An Internship Report on National Bank of Pakista1

8/2/2019 An Internship Report on National Bank of Pakista1

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An Internship Report on National Bank of Pakistan

DEFINITION OF A BANK

The World Bank is used in the sense of a commercial bank. It is of

Germanic origin though some persons trace its origin to the French word,

Banqui and the Italian word Banca Chambers Twentieth Century

Dictionary defines a bank as an institution for the keeping ending and

exchanging etc. of money.

According to Crowther. The Bankers business is to take the debts

of other people to offer his own in exchange, and thereby create money.

According to Kent, the bank is an organization whose principal

operations are concerned with the accumulation of the temporarily idle

money of the general public for the purpose of advancing to others for

expenditure.

According to Sayers, Ordinary banking business consists of

changing cash for bank deposits and bank deposits for cash; transfering

bank deposits from oen person or corporation to another; giving the

secured or unsecured promises of businessmen to repay, etc.

Thus bank is a financial institution, which uses funds depositedwith it to extend loans to companies or individuals, and also provides

financial services to its customers.1

In other words it is an intermediate party between the borrower

and the lender. The difference between the terms on which it

borrows and those on which it lends forms the source of its profit.

BANKING

Banking is the acceptance, transfer, and, most important,

creation of deposits.2

Banking consists of safeguarding and transfer of funds, lending

or facilitating loans, guaranteeing creditworthiness, and exchange of

money. These services are provided by such insti tutions as

Department of Business Administration Kotli Azad Kashmir.


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commercial banks, saving banks, trust companies, finance

companies, and merchant banks or other institutions engaged in

investment banking. All countries subject banking to government

regulation and supervision normally implemented by central banking

authorities.

EARLY BANKING

Many banking functions such as safeguarding funds, lending,

guaranteeing loans, and exchanging money can be traced to the

early days of recorded history. In medieval t imes the KnightsTemplar, an international military and religious order, not only

stored valuables and granted loans but also arranged for the

transfer of funds from one country to another. The great banking

families of the Renaissance, such as the Medici in Florence, were

involved in lending money and financing international trade. The

first modern banks were established in the 17th century, notably the

Riksbank in Sweden (1656) and the Bank of England (1694). 3

In the 17 th century, English goldsmiths provided the model for

contemporary banking. Gold was stored with these artisans for

safekeeping, and was expected to be returned to the owners on

demand. The goldsmiths soon discovered that the amount of gold

actually removed by owners was only a fraction of the total stored.

Thus, they could temporarily lend out some of this gold to others,

obtaining a promissory note for principal and interest. In time, paper

certificates redeemable in gold coin were circulated instead of gold.

Consequently, the total value of these banknotes in circulation

exceeded the value of the gold that was exchangeable for the

notes.



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Two characteristics of this fractional-reserve banking remain

the basis for present-day operations. First, the banking systems

monetary l iabi li ties exceed i ts reserves. This feature was

responsible in part for Western industrialization, and it still remains

important for economic expansion, though a risk of creating too

much money is a rise in inflation. Second, liabilities of the banks

(deposits and borrowed money) are more liquidthat is, more

readi ly convert ible to cashthan are the assets ( loans and

investments) included on the banks balance sheets. This

characteristic enables consumers, businesses, and governments tofinance activities that otherwise would be deferred or cancelled; at

the same time, it opens banks to the risk of a liquidity crisis. When

depositors en masse request payment, the inability of a bank to

respond because it lacks sufficient liquidity means that it must

either renege on its promises to pay or pay until it fails. A key role

of the central bank in most countries is to regulate the commercial

banking sector to minimize the likelihood of a run on a bank, which

could undermine the entire banking system. The central bank will

often stand prepared to act as lender of last resort to the banking

system to provide the necessary liquidity in the event of a

widespread withdrawal of funds. This does not equal a permanent

safety net to save any bank from collapse, as was demonstrated by

the Bank of Englands refusal to rescue the failed investment bank

Baring in 1995.



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FUNCTIONS OF COMMERCIAL BANKS.

Commercial banks perform a variety of functions, which canbe divided as;

(1) Accepting deposits;

(2) Advancing loans;

(3) Credit creations;

(4) Financing foreign trade;

(5) Agency services; and

(6) Miscellaneous services to customers.1. ACCEPTING DEPOSITS

This is the oldest function of a bank and the banker used to

charge a commission for keeping the money in its custody when

banking was developing as an institution. Now a days bank

accepts three kinds of deposits. The first is saving deposits, on

which the bank pays small interest. The depositors are allowed to

draw their money by cheques up to a limited amount during a week

or year. Businessmen keep their deposits in current accounts.

They can withdraw any amount standing to their credit in account

deposits by cheques without notice. The bank does not pay interest

on such accounts. Current accounts are also known as demand

deposits. Deposits are also accepted by a bank in fixed or time

deposits. The rate of interest increases with the length of the time

period of the fixed deposit. But there is always the maximum limit of

the interest rate, which can be paid. For instance, the interest rate

on fixed deposits over five years is 8 percent in Pakistan.



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2. ADVANCING LOANS

One of the primary functions of a commercial bank is toadvance loans to its customers. A bank lends a certain percentage

of the cash lying in deposits on a higher interest rate than it pays

on such deposits. This is how it earns profits and carries on its

business. The bank advances loans in the following ways.

a) Cash Credit: The bank advances loans to businessmen

against certain specified securities. The amount of the loan is

credited to the current account of the borrower. In case of a new

customer a loan account for the sum is opened. The borrower can

withdraw money through cheques according to his requirements but

pays interest on the full amount.

b) Call Loans: These are very short-term loans advanced to the

bill brokers for not more than fifteen days. They are advances

against first class bills or securities. Such loans can be recalled at a

very short notice. In normal times they can also be renewed.

c) Overdraft: A bank often permits a businessman to draw

cheques for a sum greater than the balance lying in his current

account. Providing the overdraft facility up to a specific amount to

the businessman. But he is charged interest only on the amount by

which his current account is actually overdrawn and not by the full

amount of the overdraft sanctioned to him by the bank.

d) Discounting Bills of Exchange: If a creditor holding a Bill of Exchange wants money immediately, the bank

provides him the money by discounting the bill of exchange. It

deposits the amount of the bill in the current account of the bill-

holder after deducting its rate of interest for the period of the loan,

which is not more than 90 days. When the Bil l of Exchange



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matures, the bank gets its payment from the banker of the debtor

who accepted the bill.

3. CREDIT CREATION.

Credit creation is one of the most important functions of the

commercial banks. Like other financial institutions, they aim at

earning profits. For this purpose, they accept deposits and advance

loans by keeping a small cash in reserve for day transactions.

When a bank advances a loan, it opens an account in the name of

the customer and does not pay him in cash but allows him to draw

the money by cheque according to his needs. By granting a loan,

the bank creates credit or deposit.

4. FINANCIAL FOREIGN TRADE:

A commercial bank finances foreign trade of its customers by

accepting foreign bills of exchange and collecting them from foreign

banks. It also transacts other foreign exchange business and busy

and sells foreign currency.

5. AGENCY SERVICES:

A bank acts as an agent of its customers in collecting and paying

cheques, bills of exchange, drafts, dividends, etc. it also busy and sells

shares, securities, debentures, etc. for its customers. Further, it pays

subscriptions, insurance Premia, rent, electric and water bills and other

similar charges on behalf of its clients. It also acts as a trustee andexecutor of the property and will its customers. Moreover, the bank acts

as an income tax consultant to its clients, for some of these services, the

bank charges a nominal fee while it renders others free of charge.



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6. MISCELLANCEOUS SERVICES:

Besides the above services. The commercial bank performs anumber of other services. It acts the custodian of the valuables of its

customers by providing them lockers where they can keep their jewelry

and valuable documents. It issues various from of credit instruments, such

as cheques, drafts, travelers cheques, etc., which facilitate transactions.

The bank also issues letters of credit and acts as a referee to its clients. It

underwrites shares and debentures of companies and helps in the

collection of funds from the public. Some commercial banks also publish

journals, which provide statistical information about the money market and

business trends of the economy.



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ROLE OF BANKS IN ECONOMIC DEVELOPMENT

OF A COUNTRY

In modern age, monetary by banking system plays a vital role in

economic development of a country. To provide financing for the

accomplishment of certain economic plans depends upon an organized

by sound banking system by a country financial institutions plays an

important role in credit provision. So, if the monetary market by banking

system of a country are well organized by sound, it will help in

accelerating the process of economic development. To encourage people

to save more by then investment of these savings into suitable aeras

depends upon the policy by strength of banking system.

Besides be strong banking system, monetary policy of a county

also plays a vital role in development. Although monetary policy of a

country is made by the central bank, yet it depends upon the co-operation

of commercial banks.

As for as a developing country like Pakistan is concerned, it always

suffer capital deficiency. Only banks can solve problem by providing credit

in required amount. The reasons is, to motivate the people towards

savings, collection of the saved amount by then investment of this

amount, all this is the duty of banks. By doing so, banks become an

example of model investment for people.

Hence, the banking system of a country can help i.

i) Development of a country.

ii) To make the monetary policy successful.

Main features of monetary policy are as following.

i) To achieve high level of employment.



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ii) To stable in prices.

iii) To save economy from recession by inflation.

iv) To avoid fluctuation of interest rates

v) To improve in standard of living of people.

So the banking system of 3rd world countries is not so stable, so it

very difficult to implement monetary policy properly. As far as Pakistan is

concerned, when all the scheduled banks were nationalized in 1974,

State Bank of Pakistan got a complete grip upon banking network. Owing

to this, the role of banks in economic development became more

prominent. It can be understand through following facts.

i) PICIC by Industrial development bank has played an

important role for the development of industrial sector and have issued

long by short-term debts for necessary machinery, raw material

equipment.

ii) For the development of agriculture red sector, NBP was the

first one to be established in this regard. Then ADBP by now other

commercial banks are also providing credit for agricultural sector.

iii) These banks provide financing for domestic as well as

international trade.

iv) Have provided credit facility to small business people to

promote cottage industry.

v) Have provided financing for house building to overcome the

scarcity of houses. HBFC has played a vital role in this regard.

vi) Have played an important role in providing finance to Govt.

especially in agricultural sector.



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BANKING IN PAKISTAN

At the time of independence in 1947, it was very difficul t for

Pakistan to immediately run its banking system therefore it was

decided that the Reserve Bank of India will continue to function in

Pakistan until Pakistan establishes its own banking system.

Before the partition of the subcontinent the entire banking

system was almost controlled and managed by non-Muslims. The

Hindus in order to ruin the economy of newly established state closed

down most of the head offices and branches of scheduled and non-

scheduled banks in Pakistan. At the time of partition there were 487

off ices of scheduled banks in West Pakistan and 144 in East

Pakistan but many of the offices were later transferred to India by

non-Muslims and therefore the number of offices were reduced from

631 to 195. i

The Reserve Bank of India caused further difficult ies to

Pakistan by refusing to give Pakistan its share of 55 crore which

Pakistan was entitled to from the cash balance of undivided India.Therefore the Government of Pakistan decided to establish the State

Bank of Pakistan on 1st July 1948 and the reserve bank of India was

relived of its duties.

The State Bank of Pakistan was entrusted with the duty

regulating the issuance of bank notes and generally to cooperate the

currency and credit system of the country to its advantage. State

Bank of Pakistan was given a monopoly of note issue, is to act as a

fiscal agent for the government, supervise the operations of the

commercial banks, is the lender of last resort to commercial banks, is

to perform the function of clearing house for the banks and to

maintain the external value of the rupee. The banking companies act



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in 1949 was created empowering the State Bank to control the

operations of baking companies in Pakistan. ii

After the establ ishment of the State Bank of Pakistan the

government of Pakistan established Industrial Finance Corporation in

1949, which later changed into the Industrial Development Bank of

Pakistan. The bank was entrusted with a task of providing financial

facilities for the development and modernization of agriculture,

animal husbandry, fishery, poultry, dairy farming.

In 1952 House Building Finance Corporation was established

to provide financial aid to individuals and corporate housing societiesfor construction of residential houses.

In 1966 Investment Corporation of Pakistan was established

with a view of broadening the base of investment and developing the

capital market. In 1973 National Development Finance Corporation

was established to provide long and medium range loans, assistance

and advice to government sponsored or managed enterprises.

On 1st January 1974 the Government of Pakistan decided to

nationalize the Pakistani scheduled banks with an objective that the

nation as a whole will benefit from this act. The nationalization was

smooth and yielded positive results. As a result of nationalization all

the commercial banks were merged into the following five banks. ii i

1. ABL

2. UBL

3. HBL

4. NBP

5. MCB



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The nationalization of banks lead to the development of such

conditions and circumstances that could not be changed without

disinvestment and privatization of nationalized and public sector

banks therefore an ordinance was promulgated in 1991 to pave way

for the privatization of banking in Pakistan.

As a result of privatization The Allied Bank of Pakistan was sold to

the employees of the bank and the Muslim Commercial Bank of

Pakistan was dissinvested in two steps. Further the United Bank of

Pakistan and Habib Bank of Pakistan will also be privatized soon.

Some other financial institutions are also expected to be privatizedsoon. This privatization is expected to bring the era of economic

development in Pakistan.



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HISTORICAL BACKGROUND OF NBP

The story of NBP is part of our struggle for economic

independence. When we won political independence, our economy

was controlled by Non-Pakistanis, mostly Hindus. East Pakistan was

spared from massive migration but its economy was also, being

dependent on Calcutta, badly hurt. Most bankers and business expertsleft Pakistan and the economic life was brought to a standstill, these

mostly branches of Imperial Bank of India were only in partial

operation with skeleton staff.

Banking & Finance - History

It was decided that Reserve Bank of India would act as the

common monetary authority of both countries up to September 1948.

But this arrangement did not prove well. In August 1947, we were

given a first installment of Rs.200 million (20 crore) as our share,

leaving a balance of Rs.550 million (55 crore) but it was not paid when

asked for.

In October 1947 there was fighting in Kashmir, when India

refused to give us the amount of Rs. 55 crore if we did not give up all

interest in Kashmir, which we refused. In response, Reserve Bank of

India refused to make even an advance for ways and means. Despite

that India had to pay our 50 crore, (the remaining 5 crore still remainsunpaid). There was a controversy on establishment of our central bank

because we had no experience or expertise but it was resolved and

SBP was created, 3 months ahead of schedule, on July 1, 1948, which

was the last public appearance of the Quaid-e-Azam. SBP claimed its



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share of Assets of Reserve bank of India against the Indian currency

retired from Pakistan, but this 50 crore India disputed and virtually

refused to settle this dispute uptil now.

In 1949 (September) U.K. devalued its currency, India followed

suit but we did not. India said we had contravened the agreement of

keeping both currencies at par. We said we had not done that, India

had done it arbitrarily without consulting us. On October 3, 1949, the

two central banks were to announce the new par value of both

currencies but India denied a day earlier. India also froze our trade -

balance surplus which is still an unsettled dispute. India also withdrawthe Marwari merchants who were employed annually for movement of

jute crop by financing it. There being no jute industry, prices fell

sharply, foreign banks and foreign merchants stood aside and an

agrarian unrest was threatening. Two Ordinances were, therefore,

issued.

1. Jute Board Establishment Ordinance &

2. NBP Ordinance dated 08.11.1949

NBP was established on 20.11.1949 to provide finance to

suitable parties. NBP stood behind jute trade, SBP stood behind NBP

and the government stood behind SPB. Speedy it was such that 6

branches came into being at once and the doubts on our ability to

handle this situation were dispelled for ever. Now, as the Jute Board

and NBP were in the field, the foreign merchants and bankers also

rushed in to get their share in the business and consequently NBP had

to lay out much less finance than it could. Mr.Ghulam Farooq waschairman Jute Board & Mr. Mumtaz Hassan was chairman NBP. Until

June, 1950, NBP remained exclusively in jute operations, thereafter

other commodities were also taken-up. After that Mr. Zahid Hussain,



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Governor SBP assumed additional charge also as chairman NBP's

Board of Directors, & Mr.M.A. Muhajir became its first M.D.

In 1952 NBP replaced Imperial Bank of India. Mr. Mumtaz

Hassan as Acting Governor of SBP negotiated this arrangement. In

1962 when Mr. Mumtaz Hassan became MD (He had already served

NBP for 10 years as its Chairman of government Director), the number

of branches had increased from 6 to 239 and deposits from Rs.5 crore

(50 million) to 106 crore (one bn & 60 mln) , profit, from 3 million (3

lac) to 21 million (2.1. crore) and the staff increased from 380 to 7091,

as compared to 1949-50. In Dec. 1966 its 600th branch was openedraising the deposits to 2.31 bn. and staff to 14, 963. Upto 1965, the

shareholders had received 225% of their original investment. Now its

has more than 21549 employees 1537 branches and Rs.208283

million deposit.

MANAGEMENT

Before nationalizing, affairs of Bank were governed by a Central

Board of Directors which was led by a managing director nominated by

Federal Govt. when the Banks was Nationalized at January 1,1974, its

previous administration i.e. Central Board of Director was dissolved,

an Executive Board was established which is governed by a chief

Executive who is the President of the Board of Directors.

GENERAL PERFORMANCE

Circumstances in which NBP was established were really

miserable for economy. But i t successfully over came these

circumstances to rescue the country, from the severe economic

Crises. It is the largest Commercial Bank in Pakistan.



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The Bank has taken many steps to reduce the element of

interest in Banking sector, like other Banks it has done a lot of work to

motivate people towards profit and loss sharing accounts. The Bank

has also offering Qarz-e-Hasna for education by rural credit program.

Bank is also providing credits to small Businessmen.

HEAD OFFICE

The head off ice of NBP is located at 1.1. chandigar road

Karachi.

REGIONAL OFFICES

The bank has following nine regional headquarters.

1. Karachi

2. Hyderabad

3. Quetta

4. Multan

5. Faisalabad

6. Peshawar

7. Lahore8. Islamabad

9. Muzaffarabad (A.K)

ZONAL OFFICES

There are forty (40) Zonal Offices, each being headed by Zonal

Chief and directly controlled by the respective regional offices. .

EMPLOYEES

There are 15,541 total number of employees as for December1999, working in National Bank of Pakistan.

BRANCHES



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Total number of domestic branches are 1408, as for December

1999.

OVERSEASE BRANCHES

There are 24 overseas branches and 4 representative offices

serving in different parts of the world.

ORGANIZATION STRUCTURE OF NBP

The structure of National Bank of Pakistan is shown in the

organizational chart.

PRESIDENT

S.E.V.P

E. V. P

S. V. P

V. P

A. V. P

O. GI

O. GII

O. GIII



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Clerical Staff Non-clerical Staff

Cashier Messenger

Technical Staff DR (Dispatch Rider)

MANAGEMENT OF NBP

Mr. Syed Ali Raza (President)

BOARD OF DIRECTORS

The board of directors is the supreme governing body of

National Bank of Pakistan. it comprises of a governmentrepresentative, Pakistan Banking Council Nominee, Nominee of

corporate sector and three directors from National Bank of Pakistan.

These are,

i. Mr. Syed Ali Raza (Chairman)

ii. Mr. Aftab A. Khan (Director)

i ii . Mr. Muhammad Younas Khan (Director)

iv. Mr. Aizaz Sarfraz (Director)

v. Mr. Bilal A Qurashi (Director)

vi. Mr. Khalid Sultan Khawaja (Director)



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vii . Mr. Irshad Al i Gola (Director)

viii. Mr. S. M. Raifque (Secretary)

EXECUTIVE COMMITTEE OF NBP

1. Syed Ali Raza (Chairman & President)

2. R.A Kaleemi (Member)

3. S.M Rafique (Member/Secretary)

4. Seikh Muhammad Ibrahim (Member)

5. Masood Karim Seikh (Member)

6. Muhammad Khalique (Member)

7. S. Mustanir Haider (Member)

8. Asif Hasan (Member)

9. Abdul Hameed Shahzaman (Member)

10. M. Nusrat Vohra (Member)



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BRIEF LIST OF SERVICES PERFORMED BY NBP

1. NBP was born to finance jute industry which was vital for the

country, specially East Pakistan-1949.

2. NBP started financing cotton and other commodities afterwards.

3. NBP served the nation through schemes like factory workers

scheme (1962), Peoples' credit scheme (1964), School Banking

scheme (1962), Export Finance Schemes of SBP.

4. NBP has a bright record of staff Welfare- latest being the NBP

foundation (1996).

5. NBP worked as Trustee and/or Custodians (e.g. of NIT).

6. NBP established ladies counters and inducted ladies to NBP.

7. NBP served the agricultural sector.

8. NBP replaced Imperial Bank of India.

9. NBP took over bank of Bahawalpur.

10. NBP took over Mehran Bank & some other banks' branches.

11. NBP has a track-record of investments in Government

Securities.12. NBP works on behalf of SBP as authorized.

13. NBP has a progressive chain of deposit banking and financing

services.

14. NBP performs modern services like foreign currency accounts

credit/charge cards, US commercial paper, corporate Clients'



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service through corporate branches, local travellers' cheques,

local currency bonds, etc.

15. NBP has a large network of branches through out the country.

16. NBP is the pioneer in Management education in Banking Sector.

17. NBP is pioneer of creating its own films for training of its staff at

4 staff colleges.

18. NBP finances priority sectors of the economy as required by the

govt. e.g. Yellow Cab Scheme, self employment scheme etc.

19. NBP has a track-record of contribution to defence funds,

environment development, education, health care & sports.20. NBP is broadening its vision and marching towards a client-

Focussed corporate culture in the bank.



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DIVISIONS OF NBP

CORPORATE CREDIT DIVISIONThe major function of this division is to handle the big loans and

industrial financing, I.B.R.D. It also does the evaluation of credit

ceiling policy devised by the credit division.

INTERNATIONAL DIVISION

This division has to look after the administration of National

Bank of Pakistan outside Pakistan. It takes care of all the affairs aboutthe advances given outside, the management of the branches of the

bank outside Pakistan, the posting of employees outside Pakistan etc.

RECOVERY AND LITIGATION DIVISION

This division comes into operation when recovery of advances

given becomes difficult or impossible. It is the job of this division to

decide whether to go court against the client or not.

AUDIT AND INSPECTION DIVISION

The major function of this division is to carry out the inspection

of rules and policies. It also inspects the books of accounts, whether

they are kept rightly or not.

ADMINISTRATION DIVISION



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where the customer make the complaints if they are not treated well.

This division also accepts Hujj application. This division is very

important as it directly concern the customers who are the ones to

make the deposits which the bank invests.

BUSINESS PROMOTION AND MARKETING DIVISION

It concerns the marketing and selling of the policies and interest

rates of National Bank of Pakistan through advertisements on

television or in the papers etc.

LAW DIVISION

This division consists of an executives committee and an

Evaluation committee. Their job is documents evaluation and they give

legal opinion to recovery and litigation division also.

COMPUTER DIVISION

This division does data processing through computers anddevelop control systems. All these divisions perform their functions

through the branches and they are located at the head office in

Karachi.



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DEPARTMENTS OF NBP

1- DEPOSIT DEPARTMENT

Procedure of Opening an Account

The opening of account and their maintenance is very essential

for the banking companies from the point of view of security and

efficient services to be rendered by these companies to their clients.

This is why the banks always insist upon their new account holders to

provide them a reasonable reference of a person already maintaining

his account with them or with some other bank, who is referred to as

introduce of the account. Thereafter the necessary documents filled by

the account holders. The account numbers are serially allotted to the

account holder. Their special instructions with regards to the operation

of accounts are obtained from them under the old system of banking

separate ledgers are maintained for recording the transactions of

account holders but now under the computerized banking every

account holders transactions are recorded on his separate lose leafcard and the transactions of these loose leaf cards are recorded by

posting machine under this system the entire position of account

holder is readily seen at a glance. This system is more convenient and

the error of human element is eliminated. For every account holder a



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double record of transaction is automatically recorded on this loose

leaf card. When this sheet is completely filled up the bank despatches

one portion.

KINDS OF ACCOUNTS

PLS SAVINGS ACCOUNTS

These accounts are opened with not less than Rs.500/. If at any

time the sum falls below Rs.500/ the account will not qualify for

sharing in profit nor shall it be liable for loss, if any. There is no

restriction on the maximum amount. The account will be

credited/debited with the amount of profit/loss worked out at the rate

determined by the bank on the basis of its networking results at the

end of each half year. These wil l be only checking accounts,

withdrawal will be allowed not often than 8 times in a calendar monthand more than one PLS account opened in the same name.

TYPES OF PLS SAVINGS ACCOUNTS

i) Individual account

ii) Joint account

ii i) Checking account interest @ 7.50%

iv) Non checking account

v) PLS term deposit

Such accounts are opened for indefinite period with nominal

rate of mark up for the withdrawal of these accounts advance notice is

required.

In the first category 7 days notice is required and for withdrawal

of investment.



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In second category advance notice of 30 days is required for

withdrawal and the percentage of profit for both the above mentioned

types of accounts if any may be announced by the government

annually.

CURRENT ACCOUNT

These accounts are opened with the minimum amount of

Rs.1000/ no interest is allowed by the bank. The funds held in the

account are payable on demand without any restr ictions on

withdrawals. The bank normally open current account for the business

need of the firms. In this category following types of accounts are

opened.

a) This type of account is opened for private or public limited

company. The following documents are invariably obtained for opening

the accounts:

i) Resolutions from the board of directors for opening theaccount.

ii ) Memorandum and articles of association.

ii i) Certi ficate of incorporation.

iv) List of board of directors.

v) Certi ficates of commencement of business.

b) Societies/Club/Association

This type of account is opened for clubs societies and for

opening of such account it is necessary to obtain the copy of bye lows.

c) Proprietorship

These type of accounts are opened for business concern having

an individual as their sole proprietor.

d) Partnership



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This type of account is opened for business concerns having a

number of partner. While opening this account care is taken to obtain

the partnership deeds along with their specific instructions with to the

operation of accounts.

FIXED DEPOSITS

In this type of account a certain amount is deposited for a

certain period such as six month, two years or longer. A fix deposit

receipts is issued in the name of the depositor. The receipt is signed

by the officer incharge and the bank manager. A notice is given to the

depositor on a prescribed form two weeks before the FDR falls due,

requesting the depositor to withdrawn his money or to renew his

deposits. The interest allowed on fixed deposit varies with the period

for which the deposits is made.

SHORT TERM DEPOSIT

Application for short term deposit is taken on form F-486 and

the amount on form F-88. The amount of such deposits will be credited

to short term deposit account. Rate of interest allowed by bank on

short term deposit is advised by the head office from time to time and

are laid down in section XII of supplement No.1.

CALL DEPOSITS

Branch may accept call deposit from local bank or from other onsuch rates on interest as may be prescribed by the head office from

time to time through controlling office. These deposits will be credited

to cal l deposit account in the favor of government and semi

government department should also be credited to call deposit

account.



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SAVING ACCOUNTS

Saving account is opened by the client through an application

on the printed form available from the bank as per instructions

mentioned thereon. The signatures of the new applicant must be

verified by an existing account holder in the same branch.

Application must be accompanied an amount of Rs.500/- in cash

of PLS account, and Rs.1000/ in case of current account.

A copy of national identi ty card must be attached with the

application how along with the specimen signature card signed by the

applicant.ARTICLES IN SAFE CUSTODY

Application for articles in safe deposits taken from the depositor

on form of 175 signature of the depositor should be verified by the

supervising official the number of the relative safe deposits noted

thereon on the application form filed in serial order in a separate file

which should be kept in the strong room overnight. Particulars of

articles taken into safe deposit will be recorded on the safe depositregister.



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CLEARING DEPARTMENT

Every banker acts both as a paying as well as a collecting

banker, it may be said that there in theory no legal obligation on a

banker to collect cheques, drawn, upon other banks for customer. It is

however an important function of crossed cheques. A large part of this

work in carried out through the bankers clearing house were ever it is

established.

A clearing house is a place where representative of all banks of

the city get together and settle the receipts and payment of cheques

drawn on each other. As the collecting banker runs certain risks in

receipt of their ownership the law has provided certain protections to

the banks.

The Negotiable Instrument Act, 1881, lays down the drawer or

holder of a cheque or draft may cross the instrument generally or

especially. It further lays down that a crossed cheque can only be paid

to a banker, who collect it for a customer who maintains an account.

2. TYPES OF CHEQUES COLLECTED BY

THE CLEARING DEPARTMENT

a) Transfer Cheques

Transfer cheques are those cheques which are collected and

paid by the same branch of bank.



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b) Transfer delivery cheques

Transfer delivery cheques are those cheques which are

collected and paid by two different branches of a bank situated in the

same city.

c) Clearing cheques

When the payee or endorsee (which deposits the cheque for

collection), and the drawer of cheque maintain accounts with different

banks, the collecting bank can receive the amount of cheques from thepaying banker in any of the following manners:

i. It can send its representative with the cheque to each of the

payment banks, and collect each. This procedure is wasteful of time

and labour, cumbersome and risky.

ii. The bank can maintain an account with the paying various

banks.

3. FUNCTIONS OF CLEARING DEPARTMENT IN A

BRANCH

i . To accept Transfer, Transfer delivery and clearing cheques from

the customers of the branch and to arrange for their collection.

i i. To arrange the payment of cheques drawn on the branch and

given for collection to any other branch on United Bank Limited or any

other members, or sub member of the local clearing house.

i ii . To collect amount of cheques drawn on members, submember

of the local clearing house, sent for collection by United bank

limited, branches not represented at the local clearing house.

4. PROCEDURE COMMON FOR ALL KINDS OF

CHEQUES ETC.



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i. Receiving and scrutinizing the cheques and other deposit

instruments, and the payinslips at the counter.

ii. Fixing the stamps.

i ii . Scrutiny and receipt by the authorized officer.

iv. Returning the counter foil to the depositor.

v. Certificate and confirmation by the officer incharge of the

department.

vi. Separating the cheques into transfer, transfer del ivery, and

clearing cheques.

5. SCRUTINY OF INSTRUMENTSi . The Instrument should be neither stale nor postdated.

i i. If the instrument is crossed `not negotiable' it can be for the

third party (an endorsee of an order cheque, or a holder of bearer

cheque).

iii. The Instrument should not bear any unauthorized alternation.

iv. The instrument should odd be multi lated.

v. The amount in words and figures should be same.

vi. The instrument should be drawn on a customer, or any local

branches.

vii . If the cheque is crossed `Account Payees' only or "payee's

Account", it should only be accepted for col lection for the payee's

account.

vii i. The cheques or drafts should not be crossed specially to any

other bank.

ix. A cheque payable to one of the joint account holders should not

be collected for the joint account without the payee's endorsement, or

consent.

x. A cheque payable to a firm, should not be accepted for credit to

a partner's account.



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xi. A cheque drawn by a customer in the capacity of an agent,

Attorney, or Manager of his company or firm, should not be collected

for credit to his personal account.

xii. Pay orders, although negotiable, should not be collected for

third parties.

xiii. Do not collect an instrument in the account of an agent, or of the

servant, of the payee or of the servant, of the payee or endorsee of

the instrument.

xiv. "Not transferable" instruments, like Telegraphic Transfer, or Mail

Transfer Receipt, Payslips, and Treasury Receipts, should becollected for a person other payee.

xv. If an account is new, or the balance or operation of the account

is not satisfactory, satisfy your self about the titles of the customers to

the instruments before accepting the deposits.

xvi. Branch agent's permission should be obtained before accepting

a third party cheque are draft for the credit of the account of the staff

member.

xvii. If the payee in a Government Department, Government Official,

or a trust account, the instrument can not be collected, but for the

payee's account.

xviii . I f the payee of an instrument is UBL, it can be collected for

credit of the drawers account, or the amount of the instrument may be

utilized as desired by the drawer in writing.

xix. Cheque payable to a trust, account should not be collected for

credit to a trustee's account.xx. Al l the endorsement should be regular, and no endorsement

should be missing.



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ADVANCES DEPARTMENT

Advances department performs such functions

1. Loans

2. Cash Credit

3. Overdraft

1. LOANS

Monetary assistance by a financial institution to a business

some financial problems such as to finance fiscal assets, working

capital, bridge finance, etc. The loans are granted by the bank in lump

sum, so these type called fixed or demand loans. Interest is charged

on the whole amount of a fixed loan.The borrower withdraws whole the amount of loan. This type of

loan is normally granted against security of gold and documents.

In case of demand loans against gold or documents, a demand

promissory note for the amount of loan is taken from the borrower.

Loans are granted under:

i. Loan against Gold:

Under this type of loan which is granted to the borrower.

The Head Cashier estimates the value of Gold or Gold ornaments

through an agent (Gold smith) and keeps a margin of 40 to 50 per

cent. After the opening the gold loan account a token is given to the

borrower which is a bank receipt.



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On repayment of loan, he gold or ornaments held as

security for it, together with the demand promissory note duly

discharged is returned to the borrower and his receipt for the gold

ornament taken in the demand loan ledger. This receipts states that

the ornaments returned are complete and in order. Part delivery of

ornaments is given against part payment of a loan but care is taken

that the ornaments still in the banks possession fully covers the

balance of the loan outstanding. The interest on gold loan is to be

applied with quarterly rests.

ii. Loan against pledged of stock:

In case of advancing such types of loans, the following

precaution are kept in the mind:

a) Stock pledged must be readily saleable.

b) Products should be readily saleable.

c) Advance should be within the borrows means.

2. CASH CREDITOR

Under such cash credit account is opened in the name of the

customer who borrows from the bank.

Customer is granted a loan upto a certain l imit which is

sanctioned by the head office, which he draw when he requires

interest is charged on the amount actually utilized by the customer. In

order to avoid the danger of idle fund, the bank charges are certain

rate of interest, even if the customer does not withdraw any amount.

The credit is usually given against the securities of goods or

merchandise as follows:

i . Advances Against Pledge Stock in Trade or Products:

When a cash is granted against the pledge of stock or product,

cash credit form is taken, from the certain products or stock, but the



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actual pledge is created when the stock or finished product are placed

under the bank's lock and key or the document of title are duly

endorsed to the bank by the borrower.

i i. Hypothecation of stock on Finished Products:

The difference between pledge and hypothecation is that

under a pledge the borrower's goods are placed in the bank's

possession under own lock, whereas, under a hypothecation, they

remain in the possession of the borrower or guarantor and are merely

charged to the bank under documents signed by them.

Even though the documents empower the bank to takepossession of the goods hypothecated, but it is possible that the

borrower may actually resist any attempt.

iii. Mortgages of property:

Title deeds of immovable property is accepted by the

bank only as collateral security or alternatively as unauthorized

security.

3. OVER DRAFTS:

When the bankers permits his customer to overdraw upon his

current account upto a certain limit, it is called overdraft facility

provided buy the bank. The customer is charged with the interest for

the amount he has actually overdrawn from the bank. The customer is

free to take the overdraft facility upto the limit whenever he needs and

he can at any time return back the advance to the bank by deposited

the amount with the bank.

There are two types of overdrafts:

i. Unsecured Overdraft:

Under such type of overdraft the bank rely upon the

personal security of the customer or customer's mentioned on the

customer's account.



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ii. Secured Overdraft

Under this type of overdraft the bank allows his customer

to withdraw more than his deposits after giving security against the

amount overdrawn. The securities against which the amount is

withdrawn may or Government or other first class.

REMITTANCE DEPARTMENT

The following are the main functions of this department.

Remittance can take place in three different ways.

i. Demand Draft

ii. Telegraphic Transfer

iii. Mail Transfer

DEMAND DRAFT

It is a bill down either on demand or otherwise by one bank on

another in favour of third party or by one branch of the same bank or

buy the Head Office on a branch or vice versa.

ISSUANCE OF DEMAND DRAFT

The amount both in words and figures is written and the

applicant has to sign on two places which are helpful in case DD is to

be cancelled.

The applicant then has to deposit the cash at the counter. The

officer incharge at the counter will affix the stamp cash received at the

DD issued from. After the cash has been deposited the DD will beissued to him. Each DD has its own register along with the name of

the party in whose favour the DD was issued.

CANCELLATION OF DEMAND DRAFT



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For cancellation the client has to give an application to the bank

that the DD is no longer required and has to sign the proper

verification of the signatures will cancel the DD, and will pass the entry

be debiting to main office and crediting party account. The bank will

then issue a debit advice to the main office.

TELEGRAPHIC TRANSFER

An application form for TT is provided to the client in which as to

specify the name of the payee, the place of the transfer and the

amount. If the amount is deposited through cash or through self

cheque a simple cash voucher is passed giving a credit to main office.A telegraphic massage is sent to the bank on the bank on which

the TT is drawn specifying the TT number, date, the name of the party

in whose favour it is drawn and the test number.

MAIL TRANSFER

When a customer request the bank to transfer his money from

this bank to any other bank of the branch of same bank in the city,

outside the city of outside the country the first thing he has to do is tofill an application form.

In which he states that I want to transfer the money from this

bank to that bank by mail.

If the customer is the account holder of this bank, the bank will

debit his account and the concerned officer will fill the six different

forms to make the mail transfer complete. The six forms used for this

purpose are listed below:

i. Branch Mail Transfer Mail

ii. Receiving branch registered copy

iii. Issuing Branch Register Copy

iv. Debt Voucher

v. Beneficiary's Advice



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vi. Advice to Customer

If the customer is not he account holder of this bank, then firstly

he has to deposit the money and then rest of the procedure will be

adopted to transfer his money.

CASH DEPARTMENT

The following books are maintained in the Cash Department:

1. Receiving Cashier Bank

2. Paying Cashier Book

3. Token Book

4. Scroll Book

5. Cash Balance Book

When cash is received in counter, it is entered in the Scroll

Book and Receiving Cashier Book.At the close of the day, these are

balanced with each other.

When the cheque or any negotiable instrument is presented at

counter for payment, it is entered in the token book and token is

issued to the customer. The token and the Cashier makes entry in the

paying book and payment is made to payee. At the close of day, the

Token Book and Paying Cashier Book is balanced.The consolidated figure of receipt and payment of cash is

entered in the cash balance book and drawn closing balance of cash.

Opening balance of Cash + Receipts Payments = Closing Balance.

This is very important department. All the books maintained in this

department are checked by an officer.



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ACCOUNTS DEPARTMENT

General there are two types of maintaining of an Account:

A: Journal System

B: Voucher System

Generally journal system is adopted by some commercial

industrial institutions. In journal system entries are reported on Journal

Book and then posted to main ledger.

In banking voucher system is used for every transaction voucherhas to be prepared either in cash or in transfer or in clearing. On the

sheet upon which these vouchers are summarized, transaction wise

and consolidated into on figure is called supplementary.

There two types of supplementary:

a. Debit Supplementary

b. Credit Supplementary

Debit supplementary is used for debit voucher expenses and

credit supplementary is used for credit voucher. They are of red and

green colour respectively.



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FUNCTIONS OF NBP

The National Bank of Pakistan performs two types of function. It

acts as an ordinary commercial bank, and at places where there are

no branches of State Bank of Pakistan it represents Pakistan, that is

why it cannot be privatized. As a commercial bank it performs the

following functions.

1. Accepting of deposits of money on current account, saving, term

deposit and other profit and loss sharing accounts.2. Borrowing money and arranging finance from other banks.

3. Advancing and lending money to it's clients.

4. Financing of projects including technical assistance, project

appraisal through long term/short term loans.

5. Buying, sel ling, deal ing and discounting of bil ls of exchange,

promissory notes, drafts, bill of lading, other instruments of securities

etc.

6. Foreign exchange business.

7. Financing of seasonal crops like cotton, wheat, r ice,

8. Receiving of bonds, scrips, valuable etc. for safe custody.



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9. Carrying on agency business of any description other than

managing agent on behalf of clients, including government and local

authorities.

10. Generating, undertaking, promoting etc. of issue of shares,

bonds.

11. Transacting guarantees and indemnity business.

12. Undertaking and executing trusts.

13. Making investments in other banking companies.

14. Joint venturing with foreign dealers, agents and companies for

its representation abroad.15. Participating World Bank's and Asian Development bank's lines

of credit.

16. Utility services.

17. Providing Hajj services to intending Hajis.

18. Agent to State Bank of Pakistan for collecting

19. Payment of pension on behalf of provincial and central

governments.

20. Treasury business.

21. Gold finances.

FUNCTIONS OF NBP AS A REPRESENTATIVE OF

STATE BANK OF PAKISTAN

1. Collection of cheques and bill of exchange for its customers.2. Paying insurance premium, rent or other obligations of the

customers.

3. Collecting interests due, dividend pensions and other sums due

to customers.

4. Transferring of money from place to place.



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5. Acting an executors, trustees for the customers.

6. Providing safe custody and jewelry documents or securities.

7. Issuing of travelers cheques and letter of credit to give credit

facilities for travel.

8. Purchasing shares for the customers.

9. Accepting bills of exchange on behalf of customers.

10. Undertaking foreign exchange business.

11. Furnishing trade information and tendering advice to customers.

12. Formulating operation policy guidelines for the banks.

13. Laying down performance criteria for banks and taking steps forensuring their observance.

14. Evaluating the performance of the banks in the context of

operational guidelines issued to the banks.

15. Determining the areas of coordination of the banks.

16. Formulating schemes under section of the act.

17. Making recommendations to the federal government for the

appointment of the president and members of the executive board.

18. Analyzing and appraising financial statement including balance

sheets and profit and loss accounts of banks and appointment of

auditors of the bank.

19. Conducting such surveys, inquiries and appraisals as may be

necessary for the purpose of this act.

20. Exercising and performing such powers and functions of the

federal government under the act and such other functions as the

federal government may assign to it.21. Establishing a research department or conduct banking

research and in particular study overseas banking operation and

problems of the agricultural financing.



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22. Establishing a central training institution for improving bank

services.

23. Coordinating the planning of the operat ions of nat ional ized

commercial banks, and exercising general overall checks on the cost

of their operations.

24. Appointing lead banks and to apportion share of advance

among the banks in respect of consortium loans financed by the

nationalized commercial banks only, in accordance with resource

availability of each bank.

25. Watching the progress of the implementation of the rul ingsmade in State Bank Annual Inspection Reports and the remedial and

corrective measures taken by the banks with a view of removing

imbalances both in respect of commodities and regions.

26. Overseeing foreign operations of banks to ensure that these are

being conducted in the best interest of the bank.

WORK DONE BY ME AT NBP MAIN BRANCH KOTLI

(A.K)

I performed the following work in my 2 months training at NBP

Main Branch Kotli (A.K).

GENERAL BANKING

First of all, I was asked to work in different sections of general

banking. The incharge of general banking having good command onbanks operations. Here I dealt with new customers who wanted to get

information about the branch and willing to deal with the branch. This

is a very interesting department because here I met people of different

types and deals with them accordingly.



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BILLS & REMITTANCE DEPARTMENT

It is a most important and interesting department. This section

deals with the transfer of money from one branch to another branch.

Nearly 6 drafts issued daily from this department. Here I knew

how the amount transfer and what is the procedure. This department

also deal with T.T. transfer of money. I worked nearly two and a half

week in this department.

DEPOSIT DEPARTMENT

Deposit department deals with current, saving, fixed accounts

for a long period.

In current accounts the banks does not offer any interest. You

can deposit or withdraw any amount during banking hours. In PLS

account we can only withdraw upto Rs.25000/- per month. If you want

to withdraw more than Rs.25000/- a notification must be given to the

bank.

In fixed accounts normally people of old age are more interested

because they get a lumsum amount every month as a markup or

interest. These accounts are normally for 2 to 5 years.

CLEARING DEPARTMENT

In clearing department I deals with cheques of Bank's clients

drawn on different banks.CREDIT DEPARTMENT

I spent last week of my training in credit department. It deals

with the advancing of loans. This department is further divided into

some sections like cash finance, demand finance, finance against



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property, finance against shares, modaraba financing, mosharika

financing etc.

NATIONAL BANK OF PAKISTAN

Balance Sheet

December 31, 1999

(Rupees in 000)

ASSETS:-

Cash

Balance with other banks

Money at call and short notice

Investments- net of diminution

Advances- net of provision

Operating fixed assets

Capital work in progress (building cons.)

Other assets net of provision.

349,969,775 325,057,409LIABILITIES:-

Deposits and other accounts

Borrowings from other banks, agents, ect.

Bills payable

Other liabilities


64,793,405

20,021,108

4,066,521

91,277,587

122,293,933

6,723,042

185,708

40,571,282

52,646,553

12,777,002

1,058,164

102,968,932

109,524,000

6,073,659

219,326

39,789,773

294,754,493

11,362,600

2,082,447

25,770,235

273,390,739

10,287,943

3,271,018

22,958,650


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NET ASSETS 333,969,775 309,908,350

REPRESENTED BY:- 15,962,811 15,149,059

Share capital

Reserve fund and other reserves

Accumulated loss

Shareholders equity

Surplus on revaluation of fixed assets

15,962,811 15,149,059

MEMODRANDUM ITEMS:-

Bills for collection 2,509,239 2,766,198

Acceptances, endorsements and other obl igations. 98,978,343 88,982,959

Contingent liabilities and commitments

Qarz-e-Hasna Fund 281,768 214,165


1,463,880

9,124,223

(834,634)

10,149,469

5 813 342

273,390,739

10,287,943

3,271,018

22,958,650


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PROFIT AND LOSS ACCOUNT

For The Year Ended December 31, 1999

1999 1998

(Rupees in 000)

Mark-up/ Interest discount and /

Or return earned

Less: Return on deposits.

Fees. Commissions and brokerage

Profit/ (Loss) from dealing securities

Divided incomeOther operating income

Operating Expenses:

Administrative expenses

Diminution in value of investments

Provision against non-performing advances


31,277,047

(20,905,676)

10,371,371

2,244,203

23,351

255,829

1,462,851

3,986,234

7,941,136

1,124,085

1,516787

823,236

2,340,023

73,565

11,478,809

27,8992,906,695

2,595,211

311,484

488,546

(177,062)

(261,572)

(438,634)

(438,634)

31,699,317

(22,915,325)

8,784,046

1,367,663

(478)

290,923

1,072,408

2,730,516

6,160,139

155,151

515,552

12,500

528,052

32,261

6,875,603

74,931

4,713,890

2,578,508

2,135,382

1,605,729

529,653

(738,2660)

(208,607)

(52,965)

.(261,572)


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Other provisions.

Bad debts written off directly

Other income

Amortization of deferred cost

Profit before taxation

Taxation

(Loss)/profit after taxation

Loss brought forward

Appropriations

Transfer to statutory reserveLoss carried forward


CASH FLOW STATEMENT

December 31, 1999

1999 1998

(Rupees in 000)

CASH FLOW FROM OPERATING ACTIVITES:

Profit before taxation

Less: Profit/(Loss) from dealing securities

Dividend Income

Profit on sale of fixed assets

Adjustment for non-cash chargesDepreciation

Provision for diminution in the value.

Provision against non-performing advances

Amortization of deferred costs

Others


311,484

23,351

255,829

3,048

29,256

398,051

1,124,085

1,516,787

2,595,211

823,236

6,457,370

6,486,626

.

11,273,122

(14,286,720)

(1,242,180)

(4,255,778)

21,363,754

(1,188,571)

2,872,42123,047,604

2,135,382

(478)

290,923

16,914

1,828,023

410,957

155,151

515,552

2,578,508

12,500

3,672,,668

5,500,691

15,229,550

(4,273,978)

(2,062,183)

8,893,389

18,527,839

745,919

2,659,31122,033,069


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(Increase/(decrease) in operating liabilities

Government Securities

Advances

Other Assets

Increase/(Decrease) in Operating Lib.

Deposits and other accounts

Bills payable

Other liabilities

Cash flow before tax and other payments

Special separation package costs paid

Income tax paid

Net cash inflow from operating activities

CASH FLOW FROM INVESTING ACTIVITIES

Purchases of investment securities.

Dividend income

Fixed capital expenditure

Sale proceeds of fixed assets

Net cash used in investing activities

CASH FLOW FROM FINANCING ACTIVITIES

Borrowings from other banks, agents etc.Net cash from financing activities

Effect of exchange translation adjustment

Increase in cash and cash equivalents for the year

Cash and cash equivalents at the beginning of the year


682,512)

255,829

(377,122)8,801

(795,004)

1,074,657

1,074,657

348,367

22,399,315

66,481,719

88,881,034

64,793,405

20,021,108

4,066,521

88,881,034

25,278,452

(369,551)

(3,137,606)

21,771,295

36,427,149

(11,982,586)

(5,022,014)

19,422,549

(8,869,082)

290,923

(84,449)

22,761

(8,639,847)

530,917

530,917

245,431

11,559,050

54,922,669

66,481,719

52,646,553

12,777,002

1,058,164

66,481,719


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Cash and cash equivalents at the end.

Cash and cash equivalents

Cash

Balances with other banks

Money at call and short notice

Cash and cash equivalents at end of year.

RATIO ANALYSIS

1. LIQUIDITY RATIOS :

a) Net WORKING Capital =Current Assets Current liabilities

1998 278806587 184275299 =94531288

1999 302452554 296836940 =5615614

Comments:

Working Capital comes out by deducting current liabilities from

current assets, working capital in 1998 was higher as compare to

1999.

b) Current Ratio= current Assets - Current liabities

1998 278806587 = 1.51 :1

184275299



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1999 302452554 =1.02 :1296836940

Comments:

Current ratio means how current assets meet current liabilities.

In practice it must be 2 : 1. In 1998 Current ratio is 1.5 : & in 1999 it is

1.02 : 1 , which is not according to standard.

c) Acid Test Ratio = Cash+Marketable Securities+A/C recieveables

Current Liabilities

1998 169450651 =0.92:1

184275299

1999 180158621 = 0.61: 1

296836940

Comments:

The quick (acid test) ratio is similar to the current ratio except

that it excludes inventory from current assets. Generally 1.01 :1 or

greater is recommended. In 1998 it was 0.92 & in 1999 it was 0.61which is not according to standard.

2 Activity Ratios :

a) Proprietary Ratio = Stock Holder Equity

Total Assets

1998 15149059 = 0.031

325931072

1999 15962811 = 0.045

349932586

Comments:



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Proprietary ratio can be calculated by dividing stock holder

equity on total assets. In 1998 it was 0.031 but in 1999 it slightly

improves to 0.045.

b) Total Assets Turnover Ratio. = Sales .

Total Assets

1998 34504818 = 0.11 : 1

325931072

1999 35291180 = 0.10 : 1

349932586

Comments:

Total Assets Turnover indicate the efficiency with which the firm

is able to use all its assets to generate revenue. It indicates weather

the firms operation have been financially efficient or not. In 1998 it

was 0.11 but in 1999 it decreases to 0.10.

3 Leverage Ratios :

a) Debt Ratio = Total Liabilities

Total Assets

1998 310782013 = 0.953 : 1

325931072

1999 333969775 = 0.954 : 1

349932586

Comments:

This ratio shows how many times total assets covers total

liabilities other than equity. In 1998 it was 0.953 but in 1999 it was

0.954 which shows slight improvement.



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b) Debt To Equity Ratio: = Long Term Debts

Share Holder Equity

1998 34120256 = 2.25 : 1

15149059

1999 37132835 = 2.33 : 1

15962811

Comments:

Debt equity ratio indicates the relationship between the longterm funds provided by creditors. It is used to calculate the degree of

financial leverage of the firm. It was 2.25 in 1998 but in 1999 it

improves to 2.33.

c) Cash To Deposit Ratio: = Total Cash

Total Deposit

1998 52646553 = 0.219 : 1

27339142

1999 64793405 = 0.219 : 1

29475437

Comments:

Cash to deposit ratio can be calculated by dividing total cash to

total deposits. In 1998 it was 0.193 but in 1999 it improves little bit to

0.219.

4. Profitability Ratios :

a) Operating or Grass Profit Ratio = Profit Before Taxes

Sales or Income



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1998 2135382 = 0.061 : 1

34504818

1999 311484 = 0.009 : 1

35291180

Comments:

The operating profit ratio represents pure profit earned on each

rupees. It ignore any financial or governmental charges and measure

only the profit earned on operations. It was 0.061 in 1998 but in 1999it was decrease to 0.009.

b) Return On Equity Ratio: = Net Profit After Taxes

Share Holder Equity

1998 529653 = 0.031 : 1

15149059

1999 Not Calculated because of net loss.

NOTE: Other profitability ratios cannot be calculated because of

NET LOSS IN THE FINANCIAL YEAR OF 1999.



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PERFORMANCE ANALYSIS OF NBPANNUAL

REPORT 1999

N. B. P celebrated its Golden Jubilee in 1999. During the last fifty

years the bank has made substantial strides in the financial services

industry in Pakistan. Currently its market share is around 22% and it

remains the largest financial institution in Pakistan.

Profit befor provisions& taxation:

In 1999,profi t before provisions & taxation

increased to Rs. 6.9 Billion from Rs.5.5 Billion in 1998,showing an

increase of 27%.Growth in deposits:

The growth in deposits has been maintained at over 7%.

In 1998 total number of deposits were 273391 mil lion while in

1999,they increased to 294754 million.



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Advances:

Total gross advances of the bank at the end of 1999

stood at Rs. 139.6 Billion net of recoveries as compared to total

advances of Rs. 126.1 Billion at year ended 1998.

Capital adequacy ratio:

Despite the provisions, the capital adequacy ratio of

11.4% exceeds the minimum internationally accepted ratio of 8%.

Non performing loans:

The increase in non-performing loans to Rs.30 Billion

from Rs. 20 Bil lion in1998 was on account of a change in the

prudential Regulations for restructured loans.

Satellite Network:

NBP has established router based high speed satellite

network between six cities and intends to expand this network from six

to nine cities. It will link all NBP Regions, Zones & Branches.

Future strategy:

NBPs strategy will focus on leveraging its network and

franchise for creating revenue generating opportunities using

technology to both improve customer service and achieve eternal

efficiencies and finally to improve the quality of human resources

base through structured training.



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SUGGESTIONS FOR IMPROVEMENT

I want to give some suggestions to improve the efficiency of the

bank.

1. Separate desk or counter should be established in every branch

to provide the information as required by the clients.

2. The environment of the offices should be comfortable so that

the client and staff must feel comfort during business in bank.

3. Unsecured loan are not to be provided in case of banks

directions, there families, companies or firms.

4. There are some cl ients having sound and successful plan but

without financially sound and providing securities bank shouldfirms such policies which may solve this problem.

5. I observed that many branches of NBP are over crowded. Less

people can work which is performed by extra people. No. of

employes should decrease or new branches should opens for

the adjustment of these extra employees.



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6. There is too much dependence or handwork and they are not

getting at with computer programme. All the branches of NBP

should be computerized.

7. There are some employes untrained which decreases the

efficiency of the bank branch. All the employee should well

trained.

8. Most of the bank employees are sticking to one seat only, with

the result that they become master of one particular job and

loose their grip on

9. People have to wait for re-cashing their cheques and for payingtheir utility bills, which is not good for reputation of bank, it

should be improved.

10. Promotion should be given to competent persons on merit basis.



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Documents

An Internship Report on National Bank of Pakista1