welfare account. These fund are similar to honorarium fund.

Bonus:

When the efficiency of employees increases and bank earn profit more then expectation

then bank gives extra bonus to the employees. The provision of bonus is done through

bonus account by debiting to the charges account.

Suspense Account:

When some employee needs some advance amount for them. He can withdraw that

amount from suspense account, which is then adjusted, from his salary account. But the

bank provides funds in advance within some limits under this account.



Other Expenses of Establishment

Department:

Traveling Expenses:

Under this account the transportation expenses of employees are maintain for example,

when a manager goes to attend the meeting in any other city or country his expenses on

transportation are paid from this account. Similarly when some one goes for any official

work to other branch or head office the traveling expenses are paid from this account.

Auditor Fee:

When any team comes for the auditing of some branch then all of their expenses are

beard by active branch. Also bank paid them fix amount as fee. The funds for this

purpose provided from this account.

Rent:

To pay the rent of building under the branch is running is paid from rent account

Residence:

To pay the rent of employees residence, because they are given this facility some rank.

To allocate funds for this purpose rent account is used.

General Insurance:

All the property in the branch like cash, gold, prize bonds are insured the maximum

limit of insured property that is 5.00 millions. In case of any incident insurance

company will pay the damages.

Taxes:



To pay tax on bank property like building and vehicles this account is debited.

Lightening and Power:

To furnish the branch with lights and provides the branch air conditional environment.

The funds paid from this account.

Telephone:

The provide the facility to his officer to pay their telephone bills up to certain limit for

example officer grade III have facility equal to 200 local calls. So to pay the bills of these

employees the telephone expenses account is used. Also the branch telephone bills are

paid through this account.

Pay of Security Guards:

In national bank security are provided by some private companies. So to

pay their salaries the bank used this account. With debiting this account

and crediting the security company’s account.

Depreciation of Bank Property:

Under this account the depreciation of branch building, vehicles and other machinery

are treated. Annually 10% of any property is considered depreciated.

Repairs and Renovation Expense:

The expenses on repairing the building, furniture, power generator and automobiles are

paid from this account.

Postage, Telegrams and Stamps:

The charges of dispatch section like expenses of dispatching all the mail and expenses of

telegram are paid through this account. The charges of postage and stamp collected



from customers are credited to current account and at the end of month this amount is

transferred to the postage telegram and stamp account to pay the expenses for the next

month.

Stationary, Printing and Advertisement:

The expenses on the vehicles used for branch and branch manager are paid through this

account. It includes the expenses of stationary used in branch.

Entertainment:

The bank provides a facility to manager to entertain some special clients in his chamber

or outside the chamber.

Petty Expenses:

Petty expenses include the expenses met from petty cash such amount should be at the

end of month to petty expenses instead of sundries.

REMITTANCE DEPARTMENTREMITTANCE DEPARTMENT

Remittance is a major function of the bank. It is the transfer of money from one place to

another place. The need for remittance is commonly felt in commercial life particularly

and in everyday life generally.

By proving this service to the customers the National Bank earns a lot of income in the

form of service charges.

National Bank of Pakistan deals with the following type of remittances:-

Demand Draft (DD)

Mail Transfer (MT)

Telegraphic Transfer (TT)

Pay Order

Now we discuss all these in detail:-



Demand Draft (DD):

Demand draft is a written order given by the one branch of a bank on behalf of customer

to another branch of the same bank to a certain amount to the certain person.

Procedure for Prepare Demand Draft:

1. A draft voucher is filled which contains the following information

Name of the parties involved

Date

Amount to be sent

Account number (if DD is crossed)

2. A credit voucher is filled in order to get the excise duty, withholding tax and

exchange commission,

3. The sender deposits the total amount of the two vouchers i.e. the debit and

credit vouchers.

4. Then the cashier sends the cash receipt voucher to the accounts department

and the account records the amount paid in his cash scroll.

5. Accountant gives the DD leaf along with the DD voucher to his assistant who

records the sender’s name, amount and receiver’s name. After writing all the

information in the DD register he gives it to the officer along with the DD for

authentication.

6. After authentication the DD is handed over to the sender and bank sends the

advice to the concerned branch. So when the

party presents the DD in the concerned branch its payment could be made.

The person who is entitled to receive the amount after presenting the demand draft in

the drawee branch.

DD are of two types.

Open DD: Where direct payment is made.

Cross DD: Where payment is made though account.

NBP CHARGES FOR DD5

Up to Rs. 50,000/- is Rs 50/-



Over Rs. 50,000/- is 0.1%

Mail Transfer (MT):

It is the transfer of money from one branch to another branch of the same bank through

mail service. In mail transfer there is no need of advice as the amount is directly

credited to the receiver’s account.

Procedure:

1. First a voucher is filled in which the sender writes the amount to be sent, name,

account number of the receiving person with the branch name and date.

2. A credit voucher is filled in order to deduct exchange, postage charges and

withholding tax according to the amount of the mail transfer.

3. The sender deposits the total amount of the two vouchers in the cash

department.

4. The cashier gives the vouchers to the accountant after affixing received stamp

and writing the amount in red ink.

5. Then the accountant writes the amount paid in the cash scroll and gives the MT

to his assistant.

6. MT leaf is filled according to the information provided in credit voucher. He also

writes the same information in the MT register.

7. Then he gives the MT leaf and MT register to the officer for authentication.

8. He takes two signature of the sender on the counterfoil of the MT and counter

foil is handed over to the sender, at the end the MT along with the fan fold is sent

to the concerned branch through mail.

Telegraphic Transfer (TT):

This is the most urgent method of remitting the money from one place to another place.

This method is used when the sender desires to send urgently, in this case the sender



request the manager of the branch to issue TT. Telegraphic transfer or cable transfer is

the quickest method of making remittances. Telegraphic transfer is an order by

telegram to a bank to pay a specified sum of money to the specified person. The

customer for requesting TT fills an application form. Vouchers are prepared and sent by

ordinary mail to keep the record. TT charges are taken from the customer. No excise

duty is charged on TT. The TT charges are:

Telegram/ Fax Charges on TT = Actual-minimum Rs.125.

Cable telegram transfer costs more as compared to other title of money. In cable

transfer the bank uses a secret system of private code, which is known to the person

concerned with this department and branch manager.

Procedure:

For sending the TT the manager applies a test. In the test the manager uses a coding

technique. He writes his own code number, which is allotted, to him as the bank branch

code. After making all the conformation the concerned branch makes the payment to

the receiver. If the sender wants to convey the same message through telephone then he

has to pay the charges of telephone along with the TT charges. First the person deposit

the TT amount along with the charges through the credit voucher then his TT sent to the

relevant branch.

Pay Order (PO):

A pay order is a written order issued by the bank to its own branch, drawn upon and

payable by itself to pay a specified sum of money to the person. The purpose of a pay

order is to transfer the fund from one place to another. It is usually not issued in favor of

the parties of other cities. Usually the pay order is issued for the local transfer of money

from one person to another or from the person to any other Department. It is used for

different purposes. Pay order is the most convenient, simple and secure way of transfer

of money. NBP takes fixed commission of Rs. 25 per pay order from the account holder

and Rs. 100 from a non-account holder.



Procedure:

The procedure of a pay order varies with the nature of the purpose. If the work is of

huge amount then first the manager writes a letter to the Zonal Chief in order to get

sanction of the work. Then the advertisement of the work is given in the newspaper in

order to invite the contractors.

CLEARING DEPARTMENTCLEARING DEPARTMENTNearly 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.

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 which the instrument is drawn, without

involving cash through “State Bank’s 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

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

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 cheques 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.

NIFT

If the cheque is drawn on bank by the bank within the city other than NBP, then the

collection is maid by this institution. NIFT register is maintained by the branch and the

proper recording of each cheque and other instruments are maintained.

Local Short Credit

Collections of NBP Cheques and other instruments of local branches are known as local

short credit (LSC). On LSE no charges and deductions are maid.

Short Credit

Collection of any Bank’s cheques and other instruments from outstation is known as

Short Credit (SC).



ADVANCES DEPARTMENT ADVANCES DEPARTMENT

Advances department is one of the most sensitive and important departments of the

bank. The major portion of the profit is earned through this department. The job of this

department is to make proposals about the loans. The Credit Management Division of

Head Office directly controls all the advances. As we known bank is a profit seeking

institution. It attracts surplus balances from the customers at low rate of interest and

makes advances at a higher rate of interest to the individuals and business firms. Credit

extensions are the most important activity of all financial institutions, because it is the

main source of earning. However, at the same time, it is a very risky task and the risk

cannot be completely eliminated but could be minimized largely with certain

techniques. Any individual or company, who wants loan from NBP, first of all has to

undergo the filling of a prescribed form, which provides the following information to the

banker.

Name and address of the borrower.

Existing financial position of a borrower at a particular branch.

Accounts details of other banks (if any).

Security against loan.

Exiting financial position of the company. (Balance Sheet & Income

Statement).

Signing a promissory note is also a requirement of lending, through this note borrower

promise that he will be responsible to pay the certain amount of money with interest.

PRINCIPLES OF ADVANCES

There are five principles, which must be duly observed while advancing money to the

borrowers.



Safety Liquidity Dispersal Remuneration Suitability

SAFETY

Banker’s funds comprise mainly of money borrowed from numerous customers on

various accounts such as Current Account, Savings Bank Account, Call Deposit Account,

Special Notice Account and Fixed Deposit Account. It indicates that whatever money the

banker holds is that of his customers who have entrusted the banker with it only

because they have full confidence in the expert handling of money by their banker.

Therefore, the banker must be very careful and ensure that his depositor’s money is

advanced to safe hands where the risk of loss does not exist. The elements of character,

capacity and capital can help a banker in arriving at a conclusion regarding the safety of

advances allowed by him.

CHARACTER

It is the most important factor in determining the safety of advance, for there is no

substitute for character. A borrower’s character can indicate his intention to repay the

advance since his honesty and integrity is of primary importance. If the past record of

the borrower shows that his integrity has been questionable, the banker should avoid

him, especially when the securities offered by him are inadequate in covering the full

amount of advance. It is obligation on the banker to ensure that his borrower is a person

of character and has capacity enough to repay the money borrowed including the

interest thereon.

CAPACITY

This is the management ability factor, which tells how successful a business has been in

the past and what the future possibilities are. A businessman may not have vast

financial resources, but with sound management abilities, including the insight into a

specific business, he may make his business very profitable. On the other hand if a



person has no insight into the particular business for which he wants to borrow funds

from the banker, there are more chances of loss to the banker.

CAPITAL

This is the monetary base because the money invested by the proprietors represents

their faith in the business and its future. The role of commercial banks is to provide

short-term capital for commerce and industry, yet some borrowers would insist that

their bankers provide most of the capital required. This makes the banker a partner. As

such the banker must consider whether the amount requested for is reasonable to the

borrowers own resources or investment.

LIQUIDITY

Liquidity means the possibilities of recovering the advances in emergency, because all

the money borrowed by the customer is repayable in lump sum on demand. Generally

the borrowers repay their loans steadily, and the funds thus released can be used to

allow fresh loans to other borrowers. Nevertheless, the banker must ensure that the

money he is lending is not blocked for an undue long time, and that the borrowers are in

such a financial position as to pay back the entire amount outstanding against them on a

short notice. In such a situation, it is very important for a banker to study his borrower’s

assets to liquidity, because he would prefer to lend only for a short period in order to

meet the shortfalls in the wording capital. If the borrower asks for an advance for the

purchase of fixed assets the banker should refuse because it shall not be possible for

him to repay when the banker wants his customer to repay the amount. Hence, the

baker must adhere to the consideration of the principles of liquidity very careful.

DISPERSAL

The dispersal of the amount of advance should be broadly based so that large number of

borrowing customer may benefit from the banker’s funds. The banker must ensure that

his funds are not invested in specific sectors like textile industry, heavy engineering or

agriculture. He must see that from his available funds he advances them to a wide range

of sector like commerce, industry, farming, agriculture, small business, housing projects



and various other financial concerns in order of priorities. Dispersal of advances is very

necessary from the point of security as well, because it reduces the risk of recovery

when something goes wrong in one particular sector or in one field.

REMUNERATION

A major portion of the banker’s earnings comes form the interest charged on the money

borrowed by the customers. The banker needs sufficient earnings to meet the following:

Interest payable to the money deposited with him.

Salaries and fringe benefits payable to the staff members.

Overhead expense and depreciation and maintenance of the fixed assets

of the bank.

An adequate sum to meet possible losses.

Provisions for a reserve fund to meet unforeseen contingencies.

Payment of dividends to the shareholders.

SUITABILITY

The word “suitability’ is not to be taken in its usual literary sense but in the broader

sense of purport. It means that advance should be allowed not only to the carefully

selected and suitable borrowers but also in keeping with the overall national

development plans chalked out by the authorities concerned. Before accommodating a

borrower the banker should ensure that the lending is for a purpose in conformity with

the current national credit policy laid down by the central bank of the country.



FOREIGN EXCHANGE DEPARTMENT:FOREIGN EXCHANGE DEPARTMENT:Following is the list of major foreign services provided by NBP to its customers: e .g:

Documentary Letter of Credit

Bills of Negotiation

Foreign Services

Bills for collection

A brief description on of above stated services is given under;

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

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

importer’s Bank

NBP performs the functions of both the exporter’s and the importer’s Bank as per its

customer’s 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.

ACCOUNT OPENING & CLOSING DEPARTMENTACCOUNT OPENING & CLOSING DEPARTMENT

The opening of a bank account is a contract between the Bank and the customer after

which both the concerned parties indulge in mutually beneficial business relationship.

It should be understood that the process of Account Opening is the “first contact” which

the prospective customer establishes with the Bank and vice versa. Since the Account

Opening Form (AOF) F-559 is a basic relationship document, extreme care is to be

exercised during the course of its completion and other Account Opening

Documentation (AOD). The Account Opening Form should not be viewed as merely a

formality but it provides the opportunity for the concerned officer to tactfully and

politely interview the customer for verification of the credentials being furnished.

Furthermore following factors prior to opening of accounts should be considered. The

suitability of the prospective customer. Verification of customer’s credentials. The

prospective profitability of the relationship. The proposed relationship does not



violate:-

State Bank’s rules and regulations

Applicable local laws

The Bank’s internal policy

Types of Account

Current

BBA

Call Deposit

PLS SNTDR

PLS Saving

NIDA

PLS Term

Premium Saver

Premium Aamdani

FC Current

FC Saving

FC Term

Nature of Account

Individual (Single/Joint)

Sole Proprietorship

Limited Company (Public/private)

Partnership (Registered/Unregistered)

Govt. Institution (Federal/Provincial)

Corporate Body (Incorporated/Unincorporated)

Trust

Association or Club/Society



DOCUMENTS REQUIRED TO OPEN AN ACCOUNT

At the time of opening of the account the following documents are to be obtained

from the constituent:-

INDIVIDUALS & JOINT ACCOUNTS

Attested photocopy of Computerized National Identity Card (CNIC)

In case the CNIC does not contain a photograph, the operations

manager should also obtain, in addition to CNIC, any other document

such as driving license etc. that contains a photograph. However, if the

individual does not have any other valid document, which bears

photograph, following documents should be obtained.

A copy of the photograph duly attested by gazetted officer / Nazim.

A copy of CNIC without photograph duly attested by the same

person who attested the copy of photograph as per Sr. No.(I) above.

A confirmation in writing to the effect that the individual has no

other document bearing photograph.

Branch operations manager shall ensure that the CNIC and the

photograph are of the same person whose account is being opened with

them. The particulars / CNIC of such persons must be confirmed from

NADRA in writing or through its "VeriSys" system by the branch.

In case of a salaried person, attested copy of his/her service card, or any

other acceptable evidence of service, including, but not limited to a

certificate from the employer.

In case of illiterate person, a passport size photograph of the new account

holder besides taking his/her right and left thumb impression on the

specimen signature card must be obtained.

PROPRIETORSHIP

All the above documents.

Seal of the firm should be affixed on the Account Opening Form /

Signature Card beneath the signature.

PARTNERSHIP



Attested photocopy of CNIC of all partners.

Attested copy of 'Partnership Deed' duly signed by all partners of the

Firm.

Attested copy of Registration Certificate with Registrar of Firms. In case

the partnership is unregistered, the fact should clearly be

Recorded on the Account Opening Form.

Authority letter with seal in original, in favor of the person authorized to

operate the account of the firm.

JOINT STOCK COMPANIES

Resolution of Board of Directors for opening of account specifying the

Person authorized to operate the company account with seal.

Memorandum and Articles of Association.

Certificate of Incorporation.

Certificate of Commencement of Business.

Attested photocopies of CNIC cards of all the directors.

List of Directors on Form 29 issued by the Registrar Joint Stock

Company.

CLUBS, SOCIETIES AND ASSOCIATIONS

Certified copies of:

Certificate of Registration.

By-laws/Rules & Regulations.

Resolution of the Governing Body/Executive Committee for opening of

account authorizing the person(s) to operate the account with seal and

attested copy of the CNIC card of the authorized person(s).

An undertaking signed by all the authorized persons with seal on behalf of

the institution mentioning that when any change takes place in the

persons authorized to operate on the account, the banker will be

informed immediately.

PROCEDURE OF OPENING AN ACCOUNT



When a person want to become the customer of NBP by opening an account in the bank,

the operation manager of the branch give him/her the account opening form (F-559) to

fill with all detail prescribed in the form.

Following are the main details of the customer required to open the account in the

branch.

Type of account

Nature of Account

Currency

Initial Deposit

Title of Account with complete detail including, CNIC NO., Profession, Contact No.

etc

Next of Kin details

Operating Instruction

Special instruction

Zakat Deduction

Service Charges

Detail of other accounts maintained with NBP if yes than detail of that

Signature of the prospective customer.

When the form is filled by the customer, the operation manager check the form and the

relevant documents required to attach with the form, it include

Specimen signature card

Salary slip

Copy CNIC Card

Nadra verification form

Mother CNIC Card Copy

Next of Kin CNIC Card Copy

After checking the above documents and details the operation manger sends the

form to the assistant officer to enter the details in the computer, so that the proper



record is maintained by the branch for its new customer and also for further future

correspondence.

LETTER OF THANKS

No cheque book should normally be issued to a new account holder until confirmation

letter of thanks F-529 and initial deposit received, except where the operations

manager is personally satisfied and specifically authorizes its issuance. In cases where

cheque books are issued prior to receipt of the said confirmation, passing officers

should exercise special vigilance at the time of withdrawals and make a reference to the

operations manager for authorizing payment. Dates of dispatch of the letter of

thanks i.e. F-529 and receipt of the relative confirmation should be duly noted on the

account opening form, in the system, Account opened and closed register B-127.

Vigorous follow up should be maintained for expediting receipt of confirmation.

Confirmations, when received back from the new customer, should be checked with

the respective specimen signatures on record, signatures verified and filed with the

relative account opening forms with the envelopes bearing the postal receipt.

National identity card/CNIC number of the person opening new account must be

recorded in the relative account opening form below their respective names, where

available and copy thereof must be kept with the account opening form duly attested by

the Operations Manager. The genuineness of the CNIC produced by the customer must

be got verified from the NADRA. The charges for verification if any should not be

recovered from the customer.

The discrepancy if any observed by the branch should be reported to NADRA and

SBP as attempted fraud through operations Group. The discrepancy includes issuance

of more than one, CNICs to one individual, and mismatch between particulars in the

NADRA database and customer provided CNIC copies.

No account should be opened in the name of an un-discharged insolvent.

When an account is opened in the names of two or more persons, they should be asked

to declare the mode of operation on their account opening form.



After the completion of the record the customer have to deposit the initial deposit

mention in the account opening form by the customer. Initial deposit details are,

For Govt. employees Rs. 100

For Others Rs. 5000

BANK SERVICE CHARGES

Service Charges on PLS Saving Accounts including dormant, inoperative and unclaimed

with monthly average balance Rs. 5,000/-.

Exemptions:-

The following categories of account holders are exempted from levy of the Service

Charges:

Students

Mustahqeen of Zakat

Employees of Government/Semi- Government institutions

drawing salary/pension.

Person availing any consumer product related finance facility from

the bank would be exempt from levy of service charges.

Ex-NBP employees or their spouses drawing pension/medical

from the bank.

Service Charges on Current Accounts including dormant, inoperative and unclaimed

with monthly average balance below Rs.5, 000/-

ISSUANCE OF CHEQUE BOOK

When a customer opens an account with the bank, he is provided with cheque book for

withdrawals of account. However, the first cheque book is given to the customer only

when all the required documents are checked. A cheque book contains twenty five, fifty

or hundred leaves. The cheque book also carries a requisition slip for the issuance of the

new cheque book. This slip is duly filled and singed by the customer. The signature of

the customer is verified by the bank and new cheque book is issued to the customer and



serial numbers of the cheque are duly entered in the book of the bank. Along with the

signature, person should also write his full name & address.

Usually only one cheque book is issued at a time, however big concerns who need a

number of cheque books at a time, may ask the bank to stock as number of cheque

books in their name and to point their name on these cheque books. Issuance of Cheque

Book Rs.3/- per leaf (plus excise duty if any) Actual.

ISSUANCE OF CHEQUE BOOK FOR THE SECOND TIME

The account holder shows his/her requisition slip from the old cheque book. The officer

in accounts department sends the slip for sign verification.

Filling the pay in cash slip to stationery account. This slip represents the fee for issuing

cheque book that is submitted in cash department.

Entering name of account holder in cheque books issuance register. First the date is

enter than the serial number of cheque book is written than the account holder name

and account number is entered. Finally account holder does his/her signatures.

Stamp of branch like NBP City Branch Sargodha along with the stamp of account

number is applied on cheque book.

Requisition slip comes almost at the end of cheque book. The issuer writes down the

name of account holder, date of issuance and officer signed the slip.

Issuance of new cheque book in lieu of lost cheque book (Rupee A/c only). These

Rs.100/- per request plus excise duty if any. US$ 2/- in F.C Account.

THE REQUISITES OF A CHEQUE

There is no prescribed form of words or design of a cheque but in order to fulfil the

requirements the cheque must have the following:

It must be in writing

It must contain an order to pay and addressed a specified bank.

The order must be unconditional

The order must direct to pay on demand

The sum ordered to be paid must be certain.

The payment should be ordered to be paid to a certain person or to his order

or the bearer.



CHECKING AND PAYMENT OF CHEQUES

It is the primary function of the bank to repay the money received from his customer’s

account usually by honoring his cheques. It is a contractual obligation of a banker to

honor his customer’s cheque, if he has checked the following on a cheque:

Name of the Bank & branch

Amount in figure and words

Signature of the Drawer (verification)

Posting mark by the computer operator

Cancellation by the authorized

Cheque should not be damaged

Funds must be sufficiently available

No legal bar prohibiting payment.

STOPPING THE PAYMENT OF CASH ON PRESENTATION OF CHEQUE

The payment of cheque is stopped dishonored on the following grounds:

Effects not yet cleared, then request to present again.

Irregularity endorsed

Drawer’s signatures differ

Payee’s endorsement requires bank’s guarantee

Alteration requires full signatures

Cheque is post dated

Cheque is without date

Amount in figures and word differs

Crossed cheque must be presented through the bank

Payment stopped by the drawer.

CLOSING OF ACCOUNTS

When an account is to be closed, the constituent should, where possible, be requested

to draw the balance due to him/her/her, less Bank’s dues if any, by means of a



cheque in the usual course and a ,‟NIL” confirmation memo obtained from him/her.

Alternatively, the amount may be paid to him/her against his/her receipt either in the

form of a payment order or a PLS Savings / Current account closing form. The unused

cheque forms must be returned by the constituents in either case. The account opening

forms, specimen signature cards and other documents relating to the closed accounts

should be removed from the relative files and placed in closed accounts files, separate

files being maintained for current, cash finance and PLS savings accounts and all other

accounts. A note to his/her effect should also be made against the entries relating to the

closed accounts in the relevant books.

Account closing charges Rs.250/- for Local Currency or entire amount if balance in the

account is below Rs.250/-.US$ 5/- for Foreign Currency or entire amount is below

US$5/-.

CHAPTER # 6



“NBP REMOUNT DEPOT BRANCH”

HIERARCHY OF NBP REMOUNT DEPOT BRANCH SARGODHA

MANAGER

OPERATION MANAGER

REMITTANCE HEAD

BRANCH OFFICER

HEAD CASHIER

ASSISTANT OFFICER

GOLD SMITH

COMPUTER OPERATOR

CASHIER

REMOUNT DEPOT BRANCH SARGODHAREMOUNT DEPOT BRANCH SARGODHA

(HIERARCHY)(HIERARCHY)



CHAPTER # 7

“WORK DONE BY ME AT REMOUNT BRANCH SGD”

PREPARING DEBIT & CREDIT VOUCHER


BRANCH MANAGER

Mr. Raiz Ahmed

AVP

OPERATIONS MANAGER

Mr. Main Zulfiqar Ahmed

AVP

BRANCH OFFICER

Mr. Ghulam Abbass

OG-II

SENIOR CASHER

Mr. Gulzar Ahmed

OG-II

CHECKING OFFICER

Mr. Syed Sajid Hussain

OG-I

COMPUTER OPERATER

Mr.Hamid Nawaz MaliOG-II

CASHER

Mr.Haroon Qamar

OG-III

ASSISTANT OFFICER

Mr.Ahmed Saeed

OG-III


PREPARING LSC, SC, NIFT

ACCOUNT OPENING

ISSUING CHEQUE BOOK

ISSUING PAY ORDER

ISSUING DEMAND DRAFT

PAYMENT OF SALARY TO SECURITY GUARDS OF BRANCH

PAYMENT TO PENSIONERS

GOLD FINANCING

PUNCHING THE DATA IN COMPUTER

RECORDING THE DATA IN DIFFERENT REGISTERS

FILLING THE CHEQUES OF ILLITERATE CUSTOMERS

RESPONSE TO REGIONAL OFFICE OF DIFFERENT LETTERS & ENQUIRES

PAYMENT OF SALARY TO ARMY OFFICERS OF REMOUNT DEPOT SARGODHA

WORK DONE BY ME IN BRANCHWORK DONE BY ME IN BRANCH

Preparing Debit & Credit Voucher

Preparing LSC, SC, NIFT



Account Opening

Issuing Cheque Book

Issuing Pay Order

Issuing Demand Draft

Payment of Salary to Security Guards of Branch

Payment to Pensioners

Gold Financing

Punching the Data in Computer

Recording the Data in Different Registers

Filling the Cheques of Illiterate Customers

Response to Regional Office of Different Letters & Enquires

Payment of Salary to Army Officers of Remount Depot Sargodha

1. PREPARING DEBIT AND CREDIT VOUCHER

In the first week of my internship in the NBP RD. branch, I start my training with the

preparing of the debit & credit voucher under the Branch Officer Mr. Ghulam Abbass.

In preparing the debit & credit vouchers the main thing which must be kept in mind

during the preparation of these vouchers is “countra”. The amount of debit and credit

vouchers must be equal under the head of countra.



2. PREPARING LSC, SC, NIFT

During the first week of my internship the second thing which I learn by my Branch

Officer is the preparation of the Local Short Credit (LSC), Short Credit (SC) NIFT.

LSC mean the cheque of local NBP branches, which come to the branch for the collection

of the amount from the relevant branch. We then take the cheque and first record in

debit voucher, give one slip of voucher to the customer and attach the other with

cheque or any other instrument. Then record it in LSC register and prepare the form F-

275 and then send the F_275 along with cheque to the relevant branch for collection by

main.SC means the cheque or other instrument of either bank, outside the Sargodha city

come to the branch for collection. We adopt the same procedure as in LSE and send the

instrument to the relevant branch by mail.

NIFT is an institution which collects the amount from the banks which are situated in

Sargodha, other than the National Bank of Pakistan (NBP). Normally these cheques are

of those customers which have accounted in NBP as well as in other banks in the city

and they transfer their amount from others banks to NBP RD. branch.

3. ACCOUNT OPENING

During my training period, I have opened five accounts under our Operation Manager,

Mr. Mian Zulfiqar Ahmed. The total procedure regarding the opening of the account I

adopted. All accounts, which I opened during training, are PLS Saving accounts because

in our Remount Depot branch most of the customers have account for the purpose of

receiving their salary from the Govt. so that I can’t attain the chance to open the current

account.

Procedure regarding opening of the account are already discuss above, main things in

opening the PLS Saving accounts are

Check the account opening form that it is properly filled.

Check the documents required for opening of the account.

Salary slip checking

Checking the attestation of the CNIC copies.



Check the NADRA classification form

If no service charges are allowed than checking of the required employment

certificate.

Record the data in the computer software

Take the initial deposit from the customer.

Sending letter of thanks for the verification of the address of the customer.

Then issuing the cheque book against receiving the replying letter along with one

hundred rupees, charges of issuing.

Maintain the proper record of the customer account for further correspondence.

4. ISSUING CHEQUE BOOK

When the reply of letter of thanks comes to the branch than the customer deposit the

Rs.100 and our Assistant Officer, Mr. Ahmed Saeed issue the cheque book to the

customer.

In the cheque book one slip is present for the purpose of taking new cheque book, when

the present one becomes ended.

Further cheque books are issued when the present one become ended or lose. In case of

lose or any other relevant problem the application written to the manager for issuing

the new cheque book. The customer must signed in the cheque book issuing register is

that the proper record is maintained.

5. ISSUE PAY ORDER

In the second week of my training in the bank, I issued the pay order in my own name

for the purpose of applying for the post of lecturer in the University of Sargodha. The

procedure of the issuance is very simple.

First of all the debit & credit vouchers are prepaid and the fill the pay order in the name

of the person to whom it may be drawn. In my case, I fill the pay order in the name of



Treasurer of Sargodha University. Then enter the detail in the PO register and write the

register serial no. on the pay order. I also sign on the back of the slip which is in

recorded by the bank. One slip is for the customer and remaining part is attached with

my documents for University.

6. ISSUE DEMAND DRAFT

During my internship program, I also issued demand draft to our branch’s customer for

the purpose of job application to AIOU. There is special DD form whish I filled for the

customer and then write the demand Draft to the address told by the customer and the

properly record in the DD register. My respected Head of Remittance department,

Mr.Shahid Shah guided in each stage of issuing the Demand Draft and Pay Order.

7. PAYMENT OF SALARY TO SEURITY GUARD OF BRANCH

During my training, I also give the salary to our branch security guards my debiting

their account and crediting the Charges A/C.

One thing which must be remember in paying the salary to the guards is that, the whole

amount is writer in debit voucher and three credit voucher is prepaid including the tax

deduction from their account which send to the main branch. In this transaction we

credit the main branch and the main branch debit us so that the debit and credit is

equal.

8. PAYMENT TO PENSIONERS

There are two types of pensions

i. Provisional

ii. Central



Provisional pension means, as the words show that the person is not the employee of

central Govt. so that he/she receiving the provisional pension.

Central pension is paid to that customer who is the employee of central Govt. so that the

pension which he/she takes named Central pension.

During my internship program, I paid both central & provisional pension to customers.

The procedure of payment and recording is probably same. I take the copy of pension of

the customer and checked that how many months pension is due, then take the relevant

pension register and check the name and face of the person through picture attached in

the register. Then I enter the detail of the pension payment to the register and in the

copy of the customer and stamped it. After it the customer shows it to the cash counter

and takes the amount of the pension.

9. GOLD FINANCING

During my internship, I also work under our bank’s Gold Smith who very carefully

describe me that how can weight the gold and how can calculate the net weight of the

gold ornaments. During my period of internship the rate of interest on gold financing is

15.50%.Documents required for gold financing are

BBF

Loan Application Form

Checking of Gold in-front of authorized officer or manager.

Customer’s CNIC

Granter’s CNIC

Utility bill (any) where he/she is resident.

Gold Smith Certificate.

Stamp Paper ( IB-12, IB-26, IB-6A)

Delivery letter

(Only gold’s gross & Net weight with amount advance is mentioned)



Borrower’s introduction and detail is very compulsory thing in dealing with Gold

Financing because there is lot of risk involved in that case. In case of default 3 Legal

notices to borrower before

1st 3 days of expiry

2nd Notice after 30 days of expiry

3rd After 60 days of expiry

I also record all the detail of our gold financing customers in to the computer for proper

details and to prepare the software copy of all record.

10. PUNCHING THE DATA IN TO THE COMPUTER

The Sargodha’s most busy branch of NBP, after the main branch is Remount Depot

branch. Because all the military officers and there employees take the salary from that

branch. So that there is lot of work in the branch for me e.g. recording the cheques of

salary in the computer, enter the record of gold financing and enter the amount of

salary to the relevant accounts for payment.

11. RECORDING THE DATA IN DIFFERENT REGISTERS

The main registers in which I record the data are

LSC register

SC register

NIFT register

Gold Financing register

Cheque book issuing register

Charges register

Pay Order & Demand Draft register

12. FILLING THE CHEQUE OF ILLETERATE PERSON

NBP is a nation’s bank, so in NBP have all types of customers, including illiterate person.

So I help that type of customers by filling their cheques and other slips which they want.

I feel honor after helping these customer of the branch.



13. RESPONSE TO RREGIONAL OFFICE OF DIFFERENT LETTERS

AND ENQUIRES

Mr. Mian Zulfiqar Ahmed (Operation Manger) of the branch assign special work to me

and train me very well that how can the response of the Regional Office Letter can write.

During my stay in the RD branch, I have written to many letters responding to the

Regional Office Letter.

During my stay in the branch the surprise inspection is held and I write the answer of

this inspection’s objections to the Regional Office with the help of Operation Manager

who guide me very politely and in very detail.

14. PAYMENT OF SALARY TO ARMY OFFICER OF REMOUNT DEPOT

SARGODHA

All salary paid to the Sargodha Remount Branch is paid by NBP Remount depot Branch

Sargodha, in which I complete my internship of six weeks.

With the help of Head Cashier, Mr. Gulzar I paid the salary to the army officers. In RD

branch there is too much rush in the first ten days of each month of military employees

and the pension holders. So I help my Branch Officers in their work and also got well

experience of branch operations.

Chapter # 8

“FINANCIAL STATEMENTS-2008”University of Sargodha 91


BALANCE SHEET

PROFIT & LOSS STATEMENT

CASH FLOW STATEMENT

Balance sheetAs at December 31, 2008

Rupee in ‘000

ASSETS

Cash and balance with treasury banks 106,503,756Balance with other banks 38,344,608



Lending to financial institutions – net 17,128,032Investments – net 170,822,491Advances – net 412,986,865Operating fixed assets 24,217,655Deferred tax assets – net 3,204,572Others assets 44,550,347

817,758,326

LIABILITIES

Bill payable 10,219,061Borrowing 40,458,926Deposits and other accounts 624,939,016Sub-ordinated loans -Liabilities against assets subject to finance lease 25,274Deferred tax liabilities – net -Other liabilities 39,656,831

715,299,108

NET ASSETS 102,459,218

REPRESENTED BY

Share capital 8,969,751Reserves 19,941,047Unappropriated profit 52,456,204

81,367,002Surplus on revolution of assets 21,092,216

102,459,218

Profit & Loss AccountFor the year ended December 31, 2008

Rupee in ‘000

Mark up/return/interest earned 60,942,798Mark up/return/interest expensed 23,884,768Net mark up/interest income 37,058,030Provision against non-performing advances 10,593,565Provision for/ (reversal of) diminution in the value of investments 373,249



Provision against off balance sheet obligations 4,000Bad debts written off directly -

10,970,814Net mark up/interest income after provisions 26,087,216

NON-MARK-UP/INTEREST INCOMEFee, commission & brokerage income 7,925,370Dividend income 2,878,932Income from dealing in foreign currencies 3,969,057Gain on sale and redemptions of securities – net 395,427Unrealized gain/loss on revaluation of investments 1,707Other income 1,245,369Total non markup/interest income 16,415,862

42,503,078NON MARK UP/INTEREST EXPENSESAdministrative expenses 18,171,198Other provisions/write offs 747,521Other charges 583,361Total non mark-up 19,502,080

23,000,998Extra ordinary/unusual items -

PROFIT BEFORE TAXATIONTaxation Current 11,762,650

Prior years -Deferred (4,220,242)

7,542,408PROFIT AFTER TAXATION 15,458,590Unappropriated profit brought forward 45,334,188Transfer from surplus on revaluation of fixed assets on account of incremental depreciation 130,456Profit available for appropriation 60,933,234Earning per share 17.23

CASH FLOW STATEMNETFor the year ended December 31, 2008

Rupees in ‘000CASH FLOW FROM OPERATING ACTIVITIESProfit before taxation 23,000,998Less: Dividend income (2,878,932)

20,122,066Adjustments:Depreciation 748,690Amortization 2,885Provision against non-performing advances 10,593,565Provision for/ (reversal of) diminution in the value of investments 373,249



Provision against off balance sheet obligation 4,000Gain on sale of fixed assets (7,289)Financial charges on leased assets 10,750Bad debts directly written off -Other provision/written off 747,521

12,473,371 32,595,437

Increase/decrease in operating assetsLending to financial institution – net 4,288,568Held – for – trading securities (223,610)Advances – net (83,261,500)Other assets (excluding advance tax) (10,379,475)

(89,576,017)Increase/decrease in operating liabilitiesBill payable 3,157,159Borrowing 30,360,866Deposits and other accounts 33,031,581Other liabilities (excluding current taxation) 8,637,877

75,187,483Income tax paid 15,663,472Financial charges paid 10,750

15,674,222Net cash from operating activities 2,532,681CASH FLOW FROM INVESTING ACTVITIESNet proceed from/ (investments in) available for sale securities 10,560,682Net proceed from held to maturity securities 2,358,937Dividend income received 2,878,932Investments in operating fixed assets (1,635,957)Investments in subsidiaries, associates and joint venture -Sale proceed of property and equipment disposed off 22,032Net cash from/ (used in) investing activities 14,184,626CASH FLOW FROM INVESTING ACTIVITIESPayment of lease obligation (16,078)Dividend payment (6,104,894)Net cash used in financing activities (6,120,972)Effect of exchange rate changes on cash and cash equivalent 2,623,064Increase in cash and cash equivalent 13,219,399Cash and cash equivalent at the beginning of the year 131,456,989Cash and cash equivalent at the end of the year 144,676,388

CHAPTER # 9

“FINANCIAL STATEMENT ANALYSIS”

WHAT IS FINANCIAL STATEMENT ANALYSIS?

VERTICAL ANALYSIS/COMMON SIZE FINANCIAL STATEMENT ANALYSIS



HORIZANTAL ANALYSIS/COMPARITIVE FINANCIAL STATEMENT ANAKYSIS

RATIO ANALYSIS

FINANCIAL STATENMENT ANALYSISFINANCIAL STATENMENT ANALYSIS

"Financial statement analysis is the process of identifying of financial strengths and

weaknesses of the firm by properly establishing relationship between the items of the

balance sheet and the profit &loss account," and it is done through ratio analysis.



VERTICAL ANALYSIS/COMMON SIZE FINANCIAL

STATEMENT ANALYSIS

The sum of individual accounts within groups is 100%, this analysis is said to yield

common-size financial statement analysis. Common-size financial statements are

especially for intercompany comparisons because the financial statements of different

companies are reset in common size format.

Balance sheet and income statement of NBP in common size format are given below

with brief analysis of both statements.

BALANCE SHEET

Assets 2008 2007

Cash & Balances with treasury Banks 13.02 12.4

Balances with other banks 4.7 4.9

Lending to financial institutions-net 2.1 2.81

Investment-net 21 27.7

Advances-net 50.5 44.7

Operating fix assets 3 3.4



Deferred tax Assets-net 0.4 0

Other assets 5.5 4.066

Liabilities

Bill payables 1.43 1.1

Borrowings 5.7 1.7

Deposit and other accounts 87 92

Sub-ordinate loans

Liabilities against assets subject to finance lease

0.0035 0.0052

deferred tax liabilities-net 0 0.8

other liabilities 5.5 5

Net Assets 12.5 15

Represented By

Share capital 11 11.77

Reserves 24.5 23

Un-appropriated profit 64.5 65.5

10 9

Surplus on revaluation of Assets-net 2.5 6

12.5 15

ANALYSIS

Cash & balance with treasury Banks is increase in current year from 12% to 13% of

total assets portion of balance with other banks shows decreasing trend in current year

4.7% of total assets as compare to 4.9% and 6.4% in 2007 and 2006 respectively,

lending to financial institution decreasing other assets portion is increasing in current

year which is 5.4% of total assets as compare to 4.06% and 4.3% in 2007 and 2006

respectively.

Total liabilities show increasing trend in current year which is 87.5% of total assets as

compare to 84.7% and 87.1% in 2006 and 2007, this increase is because to greater



increase in bill payable, borrowing and other portion of liabilities. Net assets portion is

decreasing this decrease because of increase in liabilities which means in NBP’s debts

increase, equity portion also increasing as compare to previous year of equity portion

this increase because of increasing in reserves, the increase in equity show that the

NBP’s dependence on equity financing increasing while the dependence on debt

financing decreasing.

INCOME STATEMENT

2008(%) 2007(%)

Mark-up/Return/Interest earned 164.45234 150.3725Mark-up/Return/Interest expensed 64.452341 50.37252Net-Mark-up/interest Income 100 100provision against non-performing advances 28.586422 14.04448Provision for/(reversal of) diminution in the value of investment

1.0072014 -0.11968

Provision against off balance sheet obligations 0.0107939 0Bad debt written off directly 0 0.118643

29.604418 14.04344Mark-up/interest Income after provisions 70.395582 85.95656



Non-Mark-up/interest Incomefee,commision and brokerage income 21.386377 20.16589dividend income 7.768713 9.703531Income from dealing in foreign currencies 10.710383 3.100932Gain on sale and redemption of securities-net 1.0670481 6.963208Unrealized/(loss) on revaluation of investments classified as held-for-trading

0.0046063 -0.09505

Other income 3.3605915 0.438196Total Non-Mark-up/interest Income 44.297719 40.27671

114.6933 126.2333Non-Mark-up/interest expensesAdministrative expenses 49.034441 42.24245Other provisions/write offs 2.0171634 0.499642Other charges 1.5741824 0.05097Total Non-Mark-up/interest expenses 52.625787 42.79306

62.067514 83.44021Profit Before Taxation 62.067514 83.44021Taxation-current 31.741164 24.71493 -prior years 0 1.164149 -deferred -11.3882 0.962641

20.352965 26.84172Profit After Taxation 39.016078 56.59849Un-appropriated profit brought forward 122.35995 95.37669Transfer from surplus on revaluation of fix assets on account of incremental depreciation

0.3520317 0.115991

Profit available for appropriation 164.42653 152.0912

ANALYSIS

Markup/ interest unearned show increasing trend last few years but markup/ expensed

increase which is 64.5% of interest income as compare to 50% and 46% in 2007 and

2006, markup interest income after provisions show decreasing trends since 2006 this

decrease because of greater increase in provision against non performing advances and

provision for/ diminution in the value to investment. Total no markup/ interest income

show increasing trend which is because of greater increase in income from dealing in

foreign currency and fee, commission and brokerage income and other income, profit

before taxation show declining trend this is because of increase in the portion of



interest expense in current year which is 52.6% as compare to 43% and 45% in 2007

and 2006, interest expense increase in because of increase in admin expenses, other

provision/ write off and other charges also increasing. Profit after taxation show greater

declining which is because of increasing in taxation which was 31.74% of interest

income, the decrease in profit after taxation most effective decreasing profit before

taxation.

Horizontal Analysis/Comparative Financial Statement Analysis

Individual conduct comparative financial statement analysis by reviewing consecutive

balance sheets, income statements, or statements of cash flows from period to period.

This usually involves a review of changes on individual account balances on year-to-

year or multiyear basis.

Two techniques of comparative analysis are especially popular:

Year-to-year change analysis



Index-number trend analysis

Here, I use the index-number trend analysis by taking year 2007 as a base year.

BALANCE SHEETRupee in ‘000

2008 2007 Growth

ASSETSCash and balance with treasury banks 106,503,756 94873249 12.26Balance with other banks 38,344,608 37472832 2.33Lending to financial institutions – net 17,128,032 21464600 -20.20Investments – net 170,822,491 210787868 -18.96Advances – net 412,986,865 340677100 21.22Operating fixed assets 24,217,655 25922979 -6.68Deferred tax assets – net 3,204,572 - -Others assets 44,550,347 30994965 43.73

817,758,326 762193593 7.29

LIABILITIES



Bill payable 10,219,061 7061902 44.70Borrowing 40,458,926 10886063 271.66Deposits and other accounts 624,939,016 591907435 5.58Sub-ordinated loans - - -Liabilities against assets 25,274 33554 -24.68Deferred tax liabilities – net - 5097831 -100Other liabilities 39,656,831 30869154 28.47

715,299,108 645855939 10.75NET ASSETS 102,459,218 116337654 -11.93

REPRESENTED BY

Share capital 8,969,751 8154319 10.00Reserves 19,941,047 15772124 26.43Unappropriated profit 52,456,204 45344188 15.74

81,367,002 69270631 17.46Surplus on revolution of assets 21,092,216 47067023 -55.19

102,459,218 116337654 -11.93

INCOME STATEMENTRupee in ‘000

2008 2007 Growth

Mark up/return/interest earned 60,942,798 50469481 20.51Mark up/return/interest expensed 23,884,768 16940011 41.00Net mark up/interest income 37,058,030 33629470 10.25Provision against non-performing advances 10,593,565 4723084 124.23Provision for diminution in the value of investment 373,249 -40248 -1027.37

10,970,814 4,722,735 132.23

Net mark up/interest income after provisions 26,087,216 28,906,735 -9.75

NON-MARK-UP/INTEREST INCOMEFee, commission & brokerage income 7,925,370 6781683 16.86Dividend income 2,878,932 3263246 -11.77Income from dealing in foreign currencies 3,969,057 1042827 280.60Gain on sale and redemptions of securities – net 395,427 2341690 -83.11Unrealized gain/loss on revaluation of investments 1, 707 -31964 -10534



Other income 1,245,369 147363 745.10Total non markup/interest income 16,415,862 13544845 21.19

42,503,078 42451580 0.12NON MARK UP/INTEREST EXPENSESAdministrative expenses 18,171,198 14205911 27.91Other provisions/write offs 747,521 168027 344.88Other charges 583,361 17141 3303.30Total non mark-up 19,502,080 14391079 35.51

23,000,998 28060501 -18.03Extra ordinary/unusual items - - -

PROFIT BEFORE TAXATIONTaxation Current 11,762,650 8311500 41.522

Prior years - 391497 -100Deferred (4,220,242) 323731 -1403.63

7,542,408 9026728 -16.44

PROFIT AFTER TAXATION 15,458,590 19033773 -18.78Unappropriated profit brought forward 45,334,188 32074677 41.33Transfer from surplus on revaluation of fixed assets on account of incremental depreciation 130,456 39007 234.44Profit available for appropriation 60,933,234 51147457 19.13

RATIO ANALYSISRATIO ANALYSISRatio means “one number expressed in term of another a ratio is statistical yardstick by

mean of which relationship between two or various figures can be compared or

measured.

Parties interested in ratio analysis

Trade creditors

Trade creditors are interested in firm's ability to meet their claims over a very short

period of time. Their analysis will, there fore confine to the evaluation of the firm's

liquidity positions.

Suppliers of long-term debt



Suppliers of long-term debt on the other hand are concerned with firm's long-term

solvency and survival. They analysis the firms profitability over time, its ability to

generate cash to be able to pay interest and repay interest and repay principal and the

relationship between various source of funds. (Capital structure relationship).

Long-term creditors do analyses the historical financial statements but they place more

emphasis on the firm's projected financial statement to make analysis about its future

solvency and profitability.

Investors

Investors who have invested their money in the firms share are most concerned about

the firm steady growth in earning. As such, they concentrate on the analysis of the firm's

present and future profitability. They are also interested in the firms financial structure

of the extent it influence the firms earning ability and risk.

Management

An organization would be interested in every aspect of the financial analysis. It is their

overall responsibility to see that the resources of the firm are used most effectively and

efficiently and that the firm's financial condition is sound.

So thus management employee financial analysis for the purpose of internal control and

to better provide what capital supplier seeks in financial condition and performance

from the business and from an internal control standpoint, management needs to take

financial analysis in order to plan and control effectively.



RATIOS 2007 2008Capital Adequacy Ratio 17.72% 16.61%Current ratio 0.80:1 0.89:1

Cash ratio 0.150 0.158

Cash reserve ratio 0.160 0.170

Average rate of lending 0.080 0.088

Income/expense ratio 3.316 2.851

Net profit margin 0.376 0.253

Asset turnover ratio 0.048 0.046

Cash turnover ratio 0.354 0.348

Return on assets(pre-tax profit) 4.00% 3.00%

Return on average assets(ROA) 0.027 0.019

Return on average equity(ROE) 0.311 0.205



Return on investment 0.090 0.090

Return on advances 0.055 0.037

Loan to assets ratio 44.7% 50.5%

Loan to deposit ratio 57.5% 66.0%

Interest expense to total expense 0.540 0.550

Interest income to total income 0.788 0.787

Advances growth ratio 0.077 0.212

Deposit growth ratio 0.179 0.056

Debt to equity ratio 9.323 8.791

Debt to asset ratio 0.847 0.874

Investment to Deposit ratio 0.356 0.273

Advances to deposit ratio 0.575 0.660

Earning per share 21.22 17.23

Average profit per branch(Rs.000) 15094 12115

CHAPTER # 10

“SWOT ANALYSIS”

STRENGTHS

WEAKNESSES

OPPORTUNITIES



THREATS

STRENGTHS, WEAKNESSES, OPPORTUNITIES &STRENGTHS, WEAKNESSES, OPPORTUNITIES &

THREATS (SWOT) ANALYSIS:-THREATS (SWOT) ANALYSIS:-

STRENGTHS:STRENGTHS:

NBP one of the largest financial institutions of Pakistan with eight million of

customer base NBP holds 24.6% share of time and demand deposits in the country.

Local currency deposits comprise 67% of bank's total deposits while foreign

currency deposits account for the rest.

NBP has an extensive domestic branch network of 1276 (according to the latest

data) branches located all over Pakistan. The Bank also has a presence in 22

international locations including the USA, United Kingdom, Europe and the Far East.

NBP's total assets stood at Pak Rs.817758 million on December 2008. This included

total earning assets of about Pak Rs.268 billion with gross loan portfolio of Pak

Rs.140 billion. The bank also has an investment portfolio of Pak Rs.91 billion, which

comprises treasury securities, corporate bonds, shares and other securities.



NBP cash provision as percentage of non performing loans equal to 60% this

coverage factor for the non performing loans is the highest amongst the nationalized

commercial bank.

NBP is working as right arm government of Pakistan as it is responsible for all

claims of government for recovery as well as payment. All depositor of NBP are in

relief that their money security is guaranteed by government of Pakistan.

It acts as an agent of the Central Bank wherever the State Bank does not have its

own Branch.

National Bank of Pakistan is only one bank which has the facility of Western union.

In this particular scheme money is transfer in Pakistan from abroad. This is the

fastest

way to money transfer. You can receive the money from bank to see the name and

password of particular client.

WEAKNESSES:WEAKNESSES:

NBP staff especially at lower considers their work as burden. They usually waste

time in other task a part in performing their duty. Using government property for

there own need. They are reluctant to accept change brought by latest restructuring

efforts.

The general out look and interior layout of branches are not as required according to

modern banking

NBP bearing up large burden in running those branches, which are not producing

any income but keep on adding expenditure.

NBP is relying on its traditional sources of income it has not taken benefit from

innovation in banking like introducing retail banking or consumer banking and

using any type of scheme to generate more deposits and producing more advances.

Further, more don’t even continue its credit card due mismanagement and lack of

control.



NBP is far behind in offering modern banking facility like automated teller machines

then other commercial bank in Pakistan as only eighteen branches in all over

country have this facility.

NBP has only forty-four on line branches. While from remaining branches data

gathering is time consuming, and not fool proof. Quantum of settlement within

different branches is pending because of this updating daily record is becoming very

difficult.

Customers have to fallow long lengthy procedure for opening of account as well

applying for debt. Which discourage most of the people to invest in NBP.

In NBP, most of the time merit not has importance in hiring of employees. Such

practices are black spot on the face of bank and resulted big losses and fraudulent

acts by NBP own employees.

OPPORTUNITIES:OPPORTUNITIES:

Reorganizing efforts going on in the NBP has open many opportunities for NBP to grow.

NBP current management has boarder vision. They have taken steps to improve

customer services, streamline internal procedure and creating a delectating climate for

technology initiative.

To achieve above mention objective they have created operation group

Starting of the retail banking initial working.

Setting of target for of making at least 300 branches country wide on line.

Closing of all those branches, which are burden on NBP.

Management to offer specialized services to major corporate including advisory and

debt syndication introduces the concept of relationship manager.

Comprehensive training programs has been develop to up grade the core banking

skills of the existing staff as well as integrate high quality hiring.



To improve the motivation of staff a merit-based culture is being promoted. Through

overhauling the manpower recruitment preservation and performance appraisal

system.

Make NBP Banking Online up to 2013, the process of achieving that target is moving

faster.

These actions taken by current management provide a great opportunity for NBP for

making it future prosper and can make NBP not less than any modern commercialize

bank in Pakistan.

THREATS:THREATS:

Following are the major threats which national bank of Pakistan is facing:

Major threats NBP facing is from its competitor especially from denationalized

commercial bank. In which MCB is on the top of the list, The Bank provides 24 hour

banking convenience with the largest ATM network in Pakistan covering 15 cities

with over 100 ATM locations.

Retail banking and consumer banking resulting in the products such as credit cards,

housing finance and automobile finance lending to small individual consumers, and

purchases of automobiles, housing, and consumer goods are generally made on a

cash basis. These are causing another threat, if not counter will result in significance

loss of customers



Recently banks and other financial institutions have introduced innovative schemes

to attract deposits, like gift cheque scheme by MCB. These schemes offer prizes on

short and long term fixed deposits, through lucky draws.

Now banks are using technology which covers the distance no matter how far away

any one, through a satellite based, on-line real-time banking system and by offering

telephone banking, electronic funds transfer, E-Banking and other modern facilities.

CHAPTER # 11

“COMPARITIVE ANALYSIS”

POPTER’S FIVE FORCES MODEL OF NBP



COMPETITIVE ANALYSIS

Porter’s five forces model

This approach is widely used for competitive analysis. It is because of the high intensity

of competition among companies there five main competitive forces.

Rivalry among competitive firms:

It is a very powerful force among the competitive forces the strategies pursued by one

firm can be successful only to extent that they provide competitive advantages over the

competitor. These competitive strategies may be lowering prices, best quality series.

The NBP offering very low charges an demand draft, telegraphy transfer, mail transfer

and give other additional services to the customers and to the Nation. Because NBP is a

“Nation’s Bank”.



Potential entry of new competitors:

Whenever new firms ca easily enters a particular industry, the competition increases.

The gout restriction, tariffs, patents etc can stop new firm to enter into the business as

per Banking industry is concerned this market is already very situated in Pakistan and

there are banks with quality services and low charges. So there is no threat to NBP from

potential entry and NBP is also a public sector bank because of that no other new bank

not takes over it.

Potential Development of substitute products:

This is the third factor affecting the competitions. There may be some other product can

be substitute the product of that industry. For example banks offering sawing schemes

in Pakistan and these schemes are also offered by GPOs in Pakistan so they must

compete them in this field. If they offer low rates than GPOs so people will go to deposit

in GPOs.

People concentration high rates so that’s why sawing PLS accounts are more then

current accounts. The next examples will ATM which substitute presenting cheques at

counter and encash it. The NBP is lacking in this field. It must improve in this field to

compete the competitors.

Bargaining Power of Suppliers:

The bargaining power of supplier affects the intensity of competition, especially when

there are a large number of suppliers. In case of banks the suppliers are customers they

supply the money to banks. Now they must offer good services, quality, and safety. Low

charges etc to customers. In this field NBP is very good. B/C at offers good quality

services to customers. They charge low charges on remittances. So that’s it is

competitions other banks.

Bargaining Power of Consumers:

When customers are concentrated or large, or buy in volume, their bargaining power

represents a major force affecting intensity of competition. Now the number customers

in Pakistan for banks are very high. Banks offering variety of products and services to



their customers. NBP have a large number of customs. Now it must offer good services

and products to their customers to attract them to come to NBP.

CHAPTER # 12

“GENERAL SUGGESTIONS”



GENERAL SUGGESTIONSNBP is an effectively operating and profit making organization and carrying out its

activities under a specified system of procedure. The main regulatory body is State Bank

of Pakistan, which provides policy guidelines and ensures that the money market

operates on sound professional basis. While the head office specifies the whole

procedure of function and operations. This procedure has been modernized with the

passage of time with a view to streamline the approach and underlying procedure for

effective overhauling of its own capabilities so as to bring them at par with international

practices.

Here I am giving some suggestions, which in my view can add some input for efficiency

and better performance of NBP.

The recommendations are as follows:

Professional training



NBP staff lacks professionalism. They lack the necessary training to do the job efficiently

and properly. Although staff colleges in all major cities but they are not performing well.

For this purpose these staff colleges should be reorganized and their syllabus should be

made in such a way to help the employee understand the ever changing global economic

scenario.

Banking council of Pakistan should also initiate some programs to equip the staff with

much needed professional training.

Delegation of authority

Employees of the bank should be given a task and authority and they should be asked

for their responsibility.

Performance Appraisal

The manager should strictly monitor the performance of every staff member. All of

them should be awarded according to their performance and result in the shape of

bonuses to motivated and incite them to work more efficiently.

Changes in Policies

There should not be any abrupt policies change by the upper management, as this

practice hurts the customer confidences in the bank. Government should make long

term policies.

Need of Qualified Staff

Required, qualified staff should be provided to branch in order to improve the

functioning of the branch. Especially a telephone operator should be appointed.

Utility Bill Charges



Bank gets Rs. 2 to 3 to processes a utility bill, and it is very tire, tough and hard job

despite this working resulting in a loss to then Rs 3 to5 per transaction. These charges

should be increased to RS 10 per bill to enable the branch to cover their handling costs

and make some profit.

Link with the Head Quarter

100 major branches of NBP should established a direct link with the, head quarter In

Karachi, through Internet or Intranet. This will make the functions and decision making

of the management easier and convenient.

Credit Card

National bank of Pakistan should start its operation in credit card. These cards are very

helpful for the ordinary customer in general and the business people in particular. To

make it mores secure and to eliminate the misuse of it, the management is required to

keep proper security against the card.

Decreasing Administrative Expenses

Bank should their administrative expenses. This was Rs 8 billion in the year 2000. That

can be done by lying off the surplus pool of employee with golden handshakes scheme.

The branches that are not much used could also be closed. Employee can also be how to

control the bank expenses. That will give positive results in the future.

Needs to be Flexible in credit Policy

As mentioned earlier, NBP is very conservative in advances and loans policy. It reduces

the investment opportunities. Also loans should be given to the small businessmen and

the agriculture sector at the low markup rate. It should adopt flexible credit policy while

giving credit to the agriculture sector.

Technological Advancement

I would like to suggest that at least all the main branches of NBP should be fully

computerized in order to expedite the dealing process among bankers and their



customers. Every department should be provided a computer with adequate training

(especially Advances, Deposits and Foreign Exchange departments).

Daily records should be entered directly into these computers, (instead entering the

overall daily transactions after the banking hours). It will not only reduce transaction

time, will increase accuracy but will also be efficient as well.

Not only it will be economical but will also reduce the extra burden of work of the bank.

It will also help in reducing the use of excessive paper work.

Marketing Policy

The branch should adopt various marketing strategy and promotion strategy to

promote the bank and its product.

The most important in my opinion is personal marketing; it is the most effective of all

when you think in term of branch level. But on the whole organization level, they should

arrange the seminar with in the bank and outside the bank. They should introduce

various prizing schemes just like Allied Bank. Karamad Scheme, Bank Al-Falah (monthly

income earning scheme) and various others.

They should do more advertising through newspaper and media and through channel of

personal contacts.

Complaints of Customer

There should be an information desk to provide the information and to receive the

complaints of the customer in the bank. There is no complaint box available in the

branch and not any person appointed to hear the complaints. Every person cannot go to

the manager for the complaint because most of the people are hesitant. So I suggest

management to install a compliant box in the branch, and recruit a special person for

that guidance of the customer when they are unable to manage some difficulties in

banking matters.



CHAPTER # 13

“BANKING TERMINOLOGIES”



Banking TerminologiesBanking Terminologies

Account Holder

A person who has opened any account with a bank or is a holder of deposit / deposit

certificate or any instrument representing deposit/placing of money with bank or has

borrowed money from the bank.

Account Payable

Cost of goods or services bought but yet to be paid.

Accrual

Addition of an expense or an income. Expected additions or gains from investments and

business operations.

Acid Test Ratio

Ratio of a company’s quick assets (cash and near cash assets) to its current liabilities.

Allonge

Piece of paper attached to a bill of exchange for making endorsements.

Asset

Tangible form of valuable possession land, buildings, money, securities, gold and patent



rights.

Audit

Meticulous, through checking and verification of books of accounts on periodic basis to

control leakage and lack of compliance of banks financial procedures.

Balloon

Liquidation of loan liability by full and final payment of remaining amount.

Bank Note

Paper currency issued by the duly authorized Central Bank of the respective

country containing promise to pay the bearer on demand the amount of money.

Bank Statement

Statement of customer account reflecting debit and credit entries with relevant dates

and available balance.

Banker’s Bank

Every Central bank acts as bankers. Bank being the bank of last resort as it comes to

the assistance of commercial banks in time of dire need.

Bill of exchange

Instrument in writing containing an unconditional order, signed by the maker, directing

a certain person to pay on demand or at a fixed or determinable future time, a certain

some of money only to, or to the order of a certain person or to the nearer of the

instrument- Negotiable Instruments Act 1881.

Bill of Lading

Basic transport for shipment of goods giving legal title of ownership to beneficiary

Blank Cheque

Cheque bearing only signature of drawer in which material particulars are left

unspecified, such as the name of payee, amount payable and date.

Blocked Account

Restriction on the operation of bank account on court order or government directive;

amounts to effective freezing of bank account



Cheque

Cheque has been defined as “a bill of exchange drawn on a specified banker” not

expressed to be payable otherwise than on demand essential ingredient of cheque as

defined in Section 6 of the Negotiable Instruments Act 1881, is that it must be

drawn on a particular, identifiable banker payable on demand, that is when a cheque is

presented at a bank counter it has immediately to be paid if the cheque is in order.

Collateral Security

Collaterals are additional securities as a comforting source to cover lending risks for

bankers.

Current Ratio (Current Assets/ Current Liabilities)

A current ratio of over 1:1 indicate that a company has a higher level of current assets

than current liabilities and should, therefore, be in a position to meet its short terms

obligations as and when they fall due.

Credit Investigation

Strict check and evaluation of the information to find out credit worthiness of borrower.

Credit Risk

Danger that repayment of loan to lender may not be possible; so assessment of

borrower is made to weigh such eventuality.

Crossing

Putting two parallel lines over the cheque, this could only be credited to the account.

Default

Act of failure to pay an installment of a debt repayment.

Demand Promissory Note (PRO Note)

Demand Promissory Note is signed by the borrower for certain sum of money including

rate of Markup etc., Payable on demand.

Double Entry Book Keeping

System of accounting having exactly matching debt and credit entries duly recorded on

daily basis showing all banking transactions. Accounting methodology under which



each business transaction is recorded as credit in one column and debit in another

column.

E-Commerce

Trade deals performed by electronic means by E-Mail and WEB sites.

Finance

Defined by Banking Companies (Recovery of Loans, Advances, Credits and Finance)

Act 1997, as an accommodation or facility under interest free system extended on the

basis of participation In profit and losses.

Forex

Abbreviation for foreign exchange.

Forged Cheque

Cheque bearing counterfeit signature. An instrument in which material particulars have

been changed to facilitate defalcation or to perpetuate fraud.

Instrument

Document having legal status like contract, promissory note, bill, cheque and deed.

Lease

Agreement with owner to use land, building, equipment, office on specific terms of rent.

Markup

Profit from added valuation of an asset. Margin taken by the lender over the cost of

funds. In interest free Islamic Banking, it represents the profit rate.

Quick Assets

Having character of instant conversion of liquid assets, in money e.g. cash, bank

balances, securities.

Quick Ratio

Indicator of ability of a company to pay short-term debts; comprises of cash, receivables

and easily marketable stocks and securities.

Quick Ratio = cash and other equivalents/ current liabilities



Sale Cheque

Cheque presented on the counter of bank for encashment after the expiry date

mentioned in the instrument. Stale cheque is not accepted for payment.

Suspense Account

This account for items which do not fall under already described expenditure or

temporality in-cur expenditure that expediency demands and later are as signed to

proper head of expenditures. Or provisional expenses are incurred and put in

suspense account till the final and regular settlement of the expense.

Voucher

Piece of paper containing information relating to some expense, payment-expense

voucher or a payment voucher; enable holder to receive something.

Working Capital

Current assets minus current liabilities are the working Capital of a company.

Yield

Return on investment, profit or bank deposits.


NBP - A Report

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