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INTERNSHIP REPORT NBP ABDULLAH PUR

Submitted By:

ZAFAR ABBAS RIZVI (2009-Ag-987) M.Com (Accounting)

Submitted to:

Sir. YASIN ZIA

INSTITUTE OF BUSINESS MANAGEMENT SCIENCES

UNIVERSITY OF AGRICULTURE FAISALABAD

ACKNOWLEDGEMENT
First of all I would like to prostrate myself in front of ALMIGHTY ALLAH the Omnipotent, the Omnipresent, the Merciful, the Beneficial who created us among the Muslims and also bestowed and blessed us with such a lucid intelligence as we could endeavor our services toward this manuscript. Countless salutations are upon the HOLY PROPHET MUHAMMAD (May Peace Be upon Him), the fountains of knowledge, who has guided his Ummah to seek knowledge for cradle to grave. I feel much pleasure to intend my sincerest gratitude, inspiring cooperation and appreciation to our teacher, Sir. Khalid Latif for his keen interest, expert guidance and invaluable suggestions during the entire study period and preparation of this manuscript. I also want to thank our Honorable Parents for their inspiration and moral support, who taught me the value of hard work by their own example and their encouragement and motivation that was given to me to carry out the work. Words are lacking to express my humble obligation to my affectionate and extra caring Parents. I am very grateful for the love and support of my parents.

Finally, would like to thank all whose direct and indirect support helped me completing my report in time and attaining this position.

DEDICATION

All My Words Dedicated With Respect and Reverence Love and Affection to My Loving Parents, Family & Friends

Whose Love and Prays Always Accompanies Me Like a Shining Star Whenever I was in Darkness and Enable Me to Reach This Stage.

Table of Contents
CONTENTS
EXECUTIVE SUMMARY INTERNSHIP PLAN INTRODUCTION OF STUDY HISTORY AND PROFILE OF NBP SERVICES OF NBP WORK DONE AT NBP SWOT ANALYSIS FINANCIAL ANALYSIS GENERAL SUGGESTIONS

PAGE #

1 2 3 5 10 17 32 36 48

EXECUTIVE SUMMARY

This report highlights the operations and functions of National Bank of Pakistan. NBP act as financial agent to its customers in return it gets reward for its services in the shape of profit. Being a Government owned institution it plays an important role in development of society as well as in development and growth of the economy. National Bank of Pakistan is one of the leading banks in Pakistan. According to international standards of banking system it is one of the best bank in South Asian region as well as the bank of the year 2008. This report explains how different functions of NBP work and what are their services. The main purpose of the internship is to gather relevant information to compile internship report on National Bank of Pakistan Main Branch Islamabad. Another purpose of this Internship program is to enable the students to use the management techniques acquired during their courses, and find out the possible solution of management problems faced by the organization The report is based on my six week internship program in National Bank of Pakistan. The methodology reported for collection of data is primary as well as secondary data. The biggest source of information is my personal experience, observation while working with staff and having discussion with them. The annual report 2008 also helped me in this regard.

Internship Plan
1st Week Learn about MAIL TRANSFER 2nd Week Learn about PENSION PAYMENT 3rd Week Learn about REMITANCES 4th Week Learn about CHEQUE PAYMENT 5th Week Learn about ACCOUNT OPENING 6th Week Learn ACCOUNT HANDLING 7th Week Learn about GOVT. RECEIPTS 8th Week Learn about CLEARING

CHAPTER 1

INTRODUCTION OF STUDY

Scheme of Study Chapter 1: An introductory chapter that discuss the introduction of study of report, its Background, Purpose, Scope, Methodology, limitations and Scheme of the report. Chapter2: History of NBP, mission statement, its objectives and functions of National Bank of Pakistan. Chapter3: In this chapter the services of NBP were discussed. Chapoter4: in this chapter works performed in NBP was discussed Chapter5: It tells about Strengths, Weaknesses, Opportunities and Threats of i.e. SWOT analysis of NBP. Chapter 6: It consists of comprehensive performance of NBP through past several years. Financial analysis and those parties, which are interested in financial performance of Bank.

Chapter 7: In this chapter general suggestions and recommendations has been discussed.

CAHAPTER # 2

HISTORY AND PROFILE OF NBP


HISTORY OF NBP: The NBP was established vide NBP Ordinance No. XIX of November 9. 1949. British Govt. devalued its currency in September 1949, India devalued its rupees but Pakistan did not. It led to a crisis in trading between the two countries and India refused to lift the Pakistan Jute. To solve this problem i.e. to export jute NBP was established through an Ordinance of GOP. 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 Bank in 1950 had one subsidiary The Bank of Bahawalpur on December4, 1947 by the former Bahawalpur State. NBP was undertaking Treasury Operations and Managing Currency Chests or Sub Chests at 57 of its offices where the turnover of the business under the head amounted to Rs.2460 million. i) Deposits held by NBP constituted about 3.1% of total deposits of all

Pakistani Banks in 1949, which rose to 38% in 1952. ii) Growth in Deposits was accompanied by increase in Bank portfolio in advances. NBP

lent out to Textile, Yarn, Iron and Steel and played a pioneer role in support of agriculture and commerce. iii) NBP advances reached Rs.554.4 million by December 1959, which was one third of the total schedule bank credit.3

MISSION STATEMENT
To make the Bank complete and competitive with all international Standard in performing, quality of, operations, staff, financial strength. And products and services To develop a culture of excellence in every spare of activity of the bank

GOALS AND OBJICTIVES An organizational objective is the intended goal that prescribes definite scope and suggests direction to the panning efforts of a organization.6 GOALS AND OBJICTIVES NBP To be the pre-eminent financial institution in Pakistan and achieve market recognition both in the quality and delivery of service as well as the range of product offerings.7 BOARD OF DIRECTORS Table 1 NAME Ali Raza Dr Waqar Masood Ifthikhar Ali Malik Syed Shafqat Ali Shah Jamoti M Zubair Motiwala Sikandar Hayat Jamali DISIGNATION Chairman & President Director Director Director Director Director

M. Khalid Malik S.M. Rafique


(Source Annual report 2003)

Director SEVP & Sectorary to BD

MANAGEMENT Management is a distinct process consisting of activities of planning, organizing, actuating and controlling performed to determine and accomplish stated objectives with the use of human being and other resources.8 The management has two types. 1 Centralized. 2 Decentralized. Centralized Management tends to concentrate decision making at the top of the Organization . Decentralized disperses decision making and authority throughout and further down the organizational hierarchy.9 NBP have a centralized type of management because all the decisions are taken by the top management. SENIOR MANAGEMENT OF NBP. Table 2 SEVP & Group Chief, Corporate & Masood Karim Sheikh Investment Banking Group and Chief Financial Officer

S. M. Rafique

SEVP & Secretary Board of Directors SEVP & Group Chief, Special Assets

Derick Cyprian

& Remedial Management Group SEVP & Group Chief, Compliance Group EVP & Group Chief, Commercial & Retail Banking Group EVP & Group Chief, Information Technology Group EVP & Group Chief, Audit & Inspection Group EVP & Group Chief, Operations Group EVP & Group Chief, Risk Management Group EVP & Group Chief, Treasury Management Group EVP & PSO to the President Group Chief, Human Resources Management & Administration Group Group Chief, Organization D&T Group

Imam Bakhsh Baloch

Shahid Anwar Khan

Nadeem A. Dogar

Muhammad Sardar Khawaja

Dr. Asif A. Brohi

Javed Mehmood

Muhammad Nusrat Vohra

Amim Akhtar

Dr. Mirza Abrar Baig

Uzma Bashir

(Source www.nbp.com.pk)

REFRENCES
1 2 3 4 5 Bank Nationalization act 1974. Islamic Banking. www.nbp.com.pk Annual report 1998. Terry and Franklin Principles of Management.

CAHAPTER # 3

SERVICES OF NBP
SERVICES
Services are he outputs of the firm which are in intangible form. NBP offers the following services to the people. DEMAND DRAFTS If you are looking for a safe, speedy and reliable way to transfer money, you can now purchase NBPs Demand Drafts at very reasonable rates. Any person whether an account holder of the bank or not, can purchase a Demand Draft from a bank branch. SWIFT SYSTEM The SWIFT system (Society for Worldwide Inter bank Financial Telecommunication) has been introduced for speedy services in the area of home remittances. The system has built-in features of computerized test keys, which eliminates the manual application of tests that often cause delay in the payment of home remittances. The SWIFT Center is operational at National Bank of Pakistan with a universal access number NBP-APKKA. All NBP overseas branches and overseas correspondents (over 450) are drawing remittances through SWIFT. Using the NBP network of branches, you can safely and speedily transfer money for our business and personal needs. LETTERS OF CREDIT NBP is committed to offering its business customers the widest range of options in the area of money transfer. If you are a commercial enterprise then our Letter of Credit service is just what you are looking for. With competitive rates, security, and ease of transaction, NBP Letters of Credit are the best way to do your business transactions.

TRAVELER'S CHEQUES Travelers cheques are negotiable instruments, and there is no restriction on the period of validity of the cheques. Rupee travelers cheque is available at all 700 branches of NBP. This can be encashed in all 400 branches of NBP. There is no limit on purchase of this cheque. It is one of the safest ways for carrying money. PAY ORDER NBP provides another reason to transfer your money using our facilities. NBP pay orders are a secure and easy way to move your money from one place to another. And, as usual, NBP charges for this service are extremely competitive. The charges of NBP are very low all over the Pakistan. It charges Rs 50/- for NBP account holders on issuing one payment order. And charges Rs 100/- for NBP non-account holders on issuing one payment order. It charges Rs 25/- for students on payment of fees of educational institutions. If someone want a duplicate of payment order they charges Rs 100/- for NBP account holders and Rs 150/- for non account holders. MAIL TRANSFERS Move your money safely and quickly using NBP Mail Transfer service. And NBP also offer the most competitive rates in the market. They charges Rs 50/- exchange rate and RS 75/- postage charges on issuing mail transfer. FOREIGN REMITTANCES: To facilitate its customers in the area of Home Remittances, National Bank of Pakistan has taken a number of measures to:
y y

Increase home remittances through the banking system Meet the SBP directives/instructions for timely and prompt delivery of remittances to the beneficiaries

COMMERCIAL FINANCE NBP dedicated team of professionals truly understands the needs of professionals, agriculturists, large and small business and other segments of the economy. They are the customers best resource in making NBPs products and services work for them. RADE FINANCE OTHER BUSINESS LOANS There are two types of trade finance. AGRICULTURAL FINANCE NBP provides Agricultural Finance to solidify faith, commitment and pride of farmers who produce some of the best agricultural products in the World. Agricultural Finance Services: I Feed the World program, a new product, is introduced by NBP with the aim to help farmers maximize the per acre production with minimum of required input. Select farms will be made role models for other farms and farmers to follow, thus helping farmers across Pakistan to increase production. Agricultural Credit: The agricultural financing strategy of NBP is aimed at three main objectives:y y y

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):


y

Production and development

y y y y y y y

Watercourse improvement Wells Farm power Development loans for tea plantation Fencing Solar energy Equipment for sprinklers

Farm Credit: NBP also provides the following subsidized with ranges of 3 months to 1 year on a renewal basis.
y y y

Operating loans Land improvement loans Equipment loans for purchase of tractors, farm implements or any other equipment

Livestock loans for the purchase, care, and feeding of livestock. Production Loans: Production loans are meant for basic inputs of the farm and are short term in nature. Seeds, fertilizers, sprayers, etc are all covered under this scheme. If you require any further information, please do not hesitate to e-mail us.

CORPORATE 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 banks belief in its client's capabilities, and its commitment to the country. Loan Structuring and Syndication: National Banks leadership in loan syndicating stems from ability to forge strong relationships not only with borrowers but also with bank investors. Because we understand our syndicate partners asset criteria, we help borrowers meet substantial financing needs by enabling them to reach the banks most interested in lending to their particular industry, geographic location and structure through syndicated debt offerings. Our syndication capabilities are complemented by our own capital strength and by industry teams, who bring specialized knowledge to the structure of a transaction. Cash Management Services: With National Banks Cash Management Services (in process of being set up), the customers sales collection will be channeled through vast network of NBP branched spread across the country. This will enable the customer to manage their companys total financial position right

from your desktop computer. They will also be able to take advantage of our outstanding range of payment, ejection, liquidity and investment services. In fact, with NBP, youll be provided everything, which takes to manage your cash flow more accurately

INTERNATIONAL BANKING National Bank of Pakistan is at the forefront of international banking in Pakistan which is proven by the fact that NBP has its branches in all of the major financial capitals of the world. Additionally, we have recently set up the Financial Institution Wing, which is placed under the Risk Management Group. The role of the Financial Institution Wing is:y y

To effectively manage NBPs exposure to foreign and domestic correspondence Manage the monetary aspect of NBPs relationship with the correspondents to support trade, treasury and other key business areas, thereby contributing to the banks profitability

Generation of incremental trade-finance business and revenues

NBP offers:
y y

The lowest rates on exports and other international banking products Access to different local commercial banks in international banking

Cash and Gold Finance. Cash and Gold finance means that loan is given against the gold. The gold is mortgaged with the bank and loan is taken. It is the area of consumer finance. And borrower can take loan for common use.

Advance salary loan: This loan is given to those people who are govt servants. They can get a loan up to the salary of fifteen months.

REFRENCES 1. http/www.nbp.com.pk .services 2. Annual reports 2001, 2002, 2003.

CAHAPTER # 4

WORKS DONE AT ABDULLAH PUR BRANCH

GENERAL BANKING
General banking area is also call the operations group. It consist on following section

 ACCOUNTS SECTION  REMITTANCES SECTION  BILLING & GOVERNMENT RECEIPTS  CLEARING

ACCOUNTS SECTION
Accounts Department of the bank can be considered the most important department. This department is basically concerned with processes and activities of recovering, sorting, summarizing and reporting data resulting from the whole day transactions of all the departments. Actually the process of this activity starts from the preparation of all the required vouchers by different related departments. When these vouchers are prepared, these are posted into

respective computer terminals by the relevant departments. Before merging, a batch list is printed out by Computer Department and duly checked by the respective departments. After this, merging stage comes, after which a proof list is printed out. This is the stage, where Accounts Department starts performing its function. Proof list is checked by the Accounts Department.

This section performs the following functions:

Opening of Accounts

y y y

Issuance of checque books Closing of accounts Payment of Cheques

Types of accounts
Following types of accounts are open in NBP  Saving account  Current or demand account  Fixed account

Saving account (PLS)


This type of account is designed to encourage the saving habit of the customer and lead to a long-term banking or investment relationship. Bank saving accounts are in the nature of deposits accounts and are not normally available for drawings. Rates of interest are typically ahead, by a small margin. Saving accounts with the banking sector represent a very small proportion of total deposits. Customer can make any withdrawals from type of account. The cash reserve ratio is typically low them the current account because the withdrawals against this account is very low. The minimum balance for this account is Rs.100 and interest rate is

Current or demand account


These are those deposits, which can be drawn by the depositor at my time by presenting a cheque to the bank. People deposit their money in this account they gave a ready command on their account in developed and under developed countries of the world, a very significant part of money is kept under current or demand account. On this type of account of interest transfer of cash or by cheque takes place at sight. The cash reserve ratio for this account is very high. The

operating cost for the handling of this type of account is very high because withdrawals are very regular.

Fixed account
Fixed accounts are those, which are deposited for a fixed period of time and are repayable after the expiry of stipulated time to the customers. Those people who have surplus funds and want to have save investments deposit the amount in the fixed account. The rate of interest given to depositor varies with the length of deposit, i.e. it is higher for longer period and lowers for shorter period. The rates on this type of deposits are higher than the saving bank accounts. The cash reserves against this deposit are very low because there is no fear of withdrawal of a month before the stipulated of time. No paying books or passes book or cheque book is issued to the customers against this deposit to the depositors.

The authorities of national bank of Pakistan have the right to revise all these rates of interest with out any notice to customers generally rates of interest are revised after six months. The amount deposited for 7 and 30 days short term notice and accumulated for the period exceeding the limit and the customers can get the interest of the extra days of deposit but in the case of months and years the customer did not get any additional interest for the exceeding period of deposit.

Procedure for Opening an Account


First of all, the customer gets an application from the bank, which requires all information necessary for opening account and also the documents required. An account can be opened as:

1) An individual account 2) Joint account 3) Proprietorship account 4) Limited company account

5) Partnership 6) Club, society, association and trust

Information Required by the Bank


y y y y y y y y Name Address Telephone No. Currency of Account Nature of Business Country of Residency Special instructions regarding the account Signatures

Documentation In case of limited company accounts


Photocopy of National Identity Card of each director Application form Copy of companys memorandum and articles of association List of directors Copy of board resolution Certificate of incorporation Their signature cards Certificate to commence business

y y y y y y y y

Documentation In case of Partnership Account


Application form

y y y y

A copy of partnership deed Signature cards of partners Registration certificate copy A copy of National Identity Card of each partner

Documentation In case of Club, Society, Association or Trust


y y y y Application form Copy of rules Certified copy of resolution Signature cards 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 withdrawals. Bank has the right not to open an account without assigning any reason or to close the account if it is not operated in a satisfactory manner by the instructions of the head office.

Issuance of Cheque Book


After opening the account, a cheque book is given to the customer to sign upon which the number of cheque book issued and the name of the customer is written. Bank issues a cheque book against requisition. A cheque book may be of 20 (PLS), 25, 50 or 100 leaves (current A/C). Rs. 4.50 per leaf as excise duty is charged to the customer. A cheque book register is maintained by the office. In this register, the cheque book inventory, cheque books issue are recorded.

Loose Cheques
If any customer forgets or leaves his cheque book at his home, which is far away from the bank or whatever the case may be, the customer applies with the bank for the issuance of loose cheque by the bank as he does not has his cheque book with him and the money is urgently required, the this cheque is called the loose cheque. Bank issues a loose cheque for Rs. 50 as charges for the issuance of the loose cheque plus Rs. 4.50 as excise duty.

Payment of Cheques
It is banks primary function to repay the money required for its customers account usually by honoring his cheques. It is a contractual obligation of a banker to honor its

customers cheque if the following essential are fulfilled : y y y y y y y y Cheque should be in a proper form Cheque should not be mutilated Cheque should be drawn in this particular branch Cheque should not be damaged No unauthorized material alterations Funds must be sufficiently available Cheque should not be post date or stale Cheque should be presenting during the banking hours

Procedure for Closing an Account

The customer can close the account. Customer is required to submit an application for closing the account. Then the account is closed out and his balance is paid to him after deducting the closing charges,

i.e., Rs. 200 and the application is filed in Account Closing File. Remaining leaves of cheques will also be collected from the customer.

The activities of Accounts Department can further be divided as:

 Routing of expenses vouchers  Preparation of daily activity reports  Preparation of weekly and monthly statements  Preparation of statements for tax purpose.

Routing of Expenses
Vouchers of all expenses and material purchases are routed out through this department. As far as the expenses are concerned, they include the heads of salaries paid to confirmed employees of bank, wages paid to employees that are on contractual basis, rent of the building, lease installment and insurance premium paid to insurance company for the insurance of vehicles and cash in safe and counter. Expenses also include the utility bill, which consists of courier, electricity, water and gas bills, medical expenses, which are reimbursed.

Preparation of Daily Activity Reports


As far as the daily activity reports of this department are concerned, these include the following heads:

Voucher collecting of

 Loan transactions  General ledger transactions  Foreign currency related transactions  Fixed deposit related transactions The checking is on daily basis.

Preparation of Daily, Weekly Monthly and Annual Statements

Daily Statements
These statements are sent daily to Main Office Karachi. These are:

 Daily Affair Statement, which is same as Balance Sheet  Statement of Income and Expenditure, which includes the details of income generated and expenses incurred by the bank.

Weekly Statements
These statements are generated on weekly basis for the purpose of sending it to Head Office. These also include:

 Statement of affair  Deposit and advances position of the bank

Monthly Statements
These statements are prepared on monthly basis and also sent to Head Office (Qatar). These include:

 Provisional statement of income and expenses. This statement adjusted for accruals and prepayments.  Monthly Balance Sheet and Income Statement  Comparative Statement

Statements for Tax Purpose


The department also prepares two statements for the purpose of paying tax on monthly and annual basis. These statements are generated for the purpose of submitting to Central Board of Revenue. These are:

Statement of deduction of income chargeable under the head salary under Section 53 (Tax deducted at source) Withholding Tax from the payments made to vendors, suppliers and other parties providing various services. The rate of withholding tax is as follows:  Suppliers  For other parties 2.5% 5%

REMITTANCES SECTION

Remittances can be made through: y y y Instrumental transfer Electronic transfer

a. Instrumental Transfer
Instrumental transfers are following

Demand Draft

It is an instrument, which is payable on demand and it is only presentable in the city/country. When any draft, i.e., an order to pay money, drawn by an office of bank upon another office of the same bank for a sum of money payable to order on demand, purports to be issued by or on behalf of the payee, the bank is discharged by the payment in due course. When a person requires a draft, he should be asked to complete the prescribed application form in which he should state the amount of the draft, the name of the payee, and the place of payment. The person to those persons, who have been duly authorized to act on his behalf, should sign this application form. An advice is prepared and two copies of this advice are sent to the Head Office. The bank charges 3% withholding tax and commission according to the rate list (minimum is Rs. 200).

Pay Order

It is an instrument, which is payable in demand and only presentable in city. Pay order is also called the bankers cheque drawn upon the issuing bank itself. It is not negotiable and therefore, bankers tend to cross the instrument Payees account only to avoid

the possibility of dealing with instruments with forged endorsement. The pay order is issued favoring individuals, commercial concerns, government departments. On the presentation of pay order, the bank is liable to pay the amount to the customer. Bank charges excise duty of Rs. 4 and service charges of Rs. 100.

Pay Slip

It is an instrument, which is issued by bank and used for expenditure purposes, i.e., electricity bills, maintenance bills, security bills, fixture and fitting, etc.

Call Deposit

Call deposit are not actual deposits of bank. It is in fact the liability of the bank. Call deposit are ofently prepaid by the bank for contractors

Following steps are involved

1) Depositor fill the credit vouchers for call deposit. He writes the following information y y y Name of company Amount Date 2) He deposits the cash along with filled voucher in the cash department

Encashment of CD

For the encashment of call deposit needed

y y y y

5 rupee stamp two signature of customer on the back side of CD token issued accountant make entry in the CD register show that it has returned

b. Electronic Transfer
Electronic transfer is of following types

Telegraphic Transfer

It is the message, which is sent from one branch to another on the order of payer to payee through wire. It is one of the quickest means to transfer fund through the use of

telex/fax/internet or cable. Payment to the beneficiary is affected directly by the drawee office upon identification or through credit into beneficiarys bank account. As such remitting office is not required to issue any instrument payment to the remitter for delivery to the beneficiary.

Issuance and Payment of Telegraphic Transfer Outgoing


Application form is filled by the client in which the name and account number of the beneficiary, which is to be credited and name of customer is required. For telegraphic transfer, the payment can be made in case or by cheque or by debiting the customers account if he is the account holder. The amount of Telegraphic Transfer should be written on the form. The amount is transferred to beneficiarys account in the other bank. An advice is given to the customer but application is filled in the record of the bank. If the beneficiary is not the account holder of DBL, bank credits a Telegraphic Transfer payable account and when payment is made to the beneficiary, TT payable account is debited.

Issuance and Payment of Telegraphic Transfer Incoming


When a TT is received then an entry is passed in TT incoming register after verifying the test. When a person comes and wants to encash his TT, bank checks the statements of that person. If the bank finds any account credited to the persons account against TT, bank prepares a voucher for this payment against that TT. The customer then presents that certificate to the cash counter and collects money.

Mail Transfer

It is the same like TT, but in this type, the message is sent through mail rather than telex. The procedure is same as TT, but the advice is sent through mail rather than wired.

Travelers cheques (TC)


These are also called TC. Travelers cheques first came into use century ago. Form of travel currency giving to the holder .the security of a letter of credit and convenience of a local currency. In practice, they are acceptable in payments of accounts on board ship, at hotels and in stories. They are in form of a draft. They should be so signed immediately on issue and place is provided on the cheque for the signature of the beneficiary on its

BILLING & GOVERNMENT RECEIPTS


This department is performing following functions  Collection of utility bills  Collection of dues of education institution  Payment of salaries  Payment of zakat  Payment of pension

CLEARING

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.

Procedure for Clearing the Cheques

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.

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.

y y

National bank of Pakistan Clearing Stamp

At the end of day, all cheques are counted and then scrutinized in bank-wise and sent to the Clearing House.

REFRENCES 1. http/www.nbp.com.pk .services 2. Annual reports 2001, 2002, 2003.

CHAPTER #5

SWOT ANALYSIS
SWOT analysis is one of the most important steps in formulating strategy using the organization mission as a context, managers assess internal strengths distinctive competencies and weakness and external opportunities and threats. The goal is to then develop good strategies and exploit opportunities and strengths neutralize threats and avoid weaknesses.

STRENGTHS
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. 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. 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. 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.

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.

WEAKNESSES
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. NBP 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.

INEFFICIENT 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. LACK 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.

OPPORTUNITIES
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. 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.

THREATS
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. 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.

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.

References
1. Daft l Richerd Management 4th Edition Pages 254, 256, 269. 2. Kottler Philip Marketing Management Millennium Edition Page 76. 3. Fred R. David Strategic Management Concepts Cases 7th edition.

CHAPTER # 6

FINANCIAL ANALYSIS
National bank of Pakistan Statement of financial position As on 31 December, 2010

Particulars Assets Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances Operating fixed assets Deferred tax assets Other assets Total Assets Liabilities Bills payable Borrowings from financial institutions Deposits and other accounts Liabilities against assets subject to finance lease Other liabilities Deferred tax liabilities Net assets Represented by Share capital Reserves un-appropriated profit surplus on revaluation of assets -

2007

2008

2009 2010

94873249 106503756 115827868 115,442,360 37472832 38344608 28405564 30,389,664 19587176 23,025,156 210787868 170822491 217642822 301,323,804 340677100 412986865 475243431 477,506,564 25922979 24217655 3204572 25147192 26,888,226 3062271 6,952,666 21464600 17128032

30994965 44550347 59316438 53,496,240 762193593 817758326 944232762 1,035,024,680 7061902 10886063 10219061 40458926 10621169 8,006,631 45278138 20,103,591

591907435 624939016 726464825 832,151,888 33554 30869154 5097831 645855939 715299108 824676384 906,528,852 116337654 102459218 119556378 128,495,828 8154319 15772124 45344188 69270631 47067023 9969751 19941047 52456204 81367002 21092216 10763702 13,454,628 22681707 24,450,244 61346510 65,857,438 94791919 103,762,310
24,733,518

25274 39656831

42629 106,704 42269623 46,160,038

116337654 102459218 119556378 128,495,828

National bank of Pakistan Profit and loss account As on 31 December, 2010


Particulars Mark-up /return/interest earned Mark-up /return/interest expensed Net mark-up/interest income Provision against non-performing advances Provision for diminution in the value of investments Provision against off balance sheet obligations Bad debts written off directly Net mark-up/interest income after provisions Non mark-up/interest income Free, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale of securities Unrealized loss on revaluation of investments classified as held for trading Other income Total non mark-up/interest income Non-mark-up/interest expense Administrative expenses Other provisions/write offs Other charges Total non mark-up/interest expenses Profit before tax Taxation -current -Prior year(s) -Deferred 14,205,911 18,171,198 22571470 26,202,577 168,027 17,141 747,521 583,361 620780 321647
148,026 118,887

2007

2008

2009

2010

50,569,481 60,942,798 77947697 88472134 16,940,011 23,884,768 39489649 45,250,476 33,629,470 37,058,030 38458048 43,221,658 4,723,084 -40,248 10,593,565 11043469 7,011,046 373,249 4,000 39,899 4,722,735 605629 20237 10,970,814 11669335 9,969,689
2,954,678 3,965

28,906,735 26,087,216 26788713 33,251,969 6,781,683 3,263,246 1,042,827 2,341,690 -31,964 147,363 7,925,370 2,878,932 3,969,057 395,427 1,707 1,245,369 8930391 1920336 3028165 4591894 2355 552216
9,631,5-79 1,099,493 2,211,139 2,512,363 6,730 2,171,336

13,544,845 16,415,862 19025357 17,632,640 42,451,580 42,503,078 45814070 50,884,609

14,391,079 19,502,080 23513897 26,469,490 28,060,501 23,000,998 22300173 24,415,119 28,060,501 23,000,998 22300173 24,415,119 8,311,500 391,497 323,731 -4,220,242 11,762,650 9221513 -4133282 -999904
9,835,048 (939,256) (2,043,887)

9,026,728 Profit after tax Un-appropriated profit brought forward Transfer from surplus on revaluation of fixed assets Profit available for Appropriation

7,542,408

4088327

6,851,905

19,033,773 15,458,590 18211846 17,563,214 32,074,677 45,344,188 52456204 60,696,510 117,738 39,007 130,456 123934 32,113,684 45,474,644 52580138 60814248 51,147,457 60,933,234 70791984 78,377,462

National bank of Pakistan Statement of financial position As on 31 December, 2010


HORIZONTAL ANALYSIS
Particulars Assets Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances Operating fixed assets Deferred tax assets Other assets Total Assets Liabilities Bills payable Borrowings from financial institutions Deposits and other accounts Liabilities against assets subject to finance lease Other liabilities Deferred tax liabilities Net assets Represented by Share capital Reserves un-appropriated profit
100 100 100 100 122 126 116 117 132 144 135 137 165 155 145 150

2007 %
100 100 100 100 100 100

2008 %
112 102 80 81 121 93 144 107

2009 % 122 76 91 103 139 97 191 124

2010 % 122 81 107 143 140 104

100 100

173 136

100 100 100 100 100 100 100 100

145 372 106 75 128 0 111 88

150 416 123 127 137 0 128 103

113 185 141 318 150 0 140 110

surplus on revaluation of assets

100 100

45 88

0 103

53 110

HORIZONTAL ANALYSIS

COMMENTS

There is a continuous increase trends up to 2009 after that it remain stable, whereas balance in other bank increase in 2008 and decreases in 2009 &2010.

There is a decreasing trend in the lending to financial institution and in 2010 it is increasing as compare to last year that is about 16% while investment decreases in 2008 and increasing trends in 2009 and 2010.

There is a increasing trends in advances while operating fixed decrease in 2008 and but increasing trends in 2009 and 2010.and there is a continuous increasing trends in other assets.

y y

There is a overall increasing trend in the total assets. Bill payable and borrowing form bank increase up to 2009 but there is a gradually decrease in 2010 both liabilities .

There is increasing trend in deposits and other accounts and Liabilities against assets subject to finance lease is decreasing in 2008 and increasing by 27% & 18% in 2009 and 1010 respectively.

All other liabilities are gradually increasing by 28% 37% 50% respectively in 2008, 2009, 2010.

y y y

There are no deffered tax liabilities . There is decrease in net assets in 2008 and increasing trend in 2009 & 2010. There is increasing trend in share capital, reserves and un-appropriated profits.

National bank of Pakistan Statement of financial position As on 31 December, 2010


VERTICAL ANALYSIS

Particulars Assets Cash and balances with treasury banks Balances with other banks Lending to financial institutions Investments Advances Operating fixed assets Deferred tax assets Other assets Total Assets Liabilities Bills payable Borrowings from financial institutions Deposits and other accounts Liabilities against assets subject to finance lease Other liabilities Deferred tax liabilities Net assets Represented by Share capital Reserves un-appropriated profit surplus on revaluation of assets

2007
12 5 3 28 45 3 4 100 0 1 1 78 0 4 1 85 15 0 1 2 6 6 15

2008 13 5 2 21 51 3 0 5 100 0 1 5 76 0 5 0 87 13 0 1 2 6 3 13

2009 12 3 2 23 50 3 0 6 100 0 1 5 77 0 4 0 87 13 0 1 2 6 0 13

2010 11 3 2 29 46 3 1 5 100 0 1 2 80 0 4 0 88 12 0 1 2 6 2 12

VERTICAL ANALYSIS

COMMENTS
y The change of Share of Cash and balances with treasury banks in total assets is 1%in 2008 & 2010 and there is no change in 2009.there is no change in balance with other bank in 2008 and decline by 2% in 2009 and 2010. y There share of lending to financial institution is 3% of total assets in 2007 but decline in 2008, 2009 and 2010 by 1%. The share of investment in total assets is 28% in 2007 and there is a increasing trend in 2008 2009 and 2010. y Advances are 45% of total assets in 2007 bur it has increased in 2008 by 6% and in 2009 and in 2010 there is a decrease trends. there is no change in the other operating assets. There is a 1% change in other assets. y The share of bill payable in total liabilities is 1% it remain the same in all years. Borrowing form financial institution increased up to 2009 and but decline in 2010.there is a increasing trend in deposits with other banks. y Other liabilities increase in 2008 but it has declined by 1% and after that it remain same. y The share of net assets is 15%, 13%,13%,and 12% respectively in 2007, 2008, 2009 and 2010. there is no change in share capital, reserve and un-appropriated profit. There is a decreasing trend.in Surplus on revaluation of asset.

National bank of Pakistan

Profit and loss account As on 31 December, 2010 HORIZONTAL ANALYSIS (INDEX ANALYSIS)
Particulars Mark-up /return/interest earned Mark-up /return/interest expensed Net mark-up/interest income Provision against non-performing advances Provision for diminution in the value of investments Provision against off balance sheet obligations Bad debts written off directly
100 232 247 93 211 115

2007 %
100

2008 %
121

2009 %
154 233 114 234 (1,505) -

2010 %
175 267 129 148 (7,341) -

100 141 100 110 100 224 100 (927)

Net mark-up/interest income after provisions Non mark-up/interest income Free, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale of securities Unrealized loss on revaluation of investments classified as held for trading Other income Total non mark-up/interest income

100 90 100 117 100 88 100 381 100 17 100 (5) 100 845 100 121 100 100 108 120 140 130 375 1,473 (7) (21) 196 107 290 212 59 34 132 142

Non-mark-up/interest expense Administrative expenses Other provisions/write offs Other charges Total non mark-up/interest expenses
100 128 100 445 100 3,403 100 136 163 184 1,876 694 369 88 159 184

82

79 79 111 (1,056) (309)

87 87 118 (240) (631)

Profit before tax Taxation -current -Prior year(s) -Deferred

100 82 100 142 100 100 (1,304)

Profit after tax Un-appropriated profit brought forward Transfer from surplus on revaluation of fixed assets
100 100 100 334 100 142 164 138 189 153 318 302 81 141 96 164 92 189

Profit available for Appropriation

100 119

Horizontal analysis Comments


y There is increasing trends in interest earned due to which net interest income is also increaings. There is a increasing trend in net mark up interest after provision. y There is decreasing trend in dividend income. Gain on sale of security decrease in 2008 and increase 96% and 7% respectively in 2009 and 2010. y y Other income has significantly increase in 2010 as compare to 2009 and 2008. Total non mark-up/interest income has increased by 21% 41% and 31% respectively.

y y

Administrative expenses has increased 28% 59%and 84% respectively 2008,2009,2010. Total non mark-up/interest expenses has increase 36%, 63% and 84% respectively 2008,2009,2010.

Profit before tax has decreased by 18% 21%and 13 % respectively 2008,2009,2010. and there is a decreasing trend in currend taxation in 2010 as compare to 2008 ,2009.

y y

There is a decreasing trends in profit after tax by 19% 4% and 8% respectively. There is a increasing trend in Un-appropriated profit brought forward.

There is increasing trend in Profit available for Appropriation it has increased by 19% 38% and 53% respectively.

National bank of Pakistan Profit and loss account As on 31 December, 2010 VERTICAL ANALYSIS
Particulars Mark-up /return/interest earned
100 100 39 61 17 1 0 18 43 15 34 11 38 100 51 49 14 1 0 100 51 49 8 3 0 2007 2008 2009 2010

Mark-up /return/interest expensed


33

Net mark-up/interest income


67

Provision against non-performing advances


9

Provision for diminution in the value of investments


(0)

Provision against off balance sheet obligations


-

Bad debts written off directly


0 9

Net mark-up/interest income after provisions


57

Non mark-up/interest income


13 5 7 1 0 2 11 2 4 6 0 1 11 1 2 3 0 2 -

Free, commission and brokerage income


13

Dividend income
6

Income from dealing in foreign currencies


2

Gain on sale of securities


5

Unrealized loss on revaluation of investments classified as held for trading Other income

(0) 0

Total non mark-up/interest income


27 84 27 70 30 1 1 32 38 38 19 (7) 12 25 74 0 100 29 1 0 30 29 29 12 (5) (1) 5 23 67 0 91 24 59 30 0 0 30 28 28 11 (1) (2) 8 20 69 0 89 20 58 -

Non-mark-up/interest expense
-

Administrative expenses
28

Other provisions/write offs


0

Other charges
0

Total non mark-up/interest expenses


28 55

Profit before tax


55

Taxation -current
16

-Prior year(s)
1

-Deferred
1 18

Profit after tax


38

Un-appropriated profit brought forward


63

Transfer from surplus on revaluation of fixed assets


0

Profit available for Appropriation


101

Vertical analysis
Comments

There is increasing trend in mark up interest expense, and the share of net mark up income consistently decrease, in 2008 2009 2010.

y y

The share of Net mark-up/interest income after provisions has decreased respectively The share of dividend income in interest income is consistently decreased.

The gain on sale of securities has decline in 2010 as compare to 2009 and the other income has increased as compare to last year.

y y

The share of Total non mark-up/interest income gradually decreased Total non mark up interest /expanse has increased in 2008 as compare to 2007 but remain constant in 2009 and 2010.

y y y

The share of Profit before tax in interest income gradually decreased respectively The share of profit after tax in interest income gradually decreased respectively The share of un appropriated profit decreased by 1% 9% 11% respectively in 2008, 2009,and 2010

REFERENCES
1 2 National Bank of Pakistan (2000, 2003) Annual Report. Block, Stanley B and Hirt Geoffrey A (1994). Foundations Of Financial Management 7th edition USA: Michael W Junior, p121-148 3. Van Horne James C and JR Wachowicz M. Jhon Financial management 11 4. Meigs Financial Accounting 11th edition. 5. R.B Hisrich and Peter P Michael Entrepreneurship 5th edition. 6. Simons Harry and Smith J.M Intermediate Accounting 5th edition. 7. Watson James Fundamentals of Accounting 7th edition. 8. Sober P Parey Advance accounting 2nd edition . editions

9. Tarry Franklin Principles of Management 8th edition 11. Vause Bob The Economist Guide to analyzing companies. 3rd edition.

WEBSITE: www.onlinewbc.gov/docs/finance/fs.ratio/. Html

Chapter # 7

GENERAL SUGGETIONS
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. While the head office specifies the whole procedure of function and operations. This procedure has been modernized with the passage of time with a view to streamline the approach and underlying procedure for effective overhauling of its own capabilities so as to bring them at par with international practices. Here I am giving some suggestions, which in my view can add some input for efficiency and better performance of NBP as an organization in genera and City branch in particular. The recommendations are as follows: Professional training NBP staff lacks professionalism. They lack the necessary training to do the job efficiently and properly. Although staff colleges in all major cities but they are not performing well. For this purpose these staff colleges should be reorganized and their syllabus should be made in such a way to help the employee understand the ever changing global economic scenario. Banking council of Pakistan should also initiate some programs to equip the staff with much needed professional training. Performance Appraisal The manager should strictly monitor the performance of every staff member. All of them should be awarded according to their performance and result in the shape of bonuses to motivated and incite them to work more efficiently.

To Over Come Problem of Space and Furniture

In the critical analysis this, problem is discussed. To overcome this problem it is suggested that a special section should be made inside the branch. Which should only handle the treasury function, salaries and pensions of federal personnel or the bank should do these functions in the evening time. Also management should purchase more furniture and arrange them in such a way which provides maximum space and convenient specially in deposit department and there should also be convenient sitting place for customers. Transfer Transfer is not properly carried out. Some of the employees are continually serving at the same post. They are simply rotated at the same branch. Therefore it is recommended that evenly rotation of every employee should take place after every three years in different braches of the bank.

Utility Bill Charges Bank gets Rs. 2 to 3 to processes a utility bill, and it is very tire, tough and hard job despite this working resulting in a loss to then Rs 3 to5 per transaction. These charges should be increased to RS 10 per bill to enable the branch to cover their handling costs and make some profit. Credit Card National bank of Pakistan should start its operation in credit card. These cards are very helpful for the ordinary customer in general and the business people in particular. To make it mores secure and to eliminate the misuse of it, the management is required to keep proper security against the card. Installing Validator and ATM Validator machine is used to count the currency notes and its installation will help to eliminate to counting errors and will save time.

This branch is situated in the City, which is supported to be the hub of business activates. In this area an auto teller machine (ATM) is the need of the hour businessmen can easily check their balance in the bank and also with draw their money conveniently. Technological Advancement I would like to suggest that at least all the main branches of NBP should be fully computerized in order to expedite the dealing process among bankers and their customers. Every department should be provided a computer with adequate training (especially Advances, Deposits and Foreign Exchange departments). Daily records should be entered directly into these computers, (instead entering the overall daily transactions after the banking hours). It will not only reduce transaction time, will increase accuracy but will also be efficient as well. Not only it will be economical but will also reduce the extra burden of work of the bank. It will also help in reducing the use of excessive paper work. Extended Banking Hours The banking hours may be extended up to six, as being practiced by HBL opposite to it. Some of the business community due to law and order situation are now reluctant to keep the fund in their premises and would want to depart with it. Therefore, City Branch may extend the night banking to cater to demand of this business community. The branch could also be opened to cater the requirements of this business community