NBP Report

Internship Report onNATIONAL BANK OF PAKISTAN

National Bank of Pakistan Bannu Cantt Branch

Submitted By:ARIF ULLAH KHAN

MBA

INSTITUTE OF MANAGEMENT STUDIESUNIVERSITY OF PESHAWAR

Session 2004-06

Internship Report onNATIONAL BANK OF PAKISTAN

Bannu Cantt Branch Bannu

Internship report submitted to the Institute of Management Studies, University of Peshawar in

Partial fulfillment of the requirements for the Degree of Master in Business Administration

(Finance)

Supervised By:Sir. AAMIR HUSSAIN

INSTITUTE OF MANAGEMENT STUDIESUNIVERSITY OF PESHAWAR

Session 2004-06

INSTITUTE OF MANAGEMENT STUDIES

Internship Report onNATIONAL BANK OF PAKISTANNational Bank Bannu Cantt Branch

Supervisor:

Signature: _________________________________

Name: Sir. AAMIR HUSSAIN

Designation: Office Manager

Organization: Institute of Management Studies

University of Peshawar

ACKNOWLEDGEMENT

Keeping pace with time is the key to success, left behind means lost.

Commerce is a fast moving subject. The person who are engaged in

business and those who are to enter in this profession must acquaint

themselves with the fundamentals and new development of Business

organization and Management.

This report is an essence of my degree requirement and without writing

report the whole training process will end in smoke. Computation and

purification of data become fruitful when it comes in the shape of

information. It is very hard to convert data into information, it requires

wide span of time, but still it was a great experience for me to have a feel of

the practical world and keeping in view the limitation of the study. This

seems reasonable attempt.

Since banking wide spread profession, it is impossible to jot out each and

every function, so I highlighted is a few functions of banking. Being the

student of Banking & Finance I tried my level best to decimate as much

information as was necessary to bring justice to my internships at Deposits,

Remittances, Credit & Foreign Exchange departments at NBP.

I will like to thank all the staff of NBP Bannu Cantt Branch especially

Manager Mr.Mattiullah Khan & Operation manager Mr.Feroz Khan,

Mr.Farhad and Mr.Asif Shah who treated me with care and answered all

my quarries.

I will also like to thank Mr.Rehman ullah Khan for his support and

guidance. In the last but not the least I will like to thank my Mother for her

prayers and affection.

CHAPTER 1

INTRODUCTION

1.1BACK GROUND OF STUDY

The study is about the internship at National Bank of Pakistan. Internship is an

integral part of all management courses at IMS. The student requires spending a

specific time period in an organization in order to get first hand knowledge of

real life situation.

This study has been conducted in National Bank of Pakistan, Bannu Cantt

Branch. NBP is a highly profitable organization, having a huge network within

and outside the country. To know about the organization and its function it was

important to work there. This internship of two months helped the students write

some useful information about National Bank of Pakistan.

The socio-economic growth of any developing country depends mainly on the

health of its financial institutions. The banking sector is one, which plays a vital

role in the development of the economy. It’s involvement in the industrial sector,

trade and commerce of the country makes it an integral and important tool for the

over all development of the country. With the advent of modern technology and

increased competition, banks are undergoing major changes, thus making this

field a challenging one. Banking sector, no doubt, has a pivotal role in the

development of our national economy. Moreover, the role of banks in the NWFP

is of significant importance due to the huge amount of home remittances from

abroad. Home remittances contribute not only to this province, but also to the

national economy.

National Bank of Pakistan is one of the leading and first government recognized

bank in Pakistan. NBP was established in Nov 9, 1949 and it started functioning

from November 20, 1949.

Institute Of Management Studies1

There are certain characteristics, which sets NBP apart from other nationalized

commercial banks. These characteristics are the reasons of the development of

NBP. The most important characteristic of NBP is that, it works, as an agent to

the State Bank, Where State Bank does not have a branch of its own. The NBP

also act as a trustee to the National Investment Trust (NIT), which is one of the

premier financial institutions of the country. It is charged the responsibility of

mobilizing small savings. The establishment of NBP thus signaled the

achievement of another milestone in the development of the banking industry in

Pakistan.

1.2 PURPOSE OF STUDY

The purpose or objective of this report is to define and describe different

functions and products offered by the bank to its valued customers, to identify

some weaknesses related to the management of the Bank, to analyze the

performance of the Bank and finally to give some necessary recommendation to

the management of the bank. This study can help the students of IMS in making

their reports about their organization. This can help the management of the NBP

in improving the performance of the Bank. As NBP is one of the oldest and well-

established banks in the public sector, so NBP is preferred in order to get more

knowledge of the organization. Also it is a degree requirement and a source of

practical knowledge. Internship in NBP had certain objectives such as:

To observe the work in different departments of NBP.

To develop the relationship to get more information.

To apply managerial skills in real work place.

To getting confidence while interviewing the heads of the different departments.

To develop analytical skills for organizational analysis and financial analysis etc.

1.3 SCOPE OF STUDY


The time duration of two months was quite adequate for the completion of study

and observation of the Bank. NBP is one of the oldest and well-established banks

of Pakistan; efforts were made to study the existing setup and functions of Bank.

Some of problems faced by the Bank have been identified and remedies have

been suggested to these problems. During internship at NBP Bannu Cantt Branch

the following departments were observed.

Deposit Department

Remittances Department

Advances Department

Account opening Department

While working in these department problems were identified and

recommendations were given to overcome those problems. Also comparative

analysis of three years financial statements and SWOT analysis of NBP was done.

An overview of the five- (5) year performance of the overall NBP is also

included.

1.4 LIMITATIONS OF THE STUDY

The vast scope of the operations of a bank is difficult to be analyzed in a

limited time of six months. The lack of information is another limitation

of the study.

1.5 METHODOLOGY OF STUDY

During internship at NBP the most important task was to collect as much quality

information about the organization as possible. Due to this reason, a number of

techniques wee used to collect the required material and compile the report. The

methodology, which was adopted for this research, is based on both the primary

data as well as secondary data.


1.5.1 Primary Data

The first hand data, i.e. the data collected for the first time is called as Primary

Data.

The Sources of Primary Data

Unstructured interviews with bank employees.

Personal observations.

Questioner.

1.5.2 Secondary Data

And the data which is collected from other sources and already processed through

mathematical and statistical techniques are called the Secondary Data.

The Source for Secondary Data

Annual Reports

Manuals of departments of the bank.

Relevant books

Brochures and circulars of the bank

Internet

1.6 SCHEME OF REPORT

This report is divided into four (4) sections.


Section I

This section consists of one chapter. First chapter of this report describes the

background, scope, methodology and scheme of the report.

Section II

This section consists of review of the organization. Chapter two includes a brief

history of overall banking sector in Pakistan .It discusses history of NBP,

activities performed by NBP and the role it is playing in the economic

development of the country. Chapter three consists of the organizational

structure of NBP, board of directors, executive committee. It also discusses the

human resource management of NBP. Chapter four has brief summary of

different departments and review of instruments and machines used in NBP Cantt.

Branch. Chapter five briefly explains all the functions of Deposit department.

Chapter six reviews the function of Remittances department. Chapter seven

consists of the review of activities performed by Establishment and Advances

department. Chapter eight includes the review of the activities performed in

Foreign Exchange department. Chapter nine includes different services offered

by NBP.

Section III

In this section of report comparative analysis of financial statements and SWOT analysis of NBP is discussed. Chapter ten consists of Financial Analysis of the NBP. It also includes comparison, graphical representation and interpretation of three years financial performance of the NBP. Chapter eleven consists of SWOT analysis & brief analysis of staff of NBP Bannu Cantt Branch Agency

Section IV

Keeping in view the SWOT Analysis is given in chapter eleven; chapter twelve

consists of the Findings and Recommendations.


CHAPTER 2

HISTORY OF BANKING

2.1 WHAT IS BANK?

There is no consensus on the origin of the word Bank. According to some

authorities, the word bank itself is derived from the word “bancus” or “banque”,

means a bench. The early bankers, the Jews in Lombard, who are thought to be

the forefathers of Banking used to transact their business on benches in the market

places. The word bankrupt also comes from there. However, the Oxford

Dictionary’s Millennium Issue gives a precise meaning of the word bank defined

as” Bank is an establishment of depositing, with drawing and borrowing money”.

Although banking has developed too much than deposits withdrawl and

borrowing of money, yet the basic function of bank remains as described above.

2.2 BRIEF STUDY OF BANKING

Banking is thought to begin somewhere in early 2000 BC when the Babylonians

developed a banking system. The origin of modern banking can be found in the

modern dealers in Florence, who received money on deposits, and were lenders of

money in the 14th century, and the names of the Bardi, Acciajuoli, Peruzzi, Pitti

and Medici soon became famous throughout Europe as Bankers. The structure

and modern form of banking started taking shape when many of the Lombardy

merchants came to England in the 14th century and settled in the part of the city of

London now called Lombard Street. They were so resourceful that even the kings

had to depend on them for loans. The goldsmiths at that time also started issuing

receipts to their depositors in respect of the cash or gold articles left with them.

These were called Goldsmith Notes. An important step in the evolution of

banking was taken when these goldsmiths started lending at interest and issues

cheque books. Some of the goldsmiths, after they were refused payments by

institute Of Management Studies6

Charles II, formed themselves into a Corporation in1965, known as the Bank of

England.

This proved to be a turning point in banking history and paved the way for

modern banking through different legislatures by the British Government.

2.3 BANKING IN INDO-PAKISTAN SUBCONTINENT

Ever since, money became the medium of exchange in our society, banks existed

in one form or the other. In those days their function was mainly to lend money to

the people and the kings.

The Vedic Epics clearly mentioned about giving and taking of credit and also

contracts of debts at dicing. Later on, Manu in his “Sammurti” clearly mentioned

these transactions by saying, “a sensible man should deposit his money with a

person of good family, of good conduct, well acquainted with the law, veracious,

having many relatives wealthy and honorable”. Manu has also prescribed the rules

to govern the policy of loans and rates of interest.

During the fifth century people were accustomed to use “hundies” as a credit

instrument. The land revenue was collected generally in kind, while the services

were paid mostly in cash. Therefore, banker’s assistance in these and other

financial matters of State was very much necessary. The bankers enjoyed very

good reputation, and the people deposited their jewelry and cash holdings with

them for custody.

Loans were given to the people against personal and other securities such as

ornaments, goods and immovable properties and the banker and customer had

very cordial relations.

The Muslim rulers provided substantial encouragement to the farmers by giving

them interest-free loans and grants in cash. They also allowed them to pay the

land revenue in cash or kind. This “agricultural finance” resulted in bumper food


production, which had a great surplus after consumption at home. Therefore, it

was being exported against pure gold.

Industrial development was not ignored at all. State loans were also given for

increase in production. These factories thus produced enough for local

consumption and left substantial quantities for exports. Textile, calico-printing

and dyeing, pottery, china-ware, indigo, opium, metal-work, paper, leather and

sugar etc. were being exported to foreign countries like China, East Indies and

Pacific Islands against pure gold. Thus the port towns of “Surat” and “Coa”

(Gujarat), “Calicut” and “Cochin” (Malabar coast); “Masulipatam” and

“Negapatam” (Coromandal coast) became the centers of the world trade, where

foreign buyers used to come for purchase of Indian commodities.

Muslim historians of the 12th century have also mentioned some, bankers known

as “Multani” and “Shroffs”. They used to act as agents to the government to

collect revenue. Such a prosperous society did need a well-regulated financial

administration and monetary system. Muhammad Tughlaq was the first king to

have introduced token currency in India. Akbar established mints all over the

country to prepare and issue currency. Royal Treasuries were also established all

over the country under a well conceived plan so that they could function as the

offices of “Central Bank” of that time, they also worked as the drawing and

disbursing offices to the Government.

Though the Muslim rulers did not establish “Bank” as such, yet the revolutionized

the entire financial and monetary structure in India and the old “Sahokars” and

“Mahajins” were eliminated. Government introduced reforms were so effective

that these “classical-bankers” were pushed into the past. Due to the prosperity of

Indian society of that time, the Royal mints and Treasuries did act as agencies for

transfer of money as well as for custody of valuables.


2.4 BANKING IN PAKISTAN

At the time of independence, the areas, which now constitute Pakistan, were

producing only food grains and agricultural raw material for Indo-Pakistan

subcontinent. There were practically no industries, and whatever raw material was

produced was being exported from Pakistan. However, commercial Banking

facilities were provided fairly well here.

Before partition of sub-continent, the entire baking system was almost in the

hands of non-Muslims. When Hindus capitalists became sure of division of sub-

continent, they transferred their funds to safe places in India. Pakistan was

declared an independent state. In mass scale migration of Non-Muslim from

Pakistan to India caused the reduction in bank deposits. The number of scheduled

bank branches was reduced from 619 to 213, and the number of non-scheduled

bank reduced from 411 to 106. The independent state of Pakistan did not have a

central bank of its own at the time of independence.

As a new country without resources it was very difficult for Pakistan to run its

own banking system immediately. Therefore, in accordance with the provision of

Indian independence Act of 1947, an Expert Committee was appointed to study

the issue. The Committee recommended that the Reserve Bank of India should

continue to function in Pakistan until 30th September 1948, so that problems of

time and demand liability, coinage, currencies, exchange etc. are settled between

India and Pakistan. It was also stipulated that Pakistan would take over the

management of public debt and exchange control from Reserve Bank of India on

Ist. April, 1948, and that Indian Notes would continue to be legal tender in

Pakistan till 30th September 1948. Following the announcement of independence

Plan June 1947, the Hindus residing in the territories now comprising Pakistan

started transferring their assets to India. Moreover, the banks including those

having their registered offices in Pakistan transferred to India in order to bring a

collapse of new State. Some important dates are mentioned here,


The first important date was establishment of Habib Bank Limited, on August 25,

1941 at Bombay. This was the first bank in Indian sub-continent, which was

operated by Muslims. Habib bank Limited transferred its Registered Head Office

to Karachi on August 07, 1947. It played a great role in the Pakistan’s Economic

Development.

The second important date in the history of Banking in Pakistan is the

establishment of Australasia Bank limited, at Lahore on December 03, 1942. Its

name was changed to Allied Bank of Pakistan Limited, on July 01, 1974. After

nationalization of the Banking Industry on January 01, 1974, three other banks

were merged in to it.

The other important date is July 09, 1947; when the Muslim Commercial Bank

Limited was registered and incorporated at Calcutta. Its registered Head Office

was transferred to Dacca on August 17, 1948. Subsequently its registered Head

office moved to Karachi on August 23, 1956.

The most important date is July 01, 1948, when State Bank of Pakistan was

established at Karachi as the Central Bank of the country. Central bank addressed

itself with an urgent task of creating a national banking system. In order to attain

this goal it provided every help and encouragement to Habib Bank to expand its

network of branches, and also recommended to Government the establishment of

a new bank which could serve as an agent of the State Bank. As a result, The

National Bank of Pakistan came into being on November 09, 1949, and by 1952 it

became strong enough to take over the agency function from the Imperial Bank of

India. This was the first Commercial Bank in the public sector. By December

1973 there were 14 scheduled banks with 3042 branches all over the country.

They were:

1. National Bank of Pakistan.

2. Habib Bank Limited.


3. Habib Bank (overseas) limited.

4. United Bank Limited.

5. Muslim Commercial Bank Limited.

6. Pak bank Limited.

7. Standard Bank Limited.

8. Commercial Bank Limited.

9. Australia Bank Limited.

10. Bank of Bahawalpur Limited.

11. Premier Bank Limited.

12. Sarhad Bank Limited.

13. Lahore Cooperative Bank Limited.

14. Punjab Provincial Cooperation Bank Limited.

At the end of June 1999, the number of scheduled Banks in Pakistan was 52 with

7,874 branches .Out of these; there are 25 Pakistani banks with 7,779 branches

and 27 foreign banks with 95 branches.

2.5 HISTORY OF NATIONAL BANK OF PAKISTAN

With the establishment of the central banks, the country has ushered in new era in

the development of banking. Soon the industry was faced with another problem of

considerable magnitude. This happened in late 1949. The British Government

devalued its currency in September 1949 both Indian and Pakistan currencies

were pegged on a fixed exchange rate basis with the pound sterling.


Inline with the British Government’s decision, the Indian Government also

devalued it rupee to maintain parity with the pound sterling. Pakistan, however,

did not devalue its currency. India did not view the Pakistani decision in the right

spirit and Pakistan’s refused to bring its currency at par with that of India led to a

crisis in trading between the two countries. India’s refusal to lift the Pakistani

jute, as reprisal resulted in a financial crisis for the jute growers, who could not be

paid. Only the Commercial bank in public sector could have offered payment, in

lieu, to magnitude the financial sufferings of jute growers.

The government responded to the situation quickly and decisively, on November

9, 1949, an order was promulgated by the Governor General bringing in being the

National Bank of Pakistan which started functioning from November 20, 1949.

In the course of its department the National Bank of Pakistan, in addition to being

a commercial bank in the public sector at a time when all other commercial bank

were in the private sector also came to acquire certain characteristics. The most

important of these characteristics is that the National Bank acts as an agent on

behalf of central bank. The National Bank also acts as a trustee to the National

Investment Trust (NIT), one of the premier financial institutions of the country,

charged with the responsibility of mobilizing small savings.

The establishment of National Bank thus signaled the achievement of another

milestone in the development of the banking industry in Pakistan.

2.6 THE HISTORY OF NBP (1996-2000 &ONWARDS)

Like all businesses in Pakistan, National Bank of Pakistan also endured a great

pressure in this period. When the biggest bank of the country was faced with

losses, Government of Pakistan made some reforms. Pakistan Banking Council

was demolished and all banks were put under independent board of governors.

Default of loans is the big issue since that time. In 1996-1997 the Government of

Pakistan pressurized all the institutions of the country to down size their staff so


as to cut down the expenses. This was the demand of IMF. As a result Golden

Handshake Scheme was offered to the employees and a large number of

employees opted to leave. This decision was very costly and was amortized. In

the second phase of the cost reduction program, the number of branches including

the branches that were running in losses was reduced by a figure of 100.

The decision of May 28, 1998 nuclear tests followed by political decision of

freezing of foreign currency accounts gave hard time to NBP. But still, NBP

performed very well and succeeded in increasing the deposits. NBP was also

successful in collecting reasonable amount of money from the defaulters. After

some time the situation was made worst by economic crises of East Asian

countries. National Bank of Pakistan performed well in this region and maintained

its credibility.

National Bank of Pakistan as per its tradition, forwarded funds for revival of

almost sixty sick units with Rs.3.5 billion in 1998 .NBP also participated in self-

employment scheme with Rs.1.9 billion. NBP also introduced ATM card system

and became a member of SWIFT in New York as well. In November 2000, 10%

share of NBP’s shares were offered to general public and listed on all domestic

Stock exchanges. It has also prepared a plan for electronic banking and E-

commerce.

By analyzing these improvements we can say that the Officials and Directors of

the bank are fully aware and alert for the challenges of globalization and

modernization.


2.7 ACTIVITIES PERFORMED BY NATIONAL BANK OF

PAKISTAN

NBP is providing all types of banking services of mercantile and commercial

banking permitted in the country, which includes:

Handing of treasury transactions for the Government of Pakistan as an

agent to the State Bank of Pakistan.

Providing services under a Trust Deed as Trustee to the National

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

NIT.

Accepting of deposits of money against current, saving, term deposit and

profit and loss sharing accounts.

Borrowing money and arranging finances from other banks.

Advancing and lending money to its clients.

Financing of projects, including technical assistance, project appraisal

through long-term/short term loans, Term finance and Musharika

Certificates, etc.

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

foreign exchange.

Financing of bonds, scripts and valuables for safe custody.

Carrying on agency business of any description other than being agent on

behalf of clients including Government and local authorities.

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

Transacting guarantee and indemnity business.


Sale and encashment of Prize Bonds through its 266 authorized branches.

Joint venturing with foreign dealers, agents and companies for is

representation abroad.

Participating in “world Bank” and “Asian Development Bank” lines of

credit.

Providing personalized Hajj services to intending Hajjis.

2.8 STATUS AND NATURE OF BUSINESS

National Bank of Pakistan (the bank) was established under the National Bank of

Pakistan Ordinance, 1949 and is listed on all the stock exchanges. It’s registered

and head office is in Karachi. The bank is engaged in commercial banking and

related services in Pakistan and overseas. The bank also handles treasury

transactions for the Government of Pakistan (GOP) and also provides services as

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

behalf of NIT.

2.9 ROLE OF NATIONAL BANK OF PAKISTAN IN

ECONOMIC DEVELOPMENT

Banks play significant role in promoting the economic activities and economic

development of a country. Industry, agriculture, trade, commerce and many other

economic activities are highly dependant on banks. Banks help in mobilization of

money. They also help in promoting the growth of internal resources for

development by attracting deposits into productive loan and investment. Banks

not only collects the savings of the people but also give loans for the development

of industry, trade and commerce.

NBP has been playing a major role in financing and developmental activities in

Pakistan. It helps in the growth of economy in all spheres of our national life. It


has contributed significantly to economic growth of the country and has served to

trade and industry in a wide sphere of operations.

The NBP was the first bank to introduce scheme of credit to small borrowers like

farmers etc, for the promotion of agriculture. The bank advances liberal credit for

rural and agricultural development. Small short-term loans are given to the

farmers free of interest. These advances can be in the shape of fertilizers, seeds

and agricultural implements.

The NBP is able to attract large amount of deposits through its large number of

branches all over the country and thus is able to provide large amount of loans to

different sectors.

The NBP is also providing finances to small-scale industries for the period up to

five years; it has introduced the people’s credit facilities to the common man at

the large and more liberal scale than before. The main objective of this scheme is

to make a contribution toward building up of a developing nation. The NBP also

helps to promote the establishment of new companies by underwriting their

shares. The bank also contributes towards the earning of foreign exchange though

its foreign exchange business in Pakistan and abroad.


MISSION:

“To be recognized in the market place by institutionalizing a merit and

performance culture, creating a powerful and distinctive brand identity.

Achieving top – tier financial performance, and adopting and living out our

core values”.

VISION:

“To be the pre-eminent financial institution in Pakistan and achieve market

recognition both in the quality and delivery of services as well as the range of

product offering.”


CHAPTER 3

ORGANIZATIONAL STRUCTURE

Organizational structure is the framework that defines the boundaries of the

formal organization and with which the organization operates. A suitable

organizational structure for the nature of the organization leads to better

performance.

The organizational structure of the bank constitutes a board of directors and an

executive committee as the governing bodies. The National Bank of Pakistan

(NBP) has 1189 branches all over the country, 16 overseas branches & 4

subsidiaries. The head office is operationally in charge of central affairs including

the delegation of power and authority to the regional headquarters all over the

country. These regional headquarters direct the function of the 12 corporate

branches. The NBP has 29 regions (circles) in four provinces as given below:

Table 3.1 NBP Provincial Headquarters & No. of Regions

Provincial Headquarters No Of Regions

Sindh 6

Baluchistan 2

Punjab 14

NWFP 5

Azad Kashmir 2

Total 29


3.1 HEAD OFFICE

The NBP has its own organizational structure and its Head Office is situated at

Karachi. All branches, regional offices and corporate branches work according to

the rules and regulations issued by the Head Office from time to time. The Head

Office of National Bank of Pakistan, which is primarily responsible for making

policies and execution of policy decision include,

a) Board of Directors

b) Executive Committee

c) Divisional head offices and provincial headquarters

The Head Office has nine divisions, which are further divided into different

wings. It is operationally in charge of central affairs including the delegation of

powers and authority to the 29 Regional Headquarters all over the country. These

Regional Headquarters direct the functions of the twelve corporate branches.

3.2 BOARD OF DIRECTORS

The Board of Directors nominates the executive committee, which nominates

divisional heads. It consists of president, six directors working under president

and one Secretary. President is the governing body and other six directors and one

Secretary work with him in a systematic way.


The Board of Directors of National Bank of Pakistan NBP has one President

and six members as given below:

Table 3.2 NBP BOARD OF DIRECTORS STRENGTH

President of the bank 1

SEVPs of the bank 3

Representative of the PBC 1

Representative of government 1

Outsiders 1

Total 7

3.3EXECUTIVE COMMITTEE

Executive Committee consists of one President and nine members and among

these nine members, one member perform functions of both member and

Secretary. Board of Directors nominates executive committee and executive

committee nominates the divisional heads. NBP has an executive committee with

President as its chairman; five SEVPs are its members and president’s advisor as

an observer. This body monitors the day-to-day affairs of the entire bank and has

sanctioning authority for financial and business proposals.

3.4DIVISIONAL CHIEFS

In order to improve the management and operation of a bank, it has been split up

into a number of divisions. Each division of a bank is placed under the

supervision and control of Divisional Chief or Senior Executive Vice President

(SEVP) or Executive Vice President (EVP). The Head Office management

controls all the divisions. The nine divisions of NBP are as follows:

a. Management Support Division


b. Audit and Inspection Division

c. Treasury Management Division

d. Credit Policy Management Division

e. Marketing and Development Division

f. Overseas Banking Division

g. Special Assets Management Division

h. Bank Secretary Division.

3.5PROVINCIAL CHIEFS

In order to improve the performance of the banking system, each bank has

Provincial Chief who has the power for sanctioning finance and other credit

facilities. The head quarters of the chiefs are situated in Lahore, Karachi,

Peshawar and Quetta. The National Bank has 29 regions (circles) in four

provinces and Azad Kashmir.

3.6REGIONS OF NBP

On May 13, 2000 a circular was issued in which zones were abolished and the

whole country and Azad Kashmir was divided into 29 regions. The changeover

process started from 1st August 2000 and was completed by 31st August 2000. The

new setup was made fully functional by 15th September.

3.6.1 Regional Management Committee

A regional management committee controls all regions. Regional management

consists of

i. Regional Business Chief

ii. Regional Operations Chief

iii. Risk management Chief

iv. Compliance Chief


The Names of the Regions are:

S.No. Region S.No. Region

1 Karachi South 2 Karachi Central

3 Federal Capital 4 Karachi West

5 Rawalpindi 6 Lahore East

7 Faisalabad 8 Gujranwala

9 Peshawar 10 Mirpur A.K.

11 Multan 12 Gujrat

13 Sialkot 14 Hyderabad

15 Abbotabad 16 Sargodha

17 Mardan 18 Jhelum

19 Quetta 20 Sahiwaal

21 Bhawalpur 22 Dera Ghazi Khan

23 Dera Ismail Khan 24 Jhang

25 Muzaffarabad A.K. 26 Sakkhar

27 Larkana 28 Gawadar

29 Gilgit **** ****


3.7 CORPORATE BRANCHES

Corporate branches play an important role in the setup of National Bank of

Pakistan, to serve the businessmen and the corporate sector of Pakistan. There are

twelve corporate branches, present in the following cities.

TABLE 3.4 CORPORATE BRANCHES OF NBP

City No Of Corporate Branches

Karachi 3

Lahore 3

Islamabad 1

Rawalpindi 1

Quetta 1

Peshawar 1

Mirpur (AJK) 1

Faisalabad 1

Total 12


3.8OVERSEAS BRANCHES

NBP has 16 overseas branches, in the following 11 countries.

Table 3.5 NBP FOREIGN BRANCHES

S.No. Country S.No. Country

1 USA 2 France

3 Germany 4 United Kingdom

5 Egypt 6 Peoples Republic Of China

7 Korea 8 Africa & Middle East Region

9 Bangladesh 10 Central Asia States

11 Hong Kong 11 Afghanistan

NBP has four representative offices in the following countries:

S.No. Country S.No. Country

1 USA 2 Peoples Republic Of China

3 Uzbekistan 4 Azerbaijan

NBP has a subsidiary situated in Kazakhstan.

3.9NBP Cantt. Branch: PESHAWAR

This branch shifted to its new building in the year 2000. It is located in the

commercial heart of Peshawar. Its main customer is Government Of Pakistan. It is

also called “Main branch Peshawar”. It’s a large branch and has been serving both


civil and military personnel. All the cheques drawn on or by the bank are pooled

here and then taken to SBP for clearance. It’s one of the most profitable branch of

NBP in Peshawar.

3.9.1 Set up

Keeping in view the size of the branch the Operation manager will take

direct responsibilities for some of the operation functions depending on

the nature of activities in the branch and will act as Compliance officer

also.

The Operations area would comprise of Cash Counter Services and

Customer Services.

The branch manager with the relationship officer(s), (if required) will

concentrate and fully devote to credit marketing and business/deposit

development.

Operations manager will report directly to the regional chief operations

with dotted line reporting to the branch manager.

3.9.2. Branch Manger Responsibilities

Overall affairs of the branch.

Checking and ensure effectiveness of control system and working

procedures.

Meeting existing and New Customers.

Marketing business/deposit development and public relations.

Assignments of accounts to relationship manger/officer.

Income and business budget.


Performance evaluation of reporting staff.

Develop objectives for reporting staff.

Review of reports.

Conduct periodical meeting of the staff.

Liaison with controlling offices.

Approval of credit proposal with-in delegated authority

Approval of expenses with in delegated authority.

Follow-up for recovery of Non performing finances

Restructuring and rescheduling of classified accounts.

Special project/Assignments by controlling officers.

3.9.3 Operations Manager Responsibilities

Supervision of all assigned operation department.

Ensure check and control systems are in place.

Create cordial and customer friendly atmosphere in branch.

Ensure continuous satisfactory service to the customers.

Review of daily activity reports.

Ensure compliance of bank/SBP and local regulations.

Approval of opening of new accounts.

Approval of expenses with in delegated authority


Preparation of expenses budget.

Develop duty list for all branch operation staff

Develop objectives for operation staff

Performance evaluation of reporting staff.

Cross-training to the staff

Management of staff attendance and vacation

Provide leadership and guidance to operations departments

Reporting of all exceptions to controlling office.

Conduct periodical meetings of operation staff

Represent branch on operation matters.

Rectification of audit irregularities

Maintenance and upkeep of the branch.

Act as compliances officer.

Special projects / Assignments by manager / controlling offices.

3.10 HUMAN RESOURCE MANAGEMENT

Human Resources Management is that part of organization, which is concerned

with the “people”. Every organization is comprised of people. It acquires their

services, develops their skills, motivates them to high level of performance and

ensures that they continue to maintain their commitment to the organization.

Getting and retaining good and competent people (employees) is critical to the

success of every organization regardless of its type. NBP also places great


importance on the qualification, caliber and competence of the staff. There are

three main steps at NBP for staffing and administration.

Recruitment of the staff

Development of the staff

Motivating staff

3.10.1 Recruitment of the Staff

Recruiting is the discovery of potential skills of the employees to fulfill

organizational needs or we can say that it is the linking activity for bringing

together employees with skills to fill the vacancies. The recruitment procedure has

following steps:

i) Short- listing of the Application

In this step, thousands of candidates apply for limited posts available. The

candidates are scrutinized and the test calls are sent to them. The calls are sent by

the Head Office to only those candidates who fulfill the requirement of the job

advertised.

ii) Tests

NBP under the supervision of the Institute Of Bankers In Pakistan conducts test.

After the tests the applicants are further short-listed.

iii) Interviews

For the interviews only those candidates are called who qualify the written tests.

Different types of questions are asked from the candidates by the interviewing

board. Interview questions include,


a. Questions about the personal background, extra curricular activities during

education and about personal contacts.

b. About the role of banking in current situation of economy.

c. Role of foreign enterprise in public economy etc

Apart from these questions, the candidate’s personal interests are also discussed

and an effort is made to have an understanding of the individual’s personality.

After these questions, an evaluation is made about whether the candidates will

prove himself as a valuable asset to the organization or not.

iv) Merit List

After the final result, the successful candidates are sent the appointment letter and

they are asked to sign the agreement with the bank.

3.10.2 Developing the Skills of Employees

Once the employees are recruited, it is very important to develop their skills.

There are two ways to develop their skills.

Initial Training/Pre Service Training

On the job Training

i) Initial Training/Pre Service Training

All the newly recruited personnel are provided with training facilities. During this

training, an employee is rotated through different sections of the branch so that he

may learn by practically doing the work. The minimum probation period is six

months.


ii) On the Job Training

On the job training programs can be arranged at any time when the need arises for

training. These training courses are of short duration, mostly for two to four

weeks. These training courses are arranged at the home station or at any other

station. In case of outstation, the transportation and boarding charges are paid by

NBP. NBP has its own training institution. This training institute arranges

seminars/courses for the NBP employees.

3.10.3 Motivating Staff

People who are motivated exert greater efforts to perform the assigned tasks

effectively and efficiently than those who are not motivated. Various measures are

used in NBP for motivating the employees and for appraising their performance.

The techniques used are as follows.

i) Audit Report

These reports are prepared by auditors and are sent to the Head Office for

performance appraisal.

ii) Salaries Wages

The Government of Pakistan finance division sets salary. Presently, President put

suggestions to the board of directors and gets approval from the board for

increasing salaries.

iii) Provident Fund

7.5% of every employee’s salary is deducted as provident fund and the bank

contributes the same.


iv) Medical Allowance

The bank also compensates the cost of medical advice and medicines, claimed by

the employees for themselves and their dependents.

BOARD OF DIRECTORS OF NBP


Syed Ali Raza

(President)

Dr. Waqar Masood Khan Muhd.Arshad ChaudhryIftikhar Ali Malik

Sayed shafqat ali

shah jamot

Syed Sikandar Hayat Jamali

M.Zubair Motiwala

Muhammd Khalid Malik

Source: Annual Report of NBP

ORGANIZATIONAL STRUCTURE OF NBP HEAD OFFICE


Source: Annual Report of NBP

BOARD OF DIRECTORS

PRESIDENT

EXECUTIVE COMMITTEE

SEVPs/CHIEF SIND AND

BALUCHISTAN

SEVPs/CHIEF

PUNJAB

SEVPs/CHIEF NWFP OF AJK

SEVPs

WINGS

SEVPs

WINGS

ORGANIZATIONAL STRUCTURE OF REGIONS OF NBP

Source: Circular No.11/2000 Dated May 13, 2000


President

Corporate and Investment

Banking Group Chief

Corporation North and

Corporation Head South

Corporate Branches

Regional Marketing Manager

Regional Business Chief

Commercial & Rental Banking Group Chief

Regional Operations Chief

Branch ManagerOperate Group Chief

Operation Deptt. of the Region

Branch Operation Manager

Regional Compliance Chief

Risk Management Group Chief

Regional Risk Management Chief

Credit Department of the Region

Branch Credit Officer

CHAPTER-4

DEPARTMENTATION

Departmentation is arranging the activities into meaningful groups. It distributes

the workload and increases efficiency and effectiveness. Departmentation can be

done on various bases for example, departmentation for customers, by function or

by location.

National bank of Pakistan Main Branch Batkhella Malakand Agency consists of

various departments based on its different functions. So it can be said that the

basis for departmentation at NBP is purely functional.

4.1 DEPARTMENTS OF NBP BANNU CANTT BRANCH

1. Deposits Department.

2. Remittances Department.

3. Advance Department

4. Cash Department.

5. Foreign Exchange Department.

4.1.1 Deposits Department

This department is responsible for the accounts opening, accounts closing and

answering customers’ queries regarding their accounts, check book issuance etc.

Lockers are also under the supervision of this department.

4.1.2 Remittances Department

This department is responsible for inward and outward remittances through

demand draft (DD), telegraphic transfer (TT) or cheque collection. It also

provides account statements to the customers and answering their queries

regarding their accounts.

4.1.3 Advances Department


Its main function is to make correspondence with Head office Regional office and

other officials, and to advance consumer loans. It checks the credibility of the

consumer and maintains loans till maturity.

4.1.4 Cash Department

The head of this department is an accountant. All the cash is given with fixed

amount in the morning from which they can make payments. At the cash counter,

local currency receipts and payments are handled. Cheques are received and

presented for transfer or collection. All the money is kept in the strong room.

Cash handling is very risky job, therefore, only authorized person is allowed to

enter cash department.

4.1.5 Foreign Exchange Department

This department is responsible for opening and maintaining the foreign currency

accounts. At present it deals in EURO, US DOLARS & GBR POUND accounts.

It also provides the facilities of sending and receiving the foreign currency

through foreign TT, MT etc. It also facilitates the exporters and importers by

opening and clearing LCs for them.

4.2INSTRUMENTS USED BY THE BANK

The bank (NBP) is making the use of certain instruments, which are explained

below:

4.2.1 Signature Card

This instrument is used to keep a record of customers. The customer fills this card

at the time of account opening. It consists of the customer’s name, account

number, amount and specimen signature. All the signature cards are kept in the

stationary in the order of account numbers, so whenever the card is needed for

any purpose, it can easily be found.


4.2.2 Vouchers

Vouchers are used in every bank. Every bank has its own printed vouchers.

Vouchers show the details about the amount received and paid by the bank. As

banks use a double entry system i.e. debt and credit system, therefore vouchers

are of two types.

i) Debit Voucher

To differentiate these types, for the convenience of the officers, debit vouchers are

printed in white color. Whenever bank incurs some expense; entries are made in

debit vouchers.

ii) Credit Voucher

These vouchers are printed in green color. They are used to enter the credit

transactions. Any income or amounts received by the bank are entered in a credit

voucher.

All the sections of the bank use vouchers because they are documentary proofs

that the transaction has taken place. Each section of bank collects its vouchers and

tallies with deposit department at the end of the day, for removing any

discrepancy.

4.3MACHINES USED BY THE BANK

In today’s modern world, an organization must adopt the modern technology to be

efficient and consequently profitable. The use of modern technology can save a

good deal of wastage of time and resources.


i) Fax Machine

In the bank fax machine is used to communicate the massage from one bank to

another and for sending important letters or any other documents for urgent

consideration.

ii) Computers and Printers

There are several computers in the bank, which are used to save accounts

information and to keep the record of other departments. Daily balance sheet and

Other important documents are printed-out through the printer.

iii) Telephone and Intercom Sets

There are 3 telephone connections; one is used by the Manager and the other two

for the other bank purposes.

4.4 DEPOSITS DEPARTMENT

The principle source of funds of any commercial bank is the deposit account i.e.

demand, saving and time deposits. From banking point of view, the term deposit

means “the currency, Cheques, or draft given to a financial institution for

crediting to a customer’s account”.

Like all commercial banks, the primary function of National Bank of Pakistan is

to accept and receive surplus money from the people. In order to attract money it

offers different types of facilities to its customers.

The deposit department of National Bank of Pakistan,bannu Cantt. Branch mainly

performs the function of,

Opening of Accounts

Closing of Accounts


Issuance of Cheque book

Issuance of Statement of account

NBP Bannu Cantt. Branch offers local currency accounts. Local currency

accounts are discussed as follows.

4.5 TYPES OF LOCAL CURRENCY ACCOUNTS

4.5.1 Current Account

A current account is a running account, which is continuously in operation. NBP

current account allows customers to deposit and withdraw cash at their own

convenience. The customer can withdraw the current deposits anytime, without

any previous notice to the bank. The bank has to honor the cheques to the extent

of credit balance in the account. No profit/interest is paid to the customer on these

deposits, but the customer is required to maintain a minimum balance in the

account. The initial amount required for opening of such an account is, Rs. 100.

The current account is opened and operated by traders, business companies,

public service bodies, industrialists etc.

4.5.2 PLS Saving Account

Saving deposits or profit and loss sharing (PLS) are those accounts on which bank

offers a relatively lower rates of interest. PLS saving account can be opened with

an initial deposit of not less than Rs. 500.

PLS Saving Account may be opened in the name of an individual or jointly in the

name of two or more persons. Charitable institutions, companies, Associations,

Societies, Educational institutions, firms etc, may also open these accounts.

Minors and illiterates are also eligible for opening saving accounts. However

illiterate customer must present themselves in person for withdrawals. The bank

determines the rate of profit or loss on PLS saving account.


4.5.3 Term Deposit Account

These are the deposits than can be withdrawn after a certain specified period of

time. The period of time varies from three months to five years. On these deposits

return/interest varies with the duration for which the amount is kept with the bank.

The rate of interest/return on term deposit is higher than that of a saving deposit.

Its interest/return is unaffected for the duration of the deposit irrespective of

market fluctuations.

Term deposit is best suited for short-term investment. Individuals as well as joint

account an be opened by sole proprietorships, partnerships, joint stock companies,

limited companies, clubs/associations/trusts, administration, executors etc. Profit

is paid at the maturity of deposit. On these deposits premature withdrawal is

permitted but against a reduced rate of interest as agreed at the time of deposit.

4.5.4 Finance Facility

Bank also extends finance facility to clients against saving and fixed term deposits

on comparatively low markup rate. The deposit is kept under lien, however the

customer may withdraw the profit amount credited to his account

4.6 OPENING OF AN ACCOUNT WITH THE BANK

Account opening has the following requirements:

4.6.1 Formal Request

The person desirous of opening an account is required to fill an “Account opening

form”. It is a formal request by the customer to the bank to allow him to open and

operate the account. The form contains information about the customer i.e. his

name, address, business/profession, contact number etc.

4.6.2 Obtaining Introduction


Before opening an account the bank obtain introduction of the customer from an

old customer.

4.6.3 Specimen Signature

The bank takes specimen signature of the customer on the “signature book” or on

a card. Signature card is used for the verification of drawer’s signature on the

cheques.

4.6.4 Minimum Initial Deposit

The current account can be opened with minimum of Rs.100 and PLS Saving

Account with minimum of Rs. 500.

4.6.5 Operating the Account

Bank provides pay-in-slip book, cheques book and passbook to the customer for

operating the account.

4.7 ACCOUNTS TERMS AND CONDITIONS

Against the submission of the bank’s prescribed application form, duly introduced

in the manner provided and on supply of documents required, the account is made

fully functional under certain conditions. In case of account on PLS basis, bank

invest the amount in any manner it considers under PLS system.

4.7.1 Deposits

All money to be deposited to the credit of an account is accompanied by pay-in-

slip showing the name and number of account to be credited. Putting Bank’s

stamp under the signatures of two bank officers on the pay-in-slip then

authenticates the entry.

4.7.2 Withdrawals


Withdrawals from the account can be made only by means of cheques supplied by

the bank. Cheques should be signed according to the specimen signature. The

drawer under his full signature must authenticate any alteration in the instrument.

4.8 STATEMENT OF ACCOUNT

Account statement is provided to the customer by the bank. In these statements

the bank assures that all debit entries are correct. In case of error, the bank passes

an adjusting entry to rectify the error.

4.9 CLOSURE OF ACCOUNT

While closing the account, the account holder returns the unused cheques and

passbook to the bank. The customer also withdraws the credit balance of the

account (if any).

4.10 ISSUANCE OF CHEQUE BOOK

Before issuing a new cheques book, the bank is required to give a requisition slip

to the customer. The customer put his signature on the requisition slip. After

verifying the signature, the cost of cheques book is charged. The account number

of the customer is written on the cheques book as well as in a cheques book

register.

4.11 REMITTANCES DEPARTMENT

4.12 Remittances

The word “Remittance” means to send money by mail or any other method. It

may also be defined as “Payments send by mail to a center for processing”.

National Bank of Pakistan also provides the facility of transfer of funds from one

bank to other and from one place to another place. The transfer of funds is mainly

the responsibility of the remittances department. Remittances are divided mainly

into two categories.


4.12.1OUTWARD REMITTANCES

When the bank sends a telegram etc. to another bank (concerned branch) for

payment to the customers, it is called outward remittance. The sender is required

to apply through a firm in which he will give all the necessary details about the

sender and the beneficiary. The signature of the customers is verified. The details

regarding documents attached and exchange control regulations are scrutinized.

Telexes option and transactions number is recorded on the source document. This

source document is then forwarded for verification. No instrument is given to the

customers. Customers can receive the TT receipt at the end of the day and

document is credited to the beneficiary account.

4.12.2INWARD REMITTANCES

When TT through telexes etc is drawn on NBP Branch, it is called inward

remittance. Message is received from the Telex Department. The concerned office

duly checks authentication and purpose of remittance it is received from abroad.

In NBP remittance takes place in the following ways.

1. Telegraphic Transfer (TT)

2. Mail Transfer (M.T)

3. Demand Draft (D.D)/Payment Order.

4. Cheque collection

5. Clearing of Cheques.


4.12.3 TELEGRAPHIC TRANSFER

It is the fastest mode of transfer of money. Sometimes when the remitter urgently

desires the remittance, he may request to issue to telegraphic transfer. TT may be

issued to general public on their written request and against the value received.

The customers fill the forms and deposits cash. The official of the National Bank

of Pakistan send instruction regarding payment to the drawee branch

telephonically in the coded language and under confidential number known as

TEST NUMBERS. Or telephone call is making to the said branch the make

payment to customers. Vouchers are sent by ordinary mail to keep the record.

Telephone charges a re also taken from the customers. No excise duty is taken on

TT.

4.13 MAIL TRANSFER

It is a mode of transfer of transferring money from one branch to another branch

either within the same city or in cities through out country. MT advices

dispatched by mail. MTs may be issued for transferring funds in one account to

another account branch or to any person not requiring urgent remittance or draft.

Customers fill same application and deposit the cash in the same way. National

Bank of Pakistan official record the transaction voucher and advices are made and

sent to responding branch. National Bank of Pakistan takes Rs. 10 as mail charges

from application. No excise duty is charged on MT.

4.14 DEMAND DRAFT (DD)

“A bank draft is an order drawn by one branch of the bank to another of the same

bank to pay a certain sum of money on demand or to the person named there on”.


DD is another mode of transfer. It is just like a cheque. The application form is

filled in the beneficiary name, account number and sender’s name is written. The

customer deposits the amount of DD in the branch concerned. Then DD is made

and given to the customers. National Bank of Pakistan official note the transaction

in issuance registers on the page of that branch of National Bank of Pakistan in

which the DD will draw. They also send advice to the branch to which the DD is

sent. An OPEN DD is one in which direct payment is made. A CROSS DD is one

on which payment is made through account.

PAYMENT ORDER

Pay Order is made for the local transfer of money. National Bank of Pakistan

takes fix connection of RS. 15 on pay order. Pay order also comes for clearing

from SBP. NBP official checks with register and writes the entry in register.

4.15 CHEQUE COLLECTION

“A Cheque may be defined as a written order of a depositor upon a bank to pay to

or to the order of a designated party or to a bearer, a specified sum of money on

demand.”

Cheque is received form the customer by the bank and branch-crossing stamp on

the face of the cheque is checked. Cheque is received along with deposit slip.

4.16 CLEARING OF CHEQUES

Clearing of cheques is made through SC (short credit), LSC (Local short credit) in

clearing house.


4.16.1SC (Short Credit)

SC is the short credit, which consists of the cheque outside the district. These

cheques are sent in SC outside the district for clearance. Once they are cleared our

bank charge a certain amount of money spent on the process form the customer.

4.16.2LSC (Local Short Credit)

LSC is the short credit, which consists of the cheques inside the district. Separate

register is maintained for it. Local branches for clearance send these cheques for

clearance. Bank has no charges on the process form the customer.

4.17 DUPLICATE ACCOUNT STATEMENTS

If the customer has not received his account statement due to any reason, he can

get a duplicate account statement. Request is received form the customer for the

issuance of duplicate statement and signatures are verified. Statement is then

printed and delivered to the customer.

4.18 ADVANCES DEPARTMENT

Bank is a profit seeking institution. It attracts surplus balances from the customers

at a low rate of profit and makes advances/finances to individual and business

firms at higher rate of mark-up.

Advances and financing in banking business refers to provision (supply) of

money on credit and it is the most important function of a bank. The bank tries to

channelize the funds into profitable ventures to make profit. Advancing loans is

the most risky process as well and bank exercises utmost care while advancing

loans to its customer.

Another function of this department is to make correspondence with Head Office,

Regional Office and other Officials.


4.19 RUNNING FINANCE

Running finance is usually provided on working capital. The running finance

facility given by NBP to its customers is only for short period. Interest/markup is

charged yearly. At the end of the year, the customer is required to renew the limit.

These are secured loans and are provided against personal security and against

hypothecation or collateral mortgage. These securities reduces the risk of loss,

therefore it is a safe investment.

4.20 DEMAND FINANCE

It is a facility in which it is obligatory on customer to withdraw the entire amount.

In demand finance, full amount of loan is advanced to the customer on the day the

loan is sanctioned. When this type of advance is given to the borrower, the bank

gives grace period after charging installments and markup. However, the

customer pays installments monthly.

4.21 PERSONAL LOANS

Customers whose salary account is maintained by bank are eligible for this type

of loan. It is up to three basic salaries of employees of government organization.

The objective of this type of loan is to improve the life style of customers.

4.22 STAFF LOANS

These types of loans include house loans, car loan etc. They are long-term loans.

Amount is deducted from the salary of employee every month.

4.23 ELIGIBILITY FOR FINANCE FACILITY

At NBP Advance is given after hundred percent backup guarantees. The types of

securities, which are accepted by the bank, are:

1. Government Bonds and Saving Certificate.


2. Cash deposits at the same bank.

3. Pledge of stock.

4.24 ADVANCE SALARY ACCOUNT

Before advance salary account was introduced by NBP, one important mode of

financing was the project financing in which there was a great deal of risk

involved for the non-performing of loans. (The risk of un-collection was not

diversified). While at the same time the salaried class was ignored too. As a result

the advance salary introduced by NBP in mid 2000 with a wide range purpose and

all branches were granted with adequate discretionary powers.

Advance salary is a modified form of running finance. It initially offered three

months advance salary to salaried class customers of any govt., non-govt. or a

registered firm with 11% markup rate per month. Advance salary account is

receiving a handsome response from existing and potential customers because of

its simple procedure and feasible nature.

Keeping in view the demand of advance salary the number of months has now

been increased to 10 months.

A potential customer of advance salary account has to bring and attach in

following documents with specified application form.

1. Three undated crossed cheques.

2. Last salary slip.

3. Photocopy of service card.

4. Copy of NIC.

5. Undertaking from the salary distribution authority.


4.25 GOLD FINANCE

National Bank of Pakistan also provides loans against gold to meet the domestic

needs of general public.

Gold Finance is provided against two personal guarantees. The loans sanction

limit is up to Rs. 5000. The bank keeps 25% margin as safety with itself. The loan

is to be paid in lump sum within one year time period.

4.26 LOAN PRE-SANCTION FORMALITIES

4.26.1 Against Liquid Securities (TDR, DSC, RIC etc)

1. Account (C/A or PLS )

2. Party’s request with purpose.

3. Legal status of party’s business (individual consumer, individual business,

firm, limited company).

4. Copy of National Identity Card.

5. Security (TDR, DSC, RIC etc).

6. Consent/ Undertaking if security owned by some one other than the

borrower.

7. Lien marked certificate (for National Center Securities).

8. Borrowers’ basic fact sheet.

9. Office note for approval with detailed terms and conditions.

10. Sanction advice (Acceptance of terms and conditions by borrowers).


4.26.2 Against Hypothecation of Goods and Machinery with

Additional Collateral of Mortgage of Property

1. Account (C/A or PLS).

2. Party’s request.

3. Statement of stock of hypothecated duly verified.

4. Statement of account.

5. Valuation certificate from bank’s engineer or approved valuer, as the case

may be.

6. Bank’s legal advisor’s certificate.

7. Title documents of the property to be mortgaged. Title deed mutation, Aks

Shajra, Naqsha Tasveeri, Fard Number, approved site plan.

8. Non encumbrance certificate (not more than three months old).

9. Personal guarantee (if property owned by someone other than the

borrower).

10. Borrower’s basic fact sheet.


12. Financial Statement (as per SBP prudential regulations).

13. CIB report (as per SBP prudential regulations).


15. Sanction advice (acceptance of terms and conditions by the borrower).


4.26.3 Against mortgage of Property Including Fixed Assets of

Industry for Industry only

1. Account ((C/A or PLS).

2. Party’s request.

3. Valuation certificate from bank’s engineer or approve value, as the case

may be.

4. Bank’s legal advisor’s certificate.

5. Title document of the property to the mortgage. Title deed, mutation, Aks

Shajra, Naqsha Tasveeri, Fard Number, approved site plan.

6. Non encumbrance certificate (not more than three months old).

7. Personal guarantee (if property owned by someone other than the

borrower).

8. Borrower’s basic fact sheet.


10. Financial Statements as per SBP prudential regulations.


12. Sanction advice (acceptance of terms & conditions).

FOREIGN EXCHANGE DEPARTMENT

In modern banking system, Foreign Exchange department plays very important

role from every aspect. It is parallel banking to the general banking with

additional functions of imports and exports business. Foreign exchange is

controlled by State Bank of Pakistan. Rules and regulations are framed by SBP.


NBP also carries the international banking through its Foreign Exchange

Department. All the transactions are carried at the rate authorized by SBP. For

this purpose US dollar has been fixed by SBP and the rate of other currencies are

calculated in accordance with the formula approved by SBP and as published

daily by Foreign Exchange Rate Committee in Karachi. NBP Head Office ensures

that the branches receive the rates published by Foreign exchange rate Committee

on the same day.

The Foreign Exchange Department provides the following services;

1) Foreign Currency Accounts.

2) Foreign Exchange Remittance Facility.

3) Import Advances to Importer.

4) Export Advances to Exporters.

4.27 FOREIGN CURRENCY ACCOUNTS:

NBP as an authorized commercial bank offers the facility of Foreign Currency

Account in four currencies, which are US Dollars, Japanese Yen, German Mark,

and UK Pound Sterling. Top management of NBP has authorized a few selected

branches for dealing in foreign currency accounts.

The foreign currency account facility by NBP is available both for Pakistani

Citizens and foreigners. The procedure for opening foreign currency account is

similar to opening of local currency accounts, except that in case of foreigners,

the bank requires photo copy of the applicant’s passport. The account may be an

individual or joint account.

The customer may open Foreign Currency Account in any of the mentioned

Foreign Currencies. Withdrawal and deposits are to be made in the same


currency. Similarly interest on the account will also be calculated in the currency

in which the account is maintained.

Broadly there are two types of foreign currency accounts.

Current Account

Saving Account

4.27.1 Current Account:

Just like local currency current account holder, no interest is given to the Foreign

Currency account holder. Foreign Currency accounts are also exempted from

Zakat, Income Tax, wealth Tax. The account holder can shift his money abroad

through foreign exchange remittance services.

4.27.2Saving Account:

NBP offers a rate of return on foreign currency saving accounts. The profit is paid

in the currency in which the account is opened. This account is also exempted

from Zakat, Income Tax and Wealth Tax. The facility of inward and outward

remittances is granted to the customer.

Foreign currency department of NBP also has a very extensive system for the

purchase and sale of foreign currencies. NBP is an authorized dealer in the foreign

currency, given the authority by the SBP. NBP deals in the buying and selling of

Foreign Currency notes only i.e. dealing in coins is avoided.

Head Office of NBP determines the maximum foreign Currency balances that can

be kept in every branch authorized to deal in Foreign Currencies. Those branches

of NBP which are authorized to deal in Foreign Currencies must submit the

following reports about foreign exchange,


Report to General Manger Office

Business Report to SBP (Monthly Basis)

Monthly Report to Head Office

4.28 FOREIGN EXCHANGE REMITTANCES

The currency of one country is legal tender only in the same country and not in

other countries. So what should the businessmen do while doing international

business. To overcome such difficulty of businessmen the business is done

through Foreign Exchange. The importer will need the currency of the exporting

country. The international business is carried out by transferring credit from

debtor’s country to the creditor’s country.

Foreign remittances can be done in the following ways:

Telegraphic Transfer(T.T)

Mail Transfer (M.T)

Foreign Demand Draft (F.D.D

4.29 IMPORT & EXPORT L/C

Now-a-days Export and Import business is very risky. The importer wants surety

of the good to be delivered to his prescribed destination; while exporters want

surety of the money to be sent to his prescribed bank. So, with a view to

overcome such difficulties a system of L/C is designed. Various banking

companies are involved in the business through L/C. NBP has also a very

extensive system of business through L/C.

The opening of L/C is a very complicated activity requiring vigilance and

banker’s shrewdness. Normally, in the preparation of L/C the following banks are

involved.


4.29.1Issuing Bank

It is the bank, which opens L/C and then sends to the country from where imports

are to be made. The issuing bank may send this L/C to one of its branch if present

there, if not, then to some other bank located in the exporter’s country.

4.29.2 Advising Bank

This bank informs the exporter that an L/C has been received and also acts

as an agent of the exporter.

4.29.3Negotiating Bank

Negotiating bank carries out the negotiation with the importer on behalf of the

exporter. It may or may or may not be the advising bank. The various credentials

related to L/C are settled as per agreed terms of L/C.

4.30 TYPES OF L/C

Following are the important types of Letter of credit;

4.30.1 Confirmed Letter Of Credit

It is a written agreement in which the bank give the guarantee that if the goods

will be of the standard and fulfilling the conditions of L/C, and then the exporter

(after presenting the L/C to the bank) will get the payment from the bank. The

characteristic of this kind of L/C is that, it can’t be cancelled after issuance and

the payment will be must.


4.30.2 Un-Confirmed Letter Of Credit

In this kind of written document the bank takes the responsibilities of receiving

the bills of exporter. But it doesn’t give the guarantee of paying these bills.

Unconfirmed L/C can be cancelled. The importer can cancel it and after

cancellation the bank don’t give the guarantee of payment of L/C. It is a kind of

conditional L/C i.e. the guarantee can be given in the case when the importer

didn’t cancel it.

4.30.3 Revocable Letter Of Credit

This kind of L/C can be cancelled by the bank or by the request of the importer. In

this kind of L/C the chances of cancellation are at every moment. So it is not dealt

widely and the importance of this L/C is very little.

4.30.4Irrevocable Letter Of Credit

This kind of L/C is issued for foreign payments. They could not be cancelled until

the given conditions are not broken. So with this kind of L/C the exporter has the

guarantee of payment.

4.30.5 Fixed Letter Of Credit

Those drafts or L/C, the amount of which is when paid once then it comes to an

end, are called fixed letter of credit.

4.30.6 Circular Letter Of Credit

This kind of L/C can be used for more than one time, e.g. if one L/C is of rupees

20 lack and the exporter provides the goods in installments, it has exported the

goods worth rupees 10 lack. The remaining goods worth rupees 10 lacks have to

be exported. And if he (exporter) pays rupees 10 lacks to the issuer (bank) so the

L/C of rupees 20 lack can be renewed.


4.30.7 Documentary Letter Of Credit

When we enclose important documents with the L/C then it becomes a

documentary L/C, i.e. insurance, invoice, post or draft, clearing certificates, etc.

4.31 THE MECHANISM OF OPENING AN L/C:

For buying any commodity from foreign country the buyer will reach the seller

(exporter) for the purchase of particular commodity of goods. After the

preliminary settling of agreement between the two parties, the importer will then

apply to his bank for the issuance of an L/C. The bank then asks the Importer to

fill the L/C application form. This form contains all the details discussed and

agreed upon by the two parties.

Besides containing information like description of merchandize, port of shipment

and unloading, it also mention the documents necessary for the honoring of draft

drawn upon the issuing bank by the importer.

Usually the following documents are attached with L/C.

Application for L/C

Membership Certificate of Chamber of Commerce or Association

Insurance Certificate

IBC charge form

4.32 NEGOTIATION OF L/C DOCUMENTS

The process of Negotiation starts when the exporter reaches the bank for honoring

the draft drawn on it by the importer. The exporter sends the documents

evidencing the shipment of goods to the bank where the credit is available and is

accompanied by a draft drawn on the issuing bank by the importer.


After complete scrutiny, if the documents meet the required terms and conditions,

the bank they may negotiate the draft. This negotiation by the bank will be with

recourse to the seller. Then this bank sends back the documents to the issuing

bank for reimbursement and is obtained in the pre-agreed manner.


CHAPTER - 5

DIFFERENT SERVICES PROVIDED BY NBP

5.1 DEMAND DRAFT

If u are looking for a safe, speedy and reliable way of transfer money, you can

now purchase NBP’s Demand Draft at very reasonable rates. Any person whether

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

branch.

5.2 TRAVELER’S CHEQUE

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 Cheque is the safest way to carry out the money.

5.3 PAY ORDER

NBP provides another reason to transfer your money using bank’s facilities. Its

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

another. And, as usual, bank’s charges for this service are extremely competitive.

A) Issuance of Pay order

1. For NBP Account Holder Rs. 50

2. For NBP Non- Account Holder Rs. 100/-

3. Rs. 25 from students for payment of fee favoring educational institution.


B) Issuance of Duplicate Pay Order

1. For NBP Account Holder Rs. 100/-

2. For NBP Non- Account Holder Rs.150/-

5.4 FOREIGN REMITTANCES

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

Pakistan has taken a number of measures to:

a. Increase home remittances through the banking system.

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

remittances to the beneficiary.

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 Pakistani at 16 overseas branches of the

Bank besides Pakistan International Bank (UK) Ltd, 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.

5.5 SHORT TERM INVESTMENTS

NBP now offers excellent rates of profit on all its 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.


5.5.1 AGRICULTURE FINANCE

Agriculture Finance

NBP provides Agriculture Finance to solidify faith, commitment and pride of

farmers who provide some of the best agriculture products in the world.

Agriculture 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.

Agriculture Credit

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

1. Providing reliable infrastructure for agriculture customers.

2. Help farmers utilize funds efficiency to further develop and achieve better

production.

3. Provide farmers as integrated package of credit with supplies of essential

inputs, technical knowledge, and supervision of farming.

Agriculture Credit (Medium Town)

Production and development.

Water course improvement.

Wells.

Farm power.

Development loans for tea plantation.

Fencing.

Solar energy.


Equipment for sprinklers.

Farm Credit

NBP also provides the following subsidized with the range of 3 months to 1 year

on a renewal basis.

5.5.2 NBP KISAN DOST

Loans available for the farmers for production, development purposes, for

purchases of tractors, for installation of tube wells, for purchase of

agricultural Implements, micro loans, for godown construction, for

construction of fish pond, for live stock farming, for milk processing, for

cold storage, bio- gas plants etc.

Mark-up 11% per annum.

Loans available at the farmer’s door step.

Agriculture experts to guide farmers.

Loans available against agricultural passbooks, gold ornaments and paper

security.

5.5.3 NBP CASH n GOLD

Facility of Rs.5000 against 10 gms of gold.

Mark-up 11% per annum.

No maximum limit of cash.

Repayable after one year.

Roll over facility.

No penalty for early repayments.

5.5.4 NBP SAIBAN


Finance available for home purchase, home construction and home

improvement.

Period of repayment ranges between 3-20 years.

Loans available upto a maximum of Rs.10 million.

Mark-up choices available. Rate ranges between 7.5 %- 9.75%.

Minimum approval and disbursement timing.

Limited to areas where there are no documentation, fee, resale and

foreclosure related issues, so to protect the bank’s interest.

5.6 INTERNATIONAL BANKING

National Bank of Pakistan is all the fore front 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.

NBP OFFERS

The lowest rates on exports and other international banking products access to

different local commercial banks in international banking.


CHAPTER-6

FINANCIAL ANALYSIS

10.1 LIQUIDITY RATIOS

Liquidity ratios are used to judge a firm’s ability to meet short term obligations. It

shows the cash solvency of a firm and its ability to remain solvent in the event of

adversities.

6.1.1 CURRENT RATIO

This ratio shows a firm ability to cover its short- term liabilities through short

term assets.

The three year comparison of NBP is given below:

Table 6.1.1: CURRENT RATIO

YEARS Current Assets / Current Liabilities

CURRENT RATIO

2003 365588 / 332090 1.10

2004 382889 / 348165 1.10

2005 279983543 / 417558742 0.67

Source: Annual Report 2005

Graph 6.1.1


INTERPRETATION

The current ratio for the financial year 2003 is just in line with the financial year

2004. It remained the same for both the years. It tells that for every Rupee 1

current liability it has 1.10 rupees, which covers through current assets. However

in 2005, it decreased to .67, as its mostly receivables are not collected.

6.1.2 ACID QUICK RATIO

A more conservative measure of liquidity is the acid quick ratio. This ratio is same as current ratio except it excludes inventories and prepayments presumably the least liquid portion of current assets. The ratio concentrates primarily on the more liquid current assets, cash, marketable securities, receivables and advances.

Table 6.1.2: ACID QUICK RATIO

YEARS Current Assets – Prepayments / Current Liabilities

ACIDQUICK RATIO

2003 365588 – 18091/ 332090 1.05

2004 382889 – 12746 / 348165 1.06

2005 279983543 – 10254 / 417558742

0.67


Graph 6.1.2:


INTERPRETATION:

The Acid Quick Ratio for the financial year 2003 has slightly improved from 1.05 to 1.06 in the year 20002. The ratio in 2005 is lesser because of the excessive prepayments. The reason for the improvement of the ratio in the next year is the less prepayment.

6.1.3 CASH RATIO

Sometimes it needs to view the liquidity of the firm from an extremely conservative point of view, for example the company may have pledged its receivables and inventories. In such type of situations, the best indicator of the firm of the short- term liquidity may be the cash ratio.

Table 6.1.3:

CASH RATIO

YEARS Cash / Current Liabilities

CASH RATIO

2003 84593 / 332090 0.25

2004 63525 / 348165 0.18

2005 59420502 / 417558742 0.14


Graph 6.1.3:


INTERPRETATION:

The three year comparison shows the smaller cash ratio in 2003, it is clear that probably NBP carried less cash in 2004 as compared to 2005.

6.1.4 OPERATING CAH FLOWS TO CURRENT LIABILITIES RATIO

Operating cash flow to current liability ratio compares cash flow to current liabilities of a firm and indicates the funds flow per unit of current liability.

Table 6.1.4:

OPERATING CASH FLOW TO CURRENT LIABILITIES RATIO

YEARS Operating cash flow / Current Liabilities

CURRENT RATIO

2003 6799 / 332090 0.2

2004 42661 / 348165 0.12

2005 14633962 / 417558742 0.035


Graph 6.1.4:


Interpretation:NBP has improved its operating cash flow to current liability ratio. The increase is attributed to the operating cash flows, which has increased more then 6 times.6.2 ACTIVITY RATIOS

Activity Ratios are also known as efficiency or turnover ratio it measures how effectively the firm is using its assets.

6.2.1 RECEIAVABLES TURNOVER / ADVANCES TURNOVER

Receivables turnover or Advances turnover provides insight into the quality of the firm receivables or advances and how successful the firm is in its collection.

Table 6.2.1:

RECEIVABLE TURNOVER RATIO

YEARS Markup/ Interest Earned / Advances

Receivable Turnover

2003 31290584 / 140547374 0.22

2004 27126839 / 140547374 0.19

2005 19452317 / 160990265 0.12

Graph 6.2.1:



INTERPRETATION:

The bank has better Advances turnover ratio in the year 2005 compared to the year 2003. and better in 2004 as well.

6.2.2 DEPOSITS TURNOVER RATIO

This ratio compares the Markup expense that the bank pays on deposits to the deposits of the bank.

Table 6.2.2:

DEPOSIT TURNOVER RATIO

YEARS Current Assets / Current Liabilities

Deposit Turnover

2003 18877247 / 349617068 0.053

2004 14698507 / 362865637 0.040

2005 6735579 / 395568490 0.017

Graph 6.2.2:



INTERPRETATION:

The DTO for the year 2000 has declined. It is 0.04 and 0.05 for the year 2004 and 2003 respectively. It shows that for each rupees deposit by the customer it pays 0.06 as interest expense. In 2005 it is 0.017, which shows the lower interest.

6.2.3 TOTAL ASSET TURNOVER

Generally the total assets turnover measures the activity of the assets and the ability of the firm to generate sales through the use of the asset.

Table 6.2.3:

TOTAL ASSET TURNOVER RATIO

YEARS Markup, Interest Earned / Total Assets

TST

2003 31290584 / 17510437 1.78

2004 27126839 / 23936263 1.13

2005 19452317 / 27584014 0.705

Graph 6.2.3:



INTERPRETATION:

The Assets efficiency of the NBP has reduced for the year 2005 to 1.13% compared to 2003 which was 1.78%. In other words we can say that each dollar investment in total assets produces 6 cents as markup. The decline in ratio is mainly because of decrease in Total Markup / Interest Earned amount in 2005. .

6.2.4 FIXED ASSETS TURNOVER

Sometimes it is needed to find the efficiency of fixed assets to generate interest revenue or sales. Fixed assets turnover is a tool to find how efficiency one the firm’s fixed assets to produce Markup / Interest revenue.

Table 6.2.4:

FIXED ASSETS RATIO

YEARS Markup or Interest Earned / Fixed Assets

Fixed Asset Turnover

2003 19452317 / 215423669 0.09

2004 27126839 / 176151526 0.15

2005 31290584 / 425446998 0.07

Graph: 6.2.4



INTERPRETATION:

The three year comparison of fixed asset turnover for NBP shows that the ratio has increased for the year 2004. The decrease in total amount of Markup / Interest Earned and increase in fixed assets has brought this ratio down. However it decreases in 2005; increase in fixed assets and markup cause this.

6.3 PROFITABILITY RATIOS

These ratios indicate the firm’s overall effectiveness of the operations.

6.3.1 NET PROFIT MARGINS

This is the conservative method of sales profitability. This ratio gives a measure of Net Income in dollars generated by each dollar of sales.

Table 6.3.1

NET PROFIT MARGIN RATIOYEARS Net Income / Markup

or Interest Earned Net Profit Margin

2003 752226 / 17510437 0.04

2004 3404593 / 23936263 0.14

2005 5897163 / 27584014 0.213

Graph 6.3.1



INTERPRETATION:

The bank has considerably improved the Net Profit Margin. In 2004 it was earning 10 paisas per rupee markup while previous year 2003 comparisons show 4 cents per dollar markup or return. And a 7% increase in 2005.

6.3.2 GROSS PROFIT MARGIN

This ratio shows the profit of the firm relative to the sales. It is a measure of efficiency of the firms operations as well as an indication of how product or services of the firm are provided.

GROSS PROFIT MARGIN RATIO

YEARS Net Markup or Interest Expense / Markup or Interest Earned

GPM

2003 18877247 / 31290584 0.60

2004 14698507 / 27126839 0.54

2005 6735579 / 19452317 0.34

Graph 6.3.2



Table 6.3.2

INTERPRETATION:

NBP bas a better Gross Profit Margin for the year 2003 compared to the year 2004. It shows that NBP has become more effective in producing the services reasonably above cost and charging for them. While in 2005 it again decreases that’s shows its good sign.

6.3.3 RETURN ON INVESTMENT

The return on the Investment measures the firm’s ability to utilize its assets to create profits by comparing profits with the assets that generate the profits from du pont approach.

Table 6.3.3

RETURN ON INVESTMENT

YEARS Net Profit Margin * Total Asset Turnover

ROI

2003 0.64 * 1.78 1.139

2004 0.14* 1.13 0.158

2005 0.213* 0.705 0.150

Graph 6.3.3

INTERPRETATION:



NBP shows a low ROI in the year 2005 compares to the year 2003 &2004. Its ROI has decreased from, in the year 2004, 0.158 to .15 in 2005. The assets turnover though reduced, still the improvement in NBP will bring this ratio up.

6.3.4 RETURN ON EQUITY

This ratio compares Net Profit after Taxes to the equity that the share holders have invested in the firm. A high return on equity reflects the firm acceptance of strong investment opportunities and effective expense management.

Table 6.3.4

RETURN ON EQUITY RATIO

YEARS Net Profit Margin * Asset Turnover * Equity

ROE

2003 0.64 * 1.78 * 1195 1361.3

2004 0.14* 1.13 * 1427 225.7

2005 0.213* 0.705 * 1813 272.2

Graph 6.3.4



INTERPRETATION:

It is clear from the above ratio comparison that the ROE ratio for the year 2005 has increased to 272.2 from 225 in the year 2004. There is a decrease in equity multiplier and asset turnover but still the improvement in Net Profit Margin in the year 2005 has favorable effect on ROE ratio.

6.4 ADVANCES TO DEPOSITS RATIOS

The firm compares the advances to deposits and sees the comparisons of different years

Table 6.3.5

ADVANCES TO DEPOSITS RATIOS RATIO

YEARS Advances / Deposits Equals

2003 170319096 / 349617068 0.487

2004 140547374 / 3628605637 0.387

2005 160990265 / 395568490 0.406

Graph 6.3.5



INTERPRETATION:

It shows that in 2005 there is an increase both in the deposits as well as in the advances, which shows a good sign for the bank. Although it is decrease as compare to 2003.

6.4. INVESTMENT TO DEPOSITS RATIOS

The firm compares the investments to deposits and sees the comparisons of different years.

Table 6.3.6

INVESTMENT TO DEPOSITS RATIOS

YEARS Investments / Deposits Equals

2003 71759449 / 349617068 0.205

2004 143524971 / 3628605637 0.395

2005 166195619 / 395568490 0.420

Graph 6.3.6



INTERPRETATION:

It shows that bank has done a good investment that increases its total in 2005, as compare to 2004 & 2003. It’s a good sign for the bank; more cash is generated in this way.

6.4.3 EQUITY MULTIPLIER

Equity multiplier compares the assets of the firm to the share holder equity.

Table 6.3.7

EQUITY MUTIPLIER

YEARS Total Assets / Equity Equity Multiplier

2003 17510437 / 11958673 0.96

2004 23936263 / 14279303 0.16

2005 27584014 / 18133897 1.52

Graph 6.3.7



INTERPRETATION:

The equity multiplier has also been reduced from in the year 2000. The main factor here again is that the amount of equity has considerably increased. But increase in the year 2000, with increase both in the assets and equity.

6.5 FIVE YEAR Performance Data Glance

Table 6.3.8

(Rs. In millions)

Years Total Assets

Deposits Advances Investments Shareholder Equity

1998 325,057 273,391 109,524 102,969 9,978

1999 350,406 294,754 122,559 91,486 10,358

2000 371,636 316,493 140,318 72,609 11,378

2003 415,089 349,617 170,319 71,759 11,959

2004 432,803 362,866 140,547 143,525 14,279

2005 471,860 395,568 160,990 166,196 18,134


Total Assets

0

100000

200000

300000

400000

500000

1 2 3 4 5 6

Years

RS

. in

millio

ns

Total Assets

Years

DEPOSITS

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

1 2 3 4 5 6

YEARS

Rs. in

millio

ns

Deposits

Years


Graph 6.3.8.1 Graph 6.3.8.2



Graph 6.3.8.3

Graph 6.3.8.5

Graph 6.3.8.4


institute Of Management Studies

(Rs. In millions )

Years Pre-Tax Profit

After-Tax

Profit

Number ob Branches

Number of Employees

1998 2,135 530 1,434 15,785

1999 520 31 1,431 15,541

2000 1,032 461 1,428 15,351

2003 3,016 1,149 1,245 15,163

2004 6,045 2,253 1,204 12,195

2005 9,009 4,198 1199 13272

80

Graph 6.3.9

Table 6.3.9

6.6 FINANCIAL HIGHLIGHTS

Table 6.3.10

Rs. In Millions

Authorized Capital 5,000

Paid up Capital 4,130

Shareholder Equity & Reserves 27,584

Deposits 395,568

Advances –Net 160,990

Investment Net 166,196

Total Assets 471,860

Pre-Tax Profit 9,009

After-Tax Profit 4,198

No. of Branches 1199

No. Of Employees 13272



6.7 BALANCE SHHET AS AT DECEMBER 31, 2005

institute Of Management Studies

2004 2005 DISCRIPTION 2005 2004 US DOLLARS IN 000 ASSETS Rupees in 000

966,294 1,033,967Cash and Balance with treasury Banks 55,531,453 59,420,502

624,309 420,301 Balance with other Banks 35,878,101 24,154,070377,891 525,738 .Landing to Financial Institutions 21,716,802 30,213,352

2,497,455 2,891,943 Investments 143,524,971

166,195,619

2,445,642 2,801,365 Advances 140,547,374

160,990,265

478,332 381,892 Other Assets 27,489,021 21,946,846141,210 155,554 Operating Fixed Assets 8,115,131 8,939,483

…. …. Deferred Tax Assets …. ….7,531,13

3 8,210,760 432,802,853471,860,13

7

LIABILITIES58,567 95,647 Bills Payable 5.496.738 3,365,744

174,568 287,001Borrowings for Financial Institutions 16,493,514 10,032,135

6,314,166 6,883,222 Deposits and other accounts 395,568,490

362,865,637

…. …. Sub- ordinate loans …. ….

1,289 715Liabilities against assets subject to finance lease 41,117 74,051

516,506 453,821 Other liabilities 26,080,400 29,682,83749,526 10,369 Deferred Tax Liabilities 595,864 2,846,186

7,114,622 7,730,775 444,276,123

408,866,590

416,511 479,985 Net Assets 27,584,014 23,936,263

REPRESENTED BY64,912 71,403 Share Capital 4,103,422 3,730,384

124,317 141,526 Reserves 8,133,312 7,144,32659,243 102,616 Un- appropriated Profit 5,897,163 3,404,593

248,472 315,545 18,133,897 14,279,303168,039 164,440 Surplus on revaluation of assets 9,450,117 9,656,960416,511 479,985 27,584,014 23,936,263

82

CHAPTER-7

SWOT ANALYSIS OF NBP

SWOT Analysis is an acronym used for strengths, weaknesses, opportunities and

threats. Strengths and weaknesses are the initial strength and weaknesses of an

organization, whereas opportunities and threats are the external one.

7.1 STRENGTHS

NBP is high profitable organization.

The only bank providing the advance salary account up to 10 months.

NBP uses the fastest ways of money transfer.

High liquidity is strength of NBP.

People have more confidence in NBP due to strong government support.

NBP is a very sound financial institute.

Role in national economic development.

Bank with more deposits than any other commercial bank.

Professional confidence.

Recognition of the hard work of staff through incentives.

Intellectual commitment to change.

7.2 WEAKNESSES

NBP has a good staff combination on the basis of experience, but their

training capabilities are not up to the requirements of the fast changing

banking environment.

The customers’ relations of the NBP staff are much weaker as compared

to other private banks.


Long term contacts are not maintained with customers.

Most of the staff is from families with strong political background so it is

very difficult to remove them or punish their negative behavior.

The technical training of the staff is negligible e.g. in case of absence of

the computer operator there is no alternate trained person who can record

the daily transactions.

The organization is very much mechanistic and provides no flexibility to

encourage creativity.

The lower staff is non-cooperative as compared to the lower staff of other

branches. The control of manager is not effective.

The discretionary powers of manager are very low to offer more

incentives and value added services to its customers. There is a lack of

commitment and professionalism on part of the employees. The staff is

always in a hurry to leave the bank as soon as possible. They were also

observed to be starting their operations comparatively late. The

organizational culture is not cooperative and friendly. Nepotism was

observed on part of the manager as well as the top management towards

some staff members.

The level of technology management in the branch is very low. The

technology available is not maintained well mainly because of the lack of

technically trained staff. In spite of the presence of technology many jobs

are done manually such as the letters, fax messages and other calculations,

which could be easily, done in MS Word and MS Excel.

The job distribution is not up to the mark. The immediate result of this is

inefficiency and delay in work. The filing system is not up-to-date.

Much time is wasted while searching for even a week old document.


The staff spends more time in collections than required. The bank

collections are usually late because of the non-availability of staff.

No efforts are made to recover the outstanding debts. There is no facility

for complaints and suggestions.

Customers coming to the Bank for TTs, TCs etc. are not received with

open hearts and thus deprive the bank of revenues.

There is a lack of functional and proper research and development, which

could scan the micro and macro environmental data for future planning

and strategy.

Financial audits are conducted but operational audits have not received

proper attention as much as it should get.

There is no procedure, which could encourage the middle and lower level

management to initiate creativity.

The lack of professional bodies is a major weakness.

Instructions are not conveyed systematically but rather than casual

manner.

7.3 OPPORTUNITIES

New marketing strategies to invest money in new projects.

There is a great opportunity for NBP in field of micro finance.

Privatization of NBP.

There is a good opportunity to utilize the skill of educated young talent for

the enhancement of business.

Advance is the main area, which has a tremendous potential in the share of

profit. This area can be profitable for the organization.


Wide range of products and product line can enhance the business.

Leasing business.

Hiring the new MBA’s, new talent which can control the administrative

expenses.

7.4 THREATS

The biggest threat to the operational success is the better competitors’

services. Many private sector banks are offering higher rates of return

to customers than NBP.

The banks in the neighborhood of NBP have become online e.g. Union

Bank, Habib Bank, Muslim Commercial Bank and Standard Chartered

Bank, while it lacks this.

Cannibalization of profits is yet another threat to the success of NBP.

The branches of NBP are located very close to each other. All these

branches are taking away each other’s customers.

One of the biggest threats to the NBP is the increasing rate of

dissatisfied customers. Most of these customers were observed to be

dissatisfied with the delays in their services.

The greatest threat to the performance of NBP is the decreasing morale

of employees. They feel that they are not provided with bonuses, they

are not given proper attention to have a say in the meetings.

High-pressure interest groups are developing which poses a constant

threat to NBP.

Establishment of new private financial institutions and expansion.

Merger of some of financial institutions.

Political pressure.


New products from private Pakistani and Foreign Banks.

Quality of human resources.

7.5 CRITICAL ANALYSIS OF NBP Bannu Cantt Branch

The critical analysis is about the National Bank of Pakistan Bannu Cantt Branch

beside some of the good aspect of the branch, there are some reactive sides which

are to be given consideration in their first priority. There are some point which

were noticed during the internship period.

7.5.1 Professional Training

Number of Employees are Six Chief Manager to Control all the staff. Operation

Manager Control all the banking activities. Two Cashiers to control all the cash

activities of the Branch one Remittances officer one is of Computer Work. They

do not have the required background to properly conduct the operation of the

bank. Many of the employees have background which is completely irrelative to

the banking profession. They do not know about the modern technology just like a

computer and don’t know how to use it properly. Although staff training colleges

are working 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 employees understand the ever changing.


7.5.2 The Transfer CriteriaThe transfer criteria and policies really want amendment. There are Six members

in the branch for more then 5 years where as on the other hand some of them are

always in rotation. Therefore, those who are permanently working they have no

fear and they don’t work properly and those who are always in transition they are

not interested in working hard because they had to leave the seat and had to

transfer to another place with net work. So there are not such fixed rules for an

employee transfer. Ultimately the bank has to suffer losses. The transfer means

when a person is shifted from one place to another, transfer are not properly

carried out. Some of the employees are continuously serving at the same post.

They are simply rotated at the same branch. Therefore, it is recommended that

evenly rotation of every employee should take place after three years in different

branches of the bank.

7.5.3 Unavailability of Computerized SystemUnavailability of the computerized system has made difficult to operate accounts

for the customers. Cashing of the cheques takes too much time of the bank and the

customers. It is a new technique for quick operation and to increase the numbers

of account holders.

7.5.4 Wrong Decision of the GovernmentIn past the every department funds would be sent to their own department but now

salaries of the Education and Health department is paid to the teachers, doctors

and lady health workers through banks. For receiving their salaries all of the

employees of that department come to the bank, which is out of the control for the

bank management. Even the ladies and the elders have to wait for hours. And now

the utility bills are also received over there, which is also an essential load for the

bank.

7.5.5 Dress Code

Most of the employees come to the bank in a very casual dress. This shows their

least care about their bank reputation and image, which gives a bad impression to

the customers.


CHAPTER 8

FINDINGS AND RECOMMENDATIONS

There is always a better way of doing things so some of recommendations

suggested for the bank in accordance to the critical analysis.

8.1 IMPROVE QUALIFICATION OF THE STAFF

Academically staff is quite qualified but most of the staff lacks professional

qualification i.e. they should do diploma in banking. It will help them a lot in

banking and also in their promotions. The cost of diploma in banking is low. It

has three stages and the cost per stage is - Rs.2, 000.

8.2 STAFF SHOULD BE TRAINED

Proper training should be given to the staff of the branch. Staff college people

should come and train the staff because some times it is difficult for staff to visit

Staff Collage Peshawar to get the required training. The cost estimates for the

Staff College employees to come to the branch and give them training will be like

Rs.1, 000 per Staff College Employee for one day. So if two people come for two

days after six months then the cost will be Rs.8, 000 per year, which is negligible.

8.3 IMPROVE TECHNOLOGY

This branch has fax, telephones and computers. It is suggested that there should

be on line banking facility and ATM (Auto Teller Machine) facility. The existing

computers should be interconnected by networking, which will cost only Rs.10,

000 for only one time. The benefit of Networking will be that the different

departments will be able to work and easily, efficiently and with least wastage of

time.


8.4 RANK INFLUENCE SHOULD BE AVOIDED

Some times high rank officers come and want themselves to be given priority. In

these cases bank should strictly follow the rule of ‘first come first serve’. This

will maintain the trust of other customers that they are not neglected just because

they have no rank.

8.5 SECRECY MEASURES MUST BE MAINTAINED

The branch must maintain the secrecy of its customer’s account especially when

the bank is asked on telephone to tell about the financial standing and balance in

the account.

8.6 GOLD LOAN AND LOCKER FACILITY

Bank should utilize its deposits by extending gold loans and all other kind of

loans to attract the potential customers to utilize their full capacity. This will

increase their business circle, and will increase profits by decreasing per unit

costs.

8.7 MOTIVITATE THE EMPLOYEES

The staff of the NBP Cantt. Branch Peshawar, especially the lower staff is found

very much demotivated. They are dissatisfied with the performance appraisal

system of the bank. They also complain about the nepotism of the upper

management. The Branch manager should establish a systematic and efficient

appraisal system to over come the demotivation and dissatisfaction of the

employees.

8.8 CUSTOMER ORIENTATION

Every leading organization considers its customers as the kings. So the bank

manager needs to keep in close contact with the existing and the potential

customers. He should inform them about new products of the bank. The

customers should be asked about the bank’s services from time to time. And the


deficiencies pointed out by the customers should be removed. The customer and

staff relationship should be made mild, soft, courteous, cooperative, and caring,

which is not like this in NBP now a days, as compared to other private banks.

8.9 JOB ROTATION

The employees should be rotated through different seats of different departments,

so that each and every employee is aware of the whole banking system. It will

benefit in the absence of employees.

8.10 DECISION OF GOVERNMENT

The government is sending the salaries of some of the departments of the NBP,

which creates a lot of rush and voice in the bank, at the end of each month the

NBP should have to appeal to the government to retake this order and send their

salaries to each department independently. The NBP is getting nothing out of it

except disaster in the bank.

8.11 DRESS CODE

Dress takes a great role in presenting somebody’s personality. Especially for

bankers, dress code should come in a very formal dress and thus they can show

their customers about their seriousness towards work.


BIBLIOGRAPHY

1. Decenzo, David. A and Robbins, Stephen. P. (1994). Human Resource

Management. USA John Wiley and Sons Inc.

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Management Studies.

3. Hassan, Mumtaz (1998). The story of NBP, Karachi.

4. Harold, Koontz and Heiz Weihrich (1984). Management. McGraw

hill, 8th edition.

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Brace Jovanovich College Publisher.

7. Koontz, Harold and Heinz Weihrich. (1993). Management. 10th

Edition. Singapore: McGraw Hill.

8. Nasir, M. Saeed. (1998). Banking Currency and Finance. Pakistan

Kitab Markaz.

9. Nasir, M. Saeed. (1998). Economic Theory. IImi Kitab Khana.

10. National Bank of Pakistan, (2000). Annual Report 2000. Karachi.

11. National Bank of Pakistan, Economic Bulletin of NBP, Karachi.

12. National Bank of Pakistan, Statements of Liabilities and Assets,

Statements of Profit and Loss (2000, 2000, 2000).

13. NBP, BBI. (1997-1998). National Institute of Banking and Finance.

RHQ Peshawar.


14. President Office June 21, Circular No. 13/2000. Head Office National

Bank of Pakistan, Karachi.

15. President Office Mays 13, Circular No. 11/2000. Head Office.

National Bank of Pakistan, Karachi.

16. Rue, Leslie. W and Lloyd L. Byers. (1992). Management. Boston:

Donnelley and Sons Company.

17. Siddiqi, Asrar. H. (1998). Practice and Law of Banking in Pakistan.

Karachi: Decent Print Enterprises.

18. www.nbp.com.pk

19. www.sbp.org.com

20. www.janggroup.com


http://www.sbp.org.com/

http://www.nbp.com.pk/

LIST OF PERSONS INTERVIEWED

Mr.Asif shah, O.G-3, NBP Bannu Cantt Branch

Mr.Farhad , O.G-2, NBP City Branch Bannu.


NBP Report

Documents

Transcript of NBP Report