CHAPTER # 1

1.1 Introduction of National Bank of Pakistan

National Bank of Pakistan maintains its position as Pakistanis 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 Pakistanis
economic growth through aggressive and balanced lending policies, technologically
oriented branches.
The National Bank of Pakistan came into existence on 20th November 1949 under the
National Bank of Pakistan Ordinance No.21 of 1949.It is a semipublic bank and
functions like other commercial banks. Therefore it receives funds from the depositors
and provides loans/credit facilities in all sectors including trade, industry and
agriculture. It also functions as an agent of the Central Bank and operates the
treasuries at places where no branch of State Bank of Pakistan exists. The National
Bank of Pakistan was also nationalized, along with other banks, in January 1974. The
Bank of Bahawalpur was also merged into this Bank.

1.2 History
1949 National Bank of Pakistan (NBP) was established under the National Bank of
Pakistan Ordinance 1949 and was 100% govt.-owned. NBP acted as an agent of the
Central Bank wherever the State Bank did not have its own Branch. It also undertook
Government Treasury operations. Its first branches were in jute growing areas in East
Pakistan. Offices in Karachi and Lahore followed.
1950 NBP established a branch in Jeddah, Saudi Arabia.
1955 By this time NBP had branches in London and Calcutta.
1957 NBP established a branch in Baghdad, Iraq.
1962 NBP established a branch in Dar-es-Salaam, Tanganyika.
1964 The Iraqi government nationalized NBP's Baghdad branch.

1
1965 The Indian government seizsd the Calcutta branch on the outbreak of hostilities
between India and Pakistan.
1967 The Tanzanian government nationalized the Dar-Es-Salaam branch.
1971 NBP acquired Bank of China's two branches, one in Karachi and one at
Chittagong. At separation of East Pakistan NBP lost its branches there. NBP merged
with Eastern Mercantile Bank and with Eastern Bank Corporation.
1974 The government of Pakistan nationalized NBP. As part of the concomitant
consolidation of the banking sector, NBP acquired Bank of Bahawalpur (est. 1947).
1977 NBP opened an offshore brain Cairo.
1994 NBP amalgamated Mehran Bank (est. 1991).
1997 NBP's branch in Ashgabat, Turkmenistan commenced operations.
2000 NBP opened a representative office in Almaty, Kazakhstan.
2001 State Bank of Pakistan and Bank of England agree to allow only 2 Pakistani
banks to operate in the UK. NBP and United Bank agreed to merge their operations to
form Pakistan International Bank, of which NBP would own 45% and United Bank
55%.
2002 Pakistan International Bank renamed itself United National Bank Limited
(UNB). The ownership structure of the UNB remained as before. The only change to
the shareholding structure is that UBL had recently been privatised in Pakistan and
was now owned 49% by the Government of Pakistan and 51% by a joint foreign
consortium of Abu Dhabi.
2003 NBP received permission to open a branch in Afghanistan.
2005 NBP closed its offshore branch in Cairo.

2
3
1.3 Hierarchy

PRESIDENT
PRESIDENT

MEMBER
MEMBERBOARD
BOARD

SENIOR
SENIOREXECUTIVE
EXECUTIVEVICE-PRESIDENT
VICE-PRESIDENT

EXECUTIVE
EXECUTIVEVICE
VICEPRESIDENT
PRESIDENT

SENIOR
SENIORVICE
VICEPRESIDENT
PRESIDENT
HIERARCHY
BRANCHHIERARCHY

VICE
VICEPRESIDENT
PRESIDENT
BRANCH

ASSISTANT
ASSISTANTVICE
VICEPRESIDENT
PRESIDENT

OFFICER
OFFICERGRADE
GRADE II

OFFICER
OFFICERGRADE
GRADE 22

OFFICER
OFFICERGRADE
GRADE 33

MESSENGER
MESSENGER

PEON
PEON

SWEEPER
SWEEPER

4
1.4 Branches
The Bank had a network of 1531branches in the country and 28 branches in foreign
countries. These countries are as follows:
1)- United States of America
2)- United Kingdom
3)- France
4)- Germany
5)- Africa, Middle East Region
6)- Bahrain Obu
7)- Asia Pacific Region
8)- Japan
9)- Republic of Korea
10)- Central Asian States
11)- Bangladesh
12)-Peoples Republic of China
13)-Pakistan.

1.5 Office Street Branch Bahawalnagar

This branch was established in 9th April 1975 by STATE BANK OF PAKISTAN
under section 28(1) of Banking Companies ordinance 1962 wide letter no.
BCD.3309/850/INBP-75. Code of this branch is 0709. This branch is situated in the
middle of Anarkali bazaar Bahawalnagar. The purpose of establishing this branch to
collect savings of the shopkeepers and advances them loans. At that time Mr. S.
Mojib Raza Was senior Deputy Director Of National Bank of Pakistan. This head
office is situated on II Chand Regar Road Karachi. Now a day this branch makes
much progress and capture a big part of market share of Bahawalnagar City.

From the 1st to 10th of every month this branch is full with pensioners & salaried
persons. This branch advance loans in the shape of Cash Finance (Hypo, Pledge),
Demand Finance (Advance Salary, Saiban, Gold Finance), Running Finance
(Mortgage), Agri Finance (Production, Development), etc.

5
This branch is also providing the facility of “Lockers” for general public. These
lockers are stored in Strong Room. This is attested by head of building department
that it is secure from earthquake and bullet proof. This branch has authority to keep
cash up to 4 Million. In case of excess amount it transfers to main branch
Bahawalnagar. Branch has 3 guards of which 2 are present there at every time for
security purpose.

Further detail of employees is given in Ch. 8.

1.6 Objectives of NBP

National bank of Pakistan is also a commercial organization and its main objective is
profit maximization. This is achieved in two ways:

1. By increasing deposits.

2. By charging interest on loans provided to the private sector and business

community.

These are explained as:

1. Increase in deposits:

Competition in banking is intense and every bank whether it is Pakistani, foreign,

private or nationalized tries to increase its deposits by providing better facilities to its
customers. By increasing its deposits a bank can extend greater amount of loan and
hence achieves higher profit. NBP is also improving its facilities and services to
attract customers with higher volume of deposits. There are two main factors involved
in increasing the deposits. These factors are improving the services and courtesy. NBP
is continuously working on these two factors to increase its deposits.

6
 2. Extension of loans:

The profitability of a bank largely depends on the amount given to people as loan and
the type of people to whom credit is given i.e. the credit worthiness of the borrowers.
This strategy has worked quite well for NBP. Deposits are collected from the people
and invested in different projects. NBP prefers to give loans to financially sound and
reliable parties, after securing the collators. NBP has an extremely well organized
section. The staff is adequately trained, and educated and competent. They carry out
extensive financial analysis before deciding on the loan. Interest charged on the loans
potentially contributes to higher profits.

Some of the other objectives of NBP are:

i. Improve customer services.

ii. Quick disposal of credit cases.

iii. Efficient operation of the branches.

iv. Better Public Relations.

v. Operational and advisory services for foreign exchange accounts activities

7
CHAPTER # 2

2.1 Account Opening And Closing Department

Basically function of A/c opening & closing in NBP is performed under Accounts
department but I am discussing it with separate heading for better understanding.
Firstly all types of Accounts which can be opened in NBP has been described:

2.2 Types of Accounts

⇒ Current account
⇒ Saving account
Brief explanation of these accounts is as follows:

Current Accounts
Current A/c is basically used to meet the daily transactions. Current account provides
safety to the customer’s money, gives the advantage for paying debts by the
convenient and safe means of sending cheques through the post thus avoiding the
trouble and loss that units in PKR, Us$ GBP and DM.

Saving Account
In case of saving accounts, account holder gets profit. There is a time limit for
drawing cash; customer cannot draw money before a certain time.
In NBP saving a/c is used as current a/c & there is no main difference between current
& saving account except profit.
This account can be opened by limited company, partnership company ,club societies
& associations, joint & sole proprietorship.

8
2.3 How to Open an Account (General)
When a person intend to open account. A card is filled & signed by customer. This
card contain:

i) Six boxes for name.

ii) Opening date
iii) Special instructions
iv) Space for first a/c No.
v) Space for other accounts.

Following points are considered by the bank in this regard.

1)- Another account holder of the bank should properly introduce the new customer.
2)- The account holder should sign the account opening form in the presence of bank
officer and the signature is duly verified.
3)- A copy of identity Card is required by Bank.
4)- Against submission of the Bank’s prescribed application form, duly introduced in
the manner provided and on supplying such document, as may be required and
account may be opened. The Bank reserves to itself the right to refuse to open and
account without assigning any reason.
5)- Each account shall be allotted a distinct number that is to be quoted in all
correspondence with the bank relation to the account.
6)- Minimum amount for opening and continued maintenance of various types of
accounts is as follows:
Rs. US$
Current 2000 2000
Saving 500 500
The bank reserves the right to change the above mentioned minimum balance
requirement at any time without any notice.

9
2.4 Procedure to Open an Account
When a customer wants to open an account, the bank officer gives application form to
him. All information, which is necessary to be known by the bank, is requirements of
the application form. From also requires the essential documents to be attached by the
customer.

2.5 Following persons can open an account:

1)-Sole proprietors
2)-Private accounts (individual A/Cs)
3)-Joint account
4)-Limited Company
5)-Partnership Company
6)-Club, Society & Association

2.6 Basically following information is required:

⇒ Name
⇒ Address
⇒ Telephone no.
⇒ Currency of account
⇒ Nature of Business
⇒ Residential status
⇒ Special instruction regarding the account
⇒ Signature of the applicant

2.7 Documents to Be Attached

Documents required to be attached are different for different categories.

1)- Sole Proprietor’s Account

They have to submit their business registration certificate number.

10
2)- Private Accounts
For individual or private accounts following documents & information has to be
given:
⇒ Name
⇒ Residence address
⇒ Mail address
⇒ Foreign address
⇒ Office address & office ph. No.
⇒ Position to title
⇒ Passport or identification No/
⇒ Matrimonial status
⇒ Date and place of birth
⇒ Nationality
⇒ Residence visa No.
⇒ Name and address of other Banks in Pakistan

3)- Joint Account

If some one wants to open joint account the following information is needed:
⇒ Full name
⇒ Address
⇒ Specimen of signatures of the joint account holders

4)- Joint Company

In this case following information & documents are required:
⇒ Certified true copy of the Memorandum and Articles of Association of the
company.
⇒ Certified true copy of the resolution of the board of directors / managing
committee / governing body regarding conduct of the account.
⇒ Certified list containing names and signatures of the directors / office bearers.

11
⇒ Certified true copy of the certificate of incorporation or registration.

12
 ⇒ Certified true copy of the certificate of commencement of business ( in case of
public limited companies).
⇒ I.d. Card copy of each director
⇒ Original is also enclosed for inspection and return
⇒ List of persons authorized to operate on the account.

5)- Partnership Company Account

Documents required in this case are as follows:
⇒ Full Names
⇒ Address
⇒ Specimen of signatures of the partners
⇒ Certified true copy of partnership deed

6)- Societies / Clubs And Association Account

Documents required in this case are as follows:
⇒ Copy of the rules certified by the president and the secretary.
⇒ Certified copy of a resolution of the committee and the specimen signatures of
the persons authorized to sign.

2.8 Other Formalities

The majority of the new customers are introduced either by an existing customer or by
bank staff. When the concerned officer is satisfied then he opens the account and
gives an account number that will be used in all communications with the bank in
regard to the account and when making deposits and withdrawal.
Bank has a right not to open and account without assigning any reason or to close the
account, if it is not operated in a satisfactory manner by the head office instructions.
So, opening questionnaire for companies & business accounts includes:
⇒ Company name
⇒ Address
⇒ Mail address

13
 ⇒ Telephone, Cable & Telex
⇒ Nature of Company
⇒ Business registration certificate number
⇒ Date of incorporation
⇒ Nature of Business
⇒ Names of main managers & director
⇒ Names & address of parent companies
⇒ Names & address of other banks
⇒ And, introducer’s declaration

And opening questionnaire for private accounts includes:

⇒ Name
⇒ Residence address
⇒ Mail address
⇒ Residence telephones No.
⇒ Foreign address
⇒ Office address
⇒ Office Telephone No.
⇒ Position or Title
⇒ Passport or identification cards No.
⇒ Matrimonial status
⇒ Nationality
⇒ Residence Visa No.
⇒ Name & address of other banks in Pakistan
⇒ Name & address of other banks in abroad
⇒ & Their account No.
⇒ & Introducer’s declaration

14
2.9 Issuance Of Cheque Book
When a customer opens an account with the bank, he is provided with cheque book
for withdrawals of account. However, the first cheque book is given to the customer
only when all the required documents are checked. A cheque book contains twenty
five, fifty or hundred leaves. The cheque book also carries a requisition slip for the
issuance of the new cheque book. This slip is duly filled and singed by the customer.
The signature of the customer is verified by the bank and new cheque book is issued
to the customer and serial numbers of the cheque are duly entered in the book of the
bank. Along with the signature, person should also write his full name & address.
Usually only one cheque book is issued at a time, however big concerns who need a
number of cheque books at a time, may ask the bank to stock as number of cheque
books in their name and to point their name on these cheque books.
Bank debits the client’s account for excise duty of Rs.2.50/- per cheque and keeps the
cheque book ready for the customer, as on his advice.
The officer keeps and maintains the cheque book register Cheque book inventory and
cheque books issued are recorded in this register. The account number for which the
cheque book is issued and the number of leaves are also recorded in this register when
the cheque book issued an entry is passed in the cheque book issue register.

2.10 The Requisites Of A Cheque

There is no prescribed form of words or design of a cheque but in order to fulfil the
requirements the cheque must have the following:
⇒ It must be in writing
⇒ It must contain an order to pay and addressed a specified bank.
⇒ The order must be unconditional
⇒ The order must direct to pay on demand
⇒ The sum ordered to be paid must be certain.
⇒ The payment should be ordered to be paid to a certain person or to his order or
the bearer.

15
2.11 Checking And Payment Of Cheques
It is the primary function of the bank to repay the money received from his customer’s
account usually by honouring his cheques. It is a contractual obligation of a banker to
honour his customer’s cheque, if he has checked the following on a cheque:
⇒ Name of the Bank & branch
⇒ Amount in figure and words
⇒ Signature of the Drawer (verification)
⇒ Posting mark by the computer operator
⇒ Cancellation by the authorized
⇒ Cheque should not be damaged
⇒ Funds must be sufficiently available
⇒ No legal bar prohibiting payment.

2.12 Stopping The Payment Of Cash On Cheque

⇒ The payment of cheque is stopped dishonored on the following grounds:
⇒ Effects not yet cleared ,then request to present again.
⇒ Drawer’s signatures differ
⇒ Payee’s endorsement requires bank’s guarantee
⇒ Alteration requires full signatures
⇒ Cheque is post dated
⇒ Cheque is without date
⇒ Amount in figures and word differs
⇒ Payment stopped by the drawer.

2.13 How To Close An Account

The account can be closed by the customer. The customer is required to submit and
application for closing the account. Then the account is closed out and his balance is
paid to him. Cheque book is returned back to bank and the officer cancel and the
remaining cheques in cheque book.

16
CHAPTER # 3

3.1 Cash Dealing Department

Cash department of NBP is given the complete responsibility of handling all receipts
& disbursement of cash. As a result of transaction in both local & foreign currencies
& near cash items such as traveler cheque etc ( when they are issued against cash).
As a consequence it is also responsible for the book keeping of these transactions &
the safe custody of cash & near cash securities of NBP.
a)- Cash receipts for receive deposits.
b)- Encashment of cheque
Cash department of NBP is a separate close part covered with glasses. No one other
than cash department’s employee is allowed to enter into that area.

3.2 Cash Receipt

The depositor uses cheque deposit slip (or cash deposit slip) for depositing the
amount. There are two types of cash deposit slip:
a)- One for current account – holders &
b)- Other for saving account holders.
Both are in different colors for clear identification. There are two parts of cash
deposits slips:
a)- Counter foil
b)- Adjacent credit voucher.

3.3 Acceptance of Cheque

The cash is paid against the cheque of the client. The following points are kept in
mind while receiving the cheque from the client.
⇒ Cheque should be drawn on NBP.
⇒ It should not be post dated.
⇒ It should be bearer cheque so the word bearer should not be crossed.
⇒ Payment is not stopped by the drawer.

17
 ⇒ Amount in words & figure should be same.
⇒ Alternation in date / figure / word require drawer’s full signature with
signature on the cheque.

3.4 Types of Cheques

Bankers in Pakistan deal with three types of cheques

a) Bearer Cheques
Bearer cheques are cashable at the counter of the bank. These can also be collected
through clearing.

b) Order cheque
These types of cheques are also cashable on the counter but its holder must satisfy the
banker that he is the proper man to collect the payment of the cheque and he has to
show his identification. It can also be collected through clearing.

c) Crossed Cheque
These cheques are not payable in cash at the counters of a banker. It can only be
credited to the payee’s account. If there are two persons having accounts at the same
bank, one of the account holder issues a cross-cheque in favour of the other account
holder. Then the cheque will be credited to the account of the person to whom the
cheque was issued and debited from the account of the person who has actually issued
the cheque.

3.5 Affirmation of Signatures

After receiving the cheque the officer verifies the signature of the account holder with
the signature on the cheque. It signatures are not the same then it is returned back
otherwise forwarded to computer terminal.

18
3.6 Computer Terminal Process
The cheque is received in computer terminal, where the computer operator checks the
balance of the account holder. The operator also sees whether the stop payment
instructions are received from account holder or not. After considering these two
points computer operator posts the cheque in account holder ledger & returns the
cheque back to the officer.

3.7 Payment Of Cash

The cheque is cancelled after posting & is returned to cashier. The cashier enters the
cheque in “cash paid register” & pays against the second signature of the receiver on
the back of the cheque.

3.8 Cash Link

NBP ATM Services For Your Convenience

Services Available On NBP ATM’s

⇒ Cash withdrawal according to your cyclic limit.
⇒ Transfer of funds between PLS Savings Account and Current Account of the
same customer through the same ATM Card.
⇒ Account Balance Inquiry.
⇒ Instant mini- statement of account listing the last 15 transactions in account.
Request for a new Cheque book which might be collected by the customer from the
branch.

How Much Cash Can Be Withdrawn

There is a 24 hours cyclic cash withdrawal limit imposed on all ATM cards.
Withdrawal limits depend on the type of customers.

19
Pin (Personal Identification Number) Mailer
A pin mailer issued to the ATM card holders carries the PIN number in a sealed
envelope. Card holder is required to keep the PIN number in a safe place as all the
operations on the ATM are carried out through the same.

20
CHAPTER # 4

4.1 Clearing Department

Nearly all the banks provide a wide variety of services to their depositors. One
valuable service provided is that of clearing. Clearing department also plays an
important role in performing the activities of the bank.
The basic function of clearing department is to provide services to customers in
collection of their cheques of other banks, whether they are in city or outside the city.
The customer can get the money in his account at NBP from the cheques drawn on
another bank. The bank accepts the cheque in the clearing which it is drawn through
the clearing house i.e, State Bank of Pakistan.

4.2 Clearing
We can define clearing as, ”the transfer of funds from one branch of bank to the other
branch of the same bank or the other bank on which the instrument is drawn, without
involving cash through “State Bank’s clearing house” or we can say in other that
cheques which can not be cashed at the ash counter of the bank.

4.3 Clearing House

It is of the service provided by central bank i.e, State Bank of Pakistan to the other
commercial banks. SBP acts as a clearing house. A representative of each bank
represents his bank in the clearing house.
“A clearing house is an association of commercial banks set up in a given locality for
the purpose of interchange & settlement of credit claims”.
The SBP maintains the accounts of the NBP like other scheduled banks and debits the
account of the drawee bank and credits the presented bank which is NBP in that case.

4.4 Types Of Cheque

Some specific types of cheque are being entertained in the clearing department of
NBP Main Branch, Lahore.

21
These types of cheque are:
1)- Local cheque
2)- Out station cheque
3)- In house cheque

1)- Local Cheque

By local cheque we mean collection of cheque from the banks which are the
members of the clearing house and which are located within the city.

2)- Out Station Cheque

By out station cheque we mean collection of cheque from the banks which are
situated outside the city. It means that presenting bank and the bank on which the
cheque is drawn are not situated in the same city.

3)- In House Cheque

In house cheque are drawn on one branch of NBP and presented to another branch of
NBP such cheques are marked with transfer stamp.

4.5 Types Of Clearing

Clearing department deals with the two type of the clearance.
These are stated below:
1)- Inward clearance
2)- Outward clearance

4.6 Inward Clearance

Cheque drawn on NBP and presented to other Banks or handed over to NBP agent in
clearing house. That is inward clearance for NBP. So inward clearing results in
outflow of funds to collecting bands reducing the balance in the clearing account.

22
4.7 Outward Clearance
Similarly cheque which are drawn on other bank and presented to NB Main branch,
Lahore are known as outward clearance for NBP Main Branch. So outward clearing
results in inflow of funds from paying bank into the clearing account maintained with
clearing house increasing the balance in the clearing account.
Outward clearing thus may be:
⇒ Local clearing
⇒ Outstation clearing
Excess of outward clearing over inward clearing produces a net increase in the
clearing account balance. Excess of inward clearing over outward. Clearing produces
a net decrease in the clearing account balance. The first case is referred to as favorable
clearing & the second case as unfavorable clearing.

23
CHAPTER # 5

5.1 Advances Department

Advances department is one of the most sensitive and important departments of the
bank. The major portion of the profit is earned through this department. The job of
this department is to make proposals about the loans. The Credit Management
Division of Head Office directly controls all the advances. As we known bank is a
profit seeking institution. It attracts surplus balances from the customers at low rate of
interest and makes advances at a higher rate of interest to the individuals and business
firms. Credit extensions are the most important activity of all financial institutions,
because it is the main source of earning. However, at the same time, it is a very risky
task and the risk cannot be completely eliminated but could be minimized largely with
certain techniques.
Any individual or company, who wants loan from NBP, first of all has to undergo the
filling of a prescribed form, which provides the following information to the banker.

5.2 Name and address of the borrower.

⇒ Existing financial position of a borrower at a particular branch.
⇒ Accounts details of other banks (if any).
⇒ Security against loan.
⇒ Exiting financial position of the company. (Balance Sheet & Income
Statement).
⇒ Signing a promissory note is also a requirement of lending, through this note
borrower promise that he will be responsible to pay the certain amount of money with
interest.

24
5.3 Principles of Advances
There are five principles, which must be duly observed while advancing money to the
borrowers.
⇒ Safety
⇒ Liquidity
⇒ Dispersal
⇒ Remuneration
⇒ Suitability

5.4 Forms of Loans

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
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 un-
utilized 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.

b) Overdraft/Running Finance
This is the most common form of bank lending. When a borrower requires temporary
accommodation his banker allows withdrawals on his account in excess of the

25
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.

c) Demand 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
d) Agricultural Finance
NBP provides Agricultural Finance to solidify faith, commitment and pride of farmers
who produce some of the best agricultural products in the World.

Agricultural Finance Services:

“I Feed the World” program, a new product, is introduced by NBP with the aim to
help farmers maximize the per acre production with minimum of required input.
Select farms will be made role models for other farms and farmers to follow, thus
helping farmers across Pakistan to increase production.

26
Agricultural Credit:
The agricultural financing strategy of NBP is aimed at three main objectives:-
⇒ Providing reliable infrastructure for agricultural customers
⇒ Help farmers utilize funds efficiently to further develop and achieve better
production
⇒ Provide farmers an integrated package of credit with supplies of essential
inputs, technical knowledge, and supervision of farming.

Agricultural Credit (Medium Term):

⇒ Production and development
⇒ Watercourse improvement
⇒ Wells
⇒ Farm power
⇒ Development loans for tea plantation
⇒ Fencing
⇒ Solar energy
⇒ Equipment for sprinklers

e) Farm Credit:
NBP also provides the following subsidized with ranges of 3 months to 1 year on a
renewal basis.
⇒ Operating loans
⇒ Land improvement loans
Equipment loans for purchase of tractors, farm implements or any other equipment
Livestock loans for the purchase, care, and feeding of livestock

f) Production Loans:
Production loans are meant for basic inputs of the farm and are short term in nature.
Seeds, fertilizers, sprayers, etc are all covered under this scheme.

27
If you require any further information, please do not hesitate to e-mail us.

28
g) Corporate Finance

Working Capital and Short Term Loans:

NBP specializes in providing Project Finance – Export Refinance to exporters – Pre-
shipment and Post-shipment financing to exporters – Running finance – Cash Finance
– Small Finance – Discounting & Bills Purchased – Export Bills Purchased / Pre-
shipment / Post Shipment Agricultural Production Loans

Medium term loans and Capital Expenditure Financing:

NBP provides financing for its clients’ capital expenditure and other long-term
investment needs. By sharing the risk associated with such long-term investments,
NBP expedites clients’ attempt to upgrade and expand their operation thereby making
possible the fulfillment of our clients’ vision. This type of long term financing proves
the bank’s belief in its client's capabilities, and its commitment to the country.

29
CHAPTER # 6

Remittance Department
Remittance means a sum of money sent in payment for something. This department
deals with either the transfer of money from one bank to other bank or from one
branch to another branch for their customers. NBP offers the following forms of
remittances.
⇒ Demand Draft
⇒ Telegraphic Transfer
⇒ Pay Order
⇒ Mail Transfer

6.1 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
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.

Open DD: Where direct payment is made.

Cross DD: Where payment is made though account.

NBP CHARGES FOR DD

Up to Rs. 50,000/- is Rs 50/- only
Over Rs. 50,000/- is 0.1%

30
6.2 Pay Order
Pay 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. 25
per pay order from the account holder and Rs. 100 from a non-account holder.

6.3 Telegraphic Transfer

Telegraphic transfer or cable transfer is the quickest method of making remittances.
Telegraphic transfer is an order by telegram to a bank to pay a specified sum of
money to the specified person. The customer for requesting TT fills an application
form. Vouchers are prepared and sent by ordinary mail to keep the record. TT charges
are taken from the customer. No excise duty is charged on TT. The TT charges are:
Telegram/ Fax Charges on TT = Actual-minimum Rs.125.
Cable telegram transfer costs more as compared to other title of money. In cable
transfer the bank uses a secret system of private code, which is known to the person
concerned with this department and branch manager.

6.4 Mail Transfer

When the money is not required immediately, the remittances can also be made by
mail transfer (MT). Here the selling office of the bank sends instructions in writing by
mail to the paying bank for the payment of a specified amount of money. Debiting to
the buyer’s account at the selling office and crediting to the recipient’s account at the
paying bank make the payment under this transfer. NBP taxes mail charges from the
applicant where no excise duty is charged.

31
CHAPTER # 7

7.1 Account Department

The main function of the accounts department of NBP is to maintain general ledger
accounts and after the business hours the function of the accounts officer is to close
books.

7.2 Functions
There are many other important functions performed by accounts department of NBP.
So I ma going to discuss these functions in three steps:
⇒ General Ledger;
⇒ Voucher system;
⇒ Types of voucher used.

7.3 General Ledger:

It is the prime record of the branch reflecting its assets and liabilities and serves as the
master control of accounting system of the branch. It consists of only those accounts,
which are authorized by the head office.

7.4 Voucher System:

⇒ Voucher is a written authorization sued in approving a transaction for
recording and payment.
⇒ Voucher is a system, which is generally designed to provide strong internal
control over the transaction, which take place during the business hours.
⇒ Whenever a transaction takes place in any department of the bank.
⇒ One debit and one credit voucher is prepared. At the end of the day, these
vouchers are collected and recorded i.e.,

32
Debit vouchers are used in two cases:

⇒ When ever any expense is incurred.

⇒ When a depositor withdraws some amount from his account

The account of the customer is debited with the amount and debit voucher is prepared.

The format of the debit voucher includes:

⇒ Name of branch
⇒ Date
⇒ Branch No.
⇒ Account No.
⇒ Transaction Code
⇒ Amount and other details (Narration)

7.5 Credit vouchers:

There are two types of transaction in which credit vouchers are used.
⇒ When a depositor deposits any amount in his account because the liability of
bank.
⇒ Any income received by the bank e.g. bank draft.

Different types of credit vouchers are used.

Now in second set these three important functions of Account department of NBP are
described briefly.
⇒ All expenses vouchers are routed ask through Accounts Department.
⇒ Preparation of various statements.
⇒ Preparation daily activity report at the end of each day.

33
7.6 Expense voucher:
All the expense vouchers passed by each department are routed through accounts
department. These expenses include:

a) Salaries given to all employees of the bank

b) Wages
c) Rent
d) Lease installments
e) Insurance - vehicle
f) Insurance - cash
g) Utility Bills
h) Medical allowances (reimbursed)
i) Cash carrying charges etc.

7.7 Salary structure:

Salary included
Bonuses
These bonuses are credited after every six months i.e. June and December. These are
first and second profit bonuses and are equal to one month's basic salary.

Allowances:
Allowances included house allowances, transport allowance and utility allowance.

Provident fund:
Provident fund is provided to each employee on his retirement. Contribution by
employer and employee is 8.3%.

34
7.8 Preparation of Statements:

Second major functions of accounts department are the preparation of various

statements. These statements are:

1)- Weekly Statements:

These weekly statements are sent at first to NBP head office Karachi.

2)- Monthly Statements:

These monthly statements are sent at first to NBP head office Karachi and then these
statements are sent to head office affairs in consolidated form. All vouchers and
statements signed and approved by manager accounts or who has authority to sign on
behalf of the bank and whose signatures appear in one of the bank’s book of specimen
signatures or a person who has authority to sign internal vouchers and records extent
of its authority will be made by the country manager.

3)- Preparation of Daily Activity Reports:

It is also duty of accounts department to prepare daily activity report at the end of
each day. It includes the details of the following:

⇒ Loans transactions
⇒ General ledger transactions
⇒ Foreign currency related transactions
⇒ Fixed deposits transactions

All vouchers prepared by different relative departments on computer.

35
In third and last step the following functions of accounts department of NBP are
described as follows:
⇒ Approval of daily expenses voucher
⇒ SBP balance
⇒ Tax returns
⇒ Budgeting
⇒ Forward Cover Fee
⇒ Debit Balance Calculation
⇒ Pay order/telegraphic commission transfer
⇒ Deposit entry
⇒ Depreciation
⇒ Result/budget
⇒ Head office report
⇒ Trial balance / Fx position
⇒ Commitment return
⇒ Sources and uses
⇒ Activity report
⇒ Statistics of activity
⇒ Monthly assets and liability
⇒ Liquidity 1, 2, 3, 4, 5 years
⇒ Excise duty balancing
⇒ EOM/EOY Print files floppy
⇒ Customer's/internal A/c statements
⇒ Computer complete back up
⇒ Quarterly statements size wise
⇒ FCY interest reporting
⇒ FCY interest checking
⇒ Service Charges
⇒ A/c to be dormant

36
⇒ Letters to customers

37
 ⇒ Classification of deposits
⇒ List of deposits
⇒ A/c opening and closing
⇒ Staff loans
⇒ A/c blocked and unblocked
⇒ Monthly resident and non resident
⇒ Zakat Calculations.

7.9 Accounting Procedure In NBP:

Various departments use debit and credit voucher for recording the transactions.
Accounting department receives the departmental journal from the departments to
gather with all the vouchers.
Verify correction of total of all into departmental entries in departmental journals.
Sort vouchers into general ledger a/c order debit separately from debit for each
account.
From departmental journals add all debits and all credits for each general ledger
account and write total for each account in relative account and extend new balances.
Prove debit and credit totals to department journal total. Write total obtained from
machines list for each contingent accident in general ledger and up data balances.
Date and sign general ledger and obtain signature of an officer.
Place general ledger includes leaf binder in chronological order.

38
CHAPTER # 8

8.1 FOREIGN EXCHANGE/DEPARTMENT:

This deptt mainly deals with the foreign business. The main functions of this deptt
are:
⇒ L/C dealing.
⇒ Foreign currency accounts dealing.
⇒ Foreign Remittance dealing.

8.2 L/C Dealing

NBP is committed to offering its business customers the widest range of options in
the area of money transfer. If you are a commercial enterprise then our Letter of
Credit service is just what you are looking for. With competitive rates, security, and
ease of transaction, NBP Letters of Credit are the best way to do your business
transactions.

8.3 Foreign Currency Account Dealing

This deptt deals with the foreign currency accounts which mainly include dollar
account, euro account etc.

8.4 Foreign Remittance Dealing

This is very important function of this deptt.

39
CHAPTER # 9

Financial Analysis
In this report financial analysis is done in two ways:

 Trend analysis
• Horizontal analysis
• Vertical analysis
 Ratio analysis

9.1 Trend Analysis

Trend analysis is done in two steps and first one is Horizontal Analysis:

Horizontal Analy

An analysis of percentage financial statements where all balance sheet or income

statement figures for a base year equal 100% and subsequent financial statement
items are expressed as percentages of their values in the base year. It is also
called Index Analysis.

Here I have done Horizontal analysis using fixed base method. For which values of
the year 2007 are taken as base.
Formula:- Current Year / Base year * 100

Vertical Analysis
Vertical analysis helps us to show the actual increase or decrease in various items of
Profit and Loss Statement with regard to a specific base as Markup Interest Earned
and for balance sheet items Total Assets are taken as base. This analysis is also called
Common- size Analysis.
Vertical analysis of the balance sheet shows the percentage increase and decrease in
various items in terms of total assets. The above analysis is done by taking total assets
as base and considered this figure equal to 100%.

40
Vertical Analysis
Balance Sheet
For the year ended
December 31, 2007, 2008, 2009
ASSETS 2007 2008 2009
Cash and balances with treasury banks 12.45 13.02 12.27
Balances with other banks 4.92 4.69 3.01
Lendings to financial institutions 2.82 2.09 2.07
Investments 27.66 20.89 23.05
Advances 44.70 50.50 50.33
Operating fixed assets 3.40 2.96 2.66
Deferred tax assets - 0.39 0.32
Other assets 4.07 5.45 6.28
TOTAL ASSETS 100 100 100
LIABILITIES
Bills payable 0.93 1.25 1.12
Borrowings 1.43 4.95 4.80
Deposits and other accounts 77.66 76.42 76.94
Sub-ordinated loans - - -
Liabilities against assets subject to
finance lease 0.0044 0.0031 0.0045
Deferred tax liabilities - net 0.67 - -
Other liabilities 4.05 4.85 4.48
TOTAL LIABILITIES 84.74 87.47 87.34
NET ASSETS 15.26 12.53 12.66
REPRESENTED BY
Share capital 1.07 1.10 1.14
Reserves 2.07 2.44 2.40
Unappropriated profit 5.95 6.41 6.50
Surplus on revaluation of assets - net 6.18 2.58 2.62
TOTAL EQUITY 15.26 12.53 12.66

Profit and Loss Account

For the year ended
December 31, 2007, 2008, 2009
2007 2008 2009
Mark-up / return / interest earned 100 100 100
Mark-up / return / interest expensed 33.50 39.19 50.66
Net mark-up / interest income 66.50 60.81 49.34
Provision against non-performing loans
and advances 9.34 17.38 14.17
Reversal of provision for diminution in -0.08 0.61 0.78

41
the value of investments
Provision against off balance sheet
obligaions bad debts written off directly - 0.01 0.03
Bad debts written off directly 0.08 - -
9.34 18.00 14.97
Net mark-up / interest income after
provisions 57.16 42.81 34.37
NON MARK-UP/INTEREST INCOME
Fee, commission and brokerage income 13.41 13.00 11.46
Dividend income 6.45 4.72 2.46
Income from dealing in foreign
currencies 2.06 6.51 3.88
Gain on sale and redemption of
securities 4.63 0.65 5.89
Unrealized loss/gain on revaluation of
investments classified as held-for-
trading -0.06 0.00 0.00
Other income 0.29 2.04 0.71
Total non mark-up / interest income 26.78 26.94 24.41
83.95 69.74 58.78

NON MARK-UP/INTEREST EXPENSES

Administrative expenses 28.09 29.82 28.96
Other provisions / write offs /
(reversals) 0.33 1.23 0.80
Other charges 0.03 0.96 0.41
Total non mark-up / interest expenses 28.46 32.00 30.17
55.49 37.74 28.61
Extra ordinary / unusual items
PROFIT BEFORE TAXATION 55.49 37.74 -
Taxation - Current 16.44 19.30 11.83
- Prior years 0.77 - -5.30
- Deferred 0.64 -6.92 -1.28
TOTAL TAX 17.85 12.38 5.24
PROFIT AFTER TAXATION 37.64 25.37 23.36

42
Horizontal Analysis
Balance Sheet
For the year ended
December 31, 2007, 2008, 2009
ASSETS 2007 2008 2009
Cash and balances with treasury banks 100.0 112.3 122.1
Balances with other banks 100.0 102.3 75.8
Lendings to financial institutions 100.0 79.8 91.3
Investments 100.0 81.0 103.3
Advances 100.0 121.2 139.5
Operating fixed assets 100.0 93.4 97.0
Deferred tax assets - 100.0 95.6
Other assets 100.0 143.7 191.4
TOTAL ASSETS 100.0 107.3 123.9
LIABILITIES
Bills payable 100.0 144.7 150.4
Borrowings 100.0 371.7 415.9
Deposits and other accounts 100.0 105.6 122.7
Sub-ordinated loans - - -
Liabilities against assets subject to
finance lease 100.0 75.3 127.0
Deferred tax liabilities - net 100.0 - -
Other liabilities 100.0 128.5 136.9
TOTAL LIABILITIES 100.0 110.8 127.7
NET ASSETS 100.0 88.1 102.8
REPRESENTED BY
Share capital 100.0 110.0 132.0

43
Reserves 100.0 126.4 143.8
Unappropriated profit 100.0 115.7 135.3
Surplus on revaluation of assets - net 100.0 117.5 136.8
TOTAL EQUITY 100.0 88.1 102.8

Profit and Loss Account

For the year ended
December 31, 2007, 2008, 2009
2007 2008 2009
Mark-up / return / interest earned 100.0 120.5 154.1
Mark-up / return / interest expensed 100.0 141.0 233.1
Net mark-up / interest income 100.0 110.2 114.4
Provision against non-performing loans
and advances 100.0 224.3 233.8
Reversal of provision for diminution in
the value of investments 100.0 -927.4 -1504.7
Provision against off balance sheet
obligaions bad debts written off directly - 100.0 505.9
Bad debts written off directly 100.0 - -
100.0 232.3 247.1
Net mark-up / interest income after
provisions 100.0 90.2 92.7
NON MARK-UP/INTEREST INCOME
Fee, commission and brokerage income 100.0 116.9 131.7
Dividend income 100.0 88.2 58.8
Income from dealing in foreign
currencies 100.0 380.6 290.4
Gain on sale and redemption of
securities 100.0 16.9 196.1
Unrealized loss/gain on revaluation of
investments classified as held-for-
trading 100.0 -5.3 -7.4
Other income 100.0 845.1 374.7
Total non mark-up / interest income 100.0 121.2 140.5
100.0 100.1 107.9

NON MARK-UP/INTEREST EXPENSES

Administrative expenses 100.0 127.9 158.9
Other provisions / write offs /
(reversals) 100.0 444.9 369.5
Other charges 100.0 3403.3 1876.5

44
Total non mark-up / interest expenses 100.0 135.5 163.4
100.0 82.0 79.5
Extra ordinary / unusual items
PROFIT BEFORE TAXATION 100.0 82.0 79.5
Taxation - Current 100.0 141.5 110.9
- Prior years 100.0 - -1055.8
- Deferred 100.0 -1303.6 -308.9
TOTAL TAX 100.0 83.6 45.3
PROFIT AFTER TAXATION 100.0 81.2 95.7

Basic earnings per share 100.0 73.8 72.5

Diluted earnings per share 100.0 73.8 72.5

45
9.2 Ratio Analysis
Ratio Analyses is a tool used in financial analysis. It is the most popular technique of
financial analysis. A ratio is the indicator of the quantitative or arithmetical
relationship between two variables. it can be expressed in terms of fraction,
percentage or proportion. In financial analyses a ratio is used as a yardstick for
evaluating the financial position and performance of a firm.

9.3 Liquidity Ratios:-

Liquidity represents the ability of a bank to efficiently and economically
accommodate deposits withdrawal as well as fund increase in assets. A bank has a
liquidity potential when it has the ability to obtain sufficient funds in a timely manner
at a reasonable cost. Liquidity is a primary factor leading to a bank’s failure whereas
high liquidity helps otherwise weak institutions to remain funded during the period of
difficulty.

Total Advances to Total Deposits Ratio:-

It demonstrate the degree to which bank has already used up its available resources to
accommodate the credit needs of its customer

Formula: (Total Advances ÷ Total Deposits)*100

2007 2008 2009

57.56 66.08 65.42

ANALYSIS
This ratio, a comparison of funds generation and its funds mobilization, indicates the
total loans sanctioned by the bank in relation to total amount of money deposited with
the bank, stands highest in 2008 ( 66.08%) as compared with the previous year
figures. This shows that the bank has greater potential to advance additional loans.

46
During all other years the ratio is quiet satisfactory representing National Bank of
Pakistan’s credit management decision.

Due toBank (Borrowing from financial intuitions) to Deposit Ratio:-

This ratio is an indicative of the proportion of the lending from the financial
institutions in relation to the total funds raised by the bank in the form of deposit

Formula: (Borrowing from financial intuitions ÷ Total Deposits)

2007 2008 2009
1.84 6.47 6.23
ANALYSIS
The due to banks to total deposits ratio of National Bank of Pakistan indicates
increasing trend during all years. The ratio is 1.84 in 2007 and increased to 6.47 in
2008. The ratio is increased in 2009 as the ratio is 6.23. The year 2007 represents the
lowest percentage of 1.84 and the year 2008 represents the peak percentage of 6.47

47
9.4 Leverage Ratios
Any ratio used to calculate the financial leverage of a company to get an idea of the
company's methods of financing or to measure its ability to meet financial obligations.
There are several different ratios, but the main factors looked at include debt, equity,
assets and interest expenses.

Debt Ratios:-
A debt ratio of greater than 1 indicates that a company has more debt than assets,
meanwhile, a debt ratio of less than 1 indicates that a company has more assets than
debt. Used in conjunction with other measures of financial health, the debt ratio can
help investors determine a company's level of risk.

Formula: Total Debt/ total assets) *100

2007 2008 2009

84.74 87.47 87.34

Debt/Equity Ratio
To a large degree, the debt-equity ratio provides another vantage point on a
company's leverage position, in this case, comparing total liabilities to shareholders'
equity, as opposed to total assets in the debt ratio. Similar to the debt ratio, a lower the
percentage means that a company is using less leverage and has a stronger equity
position.

(Total debt/ Total shareholder’s equity) *100

2007 2008 2009

79.20 79.75 76.62

48
Analysis
The debt to equity ratio of National Bank of Pakistan does not show fluctuation in
2008 it was just about constant to 80% but deceased in 2009 by 4%.

Debt to Total Assets Ratio:-

Indicates what proportion of the company's assets are being financed through debt
• This ratio is very similar to the debt-equity ratio.

• A ratio under 1 means a majority of assets are financed through equity, above
1 means they are financed more by debt. Furthermore you can interpret a high
ratio as a "highly debt leveraged firm".

Formula: (Total debt ÷ Total assets)*100

2007 2008 2009

84.74 87.47 87.34
Analysis:
Not a particularly exciting ratio, but a useful one. Cory's Tequila Co.'s debt/asset ratio
is fairly low, meaning that its assets are financed more through equity rather than
debt. And if you'll notice Cory's Tequila Co. has zero long term debt and shouldn't
have to worry about creditors getting nervous. Companies with high ratios are placing
themselves at risk, especially in an increasing interest rate market. Creditors are
bound to get worried if the company is exposed to a large amount of debt and may
demand that the company pay some of it back.

49
9.5 Profitability Ratios:-
The profitability ratios indicate the efficiency of operations and the organization’s
pricing policies. Profitability imitates not only the quantity but also the trend of
earning during a specified period but also influences the maintenance of earnings.

Net Profit Ratio:-

Net profit ratio indicates that in mark up interest what the rate of net profit is

Formula: (Net Profit after tax ÷ Markup or interest earned)*100

2007 2008 2009

37.64 25.37 23.36

Analysis:
In 2007 it was 37.64% and decreased to 25.37% in 2008 but again decreased to
23.36% in 2009 so the year 2007 was best year from profitability point of view in
these years.

Operating Expense Ratio

Ratios that are typically used to analyze how well a company uses its assets and
liabilities internally. Efficiency Ratios can calculate the turnover of receivables,
the repayment of liabilities, the quantity and usage of equity and the general use of
inventory and machinery.
Formula: Efficiency = (non interest. expense/ net interest+ non interest. income)*100

2007 2008 2009

42.79 52.63 61.14

50
Total Asset Turnover:-
This ratio shows the overall efficiency of the bank in utilizing its assets to earn mark
up return.

Formula: (Interest of markup of return earned ÷ Total Asset)*100

2007 2008 2009

6.63 7.45 8.26
Analysis:
In 2007 it was 6.63and in 2008 it was increased to 7.45and it increased to 8.26 in
2009. So the year 2009 was best year from profitability point of view in these years
.
Return on Total Assets:-
This ratio indicates the profitability of the bank based on total assets, it means that
what is the ratio of net profit after tax to total assets

Formula: (Net profit after tax ÷ Total assets)*100

2007 2008 2009

2.50 1.89 1.93
Analysis:
In 2007 it was 2.5% and then decreased to 1.89% in 2008 and slightly increases to
1.93% in 2009. This decrease shows the bank’s inefficiency to generate net profit as
compared to last year.

51
Return on Equity:-
This ratio shows that what is the ratio of profit after tax to capital funds

Formula: (Net profit after tax ÷ capital fund)*100

Capital fund = Share Capital + Reserves + Unappropriated Profit

2007 2008 2009

27.48 19.00 19.21

Analysis:
In 2007 this ratio was 27.48% and it decreased to 19.00% in 2008 that was a not good
sign especially for shareholders and was slightly increased to 19.21% in 2009. This is
a healthy decrease in view to 2007 and is due to the decrease in profit after tax.

52
CHAPTER # 10

Swot Analysis
SWOT analysis is an acronym that stands for strengths, weakness, opportunities, and
threats SWOT analysis is careful evaluation of an organization’s internal strengths
and weakness as well as its environment opportunities and threats.

10.1 Strengths:

10.1.1 Oldest Institution:

NBP in one of the oldest bank of Pakistan and first nationalized bank Hence its
customer base is strength from this plus point as customers have more confidence in
the bank. The additional value services as the privilege for the bank.

10.1.2 Alternate Duties In Sbp Absence

The NBP performs additional services for its customers as well as the other bank
customer in the absence of SBP.

10.1.3 More Deposits Than Other Bank

NBP has the relative competence in having more deposits than the other bank. This is
because of the confidence the customer have in the bank. The bank being the
privileged and oldest bank in banking sector of Pakistan enjoys this edge over all
others, lacking it.

10.1.4 Employee Benefits

The employers at NBP are offered reasonable monetary benefit. Normally two
bonuses are given Eid-Ul-Fitar & Eid-Ul-Azha. This serves as an additional benefit
and competency for the bank and a source of motivation for the employees.

53
10.1.5 Broad Network
The bank has another competency i.e. it has broad-basses network of branches
throughout the country also more than one branch in high productive cities. The
customers are provided services at their nearest possible place to confirm customer
satisfied.

10.1.6 Strictly Followed Rules &Regulation:

The employees at NBP are strict followers of rule & regulation imposed by bank. The
disciplined environment at NBP bolsters its image and also enhances the over all out
put of the organization.

10.1.7 Professional Competence

The employees at NBP here have a good hold on their descriptions, as they are highly
skilled Professionals with back ground in business administration, banking,
economics etc. These professional competencies enable the employees to understand
and perform the function and operation in better way.

10.1.8 Healthy Enviromnment

The working condition in the NBP branch here is very conductive and favorable for
better output. The informal environment affects the performance of the employees in
a positive way.

10.1.9 Relation Between Staff And Other Employess

The bank enjoys a good plus point when it comes to the employee manager
relationship the hearing as removing of discrepancies if any, between the employees,
and between the manager and employees.

54
 10.2 Weaknesses

10.2.1 Lack Of Marketing Effort:

The bank does not promote its corporate image, services, etc on a competitive way.
Hence lacks far behind in marketing effort .A need for aggressive marketing in there
in the era marketing in now becoming a part of every organization.

10.2.2NBP Under Political Pressure

The strong political hold of some parties and government and their dominance is
affecting the bank in a negative way. They sometime have to provide loan under the
pressure, which leads to uneven and adjusted feeling in the bank employees.

10.2.3Favoritism And Nepotism

The promotions and bonuses etc in the bank are often powered by senior’s favoritism
or depends upon their wills and decision. This adds to the negative factors, which
denominate the employees thus resulting in affecting their performance negatively.

10.2.4Lack Of Finacial Product

The bank falls far behind when the innovative and new schemes are considered. It has
not been involved in the tug of war between the competitors to the accounts and
strengthens the existing customer base. This stands out to be the major incompetence
and weakness of the banks.

10.2.5Inefficient Counter Services In The Rush Hours

During the rush hours, the bank is founded out to be a total flop to handle the mob of
people peaking from windows and doors. The bank has deficiency to operate in the
stages of rush hours where the people find them services entangled in a situation of
nowhere because they are not well served.

55
 10.2.6Lack Of Computerized Network
The bank lack the strength of being powered by the network of computers, which
have saved time, energy and would have lessened the mental stress, the employees
have currently. This would add to the strength if it were powered by network of
computers.

10.2.7Lack Of Modern Equipment

The bank lacks the modern Equipment that is note counting machine computers. Even
if there is any equipment they lack to fall in the criteria of being rearmed as update
and upgraded

10.2.8Uneven Work Distibution.

The workload in NBP is not evenly distributed and the workload tends to be more on
some employees while others abscond away from their responsibilities, which server
as a demotivation factor for employees performing above average work.

10.3 Opportunities

10.3.1 Electronic Banking

The world today has become a global village because of advancement in the
technologies, especially in communication sector. More emphasis is now given to
avail the modern technologies to better the performances. NBP can utilize the
electronic banking opportunity to ensure on line banking 24 hours a day. This would
give a competitive edge over others.

10.3.2 Micro Financing

Because of the need for micro financing in the market, there are lot of opportunities in
this regard. Other banks have already initiated, now the time has arrived when the
NBP must realize it and take on step to cater an ongoing demand.

56
 10.4 Threats

10.4.1 Emergence Of New Competitors

The bank is facing threats with the emergence of new competitors especially in terms
of foreign banks. These foreign banks are equipped with heavy financial power with
excellent and innovative ways of promoting and performing their services. The bank
has to take initiative in this regard or will find itself far back in competition.

10.4.2 Political Pressure By Elected Government

The ongoing shift in power in political arena in the country effects the performance of
the bank has to forward loans to politically powerful persons which create a sense of
insecurity and demoralization in the customer as well as employees.

10.4.3 Downsizing
The bank is currently acting upon the policy of downsizing which threaten the
environment of the bank Employees feel insecurity in doing their jobs and work,
hence affecting the over all performance of employees negatively.

10.4.4 Customers Complaints

There exists no regular and specific system of the removal of customer complaints.
Now a day a need for total customer satisfaction is emerging and in their demanding
consequences customer's complaints are ignored

10.5 Pest analysis

10.5.1 Political
Pakistan despite all international and public perceptions, today is a functioning
democracy and gradually there is a change in complexion and composition of
legislatures with more educated people and women (27% of National Assembly and

57
 17% of Senate) entering into politics. Similarly it helps in designing best strategies to
implement that could support the revival of bank industry. Like in the era of
nationalization bank had to suffer as other industry that¶s why that impact is still
found in the performance of this industry.

10.5.2 Economical
Although banking sector development is important at the early stage of economic
growth, general liberalization presuming a homogeneous bank role may not
necessarily promote growth. The estimated cost structure indicates that state-owned
commercial banks are large enough, while development financial institutions and
private banks can expect to obtain cost-saving advantages by expanding their
operations. Since scope economies are significant, portfolio diversification generally
increases bank profits. In addition, privatized banks are the most efficient, followed
by foreign and private banks. Public banks are the least efficient.

10.5.3 Social
Banks always helped people in improvement of living condition of poor people in
various forms like giving loans to poor for starting business or directly providing
them the instruments that could enhance their living conditions. Similarly National
Bank always tried to provide the needy people loans on soft terms and also helped to
eradicate unemployment by providing job opportunities Recent high growth trends
coupled with enhanced spending on social and 005/2006 has together begun to pay
some dividends a

Technological

⇒ Inadequate Communication infrastructure.

⇒ Inadequate computer facilities.
⇒ Inadequate IT training.

58
 CHAPTER # 11

My Internship Programme

11.1 Work Done By Me at the Branch

Major activities performed during my internship program are as follows;

11.1.1 Account Opening Department

In this department, I gain the practical knowledge about opening account. This
department deals with opening current and saving account for its customers and all
matters regarding thereof. The customers opening current and saving accounts can be
categorized as following.

⇒ Individual
⇒ Firm
⇒ Company
⇒ Trust
⇒ Staff
⇒ Others

11.1.1.1 Opening an accounts

In order to open an account, first of all the customers have to fill a form prescribed by
the bank. The person is required to bring some reference or introduction for opening
the account. Introducer may be the person who has any account with NBP.
Some important information regarding introducer e.g. the name and account number
of the introducer is written on the space provided on the specimen signature card.
Then in order to find out whether he is a true introducer or not, a letter is sent to him
thanking him for this introduction so that anything wrong may come into notice.
There are different requirements for different types of accounts and accountholders.

59
 11.1.2 Deposits:
The procedure undertaken upon receiving deposits from the customers is as follows:

⇒ Examining the deposit slip to ensure that the name and the account numbers
are clearly indicated.
⇒ Counting the cash and cheques and agree the total with the amount on the
deposit slip.
⇒ After that the pay in slip is validated for cash transaction and transfer and
clearing transfer as appropriate before the counterfoil is handed over to the customer.
⇒ Cheques signed by directors, partners or employees of a company, drawn in
favor of them and credited in their account in the bank are to be scrutinized.

11.1.3 Withdrawals:
Cheques can withdraw amount. The withdrawals can be made only at the branch
where the account is maintained. The officer under his full signature authorizes all
cash withdrawals. No third party withdrawal is permitted. In current account, the
bank does not offer any interest. We can deposit or withdraw any amount during
banking hours.

11.1.4 Issuance of cheque book:

The accountholders request for the new chequebook by presenting the requisition
slips along with the authority letter to the concerned office. His signatures are
verified before giving him a new chequebook. The presence of the accountholders is
compulsory to get a new chequebook. But if he sends a third person to get his
chequebook then the procedure is as follows;

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

⇒ The accountholders verify the signature of the third person on that authority
letter.

60
 ⇒ The bank officer gets the signature of that third person to confirm whether he
is the same to whom the accountholder has sent.
⇒ The bank issues the new cheques book and authority letter is kept buy the
bank.

11.1.5 Clearing department:

In this department, I have worked for two weeks. Main branch receives the cheques
from all of its branches and makes the lots of these cheques again. Main branch sends
these cheques to the state bank of Pakistan where a clearinghouse exits. In this
clearinghouse the representatives receive their cheques and go back to their bank's
main branch. Then the main branch sends these cheques to their relevant branches
where the validity of these cheques is verified and the accounts of the relevant clients
are affected.
The statement of clearing was submitted before 1.00 P.M. daily. The whole
procedure of clearing is completed within two days.

11.1.6 Remittances department:

I worked in this department for one week. This department deals in transfer of money
from one place to another or country by:
⇒ Demand drafts
⇒ Mail transfer
⇒ Telegraphic transfer
In this department internees are advised only to observe the working of transfer of
money from one place to another place of the country by the above modes of
transferring money. During my stay in this department I observed that how demands
draft be issued. The procedure is as follows.
First the bank receives a written request from the customer to issue a bank draft. The
written request is either in banks standard form or separate paper signed by the
applicant enclosed with cash or cheques covering the amount of the draft and other
charges of the bank.

61
While issuing a bank draft it is necessary that the draft should be free from
alternations. All the details must be written clearly in ink. After issuance a demand
draft it is handed over to the applicant and its advice containing the particulars of the
draft is sent to drawer branch with its necessary information and payment of the draft
is making on its presentation.

11.1.7 Bills collection department:

I spent one week of my training in bills collection department. Here I collected utility
bills like gas, electricity, water and telephone etc.

62
 SUGGESTIONS & RECOMMENDATIONS

Although NBP is included in ten top most banks of the world equity as well as assets
wise, but for the further improvement in various sectors may recommendations to the
bank would be as follows:

Planned and Healthy Competitions:

NBP should become very specific about its competitors, so that it can understand who
its competitor is in the first degree and who is in the second degree. Then the first-
degree competitors should be watched closely.

Formation of A Research Cell:

A research cell should continuously try to gather information about the present action
so its competitors and expected future actions. So in this way more effective strategies
can be formulated.

Reward System:

The performance reward linkage should be make strong as it is said, "A happy
employee delivers more than he receives from the organization." The NBP should
also try to make its employees happier.

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

than manual work, which is very slow and time, consuming process. In this age

63
N.B.P. even does not have a partially computerized system where as other new
competitor banks are now going towards on-line banking services.

⇒ Govt. should take keen interest to recover its bad debts, which can improve its
financial position.
In case of giving the loans, it is necessary to check the repute of customer towards
loan repayment. Bank shouldn’t advance the money to those people who are addict of
rescheduling of loans due to their political influences. Instead providing loans to these
persons, loans must be advanced to the well-reputed businesses and industries having
good record of loan repayment.

⇒ Along with the officers, the training must also be given to the clerical staff.
Because of N.B.P. are running on manual system and the training of its staff directly
improving their efficiency of work.

⇒ Present training program for its officers is need to be improved, as this

program instead of improving the efficiency of officers is merely a burden for the
bank in the form of heavy T.A. , D.A. and cost.

⇒ Working conditions must be improved for the employees. Bank will definitely
get more benefits after some expenditure on the working conditions as it improves
efficiency and productivity of the employees.

⇒ N.B.P. should flourish certain marketing plans to attract the customers by

giving them certain incentives and beneficial schemes to the customers as other
competitor banks are doing so.

⇒ There is also a need of proper recruitment and selection program. New young
talent should be introduced to inject the new ideas.

⇒ Deterioration in efficiency is mostly due to promotion without merit. So

promotions must be awarded on merit and also when due.

64
 ⇒ Special attention should be given to the behavior of the employees towards the
customers, as customer is the most important person for any bank.

⇒ There are many employees who are working on ad-hoc basis creating
dissatisfaction. The deserved should be made permanent employees.

⇒ Political influences in the bank should be eliminated.

⇒ To motivate the employees of the bank, regular bonuses and incentives should
be given to them.
⇒ There must be a friendly environment among all the employees as it enhances
the trust and sincerity.
⇒ NBP should be focus its attention towards the share of traveler cheque.
⇒ Branch manager should be trained in the field of selling to serve better
according to the expectation of customers.
⇒ The recruitment policy should be fair and transparent.
Management should increase the branch limit of expenditure to fulfill the necessary
expenditure of personnel relation.

65
 CONCLUSION

⇒ As compare to the other banks the working environment of National Bank is

very poor. Most of its branches are still in old and poorly conditioned buildings.
These working conditions effect in two ways. First from employees side if the
working conditions are not reasonable then their work efficiency will be very low and
Second from the customer’s side that the customers don’t like to go in such type of
environment. Being a Govt. Bank, political and beurucratic pressure is much more as
compared to the other banks. As a result the bad debts are high.
⇒ Being a Govt. bank it is being ignored from the beginning. It has great burden
of Govt. services, which is not much beneficial for the bank. Due to the pressure of
Govt. activities like payment of pension and receipt of Govt. collection a rush of work
is there, which disturb the normal banking business. Also such type of activities is
performed by the National Bank without any services charges.
⇒ Another burden for the National Bank is salaried accounts. Those are in large
numbers. National Bank is not gaining any advantages from these types of accounts
besides of wasting the time. These salaried accounts are dead assets for the bank.
⇒ National Bank is still working on manual basis. It is very time consuming
activity that’s why customers feel uncomforted as they have to wait for long time
even for a single cheque and also the chances of mistakes and frauds are greater in
manual work system. Motivation plays an important role in the success of any
organization. So, there is late schedule for upgrading the employee’s status.
Promotion should be in time and according to the individual’s performance.
⇒ Due to the manual work system employees have to spent most of their time in
the bank to complete even their daily routine work. They have to sit till 6:00 to 7:00
PM before going back to their homes. For this reason their normal life is disturbing
which create the irritation in the behavior of employees.

66
Bibliography
1. The first important thing is the discussions with the staff of the bank especially with
the manager of the branch.
2. The Bank Book of Instructions for the National Bank of Pakistan called the B.B.I.
3. Surfing the website of the National Bank of Pakistan (www.nbp.com.pk)
4. Reading the annual reports of the bank.
5. Reading the economic bulletin of the bank, which is published by the economic and
business research wing of the bank.

67
Annexure-1
Profit and Loss Account

For the year

ended December 31, 2007, 2008, 2009
2007 2008 2009
Rupees in Rupees in Rupees in
'000 '000 '000
Mark-up / return / interest earned 50,569,481 60,942,798 77,947,697
Mark-up / return / interest expensed 16,940,011 23,884,768 39,489,649
Net mark-up / interest income 33,629,470 37,058,030 38,458,048
Provision against non-performing loans and
advances 4,723,084 10,593,565 11,043,469
Reversal of provision for diminution in the
value of investments (40,248) 373,249 605,629
Provision against off balance sheet obligaions
bad debts written off directly - 4,000 20,237
Bad debts written off directly 39,899 - -
4,722,735 10,970,814 11,669,335
Net mark-up / interest income after
provisions 28,906,735 26,087,216 26,788,713
NON MARK-UP/INTEREST INCOME
Fee, commission and brokerage income 6,781,683 7,925,370 8,930,391
Dividend income 3,263,246 2,878,932 1,920,336
Income from dealing in foreign currencies 1,042,827 3,969,057 3,028,165
Gain on sale and redemption of securities 2,341,690 395,427 4,591,894
Unrealized loss/gain on revaluation of
investments classified as held-for-trading (31,964) 1,707 2,355
Other income 147,363 1,245,369 552,216
Total non mark-up / interest income 13,544,845 16,415,862 19,025,357
42,451,580 42,503,078 45,814,070
NON MARK-UP/INTEREST EXPENSES
Administrative expenses 14,205,911 18,171,198 22,571,470
Other provisions / write offs / (reversals) 168,027 747,521 620,780
Other charges 17,141 583,361 321,647
Total non mark-up / interest expenses 14,391,079 19,502,080 23,513,897
28,060,501 23,000,998 22,300,173
Extra ordinary / unusual items - - -
PROFIT BEFORE TAXATION 28,060,501 23,000,998 22,300,173
Taxation - Current 8,311,500 11,762,650 9,221,513
- Prior years 391,497 - (4,133,282)
- Deferred 323,731 (4,220,242) (999,904)
TOTAL TAX 9,026,728 7,542,408 4,088,327
PROFIT AFTER TAXATION 19,033,773 15,458,590 18211846
Basic earnings per share 23.34 17.23 16.92
Diluted earnings per share 23.34 17.23 16.92

68
Annexure-2

Balance Sheet
As at December
31, 2007, 2008, 2009

2007 2008 2009

Rupees in Rupees in Rupees in
'000 '000 '000
ASSETS
Cash and balances with treasury
banks 94,873,249 106,503,756 115,827,868
Balances with other banks 37,472,832 38,344,608 28,405,564
Lendings to financial institutions 21,464,600 17,128,032 19,587,176
Investments 210,787,868 170,822,491 217,642,822
Advances 340,677,100 412,986,865 475,243,431
Operating fixed assets 25,922,979 24,217,655 25,147,192
Deferred tax assets - 3,204,572 3,062,271
Other assets 30,994,965 44,550,347 59,316,438
TOTAL ASSETS 762,193,593 817,758,326 944,232,762
LIABILITIES
Bills payable 7,061,902 10,219,061 10,621,169
Borrowings 10,886,063 40,458,926 45,278,138
Deposits and other accounts 591,907,435 624,939,016 726,464,825
Sub-ordinated loans - - -
Liabilities against assets subject to
finance lease 33,554 25,274 42,629
Deferred tax liabilities - net 5,097,831 - -
Other liabilities 30,869,154 39,656,831 42,269,623
TOTAL LIABILITIES 645,855,939 715,299,108 824,676,384
NET ASSETS 116,337,654 102,459,218 119,556,378
REPRESENTED BY
Share capital 8,154,319 8,969,751 10,763,702
Reserves 15,772,124 19,941,047 22,681,707
Unappropriated profit 45,344,188 52,456,204 61,346,510
69,270,631 81,367,002 94,791,919
Surplus on revaluation of assets - net 47,067,023 21,092,216 24,764,459
TOTAL EQUITY 116,337,654 102,459,218 119,556,378

69