intership report on nbp

NATIONAL BANK OF PAKISTAN

2009 2010 2011

2012

INTERSHIP REPORT on

NBP BY MIRZA IHSAN

ULLAH #306-3332407 GOVERNMENT COLLEGE UNIVERSITY FSD.

Mirza Ihsan Ullah-3063332407

M.COM (FINANCE).

B.ED(2012)

Dedication I dedicated my Report

To all Muslim invaders who gives their life, time ,blood, family and other resources

for the expansion of Deen MUHAMMAD (SAW) without any cares. Such as Musa

Ibn Nusayr and Tariq Ibn Ziyad, Muhammad bin Qasim Sultan Salahuddin, Ayubi

Tipu sultan.

&

To Templar knight and Freemason in very sad manner who wants to change

the world but happen only ALLAH wants.

M A I N B R A N C H J A R A N W A L A

http://www.siasat.pk/forum/showthread.php?101899-Books-amp-Novel-on-Sultan-Salahuddin-Ayubi

INTERSHIP REPORT on NBP BY MIRZA IHSAN ULLAH #306-3332407 2012

2

Dedication

I dedicated my Report

To all Muslim invaders who gives their life, time ,blood, family and other resources

for the expansion of Deen MUHAMMAD (SAW) without any cares. Such as Musa

Ibn Nusayr and Tariq Ibn Ziyad, Muhammad bin Qasim Sultan

Salahuddin, Ayubi Tipu sultan.

&

To Templar knight and Freemason in very sad manner who wants to change the

world but happen only ALLAH wants.





3

Executive summary

National Bank of Pakistan is a Govt. bank. It has its head office in Karachi. It has

over

1,283 branches in Pakistan & 23 abroad. National Bank of Pakistan maintains its

position as Pakistan's premier bank determined to set higher standards of

achievements. It is the major business partner for the Government of Pakistan with

special emphasis on fostering Pakistan's economic growth through aggressive and

balanced lending policies, technologically oriented products and services offered

through its large network of branches locally, internationally and representative

offices.

The National Bank of Pakistan offers a wide range of products& services to its

customers & recognizes the importance of efficient business delivery & providing

timely solutions. Now online facility of fund or cash transfer increases the strength of

NBP. cash in gold facility very popular in the market.

Their competitors are untied bank, Allied bank, Habib bank, First women bank, Bank

of Punjab etc. The essence of business philosophy is to cater to the banking

requirements of small & medium sized entrepreneurs, providing them qualitative &

competitive services with emphasis on encouraging exports. Its products are Pay

Order, Mail Transfer, Foreign Remittance, Foreign Currency Account, Short Term

Investment, cash in gold, Commercial Finance etc.

In Jaranwala, Main Branch of National Bank of Pakistan.

Branch code is 0342 & phone number is 0414-312631


4

Preface

In order to be able to cope with the changing environment it is necessary to have

some Practical experience It is requirement of GOVERNMENT COLLEGE

UNIVERSITY FSD. that all students of M.com have to spend Six Week in any

organization to get practical exposure and to get familiarized with the ways to live in

the organizational environment which is dramatically different from the educational

environment.

That six week period called “Internship period”, if spent properly and sincerely,

enables the students to be more confident, more knowledgeable, more responsible

and more committed to its work in the practical field. I have also been assigned to do

internship of six weeks period in National Bank of Pakistan Main Branch jaranwala.It

has enabled me to understand the practical scenario and sharpen our decision

making power and utilizing the resources in an effective manner, so that our

resources generate maximum profit. In preparing this report, I have put all of my best

efforts and tried my level best to give maximum knowledge.

Despite of my all the coherent efforts, I do believe that there will always be a room

for improvement in the efforts of learner like me


5

Acknowledgement

First, all praises go to the Almighty Allah, the most gracious, the most merciful, the most kind

& generous to man & his action. And who granted me a wealth of knowledge, love and

respect to share with my fellow beings. He gave me courage to pursue my passion against

all odds.

I owe my greatest gratitude to my parents for their continuous support, assistance, guidance,

love and patience without which I could not have completed this internship and report in

such a short span of time.

I am deeply indebted to my chosen bank i.e. NBP and their customers who participated in

the study. I am especially thankful to Branch manager & Mr. Muazzam in charge of

clearing department who give me cooperative company and all the staff for agreeing to

provide the required data and give me priceless knowledge.


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Table of contents Topics page # CHAPTER NO. 1 Evolution of banking & Introduction of NBP

1.1 Evolution & Introduction of banking --------------------------------------------------- 2

1.2 Banking history in Pakistan------------------------------------------------------------ 3

1.3 National bank of Pakistan ------------------------------------------------------------- 5

1.4 Role & Function of NBP------------------------------------------------------------------ 11

1.5 Business volume of NBP ----------------------------------------------------------------- 13

1.6 Branch Network of NBP------------------------------------------------------------------- 14

1.7 Competitors of NBP----------------------------------------------------------------------- 15

1.8 Awards and Achievements of NBP---------------------------------------------------- 16

CHAPTER NO. 2 Organizational structure & Branch Structure

2.1 Organization structure and management------------------------------------------- 18

2.2 Organizational Hierarchy chart---------------------------------------------------------- 19

2.3 Board of Directors of NBP---------------------------------------------------------------- 20

2.4 What BOD does----------------------------------------------------------------------------- 21

2.5 Senior management of NBP------------------------------------------------------------- 23

2.6 Branch structure & Branch employees Chart & of NBP--------------------------- 25

2.7 Authority &decision making in Branch------------------------------------------------- 26

2.8 Chart of hierarchy of Branch to Head office------------------------------------------ 27

2.9 Head of management in NBP----------------------------------------------------------- 27

CHAPTER NO. 3 Products of National Bank OF Pakistan

Introduction of NBP products------------------------------------------------------------ 31

3.1 NBP Premium Amdani--------------------------------------------------------------------- 31

3.2 NBP premium Saver----------------------------------------------------------------------- 32

3.3 NBP Saibaan--------------------------------------------------------------------------------- 33

3.4 NBP Advance Salary----------------------------------------------------------------------- 34

3.5 NBP Cash Card- --------------------------------------------------------------------------- 36

3.6 NBP Investor Advantage------------------------------------------------------------------ 37

3.7 NBP Cash n Gold-------------------------------------------------------------------------- 38

3.8.9 NBP Kisan Taqat & NBP Kisan Dost ------------------------------------------------ 39

3.9 NBP Pak Remit---------------------------------------------------------------------------- 39

3.10 NBP Protection Shield-------------------------------------------------------------------- 40


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CHAPTER NO. 4 Departments in NBP Branch Jaranwala

4.1 Cash Department-------------------------------------------------------------------------- 43

4.2 Accounts Department---------------------------------------------------------------------- 46

4.3 Advance Department·--------------------------------------------------------------------- 50

4.4 Remittances Department----------------------------------------------------------------- 51

4.5 Clearance Department----------------------------------------------------------------- 53 4.6 Govt. Collection Department---------------------------------------------------------------- 55

CHAPTER NO.5 MY Learning as a Trainee

5.1 Introduction of Branch and learning--------------------------------------------------- 57

5.2 1st department where I worked (Remittances) ------------------------------------- 57

5.3 2st department where I worked (Account Opening) ------------------------------- 59

5.4 Government Department (FEW DAYS) ---------------------------------------------- 63

CHAPTER NO.6 SOWT Analysis of NBP

6.1 Introduction of SWOT Analysis--------------------------------------------------------- 66

6.2 Swot analysis of NBP---------------------------------------------------------------------- 67

CHAPTER NO.7 Financial Analysis NBP

7.1Introduction of FSA------------------------------------------------------------------------ 70

7.2 3 Years Statement of Financial Position of NBP------------------------------------ 71

7.3 3 Years Statement of comprehensive income--------------------------------------- 72

7.4 Ratio analysis of NBP---------------------------------------------------------------------- 73

7.5 Horizontal analysis of Financial statement----------------------------------------- 83

7.6 Vertical analysis of Financial statement--------------------------------------------- 88

Conclusion---------------------------------------------------------------------------------- 93

Findings &Recommendation--------------------------------------------------------- 95

References -------------------------------------------------------------------------------- 98


8

Chapter no 1

Evaluation& Introduction of Baking

Formation, Introduction, Function ,role

,Business volume, Branch network

&Achievement of organization

Page 2-17


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1.1 Evaluation& Introduction of Baking

The word “banking” is derived from the words Bancus, Banque or Back. The history

of Banking is traced to as early as 2000BC.

The origin of banking is also traced to early goldsmith. The first stage in the

development of modern banking thus was the accepting of deposits of cash

from these persons who had surplus money with themselves.

In the second step, goldsmiths used issue receipts for the money deposits with them.

These receipts began to pass from hand to hand in settlement of transaction.

In the same time they thought it profitable to lend at least some of the money

deposited with them to the needy persons. This proved quite a profitable business

for the gold smiths.

In order to create confidence among the people, different steps were taken to

regulate the banking organization.

A conference was held in Nuremberg, 1584. It was decided that a bank should be

set up by the state, which should streamline the banking organization and technique.

The first central bank was formed in Genoa in 1587. Banks of England were

established in 1694. With the passage of time the activities of the commercial banks

have greatly increased. They now deal with large number of matters such as

obtaining funds, advancing loans to businesses, farmers, households, and making

investment in stocks discount bills of exchange etc.

MODERN BANKING

By the year 1700 the bank of England was not only 100 issuing notes but also

conducting accounts for customers. In 1853 bank of England further impetus for

cheques, currency, and they became very popular among the customers who would

either pass them from hand to hand. In 1946 the labor government nationalized the

Bank of England.


10

1.2 BANKING HISTORY IN PAKISTAN:

At the time of partition, the total number of commercial bank on Pakistan was 38 out

of these: the Pakistan banks were 2; Indian banks 29 and the exchange banks & the

total deposits of Pakistan banks stood at Rs.880.0 millions where the advance is

were Rs.198.0 million. Before partition of sub continent, the entire banking business

was almost controlled and managed by non-Muslims. The Muslims were deliberately

kept cut of banking profession by the healthy Hindu community. When Hindu

capitalists became sure of the division of sub continent: they secretly began transfer

their capital to the safe place in India, when Pakistan declared an independent state

in august 1947. The fund and other valuables were transferred at an accelerated

pace to India. . The numbers of scheduled banks branches were reduced from 619

to 213 only both wings of the country after in dependence. The non-schedules banks

also suffered a severe jolt and their number was reduced from 411 to 106 over the

same period. West Pakistan where there was greater exodus of non-Muslims to

India suffered a great deal as a number of branches fall down from 487 to 69.In the

East Pakistan though the number of branches were not closed in such a great

number as in West Pakistan, a large number of portion of the deposit were

withdrawn from the banks and transferred to transferred to India by

the non Muslims. The mass scale closure of branches and with drawl of the deposits

caused a dead lock in the banking business in Pakistan .The government of Pakistan

was quite aware of the serious banking situation caused by the withdrawal of

deposits and whole scale migration of banking staffs to India. It took up the challenge

and started recognizing the crippled banking immediately after partition .A

moratorium of free months was also allowed to banks that had financial difficulty due

to sudden with drawl of deposits. In addition to above the following arrangements

were made for facilitating settlement of claims by the governments .Each bank was

to declare on to its offices both in India and Pakistan as clearing house for transfer of

accounts. Each bank was open at lea stone central office in Pakistan Where it could

consolidate work of all its branches and Start

Paying out to depositors. The government took some effective measures for

providing banking Training facilities to Muslims.


11

There were some complaints that Hindu banks were not honoring the cheques of

Pakistani national and were also refusing to give securities kept in their custody. The

government issued an ordinance which empowered it to investigate all such

complaints and if satisfied of their bonfires, the payment should be realized. In case

the bank insisted on non-payments, the government should realize the assets of the

banks, which were sufficient to discharge such liabilities. The government

of Pakistan also allowed the removal of Valuables, kept in save deposits vaults and

lockers by Submitting an application and getting necessary approval from the

custodian of evacuee property .The government of Pakistan tried to provide all kinds

of facilities with sincerity to the known Muslims bankers for restoring normal banking

facilities in the country but the response was discouraging. An inter dominion

agreement was reached between India and Pakistan in April1949.The main

provisions of the agreement were as under;

The inter dominion agreement could not be fully implemented.

India delayed the transfer of Muslim deposits to Pakistan.

The non devaluations decision of Pakistan government further led to the suspension

of remittance facilities through normal banking channels. Due to panicky with drawl

of deposits; some banks went into liquidation and the payments could not be made

to the depositors. In order to regulate the both of banking on sound footing, the

following measures were taken to develop the banking system in Pakistan. The state

bank of Pakistan which is the central bank of the country was established in July

1948. The national bank of Pakistan was established on 1949. This bank is to serve

as an agent to the SBP in the areas ,where SBP has no set-up.

DEFINITION OF BANK

Banking companies ordinance 1962 section 5(b) defines bank as, “Banking

means the accepting for the purpose of lending or investment, of deposits of money

from the public, repayable on demand or otherwise, an draw able by cheques, drafts

order or otherwise.

In other words,


12

A bank is an institution which Accept deposits at lower rate of interest and give

advances at higher rate of interest.

1.3 NATIONAL BANK OF PAKISTAN

History and growth of NBP

The history of National Bank of Pakistan is part of Pakistan‟s struggle for economic

independence. National Bank of Pakistan was established on November 9, 1949

under the National Bank of Pakistan Ordinance, 1949 in order to cope with the crisis

conditions which were developed after trade deadlock with India and devaluation of

Indian Rupee in 1949. Initially the Bank was established with the objective to extend

credit to the agriculture sector. The normal procedure of establishing a banking

company under the Companies Law was set aside and the Bank was established

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

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

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

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

offices were subsequently opened in December 1949.

National Bank of Pakistan is the Pakistan's premier bank determined to set higher

standards of achievements. It is the major business partner for the Government of

Pakistan with special emphasis on fostering Pakistan's economic growth through

aggressive and balanced lending policies, technologically oriented products and

services offered through its large network of branches locally, internationally and

representative offices. In modern business services provided by organizations are

termed as Products

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

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

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

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

the cessation of hostilities in Korea. The bank in collaboration with the cotton board

provided the necessary Credit facilities to the trade and the crisis was tided over.

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

banks/financial institutions. The Bank acts as the agent to the State Bank of Pakistan

for handling Provincial/Federal Government Receipts and Payments on their behalf.


13

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

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

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

specifically designed for the low to middle income segments of the population. These

include NBP Advance Salary, NBP Saibaan, NBP Kisan Dost, and NBP Cash n Gold

Nowadays and credit rating

At present day nbp is the main hand of government and state bank of Pakistan .nbp

performs many functions on behalf of government .NBP works in Pakistan as well as

in abroad.

Short term & long term credit rating

Sr.

#

Name of

Bank

Rating

Agency

Short

Term

Long

Term

Date of

Rating

Remarks

National

Bank of

Pakistan

JCR-VIS

A-1+

AAA

JUNE

2011

Rating

Outlook -

Stable

Definition of A-1’

The term A-1 when rating an insurer's ability to meet debt obligations in the short

term. A-1 indicates that the insurer has a strong ability to meet its debt obligations.

A-1 is the highest rating that Standard & Poor's issues for short-term debt.

Definition of 'AAA'

The highest possible rating assigned to the bonds of an issuer by credit rating

agencies. An issuer that is rated AAA has an exceptional degree of creditworthiness

and can easily meet its financial commitments. Ratings agencies such as Standard &

Poor's and Fitch Ratings use the AAA nomenclature to indicate the highest credit

quality, while Moody's uses AAA.


14

VISION STATEMENT OF NATIONAL BANK OF

PAKISTAN

To be recognized as a leader and a brand synonymous with

trust, highest standards of service quality, international best

practices and social responsibility


15

MISSION STATEMENT OF NATIONAL BANK OF

PAKISTAN

• Creating a distinctive brand identity by providing the highest

standards of services

• Adopting the best international management practices

• Maximizing stakeholders value

• Discharging our responsibility as a good corporate citizen of

Pakistan and in countries where we operate


16

CORE VALUE OF NATIONAL BANK OF PAKISTAN

• Highest standards of Integrity

• Institutionalizing team work and performance culture

• Excellence in service

• Advancement of skills for tomorrow‟s challenges

• Awareness of social and community responsibility

• Value creation for all stakeholders


17

GOAL OF NATIONAL BANK OF PAKISTAN

To enhance profitability and maximization of NBP

share through increasing leverage of existing customer

base and diversified range of products.


18

1.4 Role of the organization in Pakistan

NBP is playing a vital role in development of Pakistan; NBP is making a pioneer role

in development of agriculture sector, which is the main production sector in Pakistan.

As we all knows that agriculture sector is major part of our exports e.g. cotton,

sugar, rice, wheat etc. so its helps to earn major part of foreign exchange through

our exports. The nature of responsibilities of the Bank is different and unique from

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

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

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

Bank of Pakistan has also played an important role in financing the country‟s growing

trade, which has expanded through the years as diversification.

1.5 FUNCTIONS OF NATIONAL BANK OF PAKISTAN

National Bank of Pakistan is a commercial bank, so like other commercial banks it is

engaged in financing internal trade and also in other ordinary banking business of

receiving deposits, advancing loans and discounting bills of exchange.

Accepting Deposits

The most important function is to receive surplus money from the public. They throw

their nets as wide as possible to collect surplus balances of individuals, firms and

public institutions. In order to attract funds they have introduced various types of

deposit schemes that may suit the needs and tastes of a large body of depositors.

Current account

Saving account

Fixed deposit account.

Advancing Loans

Every bank has learnt by experience that depositors do not draw whole of their

deposits at a time. They only draw a part of it for day to day transactions; therefore a

bank keeps a part of the total deposits as “cash reserve” to meet the cash demand of

depositors and advances the Tijarat Ganj part of deposits to businessmen on

interest.


19

National Bank of Pakistan gives loans in following ways.

By opening a loan account

By means of overdraft

By discounting bills of exchange

By purchasing bond and securities

Creation of the Medium of Exchange

It is neither safe nor easy to make payment in the form of metallic coin or paper

notes; therefore cheques make payments. Almost 90% of the financial transactions

are made through cheques. National Bank of Pakistan collects and makes payment

of cheques for its customers.

Transfer Money

National Bank of Pakistan provides facility to transfer from one place to another at

very nominal charges. When a person wants to transfer his money from one place

he handover money to the bank and gets a draft at the name of the particular branch

were he needs the money and gets money at that place safely.

Agency Service

National Bank of Pakistan performs many services as an agent of its clients or

depositors. It makes payment on order cheques receives amount of money on

crossed cheques issued in favor of its clients and deposits the amount tin their

accounts.It purchases bonds and shares of joint stock companies for its clients under

their consent.

General Utility Services

It keeps their precious documents, gold ornaments, bonds, and shares etc in safe

custody in its locker. National Bank of Pakistan provides the services of clearing the

utility bills i.e. electricity, gas and telephone bills of its customer and provide evening

banking service.


20

1.6 Business volume:

The National Bank of Pakistan is the foremost bank determined to set higher

standards of achievements. It is the key business partner for the Govt. of Pakistan

with special emphasis on nurturing Pakistan‟s economic growth through aggressive

& impartial lending policies.

As we look to the business side volume of NBP.NBP has strong position of assets

and deposits. The assets and deposits of NBP increasing day by day. it shows the

trust of people on NBP. With the help of this it can expand their business.

Loan and equity of NBP increases from previous years. It means more equity means

more share and it means more capital.

Particulars

2009

2010

2011

Total Assets

946,253,269

1,038,018,467

1153480100

Total Deposits

727,513,013

832,134,054

927415127

Total Equity

10,763,702

13,454,629

16818286

Total Loans

727,513,013

832,134,054

927415132

Total Investments

217,596,037

301,078,498

319527524

Net Profit

21119

24662

26116

Earnings per share

12.97

13.24

10.53

Years from 2009 to 2011


21

1.7 Branch Network of National Bank of Pakistan

With the geographical development of its branches, the National Bank of Pakistan

has been able to extend its services to a much larger number of Pakistanis all over

the country. Today the Bank has more than 8.8 million accounts & Bank maintains its

presence in all the major financial centers of the world through its 23 (2011)

overseas branches and 5 representative offices. Of these, three representative

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

Almaty (Kazakhstan) to take advantage of the emerging opportunities in CIS

countries. Bank‟s role Apart from having a vast branch network, Bank is at the

forefront in the acquisition and application of new technologies in every aspect of its

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

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

requirements of branches and controlling offices. Presently the National Bank of

Pakistan is divided into various Groups headed by SEVPs/EVPs. Its field operations

are controlled by 23 regions reporting to as many Regional chiefs, who control 40

zones and 15 single Branch zones headed by Zonal Chiefs; 12 corporate branches

and 1283 domestic branches headed by Branch Managers. The bank has 13 SWIFT

local centers.

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

and application of new technologies in every aspect of its banking facilities. It has

acquired leased telephone lines for on-line banking. Bank has also a presence on

the internet. The of Pakistan has 1274 online branches throughout the country. It has

modernized its services by installing Automated Teller Machines (ATMs) called

“CASH LINK” at selected branches. The Bank's organizational structure reflects the

three levels at which it operates: international, national and local. The Head Office

formulates and implements the strategic, management and operational policies.

The Bank's geographical organization consists of branches located in the regional

capitals and in some provincial capitals. The branches' activities relate to the State

treasury service, payment system services, currency circulation, banking and

financial supervision, and the analysis of economic and financial developments at

the local level.


22

The Bank has representative offices abroad, in London, New York and Tokyo; a

number of officers are seconded as financial experts to Italian embassies and

consulates. The Bank has representative offices in Beijing, Tashkent, Chicago and

Toronto

1.8 COMPETITORS OF NBP

The competitors of the National Bank of Pakistan are as follows:

Askari Bank National Savings

Habib Bank Limited Allied Bank Limited

United Bank Limited Faysal Bank

First Woman Bank Standard Charter

Muslim Commercial Bank Bank Al-Falah

Bank of Punjab Silk Bank

Dubai Islamic Bank Sonehri Bank

23 Overseas Branches

10 Representative Offices

5 Subsidiaries

4 Joint ventures

1,283 Branches

29 Regional Offices

1274 Online branches

149……………. ATM

8 Islamic baking


23

1.9 NBP Awards and Achievements.

2011 &2012

Listed in top 1000 banks of the world for the year 2012" by the world

renowned “The Banker” magazine owned by the Financial Times Group,

London.

“Pakistan: Transaction of the Year Award - 2011”, awarded by Islamic

Finance News, for two wind farm projects of 50MW each in which the bank

acted as international inter-creditor agent (for the Islamic Development Bank,

the Asian Development Bank and syndicates of local banks).

“Transaction of the Year Award - 2011”, awarded by CFA Association of

Pakistan for the private placement and offer-for-sale of Engro Foods Limited.

"Bank of the Year" awarded for the year 2011 by the world renowned "The

Banker" magazine owned by the Financial Times Group, London

"Top Corporate Finance House (Fixed Income) Award of the Year 2011",

awarded by the "CFA Association of Pakistan".

National Bank of Pakistan Awarded “Best Emerging Markets Bank 2011”

Awarded By Global Finance Magazine.

“Bank of the Year” awarded for the year 2010 by the world renowned “The

Banker” magazine owned by the Financial Times Group, London

"Runner up of Corporate Finance House (Fixed Income) Award of the

Year 2010", awarded by the "CFA Association Pakistan".

NBP is awarded “President of Pakistan Trophy”, a top slot award by

Federation of Pakistan Chambers of Commerce and Industry in 2010.

NBP is awarded “Prime Minister of Pakistan Trophy”, a top slot award by

Lahore Chambers of Commerce and Industry in 2010

Among the global leading banks, NBP is the only Pakistani bank appearing in

top 500 banks of the world in “The Banker” magazine owned by the

Financial Times Group, London


24

Ch no. 2

Organizational Structure and Management

&

Branch Structure and Management

Page 18 - 29


25

2.1 Organizational Structure and Management

A well-developed and properly coordinate structure is an important requirement for

the success of any organization. It provides the basic framework within which

functions and procedures are performed. Any organization needs a structure, which

provides a framework for successful operations. The operation of an organization

involves a number of activities, which are related to decision making, and

communication of these decisions. These activities must be well coordinated so that

the goals of the organization are achieved successfully

The Organization Structure shows the internal operations and reporting lines of the

National Bank of Pakistan. The bank has clearly defined organizational structure,

which supports clear lines of communications and reporting relationships.

There exists a properly defined financial and administrative power of various

committees and key management personnel, which supports delegations of authority

and accountability.

The internal operations of the Bank are organized into 15 main departments and

divisions headed by senior management of the bank and are report directly to the

Board of Directors. The organizational structure of National Bank of Pakistan is

centralized because all the decisions of the bank are taken by the top Management.

The National Bank of Pakistan‟s Departmental key roles and functions are as

follows:

The ownership, management, and control of all the commercial banks were taken

over by the Government of Pakistan on January 1st, 1974. A banking council was

formed under the Nationalization Act 1974. The banking council was set up for

making policy.Recommendations to the Federal Government, formulating policy

guidelines for the banks and their reorganization.

The management and organizational structure of the nationalized banks have

uniformity. This management and organizational structure is briefly described as und


26


27

2.3 BOARD OF DIRECTORS

Pursuant to Section 11 of The Banks‟ (Nationalization) Act, 1974, the number of

Directors of the Bank shall not be less than 5 and not more than 7, excluding the

President. The Federal Government may, if deems necessary, appoint a Chairman

of the Board in respect of the Bank. At present National Bank of Pakistan‟s Board of

Directors consist of 6 Directors and a President who is the Chief Executive of the

Bank and presides over the meetings of the Board

1.Qamar Hussain

Chairman Board, President , NBP

Mr. Qamar Hussain is the President of National Bank of Pakistan (NBP), the largest

Commercial Bank of the country. He holds an MBA degree in International Business

& Finance from Mcgill University, Montreal, Canada and has undergone

extensive training in business leadership abroad.

Mr. Hussain started his banking career from Bank of America N.T. & S.A., Pakistan

in the year 1981. Prior to joining NBP in 2009, he has worked with American

Express Bank Limited as Senior Director Global Credit, New York and earlier as

Senior Director Country Manager, Bangladesh. He had also been associated with

the CHASE MANHATTAN BANK in Pakistan and USA.

2.Mr. Tariq Kirmani

Director

Soon after completing his Masters in Business Administration (MBA) Mr. Kirmani

embarked upon a rewarding career, starting with a multi-national Oil Company

(Caltex later Chevron Pakistan) in 1969 and worked for seven years in the United

States of America, United Arab Emirates and Australia in different senior

management positions in Marketing, Operations and Finance. In 1991, Mr. Kirmani

became the first Pakistani to be elected as a Company Director of the mentioned

multi-national company.

3.Mrs. Haniya Shahid Naseem

Director


28

Mrs. Haniya Shahid Naseem has done her Masters in Business Administration with

honors in 1995. She is a certified director from the Pakistan Institute of Corporate

Governance and has also done various short courses in management and banking.

Mrs. Haniya Shahid has more than 15 years of diversified experience in the

education, agriculture and corporate sectors..

4,Mr.Aftab Anwar Baloch

Director

Mr. Aftab Anwar Baloch an officer of Pakistan Customs Service belongs to Seventh

Common Training Programmed. He joined service of Government of Pakistan

during 1980 and possesses 32 years of rich experience both in formulation and

implementation of fiscal policy relating to levy charge and collection of Federal

Taxes i.e. Customs Duty, Sales Tax, Federal Excise Duty etc.

5.Mr. Shahid Aziz Siddiqi

Director

Mr. Shahid Aziz Siddiqi is presently Chairman State Life Insurance Corporation of

Pakistan. Mr. Siddiqi holds a Master Degree from the Karachi University and a Post

Graduate Diploma in Development Studies from the University of Cambridge UK. Mr.

Siddiqi topped the Civil Services examination of 1968.

6.Mr. Zahid Hussain

Director

Zahid Hussain started his career with Pakistan Tobacco Company Ltd. and

subsequently worked for British American Tobacco Co. Ltd, London. Later he joined

Pakistan Automobile Corporation and served Suzuki, followed by Toyota as General

Manager Marketing. He was promoted as Chief Executive MAZDA.

2.4 What directors do…..?

1. The Board of Directors shall assume its role independent of the influence of the

Management and should know its responsibilities and powers in clear terms

2. The Board shall approve and monitor the objectives, strategies and overall

business plans of the institution.


29

3. All the members of the Board should undertake and fulfill their duties

&responsibilities keeping in view their legal obligations under all the applicable laws

and regulations.

4. The Board shall clearly define the authorities and key responsibilities of Senior

Management without delegating its policymaking powers to the Management and

shall ensure that the Management is in the hands of qualified personnel.

5. The Board shall approve and ensure implementation of policies, including but not

limited to, in areas of Risk Management, Credit, Treasury & Investment, Internal

Control System and Audit, IT Security, Human Resource, Expenditure, Accounting &

Disclosure, and any other operational.

6. As regards Internal Audit or Internal Control, a separate department shall be

created which shall be manned preferably by professionals responsible to conduct

audit of the Bank, Various Divisions, Offices, and Units Branches etc. The Head of

this department will report directly to the BOD or Board Committee on Internal Audit.

7. The business conditions and markets are ever changing and so are their

requirements. The Board, therefore, is required to ensure existence of an effective

„Management Information system‟ to remain fully informed of the Activities

8. The Board should meet frequently (preferably on monthly basis, but in any event,

not less than once every quarter) and the individual directors of an institution should

attend at least half of the meetings held in a financial year. The Board should ensure

that it receives sufficient information from Management on the agenda items well in

advance of each meeting to enable it to effectively participate in and contribute to

each meeting.

9. The Board should carry out its responsibilities in such a way that the external

auditors and supervisors can see and form judgment on the quality of Board‟s work

and its contributions through proper and detailed minutes of the deliberations held

and decisions taken during the Board meetings.

10. To share the load of activities, the Board may form specialized committees with

well-defined objectives, authorities and tenure.

11. The Board should ensure that it receives management letter from the external

auditors without delay. It should also be ensured that appropriate action is taken in

consultation with the Audit Committee of the Board to deal with control or other

weaknesses identified in the management letter.


30

2.5 Senior management of National Bank of Pakistan

Dr. Asif A. Brohi

SEVP, Operating Officer & Group Chief

Shahid Anwar Khan

SEVP &, Credit Management Group

Ziaullah Khan

SEVP Chief Assets Recovery Group

Dr. Mirza Abrar Baig

SEVP, Training & Organization Development

Group

Nausherwan Adil

SEVP & Group Chief, Operations

Tariq Jamali

SEVP & Group Chief, Compliance Group

Nadeem A. Ilyas

SEVP & Group Chief, Corporate &

Investment Banking Group

Muhammad Nusrat Vohra

SEVP & Group Chief, Treasury Management

Group

Khalid Bin Shaheen SEVP & Group Chief, Global Home

Remittance Management Group

Imam Bakhsh Baloch SEVP & Group Chief, Audit & Inspection

Group

Asif Hassan SEVP & Group Chief, Small and Medium

Assets Recovery Group

M. Rafiq Bengali SEVP & Group Chief, Overseas Banking

Group and RCE Americas Region


31

Zubair Ahmed SEVP & Group Chief, Logistics &

Engineering Group

Tahira Raza SEVP & Group Cheif, Risk Management

Group

Sheharyar Qaisrani EVP & Divisional Head Agriculture Business

Division

Muhammad Hassan Khaskheli EVP & Divisional Head, Personnel &

Industrial Relations Division, HRM&A Group

Qamar Hussain EVP & Divisional Head, Human Resources

Division

Aamir Sattar EVP & Financial Controller, Financial Control

Division

Raza Mohsin Qizilbash EVP & Head, Legal Division

Mahmood Siddique EVP & CIO, IT Division

S.M. Ali Zamin EVP, Secretary Board of Directors &

Secretary Credit Committees

Aamir Abbasi SVP & Divisional Head, Corporate

Communication Division

Kashif Aziz SVP, Head PMO

Muhammad Naeem Ansari VP / Secretary Operations Committee

2.6 ORGANIZATION STRUCTURE OF THE BRANCH


32

.Any organization needs a structure, which provides a framework for successful

operations. The operation of an organization involves a number of activities, which

are related to decision making, and communication of these decisions. These

activities must be well coordinated so that the goals of the organization are achieved

successfully

Chart of Hierarchy of Branch

Branch Employees

Manager MR. Main Zulfiqar

Deputy manager MR. Saraj ul din

Operation manager MR. Shahnawaz

Accountant MR M.Mubarik ali

Credit officer MR. Rai Sohail

Recovery officer MR. Allah Datta

Clearing & ATM officer MR. Muazzam

Remittance officer MR. Hassan

Collection officer MR. Akbar ali


33

Bill collection officer MR, M.Asif

Cashier MR, Abdul Majeed

Massager MR, Mian Saleem

Helper MR, Sohail Ahmed

Peon MR,M. Arshad

Sweeper MR,M. Ibrahem

Guard MR. M.Sahkeel

No. of Employees in Branch 17

Official ……………………...... 13

Non official ……………………… 4

________________

Total Employees 17

2.7 Authority And Decision Making of Branch

Centralize Decision Making

The Branch Manager of National Bank of Pakistan is responsible for all the affairs of

the Bank. All the decisions relating to Branch are made by him and the subordinates

have to obey these decisions. All the employees of the Bank are report directly to the

Branch Manager. The branch has one operation Managers. Operation Manager I

controls Deposits, Advance & Branch accounts department.

Authority

The chain of command illustrates the authority structure of National Bank of Pakistan

Main Branch Jaranwala. Authority is the formal and legitimate right of the manger to

make decisions, issues orders and allocates resources to achieve organizational

desired outcomes. By analyzing the chain of command of NBP, one can come to the

conclusion that, as there is scalar pattern followed at the organizational setup of

NBP, therefore


34

Delegation

Delegation is the process, which managers use to transfer the authority and

responsibility to position below in the hierarchy At National Bank of Pakistan

Jaranwala branch Operation Managers have some authority & responsibility relating

to affairs of the Branch.

2.8 Chart of Hierarchy of Branch to Head office

2.9 Heads of Management in Nation Bank of Pakistan

Executive Board

Board of Directors

Chief Executive

Divisional Chiefs

Provisional Chiefs

Circle Executive


35

Zonal Heads

Branch Managers

1) Executive Board

The general direction and supervision of the affairs of commercial banks lies in their

respective Executive Boards. An EB also consists of a President, a Secretary, and

9 other members, appointed by the Federal Government

2) Board of Directors

In the management of the banks, the board of directors is at the top of the controlling

body. Since there are no private share holders now, so there is no general meeting

of the share holders and no elected directors. The board has limited administrative

powers because after the Nationalization Act 1974, most of powers are transferred to

the Banking Council and Executive Board.

3) Chief Executive

The President of the Executive Board is the Chief Executive. He is the administrative

head of a bank and presides over the meetings of Executive Board.

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

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

and control of Divisional Chief (also called the Senior Executive Vice President

or Executive Vice President)

5) Provisional Chiefs

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

Chief. PC has the powers for sanctioning finance and other credit facilities. Each

headquarter is situated in each province e.g. in Lahore, Peshawar, Quetta, and

Karachi.

6) Circle Executive

Each commercial bank has a number of circles placed directly under the control and

supervision of Chief Executive.

7) Zonal Heads


36

Each circle is divided into a number of zones. These zones are administered by

Zonal Heads who hold the posts of Vice President or Assistant Vice

President.

8) Branch Managers

Each zone of commercial bank is divided into several branches. The control and

supervision of each branch is mostly entrusted to Assistant Vice President or Officer

G-I

Comments on the organization structure:

The National Bank has great contribution towards building wide Banking structure in

Pakistan and serving all aspects of the National life and all classes of society. NBP is

fully aware of the developments taking place in the world as well as the changes

occur in the economic and social condition with in the country. The bank is

determined to meet new challenges by redefining its goals and strategy.


37

Chapter no. 3

Products of NBP

Page 31 - 41


38

Products of National Bank OF Pakistan

A product is anything that can be offered to a market to satisfy a want or need and a

service is an act or performance that is essentially intangible and does not result in

the ownership of anything. What products or services have to be offered to the target

market depends on the market requirement and also the organization‟s profits. The

organization will offer those products and services, which result in maximum profits

and minimum costs. A bank is an organization rather a financial institution that

provides products such as different types of deposits and services like foddering

financing facilities to its customers

National Bank of Pakistan always makes efforts to improve its goodwill in the general

public. It introduces different kind of schemes time to time. The most popular

schemes conducted by NBP are as under:

1. NBP Premium Amdani

2. NBP premium Saver

3. NBP Saibaan

4. NBP Advance Salary

5. NBP Cash Card

6. NBP Investor Advantage

7. NBP Cash n Gold

8. NBP Kisan Taqat

9. NBP Kisan Dost

10. NBP Pak Remit

11. NBP Protection Shield

3.1. Premium Aamdani


39

Feather

• Earn up to 12.25% p.a.

• Minimum deposit of Rs. 20,000/- with maximum balance of Rs. 10 million for 5

years

• Free Demand Draft, Pay Order and Cheque Book*

• Convenience of NBP online Aasan Banking (for online banking customers)

• Free NBP Cash Card (ATM+Debit)

• Running finance facility up to 90%

• Profit paid every month as follows

Profit rates are expected

Year Profit Rates %

1st 11.25

2nd

11.50

3rd

11.75

4th

12.00

5th 12.25

3.2. NBP Premium SaverVER


40

Feather

1. Earn up to 8.50% p.a.

2. Minimum saving balance of Rs. 20,001/- & a maximum balance of Rs.

1million*.

3. Free NBP Cash Card (ATM + Debit).

4. Convenience of NBP Online Aasan Banking (for online banking customers).

5. Two debit withdrawals allowed in a month & no limit on number of deposit

transactions.

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

3.3. NBP Saibaan

Home Purchase

Home Construction

Home Renovation

Purchase of Land + Construction

Home Purchase& Home Construction

Financing Amount Upto 35 million

Financing Period 3 to 20 years

Debt to Equity 85: 15 (Maximum)

Home Renovation& Purchase of Land

Financing Amount Upto 15 Million


41

Financing Period 3 to 15 Years

Debt to Equity 80:20 (Maximum)

Eligibility *

Must be Pakistani Resident (National)

Aged between 21 and 65 years at the time of application/disbursement of

loan.

Salaried Person, Self-employed professionals and businessmen.

Minimum income requirement Rs. 5000 for Govt. Employees, Rs. 10,000 for

other salaried persons and Rs. 15,000 for self employeed and businessmen.

Property located in NBP approved localities.

Service duration: Two years for salaried class Three years for self-

employed/business class.

Required document With Applications Form **

Two attested passport size photographs

• Two attested copies National Identity Card

• Cheque for the processing charges

4.4. NBP Advance Salary

In January 2003 National Bank of Pakistan has launched a unique product, NBP

Advance Salary. Currently this product is for fixed income permanent employees of


42

Federal & Provincial Government, Semi-Government, Autonomous, Semi-

autonomous, local bodies and other Government organizations

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

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

its swift growth and remarkable loan disbursement of over 138 billion.

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

hassle free acquisition with no prior formalities and easy availability in a short turn-

around time is attributed as the most distinguishing features of the product. The

product is offered country wide .

• Easy installments of 1 to 60 months at your choice.

• No minimum income, collateral & insurance charges required.

• Quick processing and fastest disbursement.

• For permanent employees of Government, Semi Government and Autonomous

bodies receiving salaries through NBP.

Terms and Conditions

Eligibility

Permanent Employees of Govt., Semi-Govt., Autonomous,

Semi Autonomous, Local & other bodies who are

maintaining their Salary A/Cs at NBP.

Repayment Direct deduction from Salary A/C

Maximum Loan Amount Rs. 490,000/-

Max. Repayment

Period 5 years (60 months)

Advance in terms of #

of net take home

salaries

Up to 20 net take home salaries


43

Markup Rate SBP Discount Rate + 5%

Processing Fee 1% of Loan Amount

Verification Charges Rs 500/-

Life Insurance No Insurance of any kind.

Documentation

Charges at actual

Contact Your Salary disbursing NBP Branch.

Remaining Service

Age

At the time of approval and disbursement the

applicant’s ,,remaining service age should be 6

months after maturity of the ..loan

3.5. Cash card+ ATM

Comfortable and secure environment for trading

NBP financing at very easy terms requiring minimum documentation

Minimum turn around time

No security requirement from the customer except for the customer's equity

Customer's equity freely available for investment.

Equity acceptable in cash

Eligibility

Pakistani CNIC COPY

Over 21 years of age


44

An account with NBP

Equity in the form of cash

NO default with any financial institution.

NBP Cash Card Safety Tips

Never share your Personal Identification Number (PIN) or given it out over

telephone.

Never write your PIN Code on your card.

Never keep your card and PIN at the same place.

As you approach an ATM, beware of your surroundings, if you notice

anything unusual, visit the ATM later.

Immediately report a lost of stolen card to your NBP branch.

Stand close to the ATM machine while entering your PIN and do not allow

anyone to watch.

Ensure that the merchant has entered the correct amount of transaction

before you enter your PIN code.

Maintain your POS receipt as a record and ensure that he card returned to

you by the cashier/attendant is yours.

Protect your card from direct sunlight and magnetic fields.

Do not bend your card.

Carefully dispose off your old card when you are issued a new one.

3.6. NBP Investor Advantage

A margin financing facility developed for retail investors in line with Government‟s

efforts to promote Pakistani capital markets and will replace the Badla (COT) system


45

with a stable financing system in line with international financial markets. Besides

offering a comfortable environment to the retail stock investors, a financing facility

will also be available. Willing investors can avail NBP financing at very easy terms

requiring minimum documentation and least turn around time. The NBP financing

also does not require any security from the customer except for the customer‟s

equity.

Requirements of document

Photograph of Applicant

NBP Account - Current or PLS

Copy of CNIC

Copy of CNIC of Two (2) References

Borrower Basic Fact Sheet

3.7. Cash in Gold

Meet your need for ready cash against your idle gold jewellery with no minimum or

maximum limits. Facility of Rs. 40000/- against 10 grams of gold

Feather

Rate of mark up 15.50% p. a.

Facility of Rs.40000/- against each 10 grams of net content of Gold.

NO maximum limits of cash.

Repayment after one year.

Roll over facility.

Only Gold ornaments are acceptable.

Weight and quality of Gold to be determined by NBP‟s appointed shroff

Required documents

Photograph of Applicant


46

Application form

NBP Account - Current or PLS

Copy of CNIC

Copy of CNIC of Two (2) References

Stamp papers five.

Open new account

3.8. NBP Kisan Taqat

National Bank Pakistan Dairy Form Scheme

Advantage to Getting Loan from NBP

Very Near Banks Branch from you

Easy and Short Paper working

Get ride from the tension payment of Installments

Experience Staff‟s Help and Guide

3.9. NBP KISAN DOST

Agriculture Farming Program

• Competitive mark-up rate.

• Quick & easy processing.

• Provision of technical guidance to farmers at their doorstep.

• Wide range of financing schemes for farmers.

• Finance facility up to Rs. 100,000/- for landless farmers on personal guarantee.

• Financing available against Pass Book, Residential / Commercial property, Gold

ornaments and paper security.

3.10. NBP Pakremit


47

Pakremit is an internet based Home Remittance Service. This service is available to

U.S. residents for sending money to their family and friends in Pakistan. One must

have a valid US Dollar account with a U.S. bank or a US Dollar credit or debit card in

order to remit funds through this channel. Remitters in USA can log on to our user

friendly website, www.pakremit.com and easily remit funds to Pakistan from the

comfort of their homes, in a matter of minutes. The service is fully secure with

advance encryption application and is available for use 24 hours a day, 7 days a

Week. Fees and exchange rate have been set at competitive levels and the remitters

have the ability to track delivery of funds as well.

Process

Remitters log on to www.pakremit.com and after completing the registration

process, are able to remit funds. The whole process takes a few minutes.

Funds in Pak Rupees can be sent to beneficiaries, having an account with

any bank in Pakistan, including NBP. While funds are credited directly to

beneficiaries maintaining accounts with NBP, a pay order or demand draft is

couriered to other banks for their customers. Pay order or demand draft can

also be couriered directly to the beneficiary‟s office or home, if requested by

the remitter.

Funds in US Dollars can be sent only to a Beneficiary maintaining a US Dollar

account with one of NBP‟s Foreign Exchange Branches.

3.11.NBP Protection Shield

Insurance Coverage In case of Accidental Death (Including death due to *Riots,

Strikes, Civil commotion, Acts of Terrorism and Natural Calamities like Flood, Earth

Quake, Cyclones etc.)

Coverage of Rs. 200,000/- for Rs. 20/- per month

Definitions

Provided the insured is not directly involved in these activities


48

Accident

Unintentional, unfortunate or a harmful event by chance or apparent cause.

Accidental Death

Death due to accidental injuries, but not illness.

Insured Person

A National Bank of Pakistan PLS account holder, aged between 18 years and above,

and whose premium is deducted & details are reported to the selected insurance

company by NBP.

Policy

Group Personal Accident Policy dated 26/09/05 executed between NBP and Insurer.

Principal Sum

The amount stated in the Policy‟s Schedule of Benefits as respects each Insured

Person.

Product Detail

No medical Required

No Documentation

Fixed Auto Premium deduction Facility (After customer

consent)

Choice of Deactivation

Eligibility

NBP PLS Account holder


49

Chapter no 4

DEPARTMENTS OF NBP MAIN BRANCH

JARANWALA

PAGE 43-55


50

DEPARTMENTS OF NBP MAIN BRANCH

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 Jaranwala consists of various

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

Departmentation at NBP is purely functional.

DEPARTMENTS OF NBP MAIN BRANCH JARANWALA

NBP Main Branch Jaranwala is operating following departments

1. Cash Department

2. Deposits Department.

3. Advance Department·

4. Remittances Department.

5. Clearance Department

6. Govt. Collection Department

4.1CASH DEPARTMENT

This department consisted of three sections namely.

1. Cash Receipts

2. Token Department

3. Cash Payments

1.1Cash Receipt

In this section the cashier was receiving cash. He recorded the cash received with a

pay in slip and other documents (it necessary) and recorded it in the cash receipt

register. There were two separate types of pay-in-slips, which were used for

depositing cash, checks, and drafts. There were prescribed forms in which the

information was fed. After filling the pay-in-slip with the amount, the cash and slip


51

both were received by the cashier who entered those in the cash register and fixed a

stamp on the pay-in-slip. A part of this slip is given to the customer for his record and

other was maintained with the bank.

1.2Token Section

As the checks holders were used to go to the section. They presented the checks to

the person at the section. He checked that whether the check belonged to the same

bank, the amount in words and figures were same, check was not outdated and the

signature was there etc. Then he handled a number to the check and a token was

given to the customer/check hold

Cash Payments

The check allotted with a number by the token department is sent to the clearing

officer/passing officer. After the proper verification of the signature of account

holder‟s, cash balances and posting of that particular check to the account, the

check was passed to the cashier who ultimately called on the number fixed on the

check. The customer bearing that token number arrived at the counter. The cashier

checked out the number and paid the amount as per checks and entered number

and amount in the cashbook maintained with him.

The Negotiable Instruments. Act, 1881,

“Cheque is a bill of exchange drawn on a specified banker and not expressed to be

payable otherwise than on demand”2.

Since a Cheque has been declared to be a bill of exchange, it must have all its

characteristics as mentioned in Section 5 of the Negotiable Instruments Act, 1881.

Therefore, one can say that a Cheque can be defined as an:

“An unconditional order in writing drawn on a specified banker, signed by the drawer,

requiring the banker to pay on demand a sum certain in money to, or to the order of,

a specified person or to the bearer, and which does not order any act to be done in

addition to the payment of money”3. (Law of Banking by Dr. Hart, p.327).

The Requisites of Cheque

Define cheque


52

There is no prescribed form of words or design of a Cheque, but in order to fulfill the

requirements mentioned in Section 6 above the Cheque must have the following.

a) It should be in writing

b) The unconditional order

c) Drawn on specific banker only

d) Payment on Demand

e) Sum Certain in money

f) Payable to a specific person

g) Signed by the drawer

h) Date on cheque

i) Signature on back.

Payments of cheque

1. Receiving of Cheques

The cash is paid against the cheques of the client. The following points are

important. Cheque is drawn on same branch Cheque is not post dated. Amount in

words and figure are same. It should be bearer cheques so the word bearer should

not cross.

2. Verification of signature.

After receiving the cheques the cheques the operation manager verify the signature

of the account holder and the signature on the cheques. If the signature is not same

it is returned back otherwise forward to BBO Operator for posting.

3. Token assign.

After verification of signature , a token given to the bearer of cheque for the of of

payment of cheque.

4. Computer Terminal Process


53

The cheque is received in computer terminal, where BBO operator checks the

balance of the account holder. The BBO operator also sees the stop payment

instructions, whether received from account holder or not. After considering these

points BBO Operator post the cheque in BBO (Branch back office system) and

forward to operation manager.

5. Payment of Cash

After posting the cheque the operation manager cancelled the cheque and returned

back to cashier. The cashier enters the cheque in cash paid registered and pays

against the second signature of receiver on the back of the cheque.

4. 2. ACCOUNTS DEPARTMENT

In modern time, very few business enterprises are carried out solely with the capital

of the owners. Borrowing funds from different sources has become and essential

feature of today‟s business enterprises. But in the case of a bank, borrowing funds

from the outside parties is all the more vital because the entire banking system is

based on it. The borrowed capital of bank is much greater than theirs own capital.

Bank‟s borrowing is mostly in the form of deposits. These deposits are lent out to

different parties. The larger the difference between the rate at which these deposits

are borrowed and the rate at which they are lent out the greater will be the profit

margin of the bank Furthermore. larger the funds lent out the greater will be the

return earned on them; and greater the amount of return the greater will be the

profits of the bank. It is because of this interrelated relationship that deposits are

referred to as the “life blood” of the bank

Current account

Current deposits are also called demand liability on current deposits. NBP pays

practically no interest on current deposits. Businessmen usually open current

accounts. In NBP current account can be opened with a minimum amount of

Rs.500/-.

Minimum amount for opening this account is Rs.500

Any person can open the account with the bank

According to inter banks agreement interest is not paid on current account.


54

Bank act as custodian of money

Over draft facility is provided to the customers

Customer can withdraw money through cheque supplied by bank

Profit And Loss Sharing Account

In general it is also called saving account .To provide interest free banking facilities

in Pakistan, this type of account was introduced in January 1982 after the

islamization of banking. The main features of this account are: -

Instead of having fixed return in the form of interest the deposited money will

be shared in profit and loss of the bank.

One can open the account by depositing minimum Rs.100

Withdrawal is allowed 8 times in the month total not exceeding Rs.15000.

To withdraw a large amount a notice of 7 days to the bank is necessary.

There is not any kind of interest is provided on money deposited.

Rate of profit is declared at the close of each half-year.

Fixed Deposit Account:

This account is the major source of funds for the banks. This account is best for

people who have surplus money and don‟t need such funds in nearer future. The

money is deposited for a fixed period of time. Main features of this account are: -

Fixed amount is deposited for fixed period.

Amount of profit can be obtained after each six months.

Higher will be the time period, higher will be the rate of profit, and vice versa.

A receipt is used for the amount deposited called fixed deposit receipt.

Period of deposit can vary from 3 months to 5 years.

The amount can be withdrawn before maturity after surrendering interest..

Types of Accounts Holders.

Following are the main categories of accounts.

Individual Account

Joint Account

Company Account

Club, Society, Association or Trust A/C


55

Partnership Account

i). Individual Account:

Any account or proprietor of a business can open an individual account in National

Bank Limited. PLS (Profit & Loss Sharing) Saving account can be opened without

any minimum requirement. The client has to the following documents to the bank in

order to open an individual account with the bank. One copy of National Identity The

customer has to fill the account opening form and have to put his signature at the

signature specimen cards and also have to fill the Cheque Book Application form.

After the approval from the branch manager, the bank opens a new individual

account.

II). Joint Account

When more than one person opens a single account, it is called joint account. The

names of both persons are written on the title of the account at the signature

specimen cards. One person cannot operate joint account. Both persons have to put

their signatures on the Cheque in order to encash the Cheque..

iii). Company Account

Public as well as Private Limited companies can open a bank account at the name of

the company. They have to submit the following documents to the bank in order to

open an account at their company‟s name.

One copy of Certificate of Incorporation

Memorandum of Association and Article of Association

List of Directors of the Company

Copy of Board Resolution

The Company‟s certificate of Commencement of Business (In case of Public

Limited Company)

Signature Specimen Cards.

iv). Club, Society, Association or Trust

Any club, association or Trust can open an bank account at their own name. The

requirements of the bank regarding this type of account are:

Copy of the rules of the club/ society

Copy of office Bearers

Certificate Copy of Resolution


56

Copy of NIC

Name of person authorized to sign, their office, position and

Specimen signature.

v). Partnership account

Partnership account can also be opened with the National Bank Limited. Account

title will be name of the partnership firm. Partners who are willing to become the

authorized signature will have to sign the account opening form of the bank. Other

requirements are

Copy of partnership deed

Copy of Registration Certificate

Specimen Signature Cards.

1.Get accont opening form

2.Filling the form

3.Submit form

4.Specimen signature

5.Account number

6.pay-in-slip

7.Initial deposit

8.Pass book

9.Cheque book

Procedure to Open an Account

Step by step


57

4.3. ADVANCE DEPARTMENT

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

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

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

Division of Head Office directly controls all the advances. As we known bank is a

profit seeking institution. It attracts surplus balances from the customers at low rate

of interest and makes advances at a higher rate of interest to the individuals and

business firms. Credit extensions are the most important activity of all financial

institutions, because it is the main source of earning. However, at the same time, it is

a very risky task and the risk cannot be completely eliminated but could be

minimized largely with certain techniques.

TYPES OF CREDIT FACILITY

In addition to purchase and discounting of bills, bankers in Pakistan generally lend in

the form of cash finance, overdrafts and loans. NBP provides advances to different

people in different ways as the case demand.

a. Cash Finance

b. Running Finance

c. Demand Finance

4.3.1 Cash Finance

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

is made available either against pledge or hypothecation of goods, produce or

merchandise. In cash finance a borrower is allowed to borrow money from the

banker up to a certain limit, either at once or as and when required. The borrower

prefers this form of lending due to the facility of paying markup/services charges only

on the amount he actually utilizes. If the borrower does not utilize the full limit, the

banker has to lose return on the unutilized amount. In order to offset this loss, the

banker may provide for a suitable clause in the cash finance agreement, according

to which the borrower has to pay markup/service charges on at least on self or one

quarter of the amount of cash finance limit allowed to him even when he does not

utilize that amount.

4.3.2 Overdraft/Running Finance


58

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

temporary accommodation his banker allows withdrawals on his account in excess of

the balance which the borrowing customer has in credit, and an overdraft thus

occurs. This accommodation is generally allowed against collateral securities. When

it is against collateral securities it is called “Secured Overdraft” and when the

borrowing customer cannot offer any collateral security except his personal security,

the accommodation is called a “Clean Overdraft”. The borrowing customer is in an

advantageous position in an overdraft, because he has to pay service charges only

on the balance outstanding against him. The main difference between a cash finance

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

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

temporary accommodation occasionally resorted to.

4.3.3Demand Financing/Loans

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

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

allow loans to their customers against collateral securities they are called “secured

loans” and when no collateral security is taken they are called “clean loans”. The

amount of loan is placed at the borrower‟s disposal in lump sum for the period

agreed upon, and the borrowing customer has to pay interest on the entire amount.

Thus the borrower gets a fixed amount of money for his use, while the banker feels

satisfied in lending money in fixed amounts for definite short periods against a

satisfactory security

4.4 .REMITTANCES DEPARTMENT

NBP also provides facility of money transfer. NBP uses all the three means to

transfer money. This department is also known as Bills department

4.4.1 Bank or Demand draft:

Demand draft is a popular mode of transfer. The customer fills the application form.

Application form includes the beneficiary name, account number and a sender‟s

name. The customer deposits the amount of DD in the branch. After the payment the

DD is prepared and given to the customer. NBP officials note the transaction in

issuance register on the page of that branch of NBP on which DD is drawn and will

prepare the advice to send to that branch. The account of the customer is credited


59

when the DD advice from originating branch comes to the responding branch and

the account is debited when DD comes for clearance. DD are of two types.

a) Open DD: Where direct payment is made.

b) Cross DD: Where payment is made though account.

4.4.2Payment Order (PO)

Payment order is made for local transfer of money. Pay order is the most convenient,

simple and secure way of transfer of money. NBP takes fixed commission of Rs.

93Per payment order from the account holder and Rs. 100 from a non-account

holder.

4.4Mail transfer (MT):

An account holder of a bank, who maintains accounts in more than one branches of

the bank, may want to transfer the funds from his one account to another account.

Other than this, non-constituent wishes to remit funds in a particular account at some

place with the branch of the bank to another branch can resort to the transfer by

mail, described as mail transfer remittance. Bank is responsible for mailing and

remittance.

4.5Telegraphic transfer (TT):

A more quick system of TT is also present to assure the requirements of fast growing

business community, which have no time. If the amounts are deposited in cash, a

sample cash vouchers is passed, giving credit to the main office Karachi, and a

telegraphic message is sent to the bank on which the TT is drawn, specifying the TT

number, date, name of the party in whose favor it is drawn and the test member.

There are two types of telegraphic transfers:

In case of advice and credit

In case of advice and pay

4.6Demand Draft Purchaser (DDP)

DDP is an instrument purchased by National bank on behalf of government for the

compensation of government employees as well semi government etc. After

purchases of DDP, The copy of this instrument sent to the government for the


60

purpose of clearing .Government employees takes the payments on monthly and

quarterly basis.

4.5. Clearing Department

The major function of Clearing Department is to receive the cheques, which are

drawn on some other bank. The customer can get the money in his account at NBP,

from the cheques drawn on another bank. The bank accepts these cheques and

collects the amount from that bank on which cheque is drawn through the Clearing

House. Bank charges some commission for this function.

SC (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

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

LSC (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

5.1Types of clearing:

5.1.1. Inward clearing

Inward clearing means the cheques received by the bank from other banks. These -

Inward clearing - cheques are the cheques drawn by the bank/branch customers on

their account in favour of other parties. On receipt of the inward clearing, the

cheques are posted to the various accounts on which they are drawn -meaning the

accounts of the cheque issuer or drawer with the bank is debited to the account and

the payment is made to the bank presenting the cheque. So if in your bank

statement there is a debit as inward clearing, it means that your account has been

debited with the amount of cheque you have issued to someone for that amount.

Since you will be having details as to the issue of cheques, you can find out.

5.1.2. Outward clearing

Cheques deposited in the bank for credit to their accounts, drawn on a bank other

than that of the collecting bank,i.e., not a transfer cheque. Cheques are bound

outward to the payee/ drawee bank (the bank that is making the payment/ on whom

the cheque is drawn)


61

Outward cheques could be

Local cheques (within the same geographical/ clearing zone),

Outstation cheques (drawn on a bank outside the local clearing zone)

Foreign cheques (drawn on a bank/ location outside the country of the

collecting bank)

5.1.3Procedure for Clearing the Cheques

1. Pay-in Slip

The customer fills pay-in slip. This slip is just like deposit slip. The cheque

number, date, amount and account number must be written on this slip.

2. Stamping and Scrutinizing

The officer on receipt of cheques and pay-in slip will stamp the pay-in slip

with“cheque received” and give a portion of slip to customer and the

remaining portion is attached with the original cheque. The original cheque

will be marked with two stamps.

3. Clearing Stamp

At the end of day, all cheques are counted and then scrutinized in bank-wise

and sent to the Clearing House. The stamp is used of next date.

4. Cover letter

It is attach on the face of the bundle of clearing cheques. It includes date,

signature of authority, No. of cheque, and stamp of home branch.

4.5.2 NIFT

National Institutional Facilitation Technologies Pvt. Ltd. (NIFT) is the leading service

provider in the IT industry of Pakistan and is playing a proactive role in modernizing

payment systems in Pakistan.

It is a joint venture between a consortium of six banks and entrepreneurs from the

private sector. The group of six equity holder banks (HBL, NBP, MCB, ABL, UBL,

and FWBL) is majority shareholder in NIFT. All 36 banks including State Bank of

Pakistan (SBP) are participating members of NIFT for Cheque clearing services.


62

Since its inception in 1995, NIFT has always been in the forefront in building IT

infrastructure in the country and providing range of different technical services to

organizations all over Pakistan. NIFT offers services in different domains which

include Cheque Clearing services to the banking industry, Reconciliation services to

large utility companies, image archiving services (which include scanning, printing,

archiving & retrieval) to large institutions,

4.5.3Why cheques are not cleared.

A cheque is sometime returned unpaid by the bank to the customer. The reason is

usually given on the cheque or upon a slip of paper attached to it. The principal

reasons for dishonoring the cheque are as follows: -

(1) It does not satisfy the conditions specified in the Negotiable Instrument Act

(2) Drawers signature s differs from specimen recorded with the bank.

(3) A cheque is stale (in circulation for more than 6 months) or post dated.

(4) Amount expressed in words and figures differ.

(5) Cheque mutilated (cut torn part of cheque missing)

(6) Material alternations (change in date, crossing, amount, name of payee cheque)

(7) Order cheque not properly endorsed.

(8) Do not tally with directions contained in the crossing.

4. 6.GOVERNEMNT COLLECTION DEPARTMENT

4.6.1Government Collections/ Receipts

NBP Main Branch Jaranwala carries the responsibility of Govt. collection and

perform different services for Govt. NBP collects taxes, duties, challans, renewal of

weapons and collection of utility bills which includes Sui Gas, PTCL and PESCO

bills. This department also collects the dues of the educational institutes.

4.6.2Government Payments

This department also performing the function of payments of salaries, payment of

zakat and payment of pensions and salaries to Air Force, Army and civilians is given

through Govt. Department. For this purpose pension books are issued to the

pensioners. The record of the accounts is also maintained in this department.


63

Chapter no. 5

MY Learning as a Trainee

Page 57-64


64

MY Learning as a Trainee After joining the bank for internship initially it was so difficult for me to get the

attention of the employees, everybody was terribly engaged in their own activities,

nobody was Having time to accommodate me. This was a crucial time for me to get

the attention of NBP bank‟s management and to make them realize that their

valuable information is so much necessary for the up gradation of my knowledge and

for the completion of the task which I was assigned by the institution. But very soon I

succeeded in making relationship with the top influence people and with the help of

these people I started permeated in the system. This was my first step towards the

completion of my task and with the passage of time they realized that they could also

utilize my efforts in a productive way to minimize heir burden. They provided me their

time and information, which helped me to enhance my knowledge, and they also

shared their experiences with me, which I believe that it would be helpful in my

practical life. First two weeks I worked in Remittance department, for next two weeks

I worked in Accounts department and for rest of the time I worked with Business

Manager where I learned lot of things including how to deal with corporate

customers, with individual customer and how loans can be recovered from the

customers. During the internship session I got the chance to perform on different

activities, which are listed below, and short explanation is also given.

5.1. 1st department where I worked (Remittances)

5.1.1Demand Draft

DDs are always a secure way of paying remittances in other cities. Both account

holders and walk in customers can avail the facility of DDs. Charges tend

to differ for both customers but the advantage tend to be same. DDs are made in the

favour of beneficiary and remitter either pays in cash or through cheque.

Required document for demand draft

Copy of Nadra CNIC card

Name of person to whom it made


65

Form of demand draft includes

Date

Name of institution to which it is made

Branch name

Branch code

Amount of DD

Exchange for DD

Signature of person

Issuance of Demand Draft

After the payment of demand draft to the cashier, now DD makes on cheque and

crass the cheque to secure the payment and give to the person.

Charges for DDs are

Up to Rs. 100,000/- 0.10%, Min Rs. 100 for A/C holders

0.20%, Min Rs. 200 for Non A/C holders

Over Rs. 100,000/- 0.05%, Min Rs. 150 for A/C holders

0.15%, Min Rs. 250 for Non A/.C holders

Issuance of duplicate DD Rs. 150 for A/C holders

Rs. 250 for Non A/.C holders

When DDs are issued, head office account are debited and remitters account is

credited, on presentation, head office account is credited and beneficiary's account is

debited.

5.1.2Pay Order

POs are another safe way of paying your remittances within the city. They

are payable at any branch and then are forwarded for clearing. There charges are

Issuance of PO Rs. 75 for A/C holders

Rs. 250 for Non A/C holders

Cancellation of PO Rs. 75 for A/C holders


Issuance of duplicate PO Rs. 150 for A/C holders


In case of PO, remitter account is credited and PO A/C of branch is debited. At

presentation, Beneficiary is debited and PO A/C of branch is credited.


66

5.1.3Mail Transfer

An account holder of a bank, who maintains accounts in more than one branches of

the bank, may want to transfer the funds from his one account to another account.

Other than this, non-constituent wishes to remit funds in a particular account at some

place with the branch of the bank to another branch can resort to the transfer by

mail, described as mail transfer remittance. Bank is responsible for mailing and

remittance.

Form of Mail Transfer includes

Date

Name of person to which it is made

Branch name

Branch code

Amount of MT

Account name

Account number

Nature of transaction

CNIC

5.2 Account Opening; (2nd department)

Whenever a new customer enters in the bank with the intention to open an account,

the banker is required to determine his/her category according to his status and

needs. NBP has following categories of accounts:

Individual Account

Joint Account

Partnership Account

Company Accounts

Accounts of the Welfare/ Societies/Clubs/ NGOs

5.2.1 Procedure Of Account Opening;

A. Account Opening Form;

The first step in the procedure of opening an account is the filling of Account

Opening form. At NBP the account opening form is titled as the Relationship

Contract. It contains all the requisite information needed to open and operate an

account according to the specified rules and regulations.


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Contents Of Account Opening Form;

The following details are required to furnish the Relationship Contract.

1. Title Of Account:

It is the name through which the customer is intended to operate an account.

2. Account Number:

This is the serial number given to each account number through which an account is

accessed whenever it is needed.

3. Personal Information:

After giving the title to the account, the personal information of the customer is

written down in the Account Opening form, like Name, Father‟s name, Mother‟s

name, Employment information (Address of employer, Name of employer, job title) in

case of a salaried person, NIC #, Nationality, Residential Address, Phone number

etc. In case of joint account the personal information of each account-holder is taken.

4. Next of kin

Mention Name & address of person/next of kin to be contacted for ascertaining

consumer‟s whereabouts after the expiry of three years from the date of last

operation in his account, to inform him/her of the existence of his account when

customer were not available at the given date.

5. Address for the correspondence

Address of the customer is needed to contact the customer.

6. Corporate account

In case of company account the additional information regarding the address of the

Head office and Date and Place of the incorporation is required.

7. Type of entity

That either the applicant falls under the category of individual, sole proprietor or

company etc.

8. Nature of the account

e.g. example current account.

9. CURRENCY OF ACCOUNT

Customer has to mention the currency, in which he is going to operate.

10. Details of the term, notice & call deposit

It includes No. of receipt, Amount, Period of the deposit.

11. Zakat deduction instruction


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12. Instruction for operation of account

Under this head the applicant specify that how he/ she will operate the account. If

applicant is individual then he will select the option of „Single‟ but in case of a joint

account the customers have to make choice among the options of the „Joint‟ and

13. Introducer‟s detail

The introducer‟s name, account no., introducer‟s signature and the signature and

stamp of the verifying officer are also required to fill in the account opening form.

14. Declaration

In the end the applicant(s) agree with the rules and regulations governing the

account operating activities by signing the Relationship Contracts. In case of sole

proprietor or company account the stamp of the business should be affixed.

15. Terms & conditions governing the account

The account opening form of every bank has the terms and condition governing the

account as its complementary part so that the customer will be aware of all these

terms at the time of entering this contract. These terms and conditions should be

read and signed by the applicant(s).

5.2.2 Acceptance and verification of documents:

After filling the Relationship contract the bank officer asks the required documents

from the customer as mentioned above in case of each entity. The necessary

verification is done.

1. Verification of the CNIC

According to the regulation of the SBP now the banker is responsible to verify the

CNIC from NADRA. For this purpose the customer signs an authority letter by which

he/ she gives him the authority to verify the CNIC through the on-line CNIC

verification service of NADRA.

2. Signature different from CNIC

If the customer wishes to use a signature to operate his account which is different

from the one on his national identity card, then he will give an Undertaking under the

witness of the Introducer, that he will be responsible for this change of signature.

3. Signature specimen card

An important and foremost thing to be signed by a customer is the Signature

Specimen Card (SSC). Afterward this card is used to match the signature of the


69

customer every time he or she deals with the bank. The original card is sent to the

head office after scanning it to the system.

4. Account of the illiterate person

In case of the account of an illiterate person the only photo account can be opened.

In this account the customer has to come personally to the bank every time he/ she

will deposit to or withdraw from his/ her accounts. So, some additional documents

are required to obtain from such applicant at the time of opening a photo account like

two photographs of applicant(s), one is put on the account opening form and the

other one is out on the signature card. Also a declaration is signed by the customer

in order to open a photo account, on which the thumb impression are taken of the

customer. This is done under the witness of the introducer.

5. Application for the on-line arrangement for

Clearing/transfer/cash transaction

If the customer wants to have the account to be on-line, so that he can avail the

facility of the on-line banking, then he will sign the application for the use of this

facility at time of opening an account or at any time later on.

6. Know your customer (kyc)

It is a document which is prepared under the special instruction of the SBP. As per

SBP regulation it is very important for the banker to know his customer very well.

This form is prepared by the account opening officer according to the information

given by the customer to him..

5.2.3 Issuance of cheque book:

1. First time issue of the cheque book

After the account is opened, the customer requires a cheque book to conduct

operation in his account. In order to have a cheque book the account holder signs an

application to issue a personalized or blank cheque book.

Personalized cheque book:

A cheque book having the account title and account number printed on it is called as

Personalized Cheque Book. This assures the safety of the cheques to be used.

Blank cheque book:

It is the simple cheque book with no account title or account number on it.

2. Reissuance of cheque book


70

When two or three leaves are left in the cheque book, the account holder can

demand for a new cheque book, so customer fills “requisition slip” which is attached

in cheque book and gives to banker and receives a new cheque book for continuing

the account. An account holder can also any other person to receive the new cheque

book by giving the authority in the requisition slip. The authorized person should

bring the copy of CNIC to receive the cheque book.

3. Loss of the cheque book

In case the cheque book is lost by the customer then first step the customer should

take is to stop the payment of all the cheques. The charges for stopping the payment

are Rs.200/- per cheque or Rs.500/- for the whole cheque book. The report the

cheque numbers of the remaining cheques at the time of the lost. The officer of the

NBP will enter these numbers in the system as stopped. Now nobody can encash

these cheques all over the Pakistan at any branch.

5.2.3 Closing of account;

There are number of reasons, why an account is closed. Some of most common

reasons are mentioned below:

At the client‟s own request

Death of account holder

Bankruptcy of account holder

Liquidation or winding up under the companies act.

5.3 GOVERNMENT DEPARTMENT (few days)

Government Department is very important section of the Bank because it is

responsible for any penalty imposed by SBP due to the negligence / non completion

of work / books and balancing. All officers monitor all heads of Govt. Section for well

in time reporting in monthly, quarterly, annual return to controlling office.

5.3.1 Government receipts:

Government receipts means collection of the following

Income tax

Property tax

Sales tax

Traffic challans

Court fine

5.3.2 Government payments:


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Government payments include;

1. Salary payments

2. Pension Payments

Department of Government section receives all the provincial and central receipts.

NBP makes payments to following:

Civilian

Defense civilian pensioners

Retired officers of Armed forces

Retired officers of PAF and families

Others ( KRL, Oil Gas Development Corporation , Pakistan Aero E Complex /

PR, RANGERS)

Documents required for the pension payments:

Pension payment order

No and date of CNIC

Two specimen signature, thumb and finger impression

Photographs of the pensioner

Pension book

Officer enters them in a ledger to keep permanent record.

Documentation:

Disburser portion of the PPO is filed in serial No and kept in lock and key with

accountant. All particular of PPO are entered in PPO register. The first payment is

made to pensioner after proper identification. In case any clarification staff referred

the pensioner to general accountant or Head office.


72

Chapter no 6

SOWT Analysis of NBP

Page 66 - 68


73

6.1SWOT analysis

SWOT analysis, method, or model is a way to analyze competitive position of your

company. SWOT analysis uses so-called SWOT matrix to assess both internal and

external aspects of doing your business. The SWOT framework is a tool for auditing

an organization and its environment.

Swot matrix includes both internal and external factors ;

Strengths: characteristics of the business, or project team that give it an

advantage over others

Weaknesses (or Limitations): are characteristics that place the team at a

disadvantage relative to others

Opportunities: external chances to improve performance (e.g. make greater

profits) in the environment

Threats: external elements in the environment that could cause trouble for the

business or project.


74

6.2 Swot analysis of NBP

STRENGTHS of Nation‟s Bank

National Bank is the Nation‟s Bank

Oldest institution

Outspread network

In Top 5th bank

AAA credit rating

Experience & all round staff

Government institution

Its paid-up capital is very high

Very less uncertainty because of a Govt. bank

The biggest customer of NBP is Govt. of Pakistan

Provide High packages to employees.

Provide high staff benefits

Western union and express money transfer

On line system

Transfer of fund or cash with few minute

Strong security system

Efficient record of customer

Agency Arrangements

Advance salary &Attractive product

High ratio certificates

WEAKNESSES:

Lengthy procedure in nbp

Poor environment

Poor image in mind of people

No proper marketing effort

Lack of coordination among employee

Favoritism and Nepotism


75

Political interfering

Poor working equipment

In many branches management is not up to date.

In small area‟s branches employees have less education.

Award and promotion policies are not implemented in all branches.

There is no concept of job rotation

Inefficient counter services in the rush hours

Uneven work distribution

Lack of staff

OPPORTUNITIES

Electronic banking

Efficient staff available in marketing

Starting of the retail banking initial working.

Market penetration available in local as well as in foreign market.

Basic and business equipment offers on loan

It can introduce comprehensive form of bound

Award for employee performance

Corporate planning learning

THREATS:

Customer complaint

Major competitors offers attractive product

24 hours banking &E banking

Larger facility of ATM by other bank

Denationalized commercial bank

The hiring of uneducated people

Saving of people decreasing


76

Chapter no .7

Financial Statement Analysis of NBP

Pages 70 - 92


77

7.1 Financial statement analysis

Financial statement analysis is the process of identifying of financial strengths and

weaknesses of the firm by properly establishing relationship between the items of the

balance sheet and the profit &loss account,"

It is a valuable tool used by investors and creditors, financial analysts, and others in

their decision-making processes related to stocks, bonds, and other financial

instruments. The goal in analyzing financial statements is to assess past

performance and current financial position and to make predictions about the future

performance of a company. Investors who buy stock are primarily interested in a

company's profitability and their prospects for earning a return on their investment by

receiving dividends and/or increasing the market value of their stock holdings.

Creditors and investors who buy debt securities, such as bonds, are more interested

in liquidity and solvency: the company's short-and long-run ability to pay its debts.

Financial analysts, who frequently specialize in following certain industries, routinely

assess the profitability, liquidity, and solvency of companies in order to make

recommendations about the purchase or sale of securities, such as stocks and

bonds. The analysis of financial statement refers to the examination of the

statements for the purpose of acquiring additional information regarding the activities

of the business. The users of the financial information often find analysis desirable

for the interpretation of the firm‟s activities.

Techniques of Analysis

Three techniques may be used in evaluating financial statement data:

Ratio Analysis

Horizontal Analysis,

Vertical Analysis

7.2


78

3 Years Statement of Financial Position of NBP

National Bank of Pakistan

Statement of Financial Position

Rupees in „000‟

PARTICULARS 2009 2010 2011

ASSETS AMOUNT AMOUNT AMOUNT

Cash and balances with treasury

banks 116,668,514 115,657,025 131,843,291

Balances with other banks 28,786,397 30,743,368 28,069,897

Lendings to financial institutions 19,683,526 23,051,171 44,360,727

Investments – net 217,596,037 301,078.498 319,527,254

Advances – net 475,338,439, 478,886,775 527,109,209

Operating fixed assets 25200,870 27,620,697 28,126,754

Deferred tax assets – net 3064,459 6,954,228 7,973,084

Other assets – net 59,915,027 54,026,725 66,469,884

TOTAL ASSETS 946,253,269 1,038,018,467 1,153,480,100

LIABILITIES

Bills payable 10,621,169 8,006631 9,104,710

Borrowings 44,828,138 19,657,207 26,371,675

Deposits and other accounts 727,513,013 832,134,054 927,415,132

Sub–ordinate loan - – –

Liabilities against assets 42,629 123,413 92,739

Deferred tax _ _ _

Other liabilities 42,455,768 46,798,330 54,701,435

TOTAL LIABILITIES 825,460,717 906,719,635 1,017,685,691

NET ASSETS 58,436,054 69,740,013 79,204,209

OWNER‟S EQUITY 2009 2010 2011

Share capital 10,763,702 13,454,629 16,818,286

Reserves 23,395,059 25,129,425 26,206,507


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Inappropriate profit 61,696,594 67,103,611 69,712,113

Surplus on revaluation of assets 24,826,267 25,113,091 22,462,015

Non controlling. 110930 498076 495488

120,681,622 130,800,756 135,298,921

7.3

3 Years Profit & Loss A/C:

For the year ended December, 31

Non–mark–up / interest income

Fee, commission and brokerage

income 8,996,973 9,871,667 9,948,547

Dividend income 1,896,817 1,067,273 1,595,192

Income from dealing in foreign

currencies 3,103,673 2,278,898 3,196,630

Particulars 2009 2010 2011

Mark–up / return / interest earned 78,124,796 88,681,381 95,689,741

Mark–up / return / interest expensed 40,448,291 45,169,744 48,516,517

Net mark–up / interest income 37,676,505 43,511,637 47,173,224

Provision against non performing

advances-net 11,148,773 7,007,975 6,219,671

Provision for diminution in the value of

investments – net

651,282 2,904,949 3,138,494

Impairment of goodwill 92,593

Provision against off balance sheet

obligations

20,237 3,965

11,820,292 10,009,482 9,358,165

Net mark–up / interest income after

provisions

25,856,213 33,502,155 37,815,059


80

Gain on sale of securities – net 4,593,041 2,512,363 2,390,211

Unrealized gain on revaluation of

investments 2,355 6,730 (35039)

Share of loss from joint ventures (41,715) (16,976) 32,181

Share of profits from associates 5,238 66,906 83,559

Gain on revaluation of previously held

equity interest

_ 180,131 _

Other income 552,950 2,183,891 2,543,139

Total non–mark–up / interest

income

19,109,332 18,150,883 19754420

44,965,545 51,653,038 57569479

Non–mark–up / interest expenses

Administrative expenses 22,816,665 26,732,045 30760815

Other provision – net 628,391 179,819 554,810

Other charges 321,647 118,887 137852

Total non–mark–up / interest expenses 23,766,703 27,030,751 31453477

Profit before taxation 21,198,842 24,662,287 26116002

Taxation – Current year 8,890,206 9,871,640 9229882

– Prior years (4,137,307) (938,158) 2,60,000

– Deferred (1,003,099) (2,049,600) (1083045)

3,749,800 6,883,882 8406837

Profit after taxation 17,449,042 17,738,405 17709165

1

7.4. RATIO ANALYSIS

Ratio analyses are the most popular form of analyses all over the world and the

trusted one also. In ratio analyses as the name suggests ratios are used in analyzing

the financial standings of the organization.

Ratio analysis is a powerful tool of financial analysis. A ratio is defined as:

“The quotient of two mathematical expressions”

OR


81

“The relationship between two or more elements”

In financial ratio analysis a ratio is used as benchmark for evaluating the financial

Position and performance of a firm.

Ratio analysis enables the analyst to compare items on a single financial statement

or to examine the relationships between items on two financial statements. After

calculating ratios for each year's financial data, the analyst can then examine trends

for the company across years. Since ratios adjust for size, using this analytical tool

facilitates intercompany as well as intercompany comparisons.

CALCULATION OF DIFFERENT RATIOS:

Here we are going to calculate different ratios, which include both the balance sheet

and income statement ratios. These ratios are quite important for analyzing the

financial position of a firm.

These ratios are calculated for the years 2009, 2010 and 2011 from the „balance

sheet‟ and „profit and loss statement‟ of NBP.

7.1.1. Liquidity Ratios

A class of financial metrics that is used to determine a company's ability to pay off

its short terms debts obligations. Generally, the higher the value of the ratio

the larger the margin of safety that the company possesses to cover short-term

debts.

1.1Current Ratio:

The current ratio is the ratio of current assets to current liabilities.

Formula

Current Ratio = Current Assets / Current Liabilities

Short-term creditors prefer a high current ratio since it reduces their risk.

Shareholders may prefer a lower current ratio so that more of the firm's assets are

working to grow the business.


82

Particulars Years 2009 Years 2010 Year 2011

Formula 640476876/

781962320

646363744

/860262110

728683464/

962897823

Ratio 0.82 0.75 0.76

Interpretation:

The current ratio of NBP decreasing in 2010 and in 2011because of increase in

current liabilities. The ratio is 0.82in 2009 and 0.75 in 2010 and in 2011 it is 0.76.This

means that for every 1 rupee liability of the bank it has 0.76 rupees IN 2011.It shows

the poor short term financial position of NBP.

1.2 Cash ratio

The cash ratio is an indication of the firm's ability to pay off its current liabilities if for

some reason immediate payment were demanded. NBP cash ratios are

Formula

Cash Ratio = Cash / Current liabilities


Formula

145454911/

781962320

146400393/

860262110

159913188/

962897823

Ratio 0 .18 0.17 0.16

Interpretation:

The cash ratio of the bank is 0.18, 0.17 and 0.16 in 2009, 2010 and 2011

respectively. This shows an decrease in 2010 and 2011. This means that NBP have


83

some cash than their liability, and NBP not easily cover their liabilities with cash in

hard times.

1.3Advances to deposits ratio

The loan to deposit ratio is used to calculate a lending institution's ability to cover

withdrawals made by its customers

Formula

Advances to deposits ratio= Advances / Total Deposits


Formula

475338439 /

727513013

478886775 /

8321344054

527109209 /

927415132

Ratio 0.65 0.57 0.56

Interpretation:

It means the efficiency on NBP is good and they use their deposits efficiently in

advancing to borrowers. Here high ratio is required. The next side of the picture is

that the people will think that is risky to deposit the money in the bank

7. 2. Solvency ratio analysis

Solvency analysis of a firm indicates the amount of the other people‟s money being

used to generate profit. In general, these analyses are more concerned with long

term debts, because these commit the firm to a stream of payments over the long

run. Solvency analysis includes

2.1 Proprietary Ratio

Proprietary ratio refers to a ratio which helps the creditors of the company in seeing

that their capital or loans which the creditors have given to the company are safe.

Proprietary ratio can be calculated as follows

Formula:


84

Proprietary Ratio = Total Asset / Total Equity


Formula

120681622 /

946253269

130800756/

103828467

135298921

/1153480100

Ratio 0.12 0.12 0.10

Interpretation .

This ratio shows the solvency position of the bank. In 2009, 2010 there is an

increases trend as .i2 but in 2011 it decline .10. it shows that very small amounts of

shareholders in asset contribution.

2.2Debt-to-owner's equity

The ratio of debt-to-owner's equity or net worth indicates the degree of financial

leverage you're using to enhance your return. A rising debt-to-equity ratio may signal

that further increases in debt caused by purchases of inventory or fixed assets

should be restrained

Formula:

Debt-to-owner's equity= Total Debt / Equity


Formula

825460717/

120681622

906719635/

130800756

1017685691/

135298921

Ratio 6.83 6.93 7.52

Interpretation


85

it shows increases trend in 2009 to 2011 which means NBP financing more through

debt and NBP business depend on debt .it also increases the right of outsiders

against assets .it is high and not better for owners.

2.3Earning assets to total assets ratio

Earning assets to total assets ratio tells us about the bank management efficiency to

utilize the earning assets.

Formula:

Earning assets to total assets ratio=Earning assets/ Total assets


Formula:

827286516/

946253269

918673469 /

1038018467

1022840481/

1153480100

Ratio 0.87 .88 0.89

Interpretation

The earning assets to total assets ratio increases which means efficiency of bank

improves. It means earning capacity of earning assets .89 against 1 rupee.

3. Profitability analysis

Profitability analysis of a firm indicates the overall efficiently of the management.

Without profit a company cannot attract the outside capital. Profitability analysis

includes:

3.1Return on total assets

The return on assets ratio provides a standard for evaluating how efficiently

financial management employs the average dollar invested in the firm's assets,

whether the dollar came from investors or creditors.

Formula

Return on total assets ratio= Net Profit after Tax/ Total Assets*100


86


Formula

17449042/

946253269

17738405/

103818467

17709165/

1153480100

Ratio 1.80% 1.70% 1.53%

Interpretation

It shows the decrease trend of profitability. It means the assets of business are fully

utilized in 2009 and ratio is 1.80 but the assets of the business are fully not utilized in

more and efficient way in 2011 and ratio is 1.53 and also shows the unfavorable

trend of the business.

3.2Return on investment

A performance measure used to evaluate the efficiency of an investment or to

compare the efficiency of a number of different investments

Formula

Return on investment= Net Profit after Tax/ Investment *100


Formula 17449042 /

217596037

17738405/

301078498

17709165/

319527254

Ratio 8.01% 5.89% 5.50%

Interpretation

It means the investment of the business are fully utilized in more and efficient way it

also shows that NBP have large amount of investment but it needs some

improvement and also shows the unfavorable trend of the business


87

3.3Return on equity

Return on equity measures a corporation's profitability by revealing how much profit

a company generates with the money shareholders have invested.

Formula: Net Profit after Tax/ Total Equity*100


Formula 17449042 /

120681622

17738405/

130800756

17709165/

135298921

Ratio 14.45% 13.56% 13.08%

Interpretation

This ratio is more meaningful for share holders who are interested to know the profit

earned by the company because the dividend paid from available profit higher ratio

means factor of production fully utilized and good position but here there is decline in

ratio.

3.4Average Profit Per Branch. It shows ration ship between ne profits and

branches


Formula 17449042 /1189

17738405/1245

17709165/1283

Ratio 14675 14247 13802

Interpretation.

The average profit per branch is decreasing due to increases in no. of branches of

NBP It is not healthy for bank.

3.5Net profit margin


88

Net profit margin is the percentage profit your business makes for every dollar of

revenue – whether you‟re making a profit after covering all of your costs.

Formula = net profit/ Interest Earned


Formula 17449042

/78,124,796

17738405/

88,681,381

17709165/

95,689,741

Ratio 22% 20% 19%

Although bank is earning huge income but its expenses increased quite a bit

simultaneously. Ultimately result is decrease in the net profit of the bank. It is

decreased 20%to 19% in 2011

4. Market analysis

Investor analysis or market analysis are related to firm market valve, as measure by

its current share price to certain accounting values. Investor analysis includes

4.1Earnings per Share - EPS'

The portion of a company's profit allocated to each outstanding share of common

stock. Earnings per share serve as an indicator of a company's profitability.

Formula: (Net profit after tax − Preference dividend)/No. of equity shares


Formula

17449042/

1345338

17738405/

1339758

17709165/

1680186

Ratio 12.97 13.24 10.54


89

Interpretation:

Earnings per share is a good measure of profitability when compared with similar

other business. Here decreasing EPS, which will surely decrease share price.

4.2 Price to Earnings Ratio

The P/E looks at the relationship between the stock price and the company‟s

earnings. In general, a high P/E suggests that investors are expecting higher

earnings growth in the future compared to companies with a lower P/E

Formula: Market price/ Earnings per share


Formula 45/

12.97

39/

13.21

44/

10.54

Ratio 3.46 2.94 4.17

Interpretation:

Price to Earnings (PE) is ratio often considered to be the most important ratio in the

fundamental analysis of stocks. in 2011 it is high and more attractive for investors.

4.3 Dividend per Share

The amount of dividend that a stockholder will receive for each share of stock held

Formula: =Total Dividends/ No of shares


Formula 5820338/

1345338

8060510/

1339758

10077218/

1680186

Ratio 4.32 6.01 5.99

Interpretation:

http://www.investorwords.com/205/amount.html

http://www.investorwords.com/1509/dividend.html

http://www.investorwords.com/4735/stockholder.html

http://www.investorwords.com/4525/share.html

http://www.investorwords.com/4725/stock.html

http://www.investorwords.com/2299/held.html


90

DPS shows positive trend in 2010 and 2011.due to increase in shares of bank there

is a little decline in 2011, but over all better.

4.4 Dividend payout ratio

The dividend payout ratio measures the percentage of a company's net income

that is given to shareholders in the form of dividends.

Formula: Dividend per share/ Earnings per share*100


Formula

3.46/12.97

2.94/13.24 4.17/10.54

Ratio 27% 22% 39%

Interpretation:

It shows the percentage of net incomes that is paid to the share holders. it is

increases from 27% to 39% in 2011.and more attractive for investors and outsiders.

7.5. HORIZONTAL ANALYSIS

This technique is also known as comparative analysis. It is conducted by setting

consecutive balance sheet, income statement or statement of cash flow side-by-side

and reviewing changes in individual categories on a year-to-year or multiyear basis.

The most important item revealed by comparative financial statement analysis is

trend. A comparison of statements over several years reveals direction, speed and

extent of a trend(s). The horizontal financial statements analysis is done by restating

amount of each item or group of items as a percentage. Such percentages are

calculated by selecting a base year and assign a weight of 100 to the amount of

each item in the base year statement. Thereafter, the amounts of similar items or

groups of items in prior or subsequent financial statements are expressed as a

http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/net-income-808


91

percentage of the base year amount. The resulting figures are called index numbers

or trend ratios.

Formula = Current Year amount / Base Year amount * 100.

Horizontal analysis of Statement of Financial Position

Rupees in „000‟

ASSETS 2009 %age 2010 %age 2011%age

Cash and balances with treasury banks 100% 99.% 114%

Balances with other banks 100% 107% 97%

Lendings to financial institutions 100% 117% 225%

Investments – net 100% 138% 146%

Advances – net 100% 100% 110%

Operating fixed assets 100% 109% 111%

Deferred tax assets – net 100% 226% 260%

Other assets – net 100% 90% 110

TOTAL 100% 109% 111%

LIABILITIES %age %age %age

Bills payable 100% 75% 85%

Borrowings 100% 44% 58%

Deposits and other accounts 100% 114% 127%

Sub–ordinate loan

Liabilities against assets 100% 289% 217%

Deferred tax liabilities – net _ _ _

Other liabilities 100% 110% 128%

TOTAL 100% 109% 123%

PRSEENTED BY 2009 %age 2010 %age 2011%age

Share capital 100% 125% 156%

Reserves 100% 107% 112%

Inappropriate profit 100% 109% 112%


92

Surplus on revaluation of assets 100% 101% 90%

Non controlling 100% 449% 446%

100% 108% 112%

Interpretation .

Assets sides. The horizontal analysis of the balance sheet of the bank over all give

the positive trend .The result of the balance sheet depict that there is a constant

increasing trend in cash about 14% in 2011as compare to last year. Lendings to

financial and advance increases very huge amounts such as 125% (lending to

financial) and 10%(advances) total assets .investments increases in 2011 by 46 %.

fixed assets & others assets also increases as 10% and 11%.

Liabilities & equity. Bills payable decreased in 2010 by 25% and in 2011 by 15%.

Borrowing decreases in 2010 as 56 % and 42 % in 2011.Deposits increases in 2010

as 14 % and 27 % in 2011.Others liabilities increases 10 %in 2010 and 28 % in

2011. Shares capital of NBP increases in 2010 as 25 % and 56% in 2011.Reserves

increases in 7 %in 2010,12%in 2011. Inappropriate profit increases 7% in

2010,12%in 2011.

Horizontal analysis

Profit & Loss A/C:

Particulars 2009 % 2010 % 2011 %

Mark–up / return / interest

earned

100%

113%

122%

Mark–up / return / interest

expensed 100% 111% 119%

Net mark–up / interest income 100% 15% 8%

Provision against non

performing advances-net 100% 62% 55%


93

Non–mark–up / interest income

Fee, commission and

brokerage income

100% 109% 110

Dividend income 100% 56% 84%


currencies

100% 73% 102%

Gain on sale of securities –

net

100% 45% 4%

Unrealized gain on revaluation

of investments

100% 185% 420%

Share of loss from joint

ventures

100% 159% 101%

Share of profits 100%

177%

24%

Gain on revaluation of

previously held equity interest

Other income

100% 294% 16%


income

100% (5) 8%

100% 114% 128%

Non–mark–up / interest expenses

Provision for diminution in the

value of investments – net 100% 446% 481%

Impairment of goodwill

Provision against off balance

sheet obligations 100% 19%

100% 85% 79%

Net mark–up / interest income

after provisions 100% 129% 146%


94

Administrative expenses 100% 117% 122%

Other provision – net 100% 28% 88%

Other charges 100% 36% 42%


expenses 100% 113% 133%

Profit before taxation 100% 117% 123%

Taxation – Current year 100% 111% 103%

– Prior years 100% 22% 6%

– Deferred 100% 204% 107%

100% 183% 224%

Profit after taxation 100% 102% 101%

Interpretation:

The interest earned by National Bank of Pakistan fluctuates and shows an increasing

trend during all years. It shows an increasing trend that is 13% in 2010, 22%in 2011.

The interest expense of National Bank of Pakistan shows an increasing trend during

all years. It increases in 2010 as 11%,19 % in 2011. The net markup/ interest income

of National Bank of Pakistan fluctuates and shows a mixed trend during all years.

Provision against non performing advances decreases in 2010 by 32 % & in 2011 as

45%. Net markup increases as 26% in 2010 and 46 % in 2011.

The Fee, Commission & brokerage income of National Bank of Pakistan fluctuate

and show increases as 9% in 2010 and 10% in 2011. The dividend income of

National Bank of Pakistan is showing a mixed trend during all years .it decreases in

2010 by 44% and 16%in 2011. The administrative and operating expenses of

National Bank of Pakistan increase 22% in 2011 and 17 % in 2010 and profit before

tax 1ncreases as compared to last years. Profit after tax stable in 2011


95

7.6. VERTICAL ANALYSIS

Vertical analysis is a technique for identifying relationship between items in the same

financial statement by expressing all amounts as the percentage of the total amount

taken as 100. In a balance sheet, for example, cash and other assets are shown as

a percentage of the total assets and, in an income statement, each expense is

shown as a percentage of the sales revenue. In Vertical analysis, various

components of the financial statements are standardized by expressing them as a

percentage of some bases.

Examples of common-sized statements include:

Components of the balance sheet expressed as a percentage of total assets

Components of the income statement expressed as a percentage of sales or

Interest earned

Formula:

The formula for Vertical Analysis is:

Individual item of financial statement/total of items head *100

Vertical analysis of Statement of Financial Position

Rupees in „000‟

ASSETS 2009 %age 2010 %age 2011%age

Cash and balances with treasury banks 13% 11% 12%

Balances with other banks 2% 3% 2%

Lendings to financial institutions 2% 2% 2.7%

Investments – net 22% 28% 26.5%

Advances – net 50% 46% 44.3%

Operating fixed assets 2% 3% 2%

Deferred tax assets – net 3% 5% 6%

Other assets – net 6% 4% 5%

TOTAL 100% 100% 100%


96

LIABILITIES

Bills payable 1% .008% .008%

Borrowings 5% 1% 2%

Deposits and other accounts 79% 81% 83%

Sub–ordinate loan

Liabilities against assets .0042 % .0012% .0011%

Deferred tax liabilities _ _ _

Other liabilities 3% 3% 4%

TOTAL LIABILITIES 88% 86% 89%

NET ASSETS 12% 14% 11%

PRSEENTED BY

Share capital 1.5% 2% 1%

Reserves 2.5% 2.4% 2.6%

Inappropriate profit 5.9% 6% 5.2%

Surplus on revaluation of assets 2% 2.2% 2%

.1% .4% .2%

12% 14% 11%

Interpretation:

Assets analysis

In balance sheet of bank the most important item is earning assets. There are four

earning assets. Bank has strong earning assets like advances investments and

lending to financial institutions has major percentage in of assets of bank.

There was a slight increase in the year 2011 as compare to the years 2009& 2010,

of 12%. %. In cash and Lendings increasing trend and investment increases in 2010

28 % and decline in 2011 2% as compared to last years. Advances decreases in

2010 and 2011 In liability deposits of the bank increases as compared to last year‟s

2%. The operating fixed assets of National Bank of Pakistan shows a percentage of

2% in the year 2011. There was a slight decrease of 1% in 2011, The other assets of

National Bank of Pakistan fluctuate during all years. The percentage of other assets

is decreased to 6% in the year 2011


97

Liabilities & Equity analysis

The bills payable by National Bank of Pakistan indicates a stable percentage. The

borrowings are increased in 2011 shows a percentage of 3%. The deposits and

other liabilities of National Bank of Pakistan increased during all years. The share

capital of National Bank of Pakistan shows a mixed trend in all years. It was 10% in

2010 and shows an increasing trend of 13% in 2011. The unappropriate profit &

Reserves of National Bank of Pakistan is increased during all years

Vertical analysis of Profit & loss account

Rupees in „000‟

Non -mark–up / interest income

Fee, commission and brokerage

income 11% 13% 11%

Dividend income 3% 1% 2%


currencies 4% 2% 3%

Particulars 2009 % 2010 % 2011 %

Mark–up / return / interest earned 100% 100 % 100%

Mark–up / return / interest expensed 49% 52% 51%

Net mark–up / interest income 47% 49% 49%

Provision against non performing

advances-net 14% 8% 6%

Provision for diminution in the value of

investments – net .9% 3% 4%

Impairment of goodwill .1%

Provision against off balance sheet

obligations .1% -.oo2%

15% 11% 10%

Net mark–up / interest income after

provisions 33% 40% 39%


98

Gain on sale of securities – net 6% 3% 2%

Unrealized gain on revaluation of

investments .01% % 0.1%

Share of loss from joint ventures (.1)% .009 0.1%

Share of profits from associates .02% 0.1 % .1%

Gain on revaluation of previously

equity interest .2%

Other income .7% 2% 3%

Total non–mark–up / interest income 24.5% 20% 21%

N

57% 58% 60%

Administrative expenses 29% 31% 32%

Other provision – net .8% .2% 0.6%

Other charges .7% .1% 0.2%

Total non–mark–up / interest expenses 31% 30% 33%

Extra ordinary / unusual item 27% 28% 28%

Profit before taxation 11% 11% 10%

Taxation – Current year (5)% (1)% .3%

– Prior years (1)% (3)% (9)%

– Deferred 4% 7% 9%

Profit after taxation 23% 20% 19%

Interpretation.

The interest earned by National Bank of Pakistan fluctuates and shows an increasing

trend during all years. The interest expense of National Bank of Pakistan shows an

decreasing trend during all years. In the year 2011, the interest expensed is 51%.

The Fee, Commission & brokerage income of National Bank of Pakistan fluctuate

and show a decreasing flow. The dividend income of National Bank of Pakistan is


99

show growing. Gain on sale of securities decreases in 2011. The Total non markup/

Interest income of National Bank of Pakistan fluctuates and indicates a mixed trend

during all years.

The administrative and operating expenses of National Bank of Pakistan are 32% in

2011, representing second highest percentage among all years The total non

markup/ Interest expenses of National Bank of Pakistan are 30% in 2010 and

increases 33% in 2011.current tax and profit decreases in 2011 as compared to

2010.


100

Conclusion About Nation‟s Bank

The economy of the country is booming and with the investment favorable policies

and their smooth implementation, the role of banks in today‟s economy have become

an important one. The banking industry is also reaping the fruits of this economic

boom by growing rapidly over the past few years. There are a number of mergers

happening in the economy with foreign investments coming into the banking sector.

NBP has aimed to become the leading bank of Pakistan by that provides outstanding

services to its customers. The bank has seen phenomenal growth in the past year by

opening more branches in the country, increasing the deposit base, while also

increasing the assets and profits of the bank. The services that provides have a

great market penetration not only because of their features but also the profit and

markup rates that they charge. Also the products that NBP provides cater to sector

of the economy.

The National Bank of Pakistan plays a key role in the strategic national development.

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

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

National Bank of Pakistan is the second largest bank of Pakistan by all means;

National Bank of Pakistan is widely used as an agent for State Bank of Pakistan and

is also involved in commercial banking. National bank of Pakistan has a vital role in

Pakistan‟s banking history as well as in the economy of Pakistan, so it has a great

significance. At present the national bank of Pakistan has improving its internal and

external conditions, but due to the largest operations in Pakistan (because this is

only bank which must cover the backward regions of the country where no any other

commercial bank want to go) it still faces many problems, These problems are new

marketing strategies, organizational and management problems at the branches of

backward regions, and motivation.


101

I got a lot of experience from National Bank during my internship. During Internship I

came to know that how different activities take place in organizations, what are the

rules and procedures Followed in National Bank. National Bank of Pakistan is one of

the leading in the Pakistan‟s Banking industry with almost 1283 plus national and 23

branches in foreign countries. The Bank is still growing and growing on the way of

the prosperity. The management is highly qualified and experience in its fields. I had

a very great opportunity to work as internee so as to gain an over view of practical

life and working in industry before entering in practical life. Practical things and

knowledge is very much different from the theory and bookish knowledge. I had a

very great chance to gain practical experience and to implement my bookish and to

very refine theoretical knowledge in practical things.

Furthermore, as the bank is growing, the number of employees at NBP are

increasing, which shows that NBP is being considered as an employer, that provides

its employees with a challenging environment to work in, where they can harness

their full potential and shows confidence as an employer by the employees of the

bank.

Lastly to become the leading bank of Pakistan, NBP has to benchmark its services to

its major competitors in the industry or the market leader in the industry and provide

a continuous mean of improvement in its existing products and services, while

introducing new ones to the industry


102

Findings and Recommendations

NBP is an effectively operating and profit making organization and carrying out its

activities under a specified system of procedure. The main regulatory body is State

Bank of Pakistan, which provides policy guidelines and ensures that the money

market operates on sound professional basis. The head office specifies the whole

procedure of function and operations. This procedure has been modernized with the

passage of time with a view to streamline the approach and underlying procedure for

effective overhauling of its own capabilities so as to bring them at par with

international practices.

Here I am giving some recommendations, which in my view can add some input for

efficiency and better performance of NBP as an organization in general and NBP

Main Branch Jaranwala in particular. The recommendations are as follows:

Training of its employees

The bank should improve the quality of training of its employees and the integrity,

controls and efficiency of its systems, processes and financial reporting.

Job Rotation

There should be Job rotation of employees, so that they should know about all

departments. This will enhance the capabilities of the employees, as due to change

in work they will escape monotony. This will refresh and motivate employees.

Equal Distribution of Workload

The employees of the branch should be given equal workload.. Nobody should be

given undue relaxation. The personal contacts of some of the employees should not

spoil the environment of the branch

IT capability

The Bank should improve IT capability in the analytical areas and to develop a

medium term strategy for banking and market operations.

Micro Finance


103

The bank should provide support to the Micro, Small and Medium enterprises

thereby reducing unemployment and helping to create a more equitable distribution

of wealth.

Modern Banking

The NBP should adopt modern banking tools and techniques. Quality leadership,

clear vision, investment in IT infrastructure and human resource development.

Improve product

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

should design, develop and deliver product and services for economic growth

Proper Planning

Bank should make a plan to gear up its recovery efforts on war footing and

reorganize the recovery function of global bases. In addition, bank should tighten up

control on expenditure

Supervision

The National Bank of Pakistan should introduce a framework for consolidated

supervision and reorganize the regulatory architecture to allow better regulation and

supervision of financial control division of bank.

Adoption OF Advertising

Bank should launch advertising campaigns through out the year to promote the

habits of savings in the people. Bank should open more branches in the remote

areas of the country to get deposits and idle resources.

Rank Influence Should Be Avoided

Sometimes 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.

Consumer satisfaction

The National bank of Pakistan has to improve services provided to the pensioners

and also they have to adopt scientific methods of paying utility bills. If the consumers

are satisfied from the service they will expand his business with the bank.


104

References

www.nbp.com.pk

www.reports.com

Businessrecorder.com

Books of money banking finance

Www.sbp.com.pk