marked internship report nbp mc080203376

Virtual University of Pakistan

Evaluation Sheet for Internship Report Fall 2009

FINI619: Internship Report (Finance) Credit Hours: 3

Name of Student: Humayoun Ahmad Farooqi

Student’s ID: MC080203376

Supervisor:

Evaluation Criteria Result

Report writing Pass

Presentation & Viva voce

Final Result

SWOT analysis and recommendations are copied from internet

Mistakes in calculations are highlighted

Ratios are not interpreted.

INTERNSHIP REPORT

Name of Organization:

NATIONAL BANK OF PAKISTAN

Submitted By:

Humayoun Ahmad Farooqi

MC080203376 (Student ID)

Session 2008-2010

Submitted To:

Instructor FIN619

Date of Submission:

04-02-2010

VIRTUAL UNIVERSITY OF PAKISTAN

An I n t e r n s h i p R e p o r t

Dedications

I dedicate this Internship Report to

My family and friends

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UNDERTAKING

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INTERNSHIP REPORT

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Acknowledgement

Thanks to almighty Allah, the most merciful, beneficent, and the source of all

knowledge and wisdom. All reverence to the Holy Prophet Mohammad (S.A.W.), who is

forever guidance and knowledge for all human beings on this earth.

Special thanks to Mr. Muhammad Ali Khan campus manager Virtual University

Campus (Faisal Town), Lahore - 939, Block-C, Moulana Shaukat Ali Road, Lahore

(VLHR01) - for providing information, support and guidance at every level of my

studies. Without his co-operation it would not be possible for me to complete my MBA

degree.

I am very thankful to my family specially my mothers whose kind prayers and

cooperation helped me at every step of my work.

I am really very grateful to Anwaar Ali Assistant vice President and Nauman

Dilawar Operations Manager (Internship supervisor), National Bank of Pakistan, Model

Town Branch Lahore for their accommodating attitude during the completion of my

internship. They helped and supported me during gathering and analyzing information.

And at the end, I am really very thankful to Mr. Mohsin Ali, a friend of mine, for

his help in every step during the completion of my internship report.

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Executive summary

In this report, I have discussed about every major aspect of the bank, which I

observed during my internship. Along with it, the processes, policies and procedures of

the bank have also been discussed in detail.

The main purpose of internship is to learn, by working in practical environment

and to apply the knowledge acquired, during the studies, in a real world scenario in order

to tackle the problems. My intentions were to know how to work in financial institutions,

to know about the office environment and to know how to deal with different kind of

people.

In this report the analysis of the organization has been done and the financial

aspects have been evaluated to analyze the current position of the organization. Along

with it, the background analysis, the business process analysis, and the internal

environment and external environment of the organization have been discussed and the

recommendations for the improvement have been made.

During my internship program, I mainly worked with the departments GENERAL

BANKING and ADVANCES. These departments have been discussed in along with the

policies and procedures therein.

I have concluded my report with my experience at the National Bank of the

Pakistan along with my overall insight of the organization

The recommendation section contains my perception of the ways of improving

this organization.

In the end I have listed the references used during the preparation of my

internship report

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Table of Contents

Introduction of Organization Business Sector__________________________________1

Overview of the organization________________________________________________4

Brief History of the Organization________________________________________________4

Nature of the Organization_____________________________________________________7

Business Volume of the organization_____________________________________________9

Product Lines_______________________________________________________________10National Bank of Pakistan Saiban Scheme_______________________________________________10NBP Advance Salary Scheme________________________________________________________11National Bank Cash Gold Scheme_____________________________________________________11National Bank Kisan Dost Scheme_____________________________________________________11National Bank Premium Aamdani Certificate Scheme_____________________________________12NBP Karobar Scheme_______________________________________________________________13International Baking________________________________________________________________13DEMAND DRAFTS_______________________________________________________________13MAIL TRANSFERS_______________________________________________________________14PAY ORDER:_____________________________________________________________________14TRAVELER'S CHEQUES:__________________________________________________________14LETTER OF CREDIT:______________________________________________________________14COMMERCIAL FINANCE:_________________________________________________________15FOREIGN REMITTANCES:_________________________________________________________15SWIFT SYSTEM:_________________________________________________________________15TRADE FINANCES OTHER BUSINESS LOANS_______________________________________16

AGRICULTURAL FINANCE:_____________________________________________________16Agricultural Credit:______________________________________________________________16Production and development_______________________________________________________16Farm Credit:____________________________________________________________________17Production Loans:_______________________________________________________________17

CORPORATE FINANCE:___________________________________________________________17Working Capital and Short Term Loans:___________________________________________17Loan Structuring and Syndication:___________________________________________________17Cash Management Services________________________________________________________18SHORT TERM INVESTMENTS:___________________________________________________18EQUITY INVESTMENTS:________________________________________________________18

Competitors________________________________________________________________19

Organizational structure__________________________________________________20

Organizational Hierarchy Chart_______________________________________________20

Number of employees________________________________________________________22

Main Offices________________________________________________________________22

Introduction of all the departments_____________________________________________24Deposit Department________________________________________________________________24Advances Department_______________________________________________________________24Government Receipts and Payments Department_________________________________________24

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FBR Collection Department__________________________________________________________24Remittances Department_____________________________________________________________24Bills Department___________________________________________________________________25Cash Department__________________________________________________________________25Compliance Department_____________________________________________________________25Agriculture Department_____________________________________________________________25Human Resources Management Depatrment_____________________________________________26Information Technology Department___________________________________________________26Online Banking Department__________________________________________________________26Islamic Banking Department_________________________________________________________26

Comments on Organizational Structure_________________________________________26

Plan of your internship program____________________________________________28

Introduction of Branch_______________________________________________________28Name of Branch___________________________________________________________________28Branch Code______________________________________________________________________28Region___________________________________________________________________________28Address__________________________________________________________________________28Phone Nos._______________________________________________________________________28Fax No.__________________________________________________________________________28Name of Manager__________________________________________________________________28Name of My Operation Manager (Supervisor)____________________________________________28Number of employees_______________________________________________________________28

Starting and ending dates of internship__________________________________________29

Departments of Training______________________________________________________291. The General Banking Department_________________________________________________292. Advances Department__________________________________________________________29

Training program_______________________________________________________30

Introduction of the departments I worked in_____________________________________301. General Banking______________________________________________________________302. Advances (Credit department)______________________________________________________32

Detailed description of tasks Assigned to me_____________________________________32a. Qualification of Customer_______________________________________________________33b. Types of Accounts_____________________________________________________________33c. Issuing of cheque book:_________________________________________________________34

2. Accepting deposits_______________________________________________________________343. Making payment.______________________________________________________________35

a. Current account_____________________________________________________________35b. Saving account________________________________________________________________35c. Cheque Payments______________________________________________________________36d. Cheque cancellation:___________________________________________________________36

4. Government receipt and Payment___________________________________________________37Advances Department_______________________________________________________________37

Principles of Advances____________________________________________________________39

Structure of Finance Department___________________________________________44

Departmental Hierarchy______________________________________________________44

Numbers of Employee________________________________________________________44

Finance and Accounting Operations____________________________________________44Functions of the Finance Department___________________________________________________44

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Functions of Finance Department__________________________________________45

Accounting system of the organization__________________________________________45

Finance system of the organization_____________________________________________45

Use of electronic data in decision making________________________________________45

Sources of funds_____________________________________________________________46

Allocation of funds___________________________________________________________46

Critical Analysis_________________________________________________________47

a. Financial Analysis_______________________________________________________47i. Ratio Analysis________________________________________________________________47

a. Liquidity Ratios_____________________________________________________________47b. Leverage Ratios_____________________________________________________________48c. Profitability Ratios___________________________________________________________50d. Activity Ratios______________________________________________________________53e. Market Ratios______________________________________________________________54f. Statement of Cash Flow_______________________________________________________55g. Other Ratios________________________________________________________________56

HORIZONTAL ANALYSIS_________________________________________________________58VERTICAL ANALYSIS____________________________________________________________61INDUSTRY ANALYSIS____________________________________________________________62

FUTURE PROSPECTS OF THE ORGANIZATION______________________________63

SWOT Analysis of the organization_________________________________________64

Strength____________________________________________________________________64

Weakness__________________________________________________________________64

Opportunities_______________________________________________________________65

Threats____________________________________________________________________65

Conclusion_____________________________________________________________67

Customer Satisfaction________________________________________________________67

Poor record management and filing system______________________________________67

Unequal distribution of work__________________________________________________67

Marketing visits_____________________________________________________________67

Formal Organization_________________________________________________________67

Difference between theory and practice_________________________________________68

More accounts fewer deposits._________________________________________________68

Delegation of authority_______________________________________________________68

Lack of specialized training___________________________________________________68

Poor job rotation____________________________________________________________69

Lack of appreciation_________________________________________________________69

Promotions_________________________________________________________________69

Marketing at desk___________________________________________________________69

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Lack of business communication_______________________________________________70

Recommendations for Improvements________________________________________71

Professional training_________________________________________________________71

Delegation of authority_______________________________________________________71

Performance Appraisal_______________________________________________________71

To Over Come Problem of Space and Furniture__________________________________71

Job Rotation________________________________________________________________72

Changes in Policies___________________________________________________________72

Link with the Head Quarter___________________________________________________72

Credit Card________________________________________________________________72

Installing Validator__________________________________________________________72

Interest on Overdraft:________________________________________________________72

Cash Financing______________________________________________________________72

Decreasing Administrative Expenses____________________________________________73

Needs to be Flexible in credit Policy_____________________________________________73

Technological Advancement___________________________________________________73

Staff Relationship____________________________________________________________73

Improper Distribution of Work________________________________________________74

Favoritism and nepotism______________________________________________________74

Marketing Policy____________________________________________________________74

Complaints of Customer______________________________________________________75

Organizational Commitment__________________________________________________75

Credit Monitoring___________________________________________________________75

Avoiding Bad Debts__________________________________________________________75

References______________________________________________________________76

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Introduction of Organization Business Sector

National bank of Pakistan is providing banking/financial services in Pakistan. The

Banking/Financial service sector is often described as a nation's economic engine because

they provide financial intermediation functions between savers/investors that are looking

for safety and growth and consumers/businesses who are looking for access to credit and

capital. Banks also play a major role as instruments of the government's monetary policy

aimed at regulating interest rates and money supply in the economy. The current

economic crisis in the United States and Europe is because of the ongoing weakness of

major banks and the resulting credit and capital crunch. It is evident form history that the

banking sector is critically important in national and global economies.

In Pakistan, the total banking sector serves around 6 million borrowers and 25

million depositors, implying a penetration rate of 3.6 percent and 15 percent respectively.

In terms of access to microfinance, which means the availability of small loans, micro

deposits and micro-insurance services to low income households, the current penetration

rate is only 10 percent. In other words, 85 percent of Pakistan's population does not have

access to any financial services at all, which inherently creates an uneven and an

inequitable economic world, where the majority of people are financially marginalized.

Between 2002 and 2007, Pakistan's accelerated economic growth was

underpinned by a strong banking sector. Classified as Pakistan’s and region’s best

performing sector, the banking industry’s assets rose to over $60 billion, its profitability

remains high, non-performing loans (NPLs) are low, credit is fairly diversified and bank-

wide system risks are well-contained. Almost 81% of banking assets are in private hands.

Likewise, the present foreign stake comes to 47% of total paid-up capital of all the

financial institutions regulated by Pakistan's central bank, the State Bank of Pakistan.

At present there are 41 scheduled banks, 6 Development Finance Institutes, and 2

Micro Finance Banks operating in Pakistan whose activities are regulated and supervised

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by State Bank of Pakistan. The commercial banks comprise of 3 nationalized banks, 3

privatized banks, 15 private sector banks, 14 foreign banks, 2 provincial scheduled banks,

and 4 specialized banks.

Under the Banking Companies Ordinance, 1962 the State Bank of Pakistan is

fully authorized to regulate and supervise banks and development finance institutions.

State Bank of Pakistan can prohibit the bank from giving loans, advances & credits. It

can prohibit the bank from accepting deposits, Can cancel license of a bank, Can give

directions to the bank as it deem fit ,Can remove chairman, directors, chief executive or

other managerial persons from the office and appoint a person as chairman, director or

chief executive.

In general, there are primarily two types of banks in Pakistan: Commercial Banks

and Investment Banks. Both types of banks provide financial services essential for

Pakistan's economy to function and grow.

Commercial Banks are privately-owned institutions that, generally, accept

deposits and make loans. Deposits are money people entrust to an institution with the

understanding that they can get it back at any time or at an agreed-upon future date. A

loan is money let out to a borrower to be generally paid back with interest. This action of

taking deposits and making loans is called financial intermediation. A bank's business,

however, does not end there. Most people and businesses pay their bills with bank

checking accounts, placing banks at the center of our payments system. Banks are the

major source of consumer loans -- loans for cars, houses, education -- as well as main

lenders to businesses, especially small businesses. When banks are strong and the credit

flows, it helps the overall economic growth. When banks are in crisis, the impact on

business and consumers increases the weakness in the economy.

Investment banks provide four primary types of services: raising capital (private

equity or public offerings of shares), advising in mergers and acquisitions, executing

securities sales and trading, and performing general advisory services. Most of the major

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Wall Street firms are active in each of these categories. Smaller investment banks may

specialize in two or three of these categories.

In spite of the international economic crisis, continuing political turmoil and

rising militancy in Pakistan, the financial services sector has held up fairly well in the last

year. Its future, however, remains tied to a measure political stability in the country that

allows economic activity to occur unhindered. Let's hope the nation's political and ruling

elites can find a way to find a peaceful way forward.

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Overview of the organization

Vision

To be recognized as a leader and a brand synonymous with trust, highest

standards of service quality, international best practices and social responsibility.

Mission

NBP will aspire to the values that make NBP truly the Nation’s Bank, by:

Institutionalizing a merit and performance culture

Creating a distinctive brand identity by providing the highest standards of services

Adopting the best international management practices

Maximizing stake-holders value

Discharging our responsibility as a good corporate citizen of Pakistan and in

countries where we operate

Brief History of the Organization

National Bank of Pakistan was established vide NBP Ordinance No. XIX of

November 9. 1949. Initially the Bank’s objective was to extend credit to the agriculture

sector.

The Bank commenced its operations from November 20, 1949 at six important

jute centers in the then East Pakistan and directed its resources in financing of jute crop.

The Bank’s Karachi and Lahore offices were subsequently opened in December 1949.

The Bank in 1950 had one subsidiary ‘The Bank of Bahawalpur’ established 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.

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Deposits held by NBP constituted about 3.1% of total deposits of all Pakistani

Banks in 1949, which rose to 38% in 1952.

NBP advances reached Rs.554.4 million by December 1959, which was one third

of the total schedule bank credit.

In 2002 the Bank signed an agreement with Western Union for expanding the

base for documented remittances. In November 2002 NBP launched its advance salary

scheme

The Best in the Emerging Markets: World’s leading financial journal, “Global

Finance” after a worldwide survey declared NBP in its issue of May 2003 as one of the

Best in the Emerging Markets.

The “Bankers Magazine” in July 2003 recognized NBP as the bank with the

highest return on capital in Asia and No.8 in the world.

NBP in the only Pakistani bank which has been ranked among the Top 100 banks

of Asia for it performance in the fiscal year 2003 and then among the Top 1000 banks of

the world by the prestigious “Banker magazine” in its issue of July 2005.

In January 2004 NBP launched its NBP Saibaan scheme. In May 2004, NBP’s

standard long-term rating was upgraded by M/S JCR-VIS Credit Rating Agency to AA

(double A) from AA- (double A minus) with “stable outlook” while standalone short-

term rating was maintained at A-1+ (A one plus). This is now the best rating for a local

commercial bank in Pakistan.

WEBCOP-AASHA, an alliance against gender discrimination at workplace,

presented a recognition Award to NBP on December 18, 2004 for having a Gender

Sensitive Management.

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World’s leading financial journal, “Global Finance” in an exclusive survey has

named NBP as the Best Emerging Market Bank from Pakistan for the year 2005.

On an all Pakistan basis NBP was awarded the “Kisan Times Award” for the year

2005 by the Prime Minister of Pakistan Mr. Shaukat Aziz, for its services in the

Agriculture Sector.

The “Banker Magazine” in July 2005 recognized NBP as the 10th Best Bank in

terms of “Profit on Capital” in the world.

“Best Bank-Pakistan” award for the year 2005 by world’s leading financial

journal “Global Finance”. NBP launched its ATM + Debit Card in 2005

World’s leading financial journal, “Global Finance” has named NBP as the Best

Emerging Market Bank from Pakistan for the year 2006. NBP launched the schemes of

NBP helpline, NBP Islamic banking and NBP protection shield.

Best return on Capital for 2006 amongst all banks in Asia “Banker magazine” in

July 2007. NBP enjoys the highest rating of ‘AAA’ in the industry assigned by M/s

JCR-VIS Credit Rating Company (July 2007) limited on a standalone basis. NBP

launched premium Aamdani and Premium saver schemes in 2007

National of Pakistan was awarded The Bank of The Year for the year 2001,

2002, 2004, 2005 and 2008 by “The Banker magazine” owned by the Financial Times

Group, London.

National Bank of Pakistan was awarded “The Best Foreign Exchange Bank in

Pakistan” for the year 2004, 2005, 2006 and 2008 by the world’s leading financial

journal “Global Finance”

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Year 2008 has been a historic year for NBP’s I.T infrastructure point as the bank

started its implementation program of ‘Core Banking Application (CBA) Software’. At

the end of 2008 the Bank has a branch network of 1276 branches with 1254 domestic and

22 overseas branches.

Nature of the Organization

National Bank of Pakistan is naturally a Financial Organization, which deals with

lending, and borrowing and investing activities. The nature of responsibilities of the Bank

is different and unique from other Banks/financial institutions. It is the largest

commercial bank operating in Pakistan. Its balance sheet size surpasses that of any of the

other banks functioning locally. It has redefined its role and has moved from a public

sector organization into a modern commercial bank.

The Bank's services are available to individuals, corporate entities and

government. While it continues to act as trustee of public funds and as the agent to the

State Bank of Pakistan (in places where SBP does not have a presence) it has diversified

its business portfolio and is today a major lead player in the debt equity market, corporate

investment banking, retail and consumer banking, agricultural financing, treasury

services and is showing growing interest in promoting and developing the country's small

and medium enterprises and at the same time fulfilling its social responsibilities, as a

corporate citizen.

National Bank of Pakistan is a Governmental Organization. As an agent of State

Bank of Pakistan, it implements the policies of SBP. Its basic objective was to extend

credit to the agriculture sector.

The Bank has expanded its range of products and services to include Shariah

Compliant Islamic Banking products.

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It deals all Government Revenue, collection and payments of salaries, pensions

and Govt. Treasury. It is a complete commercial, retail and corporate bank as well.

The National Bank of Pakistan as a commercial bank generally makes advances

for a period not exceeding one year, except in case of small and medium industries for

which advance may be made for a maximum period of five years. The bank makes not

only against the security of stocks and goods hypothecated or pledged to the bank, but

also against documents of goods and propriety, shares are various joint stock companies,

Government securities, Insurance policies deposits receipts, etc. The margin and rate of

interest are determined by several factors including the type of security, the size of loan

and the integrity of the party.

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Business Volume of the organization

The business volume of National Bank of Pakistan is growing day by day. The

key features of financial statements of the National Bank of Pakistan for the last three

years and half year ending June 2009 have been discussed in the table given below

Half-year ending

June 2009 (Rs. In

Million)

Year ending

December 2008

(Rs. In Million)

Year ending

December 2007

(Rs. In Million

Year ending

December 2006

(Rs. In Million)

Share Capital 10,763.7 8,969.7 8,154.3 7,090.7

Reserves 20,887.12 19,941 15,772 13,879.2

Deposit 692,721.06 624,939 591,907.4 501,872

Investment-Net 208,622.87 170,822.49 211,146 139,946.99

Interest-Earned 37,268.4 60,942.79 50,569.48 43,788.6

Advances Net 452,131.3 412,986.86 340,318.93 316,110.4

Assets- Total 901,089.8 817,758 762,193.59 635,132.7

Pre Tax Profit 9,689.8 23,000.99 28,060.5 26,310.57

After tax Profit 6,281.2 15,458.59 19,033.77 17,022.34

Lending to

financial

institutions

12,234.1 17,128 21,464.6 23,012.7

Balances with

other banks

(Receivables)

28,102.4 38,344.6 37,472.8 40,641.67

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Product Lines

National Bank of Pakistan serving following product lines:

National Bank of Pakistan Saiban Scheme

Product items under Saiban scheme:

1. Home Purchase:

Financing Amount Upto 35 Million

Financing Period 3 to 20 Years

Debt to Equity 85:15 (Maximum)

2. Home Construction




3. Home Renovation




4. Purchase of Land + Construction




5. Balance Transfer Facility (BTF)

If you have a Home Finance Facility outstanding with another bank you can have

it transferred to NBP through a hassle-free process.

NBP Advance Salary Scheme

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

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

and remarkable loan disbursement of over 138 billion.

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

free acquisition without any prior formalities along with easy availability in a short turn is

attributed as the most distinguishing feature of the product. The product is offered

countrywide.

National Bank Cash Gold Scheme

With NBP's Cash n Gold, you can meet your need for ready cash against your idle gold jewelry.

Rate of mark-up 13% p.a.

Facility of Rs. 10,000 against each 10 grams of net contents of gold

No maximum limits of cash

Repayment after one year

Roll over facility

Only gold ornaments acceptable

Weight and quality of gold to be determined by NBP's appointed schroffs

No penalty for early repayment

National Bank Kisan Dost Scheme

Competitive mark-up rate around 14.5% per annum

Quick & easy processing

Delivery at the farmer’s doorstep

Technical guidance to farmers

Wide range of financing schemes for farmers

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Finance facility up to Rs. 500,000/- for landless farmers against personal

guarantee

Financing available against pass book, residential/commercial property, gold

ornaments and paper security

Loan facility on revolving basis for three years (renewable on yearly basis without

documentation and approval)

National Bank Premium Aamdani Certificate Scheme

Monthly Income Scheme introduced for investors as well as for general public.

Amount of investment required from Rs. 20,000/- to Rs. 5,000,000

Investment period is 5 years

Free Demand Draft, Pay Order and NBP Online Aasan Banking

Free Cheque Book / NBP Cash Card (ATM + Debit)

Profit paid every month as follows:

Period Profit Rates

1st year 7.50%

2nd year 8.50%

3rd year 9.50%

4th year 10.50%

5th year 11%

Financing facility available upto 90% of the deposit value

Premature encashment will attract penalties

Zakat and withholding tax will be deducted as per rules

NBP Karobar Scheme

Mera Apna Karobar

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Minimum down payment, 10% of asset price (5% for PCO & Telecaster)

Tenure 1 to 5 years (for PCO 2 years)

Grace period 3 months

Maximum loan amount Rs. 200,000/-

Age 18-45 years

Mark-up (variable) 1 year KIBOR + 2.00% p.a.

The customer will pay markup @ 6% p.a., rest will be borne by GOP

Life & disability insurance paid by GOP (subject to the availability of subsidy

from GOP)

International Baking

International strategy of National Bank of Pakistan is focused on capturing trade

business and increasing bi-lateral investment flows. NBP has 22 overseas branches in all

the major financial capitals of the world and is planning to open more branches in near

future.

NBP offers the lowest rates on exports and other international banking products.

The Bank also provides access to different local commercial banks in international

banking.

NBP has a Financial Institution Wing to effectively manage NBP’s exposure to

foreign and domestic correspondence.

DEMAND DRAFTS:

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

now purchase NBP’s 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.

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MAIL TRANSFERS:

Move your money safely and quickly using NBP Mail Transfer service. And we

also offer the most competitive rates in the market.

PAY ORDER:

NBP provides another reason to transfer your money using our facilities. Our pay

orders are a secure and easy way to move your money from one place to another. And, as

usual, our charges for this service are extremely competitive.

TRAVELER'S CHEQUES:

Negotiability: Pak Rupees Traveler’s Cheques are a negotiable instrument.

Validity: There is no restriction on the period of validity.

Availability: At 700 branches of NBP all over the country.

Encashment: At all 400 branches of NBP.

Limitation: No limit on purchase.

Safety: NBP Traveler’s Cheques are the safest way to carry our money.

LETTER OF CREDIT:

NBP is committed to offering its business customers the widest range of options

in the area of money transfer. With competitive rates, security, and ease of transaction,

NBP Letters of Credit are the best way to do your business transactions.

COMMERCIAL FINANCE:

The Bank’s dedicated team of professionals truly understands the needs of

professionals, agriculturists, large and small business and other segments of the economy.

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FOREIGN REMITTANCES:

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

Pakistan has taken a number of measures to increase home remittances through the

banking system and to meet the SBP directives/instructions for timely and prompt

delivery of remittances to the beneficiaries

The existing system of home remittances has been revised/significantly improved

and well-trained field functionaries are posted to provide efficient and reliable home

remittance services to nonresident Pakistanis at 22 overseas branches of the Bank.

NBP is providing home remittance services without any charges. Strict

monitoring of the system is done to ensure the highest possible security.

Special courier services are hired for expeditious delivery of home remittances to

the beneficiaries.

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-PKKA. 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.

TRADE FINANCES OTHER BUSINESS LOANS:

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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:-

1. Providing reliable infrastructure for agricultural customers

2. 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.

3. Agricultural Credit (Medium Term):

Production and development:

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.

Operating loans

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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.

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, Medium term loans and Capital Expenditure Financing: NBP provides

financing for its clients’ capital expenditure and other long-term investment needs. By

sharing the risk associated with such long-term investments,

NBP expedites clients’ attempt to upgrade and expand their operation thereby

making possible the fulfillment of our clients’ vision. This type of long term financing

proves the bank’s belief in its client's capabilities, and its commitment to the country.

Loan Structuring and Syndication:National Bank’s 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.

17

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 Bank’s Cash Management Services (in process of being set up), the

customer’s sales collection will be channeled through vast network of NBP branched

spread across the country. This will enable the customer to manage their company’s 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, you’ll be provided everything, which takes to manage your

cash flow more accurately.

SHORT TERM INVESTMENTS:NBP now offers excellent rates of profit on all it’s short term investment

accounts. Whether you are looking to invest for 3 months or 1 year, NBP’s rates of profit

are extremely attractive, along with the security and service only NBP can provide.

EQUITY INVESTMENTS:NBP has accelerated its activities in the stock market to improve its economic

base and restore investor confidence. The bank is now regarded as the most active and

dominant player in the development of the stock market. NBP is involved in the

following:

Investment into the capital market

Introduction of capital market accounts (under process)

NBP’s involvement in capital markets is expected to increase its earnings, which

would result in better returns offered to account holders.

Competitors

18

Competitors of National Bank of Pakistan are all scheduled banks, which are

listed/trading under Banking Companies Ordinance 1962.

Competitive Banks are as under:

Habib Bank Limited

United Bank Limited

Muslim Commercial Bank Limited

Allied Bank Limited

Askari Commercial Bank Limited

Soneri Bank Limited

Bank Al-Habib Limited

Bank Al-Falah Limited.

Standard Chartered Bank Limited & The Bank of Punjab

Organizational structure

19

Organizational Hierarchy Chart

Syed Ali Raza is currently the President and Chairman of National Bank of Pakistan

20

PRESIDENT

DIRECTORS / Senior Executive Vice President

Assistant Voice President

Voice President

Zonal Chiefs / Senior Vice President

Regional Chiefs / Executive Vice President

Provisional Chiefs / Executive Vice President

Officer Grade I

Office Grade II

Officer Grade III

Clerical / Non-Clerical Staff

Board of Directors consists of followings

Muhammad ayub Khan Tarin

Sikandar Hayat Jamali

Mian Kausar Hameed

Ibrar A. Mumtaz

Tariq Kirmani

Muhammad Arshad Chaudhry

Number of employees

21

Year 2003 2004 2005 2006 2007 2008

No. of employees 13272 13745 13824 14019 14079 15204

Main Offices

Registered & Head Office

NBP Building

I.I. Chundrigar Road,

Karachi, Pakistan

Registrars & Share Registration Office

THK Associates (Pvt.) Limited

Shares Department, Ground Floor,

State Life Building # 3

Dr. Ziauddin Ahmed Road,

Karachi, Pakistan

Website

www.nbp.com.pk

Audit Committee

Chairman Ibrar A. Mumtaz

Auditor Tariq Kirmani

Auditor Mian Kausar Hameed

22

Auditor Muhammad Arshad Chaudhry

Auditors

Chartered Accountants Ford Rhodes Sidat Hyder & Co.

Chartered Accountants M. Yousaf Adil Saleem & Co.

Legal Advisors

Advocates & Legal Consultants Mandviwala & Zafar

Branch Network

National Level

Year 2003 2004 2005 2006 2007 2008

No. of branches 1199 1226 1242 1250 1261 1276

International Level

22 Branches

Introduction of all the departments

There are many different departments in National Bank of Pakistan:

23

Deposit DepartmentThere are two major types of accounts i.e Saving Account and Current Account.

Customers keep their savings in PLS Saving Accounts and businessmen save their money

in bank Current Accounts. NBP gives profit on saving accounts and special saving

accounts i.e. Premium Saving Accounts and NBP Premium Amadni Certificates for one

to five year’s period.

Advances DepartmentNBP provides loans to different types of borrowers for different purposes. These

loans are given for various sectors for different periods. Small Finance, Cash Finance,

Agriculture Finance, Cash & Gold Loan, Personal Loans, Demand Finance, Running

Finance, Corporate Finance, Export Import Financing, House Building Finance (Saiban)

and NBP Karobar Scheme etc.

Government Receipts and Payments DepartmentNational Bank of Pakistan is functioning as an agent of SBP for many types of

government payments and receipts. Payments like Pension, Salaries, Grants, Zakat,

Benevolent Fund, Treasury Refund and Taxes Refund proceed through the National Bank

of Pakistan. Almost all kind of government receipts i.e. Traffic Challans, Revenue

receipts; Taxes, Abyana, Agriculture Tax, Public Service Commission Fees, EOBI Funds

and Utility Bills are deposited.

FBR Collection DepartmentNBP is playing great role for collection of FBR (CBR) taxes/revenue. A separate

counter is established at branch level to facilitate the taxpayers

Remittances DepartmentAnother important department in the bank is remittances. People send and receive

their money to the other persons and organizations through various way i.e. Bank draft,

Telegraphic Transfer, Mail Transfer, Coupons, Govt. Draft and Western Union Money

Transfer etc. The money is transferred to both inland and abroad.

24

Bills DepartmentCustomers collect their money/amount through bills. They present their cheques,

drafts and other bills for collection within the city and out of the city through mail. Now a

days Online Banking is becoming more popular for this purpose but the branch where I

got training is still not have this facility.

Cash DepartmentNational bank deals Government treasury on behalf of State Bank of Pakistan.

There are Chest, Sub-chest and Non-chest branches in the bank. SBP supplies currency

notes to the bank and monitors its cash flow. Cash In charge and other cashiers deal with

cash receipt and payment in the bank.

Compliance DepartmentRole of branch compliance department is to reconcile the prescribed frequencies,

investigate long pending reconciliation item, and ensure correct treatment every half-year

and clearing system service branch-in major cities. Internal control is the integration of

the activities, plans, attitudes, policies and efforts of the people of the bank working

together to provide reasonable assurance that the organization will achieve its objectives

and mission.

Agriculture DepartmentAgriculture Credit Department is playing a vital role in development the economy

of Pakistan. Commercial banks being the greatest mobilizer of savings in the country

with their large network of branches play important role in financing agriculture. The

National Bank of Pakistan has also been trying to ensure that loans are disbursed to

genuine agriculturists within a reasonable time and that the bank turns down no viable

loan request.

Human Resources Management DepatrmentHuman Resources Management Department works for the betterment of the

employees. Enhances skills, training management, service benefits, wages, medical

facilities, staff loans are basic functions of this department.

25

Information Technology DepartmentYear 2008 has been a historic year for NBP’s I.T. infrastructure point as the bank

started its implementation program of ‘Core Banking Application (CBA) Software’. This

is state of the art software providing a complete banking solution covering all areas. This

will be a transformation which will greatly improve operational efficiency and controls,

customer service and facilitate launching of new banking products. The implementation

process has been started and is planned to be completed within next 18-20 months in 250

branches covering about 80%

Online Banking DepartmentThis department is functioning only in online branches in the bank. This is a fast

track banking system in modern banking. NBP is also trying to enhance this facility for

their customers.

.

Islamic Banking DepartmentNBP’s Islamic banking operations have gathered momentum and have registered

impressive growth in Deposits (75%), Advances (237%) and total Assets (84%). In 2008

we further opened two more branches in Faisalabad and Rawalpindi. With the increase in

the popularity of Islamic banking both in Pakistan and overseas, NBP’s Islamic banking

operations have good potential for growth in future.

Comments on Organizational Structure

The National Bank of Pakistan is one of the oldest banks of Pakistan. The bank

has seen a lot of changed during last 60 years. However the organizational structure is not

so professionally developed and implemented. Organizational structure has not been

changed so much since many years. Although the departmentalization exists but in

branches there is no rigid concept of departmentalization present. Sometimes the chain of

command is surpassed and no care is taken on authority and responsibility fixation.

26

However, overall situation is not so disappointing. System needs improvements

but currently serving its purposes in a very suitable way.

You were required to comment or give your opinion on the structure of the organization as a whole that whether the adopted structure and practices fulfill the requirements of the organization or not like span of control, centralization/decentralization, etc.

27

Plan of your internship program

Introduction of Branch

Name of Branch National Bank of Pakistan,

Model Town Branch Model Town Lahore

Branch Code 0372

Region Lahore

Address Bank Square C-Block Model Town

Lahore.

Phone Nos.042-99230237

042-99230935

042-99230895

Fax No.042-99230928

Name of Manager Qadir Hussain

Name of My Operation Manager (Supervisor) Numan Dilawar

Number of employees24

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The branch has been performing on-line business since 2003. It is using EBS

(Electronic Banking System), banking software for its banking function. This bank has

following four departments in it.

1. Foreign Exchange Department

2. General Banking Department

3. Compliance Department

4. Advanced Department

First three departments work under the supervision of Operations Manager and

Advances department works under direct supervision of branch Manager.

There were total 3 staff members working in advance department, 2 in Foreign

Exchange Department, 1 in compliance Department and 16 in the General Banking

Department.

Starting and ending dates of internship

The starting Date of my internship program was 01.12.2009 and my internship

continued for almost 6 weeks and the ending Date of my internship program was

16.01.2010

Departments of Training

During the internship period of 6 weeks that I spent at the National Bank of

Pakistan Model Town Lahore I got practical exposure to the following departments.

1. The General Banking Department Where I worked for 4 Weeks i.e. from 01-12-2009 to 31-12-2009

2. Advances DepartmentWhere I worked for 2 Weeks i.e from 01-01-2010 to 16-12-2009

29

Training program

Introduction of the departments I worked in

I worked in Two Departments of National Bank of Pakistan.

1. General Banking

General Banking is the core of all departments; Deposits from customers are

accepted and cheques are cashed for customers. This department works under direct

supervision of Operation Manager. Two basic kinds of accounts are dealt here i.e.

Current Account and Saving Account.

Current Accounts are payable to the customer whenever they are demanded.

When a banker accepts a demand deposit, he incurs the obligation of paying all cheques

etc. drawn against him to the extent of the balance in the account. Because of their nature,

these deposits are treated as current liabilities by the banks. Bankers in Pakistan do not

allow any profit on these deposits, and customers are required to maintain a minimum

balance, failing which incidental charges are deducted from such accounts. This is

because the depositors may withdraw Current Account at any time, and as such the bank

is not entirely free to employ such deposits.

Savings Deposits account can be opened with very small amount of money, and

the depositor is issued a cheque book for withdrawals. Profit is paid at a flexible rate

calculated on six-month basis under the Interest-Free Banking System. There is no

restriction on the withdrawals from the deposit accounts but the amount of money

withdrawn is deleted from the amount to be taken for calculation of products for

assessment of profit to be paid to the account holder. It discourages unnecessary

withdrawals from the deposits.

30

The Account opening is the first step in making a customer with bank. In account

opening the formalities are fulfilled in very easy steps and it takes no time for a person to

have an account at the Bank.

Another important function here is remittances and Bills for Collection. People

send their money to the other persons and organizations through various way i.e. Bank

draft, Telegraphic Transfer, Mail Transfer, Coupons, Govt. Draft and Western Union

Money Transfer etc. It works both inward and outward.

Customers collect their money/amount through bills. They present their cheques,

drafts and other bills for collection within the city and out of the city through mail. NIFT

is the organization responsible for collecting and delivering these instruments for

clearance form State Bank of Pakistan.

National Bank of Pakistan is functioning as an agent of SBP. Many government

Payments like Pension, Salaries, Grants, Zakat, Benevolent Fund, Treasury Refund and

Taxes Refunds are carried out by the bank. Pension payment is only done through

National Bank of Pakistan. Pension payment and salary payments are the most frequent

activities in this department during the first two weeks of the month.

Similarly most of the government receipts i.e. Taxes, Revenues receipts, Taxes,

Traffic Challans, Abyana, Agriculture Tax, Public service commission Fees and Utility

Bills are deposited. The NBP is doing a great job in revenue collection of both

Government of Pakistan and Government of Punjab. Utility Bills collection is one of the

heaviest workload around the due dates of these bills

National bank deals Government treasury on behalf of State Bank of Pakistan.

There are Chest, Sub-chest and Non-chest branches in the bank. SBP supplies currency

notes to the bank and monitors its cash flow. Cash In charge and other cashiers deal with

cash receipt and payment in the bank.

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2. Advances (Credit department)

To give loan to Businessmen and individuals is the medium to convert customer

deposits into own money. As bank receives deposits at lower rates and lend them at

higher rate. Basically, this department deals with the activities of various types of credits,

nature of advance creation of charge, monitoring of classified advances etc. Advances

consists of retail and commercial advances.

NBP give loans to the borrowers for different purposes. These loans are given for

various sectors for different periods. Small Finance, Cash Finance, Agriculture Finance,

Cash & Gold Loan, Personal Loans, Demand Finance, Running Finance, Corporate

Finance, Export Import Financing, House Building Finance (Saiban) and NBP Karobar

Scheme etc.

Detailed description of tasks Assigned to me

1. Account Opening:

Account opening is very vital now a day in banking system due to KYC (Know

your customer), AML (Anti Money Laundering) and ATF (Anti terrorist financing)

I got training in this department for one week and after understanding the basic

concepts I practically opened account of some walk-in-customers.

Detail description of how you opened the account was required.

The opening of an account is the establishment of banker customer relationship.

Before opening a new account, the banker should determine the prospective customer’s

integrity, credibility, occupation and the nature of business by the introductory references

given at the time of account opening. Preliminary investigation is necessary because of

the following reasons.

To avoid frauds

To safe guard against unintended over draft

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To avoid Negligence

To make Inquiries about clients

There are certain formalities, which are to be observed for opening an account

with a bank. The accounting opening application should be received on the prescribed

account opening form. Copy of CNIC along with the original CNIC is collected and

checked at the time of account opening. The Necessary details in the form should be

filled in and all the detail should be in legible and clear writing. Specimen signatures of

applicant must be carefully tested and collected. The minimum initial deposit is ensured

before handing over the Cheque book to the customer.

a. Qualification of CustomerThe relation of the banker and the customer is purely a contractual person;

however, he must have the following basic qualifications.

He must be of the age of majority.

He must be of sound mind.

Law must not disqualify him.

The agreement should be made for lawful object, which create legal relationship

Not expressly declared void.

b. Types of AccountsFollowing are the main types of accounts according to nature of customer

Individual Account

Joint Account

Accounts of Special Types

Partnership account

Joint stock company account

Accounts of clubs, societies and associations

Agents account

Trust account

33

Executors and administrators accounts

Pak rupee non-resident accounts

Foreign currency accounts

c. Issuing of cheque book:

After the application processing and the initial minimum deposit were made, I

told customer to approach the account opening officer, who after checking the form and

deposit slip issued cheque book to account holders. I practically issued some cheque

books also under the supervision of my officer.

Requirements for issuing cheque book

a) The account holder must sign the requisition slip

b) Entry should be made in the cheque book issuing book

c) three rupees per cheque should be recovered from a/c holder if not then debit his/her

account.

d) He must have submitted a copy of CNIC and have shown his original CNIC for

verification.

2. Accepting depositsThe money, which comes in the bank, its record should be kept. Cash department

performs this function. The deposits of all customers of the bank are controlled by means

of ledger accounts. Every customer has its own ledger account and has separate ledger

cards. I worked and observed the procedure for accepting deposits. I practically accepted

the deposits of some customers also. The process is as follows

Deposits are accepted along with the deposit slips. Different colored deposit slips

are used for general deposit and clearing. Deposit slips are filled and are handed over to

cashier along with cash. I after checking the particulars of the deposit slip verified that

the amount is in accordance with the written amount. Then I made a credit entry in the

34

ledger account of customer. I stamped the deposit slip, Keeps one portion with me and

other was given to the customer for future ready reference.

The deposit slip for clearance is used for the purpose of the cheques that not going

to paid on counter but the amount is to be transferred to the ledger account of the

customer. The cheques pertain to other banks or other branches of NBP. Or it might even

be from another customer of the same bank (this kind of cheque is not sent for clearance

at SBP). All other cheques are sent to State Bank of Pakistan for clearance at their

clearance house. Although the amount is credited to the customer account as soon as the

cheque is presented but this amount contains a control in system that restrict withdrawal

of this amount. When cheque is cleared from SBP and advice of SBP is received in the

branch about payment, the control is uplifted and the amount can be withdrawn now. This

process usually takes place about two to three working days.

3. Making payment.

a. Current accountThese are payable to the customer whenever they are demanded. When a banker

accepts a demand deposit, he incurs the obligation of paying all cheques etc. drawn

against him to the extent of the balance in the account. Because of their nature, these

deposits are treated as current liabilities by the banks. Bankers in Pakistan do not allow

any profit on these deposits, and customers are required to maintain a minimum balance,

failing which incidental charges are deducted from such accounts. This is because the

depositors may withdraw Current Account at any time, and as such the bank is not

entirely free to employ such deposits.

b. Saving accountSavings Deposits account can be opened with very small amount of money, and

the depositor is issued a cheque book for withdrawals. Profit is paid at a flexible rate

calculated on six-month basis under the Interest-Free Banking System. There is no

restriction on the withdrawals from the deposit accounts but the amount of money

withdrawn is deleted from the amount to be taken for calculation of products for

35

assessment of profit to be paid to the account holder. It discourages unnecessary

withdrawals from the deposits.

c. Cheque Payments

The customer gives check at the counter and check is carefully examined. I was

told by the junior officer there that the first thing to observe name of the bank and the

branch name of the bank. Only cheques which are of National Bank of Pakistan Model

Town branch are considered for payment at counter. If cheque is drawn on another bank,

it can be deposited along with deposit slip only if customer has an account with NBP

Model Town Branch. This cheque is sent to SBP through NIFT for clearance. After

verifying the bank and branch name Date is observed. The cheque should not be a post

dated cheque neither it should be more than six months old. Then I was told to check the

amount written in words and in figures. Both should be in accordance with each other.

Any cutting or overwriting must be singed in full by the customer. Then through

computer information system the account number is checked and balance is observed.

Then I was told to check the Payee’s Account Stamp (if stamped) bearer and non-bearer

crossings etc. after that balance of amount is checked if amount is present then check will

be sent to CD in charge who is on the duty of verifying the checks’ signatures with given

cards’ signatures and then pass it to the cash section where I was told to watch the

verification sign of in charge and then I was to pay the amount written in the Cheques.

Then I have to write the denomination of currency notes paid along with their respective

quantity at the back of cheque. In this way Cheques clears and payment is made to

customer.

d. Cheque cancellation:

The cheque can be cancelled for any of the following reasons;

Post dated cheque

Stale cheque (validity of cheque is for six months from the date written on

cheque)

36

Warn out cheque

Wrong signatures etc

4. Government receipt and Payment

Almost all types of Government receipts i.e. Taxes, Traffic Challans, Revenue

receipts, Abyana, Agriculture Tax, public service commission fees, EOBI Funds and

Utility Bills are deposited. The amounts received along with the name of depositor are

written on a scroll. In utility bills the customer number is written. Every scroll is carbon

copied. I worked there for about a week. Different scrolls are maintained for different

categories of receipts. Some of these categories are Central government receipts.

Provincial government receipts, Traffic challans, Property tax, electricity bills, gas bills,

phone bills etc. Every scroll page is totaled at the end and this total is carried forward to

the next page. Then at the end of the day all the scrolls are totaled and tallied with the

cash. The challans and slips along with the original scroll are sent to National Bank of

Pakistan Main Brach Lahore.

National Bank of Pakistan is earning 0.015% of the amount received as

commission from the government so it is not only helping in revenue earning of

government but also earning a handsome amount of commission on amounts deposited.

Similarly many kinds of government payments are also made through National

Bank of Pakistan. Most significant payment is pension payment. Other payments includes

salary payments to government servants, zakat payment, grants, Treasury pay orders in

favor of bank’s account holder, treasury refunds and tax refunds etc.

Pension payment is made at appearance of original pensioner. In order to get

payment the pensioner has to fill pension payment form. His/her Original pension book

and original CNIC should be presented before the officer who will check the pension

record registered. He will verify that the pensioner is original and will tally his/her signs

with record after verification the officer will sign on the filled form that will act as

cheque and cash payment is made to the pensioner. I assisted in verification process of

pensioner for a few days.

37

Advances Department

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

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

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

Head Office directly controls all the advances. As we known bank is a profit seeking

institution. It attracts surplus balances from the customers at low rate of interest and

makes advances at a higher rate of interest to the individuals and business firms. Credit

extensions are the most important activity of all financial institutions, because it is the

main source of earning. However, at the same time, it is a very risky task and the risk

cannot be completely eliminated but could be minimized largely with certain techniques.

I worked there as assistant for two weeks. It is a very vast field and a lot is there

to learn. As it is a very sensitive issue so I was mostly assisting others in the work. Most

of the work done was under strict observation of my superiors. I was assigned different

tasks like checking form and documents for their accuracy and completion, verifying the

CNIC of the borrower, maintaining records and corresponding with the borrowers. My

observations at this department are given in the following paragraphs.

The advances department at NBP Model town branch consists of two main sub-

departments i.e. Retail and Commercial. Any individual or company, who wants loan

from NBP, first of all has to undergo the filling of a prescribed form, which provides the

following information to the banker.

Name and address of the borrower

Existing financial position of a borrower at a particular branch

Accounts details of other banks (if any)

Security against loan

Exiting financial position of the company (Balance Sheet & Income Statement)

Signing a promissory note is also a requirement of lending, through this note borrower

promise that he will be responsible to pay the certain amount of money with interest.

38

Principles of Advances

There are five principles, which must be duly observed while advancing money to the

borrowers.

a. Safety

b. Character

c. Capacity

d. Capital

e. Liquidity

f. Dispersal

g. Remuneration

h. Suitability

a. Safety

Banker’s funds comprise mainly of money borrowed from numerous customers

on various accounts such as Current Account, Savings Bank Account, Call Deposit

Account, Special Notice Account and Fixed Deposit Account. It indicates that whatever

money the banker holds is that of his customers who have entrusted the banker with it

only because they have full confidence in the expert handling of money by their banker.

Therefore, the banker must be very careful and ensure that his depositor’s money is

advanced to safe hands where the risk of loss does not exist. The elements of character,

capacity and capital can help a banker in arriving at a conclusion regarding the safety of

advances allowed by him.

b. Character

It is the most important factor in determining the safety of advance, for there is no

substitute for character. A borrower’s character can indicate his intention to repay the

advance since his honesty and integrity is of primary importance. If the past record of the

borrower shows that his integrity has been questionable, the banker should avoid him,

39

especially when the securities offered by him are inadequate in covering the full amount

of advance.

It is obligation on the banker to ensure that his borrower is a person of character

and has capacity enough to repay the money borrowed including the interest thereon.

c. Capacity

This is the management ability factor, which tells how successful a business has

been in the past and what the future possibilities are. A businessman may not have vast

financial resources, but with sound management abilities, including the insight into a

specific business, he may make his business very profitable. On the other hand if a person

has no insight into the particular business for which he wants to borrow funds from the

banker, there are more chances of loss to the banker.

d. Capital

This is the monetary base because the money invested by the proprietors

represents their faith in the business and its future. The role of commercial banks is to

provide short-term capital for commerce and industry, yet some borrowers would insist

that their bankers provide most of the capital required. This makes the banker a partner.

As such the banker must consider whether the amount requested for is reasonable to the

borrowers own resources or investment.

e. Liquidity

Liquidity means the possibilities of recovering the advances in emergency,

because all the money borrowed by the customer is repayable in lump sum on demand.

Generally the borrowers repay their loans steadily, and the funds thus released can be

used to allow fresh loans to other borrowers. Nevertheless, the banker must ensure that

the money he is lending is not blocked for an undue long time, and that the borrowers are

in such a financial position as to pay back the entire amount outstanding against them on

a short notice. In such a situation, it is very important for a banker to study his borrower’s

assets to liquidity, because he would prefer to lend only for a short period in order to

40

meet the shortfalls in the wording capital. If the borrower asks for an advance for the

purchase of fixed assets the banker should refuse because it shall not be possible for him

to repay when the banker wants his customer to repay the amount. Hence, the baker must

adhere to the consideration of the principles of liquidity very careful.

f. Dispersal

The dispersal of the amount of advance should be broadly based so that large

number of borrowing customer may benefit from the banker’s funds. The banker must

ensure that his funds are not invested in specific sectors like textile industry, heavy

engineering or agriculture. He must see that from his available funds he advances them to

a wide range of sector like commerce, industry, farming, agriculture, small business,

housing projects and various other financial concerns in order of priorities.

Dispersal of advances is very necessary from the point of security as well,

because it reduces the risk of recovery when something goes wrong in one particular

sector or in one field.

g. Remuneration

A major portion of the banker’s earning come form the interest charged on the

money borrowed by the customers. The banker needs sufficient earnings to meet the

following:

Interest payable to the money deposited with him.

Salaries and fringe benefits payable to the staff members

Overhead expense and depreciation and maintenance of the fixed assets of the

bank

An adequate sum to meet possible losses

Provisions for a reserve fund to meet unforeseen contingencies

Payment of dividends to the shareholders

h. Suitability

41

The word “suitability’ is not to be taken in its usual literary sense but in the

broader sense of purport. It means that advance should be allowed not only to the

carefully selected and suitable borrowers but also in keeping with the overall national

development plans chalked out by the authorities concerned. Before accommodating a

borrower the banker should ensure that the lending is for a purpose in conformity with

the current national credit policy laid down by the central bank of the country.

Forms of Loans

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

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

different people in different ways as the case demand.

a) Cash Finance

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

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

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

to a certain limit, either at once or as and when required. The borrower prefers this form

of lending due to the facility of paying markup/services charges only on the amount he

actually utilizes.

If the borrower does not utilize the full limit, the banker has to lose return on the

un-utilized amount. In order to offset this loss, the banker may provide for a suitable

clause in the cash finance agreement, according to which the borrower has to pay

markup/service charges on at least on self or one quarter of the amount of cash finance

limit allowed to him even when he does not utilize that amount.

b) Overdraft/Running Finance

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

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

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

accommodation is generally allowed against collateral securities. When it is against

42

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

cannot offer any collateral security except his personal security, the accommodation is

called a “Clean Overdraft”. The borrowing customer is in an advantageous position in an

overdraft, because he has to pay service charges only on the balance outstanding against

him. The main difference between a cash finance and overdraft lies in the fact that cash

finance is a bank finance used for long term by commercial and industrial concern on

regular basis, while an overdraft is a temporary accommodation occasionally resorted to.

c) Demand Financing/Loans

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

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

bankers allow loans to their customers against collateral securities they are called

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

The amount of loan is placed at the borrower’s disposal in lump sum for the

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

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

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

satisfactory security

43

Structure of Finance Department

Departmental Hierarchy

Numbers of Employee

Total No. of Employees is 03 in Finance Department. There is one Retail Officer at

branch and there are two Credit Officers.

Finance and Accounting Operations

Finance and Accounting operations are operated with the help of subordinate

staff. Bank is financing in multiple sectors.

Functions of the Finance DepartmentFinance Department performs following functions.

Borrowing from State Bank of Pakistan.

Lending to Commercial Banks

Lending to Investors.

Lending to General Public for multi-business.

44

Branch Manager

Retail Officer Credit Officer

Functions of Finance Department

Accounting system of the organization

Accounting system of the bank through specialized banking software was well

equipped with Information Technology. The staff was sufficiently trained to perform

functions on their own using the computers. The staff was very happy to have this system

as they told that it has made the things lot easier than the before manual accounting

system. Thus through this integrated software the finance department was able to carry

out their operations in a very smooth way.

Cash or accrual system of accounting?

Single entry or double entry?

Finance system of the organization

Financial system of the bank where I done my internship is mixed and

complicated because being government bank, bank deals with all kind of lending and

investing activities and also hold down the cash position of others financial institutions

i.e. banks like MCB, UBL, ABL etc.

Use of electronic data in decision making

The branch where I have got training was using very good Information

Technology environment. With all data integration the management was in a position to

sit and generate reports of various kinds. The decisions were made based on these reports

and the electronic data was analytically used to see the progress of employees and also

the overall branch.

Which software was used by this organization?

45

Use of IT along with proper training can help the management a great deal in their

decision making process. In this branch although the management was not trained enough

to use the computers and the software but they were getting benefits from electronic data

and were using them in decision making process.

Sources of funds

Fund generation of the branch is depositing, receiving interest on lending money

to various sectors, advances from other financial institutions.

What about internal and external sources?

Allocation of funds

Bank allocates funds according to the instructions of the senior management or

main branch.

In which proportion?

46

Critical Analysis

a. Financial Analysis

i. Ratio Analysis

a. Liquidity Ratios

Current Ratio

=Current assets / current liabilities *100

2006 2007 2008

142279638/

524181985 *100

153810681/

609784513 *100161976396/

675617003 *100

27.14% 25.22% 23.97 %

Where Current assets= Cash and balance with treasury banks + Balances with other banks + Lending to financial institutionsAnd Current Liabilities = Bills payable + Borrowing + Deposits and other accounts

Acid Test Ratio

=(current assets – inventories-prepaid expenses)/ current liabilities

2006 2007 2008

(142279638 –

23012732)/

(153810681 –

21464600) /

(1611976396 –

17128032)/

47

asmarafique, 02/17/10,

These contain some portion of long term as well as short term funds.

*100

524181985 *100 609784513 *100 675617003 *100

22.7 % 21.7 % 21.4%

Where inventories in this case means the lending to financial institutions

Sales to Working Capital

=Sales/ Working Capital

2006 2007 2008

(43788628/

38190234700) *

100

(50569481/

4559783200) * 100

(60942798/

9440939300) *100

0.11% 1.10 % 0.64 %

Where working capital is calculated in the table given below

Working Capital

=Current Assets – current liabilities

2006 2007 2008

142279638 -

524181985

153810681 -

609784513

161976396 -

675617003

38190234700 4559783200 9440939300

b. Leverage Ratios

Debt Ratio

= (Total Debt/ total assets) *100

2006 2007 2008

(553178593/

635132711) * 100

(645855939/

762193593)* 100

(715299108/

817758326) * 100

87.09% 84.73% 87.47%

48

Debt/Equity Ratio

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

2006 2007 2008

553178593/

79090712

(645855939/

8154319) * 100

(715299108/

8969751) * 100

78.01% 79.20 % 79.74%

Debt to Tangible Net Worth Ratio

= (Total debt/ total net assets) *100

2006 2007 2008

(553178593/

81954118) * 100

(645855939/

116337654) *100

(715299108/

102459218) * 100

674.98% 555.15% 698.13%

Current Worth/ Net Worth Ratio

= (Current assets/ net assets) *100

2006 2007 2008

(142279638/

81954118) *100

(153810681/

116337654) * 100

(161976369/

102459218) *100

173.6% 132.21% 158.08 %

Total Capitalization RatioWorking of long term debt?

= Long term debt/ (long term debt + shareholder equity) * 100

2006 2007 2008

(492853073/

5458977220) *100

(608382912/

677653543) * 100

(655781930/

737148932) *100

49

9.02% 89.77% 88.96%

Fixed Asset Ratio/ Equity Ratioqw

=(Fixed Asset/ equity) * 100

2006 2007 2008

(492853073/

53044649) *100

(608382912/

69270631) * 100

(655781930/

81367002) * 100

929.12% 878.26% 805.95%

Long term assets versus Long term Debt

= (long term assets/ long term debt) * 100

2006 2007 2008

(492853073/

28996608) * 100

(608382912/

36071426) * 100

(655781930/

39682105) * 100

16.99% 16.86% 16.52%

c. Profitability Ratios

Net Profit Margin

= (Net profit after taxation/ interest earned) * 100

2006

Profit available for

appropriation

should be taken

2007 2008

(170223346 /

43788628) *100

(19033773/

50569481) *100

(15458590/

60942798) * 100

88.88% 37.63% 25.36%

Return on Assets

= (Net Profit or net income/ total assets) * 100

2006 2007 2008

(17022346/ (19033773/ (15458590/

50

635132711) * 100 762193593) * 100 817758326) * 100

2.68% 2.49% 1.89%

DuPont Return on Assets

= (net income/ sale) * (sale / total assets)

2006 2007 2008

(0.3887 * 0.0689) *

100

(0.3763*.0663) *

100

(0.2536 * 0.0745) *

100

2.67% 2.49% 1.88%

Operating Income MarginOperating income amount is incorrect

= (Operating Income/ interest earned) * 100

2006 2007 2008

(26310577/

43788628) * 100

(28060501/

50569481) * 100

(2300098/

60942798) * 100

60.08% 55.48% 37.74%

Operating Assets TurnoverOperating assets working????

= (Interest earned / operating assets) * 100

2006 2007 2008

(43788628/

36795672) * 100

(50569481/

56917944) * 100

(60942798/

71972574) * 100

119% 88.84% 84.67%

Return on Operating Assets

= (Interest earned/ operating assets) * 100

2006 2007 2008

(17022346/

36795672) * 100

(19033773/

56917944) * 100

(15458590/

71972574) * 100

46.26% 33.44% 21.47%

51

Sales to Fixed Assets

=(Sales/ Fixed Assets) * 100

2006 2007 2008

(43788628/

492853073) *100

(50569481/

608382912) * 100

(60942798/

655781930) *100

8.88% 8.31% 9.29%

Return on Investment (ROI)

= (Net income/ total assets)*100

2006 2007 2008

(17022346/

635132711) * 100

(19033773/

762193593) * 100

(15458590/

817758326) *100

2.68% 2.49% 1.89%

Return on Total Equity

= (net profit after tax/ total equity) * 100

2006 2007 2008

(17022346/

53044649) * 100

(19033773/

69270631) * 100

(15458590/

81367002) * 100

32.09% 27.47% 18.99%

Gross Profit Margin

= (Net mark-up/ interest income) *100

2006 2007 2008

(42316608/

43788628) * 100

(47174315/

50569481) * 100

(53473892/

60942798) * 100

96.63% 93.28% 87.74%

52

d. Activity Ratios

Accounts Receivable Turnover

= (Annual credit sales/average Account receivable) * 100

2006 2007 2008

(43788628/

23012732) * 100

(50569481/

21464600) * 100

(60942798/

17128032) * 100

190.28% 235.59% 355%

Average Collection Period

= 365/ Account receivable turnover

2006 2007 2008

365/ 1.9 365/ 2.35 365/ 3.55

190 days 155 days 102 days

Accounts Payable Turnover

= (Annual credit purchases/ average account payable) * 100

2006 2007 2008

(13634912/

10605663) * 100

(16940011/

7061902) * 100

(23884768/

10219061) * 100

156% 239.8% 233.7%

Average Payment Period

= (365/ account payable) * 100

2006 2007 2008

365/1.56 365/2.398 365/2.337

233 days 152 days 156 days

Total Assets Turnover

53

= (Interest earned/ total assets) * 100

2006 2007 2008

(43788628/

635132711) * 100

(50569481/

762193593) * 100

(60942798/

817758326) * 100

6.89% 6.63% 7.45%

e. Market Ratios

Dividend per Share

= Total dividend/ No. of share outstanding

2006 2007 2008

1474605/ 590000 2831895/ 708970 6104894/ 814000

2.5 4 7.5

Earning per Share

= Net Income/ Avg. No. of shares issued

2006 2007 2008

17022349/ 708970 19033733/ 896975 15458590/ 896975

24.01 21.22 17.23

Price/ Earning Ratio

= Avg. market price per share/ earning per share

2006 2007 2008

249.05/24.01 259.9/23.34 162.54/17.23

Rs. =10.37/- Rs. =11.13/- Rs. =9.43/-

Dividend Payout

= (Dividend per share/ earning per share) * 100

2006 2007 2008

(2.5/ 24.01) * 100 (4/ 21.22) * 100 (7.5/17.23) * 100

54

10.41% 18.85% 43.53%

Dividend Yield

= (Dividend per share/ Avg. market value per share) * 100

2006 2007 2008

(2.5/249.05) *100 (4/259.9) *100 (7.5/162.54) *100

1.01% 1.54% 4.61%

f. Statement of Cash Flow

Operating Case Flow/Current Maturities of Long Term Debt and Current Noted Payable

= operating Cash flows/ current maturities of long term debt and current notes payable

2006 2007 2008

10176913/

28996608

78804419/

36071426

2532681/

39682105

0.35 2.18 0.06

Operating Cash Flow/ Total Debt

=(Operating Cash Flow/ Total Debt) * 100

2006 2007 2008

(10176913/

553178593) * 100

(78804419/

645855939) * 100

(2532681/

715299108) * 100

1.83% 12.20% 0.35%

Operating Cash Flow per Share

= Operating Cash Flow/ No. of equity Shares

2006 2007 2008

10176913/708970 78804419/896975 2532681/896975

14.35 87.86 2.82

55

Operating Cash Flow / Cash Dividend

=(Operating Cash Flow / Cash Dividend) * 100

2006 2007 2008

(10176913/

2891755) * 100

(78804419/

3263249) * 100

(2532681/

28789320) * 100

3.51% 24.14% 0.87%

g. Other Ratios

Net income per employee

= Net Income / No. of employees

2006 2007 2008

635132711/ 14019 19033773/ 14079 15458590/ 15204

45305.1 1351.93 1016.74

Asset per employee

= Asset/ No. of employee

2006 2007 2008

635132711/ 14019 762193593/ 14079 817758326/ 15204

45305.1 54136.9 53785.7

Growth of Income

=(Change in Income/ Income for last year) * 100

2006 2007 2008

(3575143/

19033773) * 100

(2011427/

17022346) * 100

(2532681/

28789320) * 100

33.93% 11.81% 18.78%

56

HORIZONTAL ANALYSISHorizontal analysis is done by subtracting the current year amount from previous year amount and then. The resulting amount is then divided by previous year amount and then multiplying the result with 100. This is used to compare whether a particular item has increased or decreased.

During 2008 NBP’s top line (operating revenue) increased by 13% from Rs. 47.2

billion in 2007 to Rs. 53.5 billion in 2008.

Pre-tax profit has reduced to Rs. 23.0 billion, a decrease of 18.9% over last year

mainly on account of higher provision charge which increased due to the bank’s

policy of prudently providing for against non-performing loans.

Earnings per share reduced by 18.9% to Rs. 17.23 in 2008

57

Pre-tax return on equity stood at 30.5%, whereas pre-tax return on assets stands at

3.0% while cost to income ratio at 0.35 remained one of the highest amongst the

Pakistani banks.

Net interest income increased by 10.2 % to Rs. 37.1 billion from the

corresponding period last year owing mainly to volume growth

The increase in lending and assets yield was partially offset by increase in deposit

rates mainly on account of a 4% mandatory increase in the rate on saving deposits

and an overall increase in bank’s funding cost.

Non-interest income shows growth of 21.2 % mainly due to increase in fee,

commission, exchange and other income. This growth is impressive since the

contribution of capital gains on sale of securities declined from Rs. 2.3 billion in

2007 to Rs. 0.4 billion in 2008.

Fee income increased by 17%

Income from dealing in foreign currencies increased mainly on account of

revaluation gains due to volatility of Pak Rupee.

During the year the bank succeeded in getting compensation on delayed refunds

for various years from the taxation authorities to the tune of Rs. 988 million

which increased other income by Rs. 1.1 billion.

Administrative expenses increased due to increase in staff cost and other

administrative expenses by 20.0 %. Staff cost increased on account of inflation

linked increase in salaries and promotions announced in 2008. Record inflation

also increased our other administrative expenses.

Provision charge against advances & other assets increased by Rs. 6.8 billion

from Rs. 4.9 billion in 2007 to Rs.11.7 billion in 2008 reflecting the greater stress

on some sectors in our portfolio.

Record inflation, high interest rates, power shortages coupled with political

environment were the factors for increase in NPLs which occurred across the

banking system as evident from the increase in NPLs in the system by 47 %. Net

NPL’s were at 3.3 % and provision coverage stood at 76%, one of the highest in

the banking system.

58

The bank’s revaluation surplus on securities including Bank Al- Jazira and mutual

funds was hit by this abnormal decline in equity prices and showed reduction of

Rs. 22.7 billion or 86 %. This decline was mainly led by Bank Al-Jazira and NIT

units; however the market value of these shares still exceeds the bank’s cost. As

of the balance sheet date, the impairment loss on listed equity securities and

mutual fund investments held under 'Available-for-sale' category amounted to Rs.

2.4 billion. SBP has allowed banks that the impairment loss resulting from the

valuation of listed equity securities / mutual funds held under ‘Available-for-sale’

category of investments as of December 31, 2008 may be held under ‘surplus on

revaluation of asset’ account as shown on the balance sheet. The impairment loss

is required to be taken to the profit and loss account in the year 2009 on quarterly

basis. The bank on a prudent basis decided to recognize Rs. 0.4 billion in P & L in

the current year representing 25% of impairment loss on the shares portfolio.

During the year, the bank, on a prudent basis carried out a desktop revaluation of

major properties to ascertain the current market value and to adjust revaluation

surplus accordingly. This resulted in reduction of Rs.2.7 billion from previously

assessed values of 2007.

Despite the difficult environment, NBP managed to pose an appreciable growth in

deposits and advances. Advances increased by Rs. 72.7 billion or 21.3% mainly in

corporate sector on account of financing related to energy and power.

2008 was a very difficult year in terms of liquidity and deposit mobilization. By

year end, the deposits increased by 6% or Rs.33 billion. Bank’s current and saving

accounts ratio stands at 58% and remains one of the highest in the banking sector.

Our corporate banking has strong relationships with the country’s top business

houses. Corporate loans showed an impressive increase of more then 28% in

2008.

During 2008 due to higher commodity support prices, financing under

government operations increased by 118%. These loans are fully backed by GoP

guarantees.

NBP’s Islamic banking operations have gathered momentum and have registered

impressive growth in Deposits (75%), Advances (237%) and total Assets (84%)

59

We expanded our operations in 2008 and 11 more branches across Pakistan were

opened in 2008 taking the branch network to 1254. In 2008 NBP increased its

number of overseas branches from 18 to 22.

VERTICAL ANALYSIS

Balance Sheet of NBP as at December 31, 2008

Assets Amount (Rs. ‘000’ Percentage

Cash and Balances with treasury 106503756 13.02%

Balances with other banks 38344608 4.69%

Lending to financial institutions – net 17128032 2.09%

60

Investments – net 170822491 20.89%

Advances – net 412986865 50.50%

Operating Fixed Assets 24217655 2.96%

Deferred tax assets – net 3204572 0.39%

Other Assets 44550347 5.44%

Total 817758326 100%

Liabilities

Bills payable 10219061 1.25%

Borrowings 40458926 4.95%

Deposits and other accounts 624939016 76.42%

Liabilities against assets subject to lease 25274 .003%

Other liabilities 39656831 4.85%

Capital

Share Capital 8969751 1.7%

Reserves 19941047 2.44%

Un-appropriated profit 52456204 6.04%

Surplus on revaluation of assets – net 21092216 2.5%

Total 817758326 100%

INDUSTRY ANALYSIS

Comparison between National Bank of Pakistan, Bank al- Alfalah, Allied Bank of Pakistan and United Bank of Pakistan for the year ended 2008. Ca;

Ratio National Bank of Pakistan

Bank Al- Falah

Allied Bank of Pakistan

United Bank of Pakistan

Net Profit Margin Ratio

25.36% 10% 27% 27%

61

Gross Profit Margin Ratio

87.74% 57% 72% 65%

Return on total Equity

15% 7% 18% 18%

Return on Assets (After

tax)

1.89% .372% 1.1% 1.37%

Total Assets to shareholders

fund

7.98 20.47 16.40 13.79

Earning per share (pre-tax)

25.64 2.24 9.47 10.8

Earning per share (after-

tax)

17.23 1.63 6.43 8.24

Payout Ratio 49.33 76.69 54.43 56.9Book Value 90.71 18.27 32.19 35Net Interest

Income Growth9.75% 5.68% 1.98% .83%

FUTURE PROSPECTS OF THE ORGANIZATION

NBP remains committed to the interest of all stake holders including its

employees, owners, regulators and Pakistani nation. We have well defined strategy on

where and how we want to proceed in the years to come.

62

With the implementation of the new ‘Core Banking Package’, NBP will

completely automate its functions which in turn will appreciably enhance work

efficiency. The Bank will continue to diversify its customer segments thereby increasing

our product offering. Its commitment towards the employee’s empowerment /

development will continue as The Bank believes that a motivated and well trained work

force is necessary to ensure sustenance and growth. On the business side it main focus

would be to reduce non-performing loans and increase deposits.

The Bank remain committed to our Vision, Mission & core values and our

strategy for the future includes recovery efforts and revival of non-performing loans,

deposit mobilization, consolidation of loans, expense management and tapping into

untapped markets by increasing our network both domestically and internationally.

Customer service will remain its main focus of Operations management.

SWOT Analysis of the organization

Strength NBP in one of the oldest bank of Pakistan and first nationalized bank

Declared World’s best Foreign Exchange bank in 2008

Stable AAA/A-1+ (Tipple A/a-One Plus) rated bank

Best Return on Capital Bank for 2006 amongst all the banks in Asia

Highest Profit making bank of Pakistan

Having Highest Assets and Capital compared to any bank in Pakistan

63

Functioning as an agent of State Bank of Pakistan

Dealing Government Treasury where SBP has not its own branch

Having unshakable trust of the public and its stakeholders

Giving Loans alone in the market against Gold Ornaments

Performing social responsibilities and claiming “The Nation’s Bank”

Disbursing Salaries and Pensions to the Government employees and earning high

profit on NBP-Advance Salary Loan Scheme

Earning commission from SBP on Government transaction

Facing no problem of cash/currency being its Chest and Sub-chest

Branches all over the country

NBP have presence in the countries having sizeable trade volumes with Pakistan

by its overseas operations

Holds largest deposit base in the market share in terms of number of accounts

Leading bank in agriculture financing amongst commercial banks with the market

share of 15%

Helping in earning of foreign exchange, remittances and leading agent of

Western Union Money Transfer

Weakness The bank falls far behind as far as the innovative schemes are concerned

The strong political hold of some parties and government and their dominance is

affecting the bank in a negative way

Lowest Internal Control and Compliance System, SBP rated “Marginal” which is

alarming for the Bank

Unsatisfactory corporate culture of the Bank

Physical environment and atmosphere compare to other banks does not meet the

standard

Less number of Online Branches

Ineffective use of technologies i.e. Information technology

64

Shortage of staff (employee per customer is very low as compared to its

competitors)

Inefficient training and technical education of staff.

Opportunities

Being a Government Bank NBP having wide scope in economic market

Trust and reliability that NBP enjoy, creates chances to enhance deposit and

profitability

Its vast network of domestic and overseas branches can help to expand business

more and more.

Bank’s deposit is increasing rapidly so there is a great opportunity to enhance its

investment and financing.

Being an agent of State Bank of Pakistan it can play vital role in local economy.

Earning commission/exchange on Government transactions

NBP can utilize the electronic banking opportunity to ensure on line banking 24

hours a day seven days a week

Threats

SBP penalties due to low internal control and compliance

Government, SBP and Prudential Rules and Regulations

The emergence of new competitors especially in terms of foreign banks

Its staff switching over to other private banks due to more facilities

Other bank’s charming atmosphere and relaxation in documentation

SBP rated just “Marginal” in respect of System & Control which is alarming for

the Bank to survive its license.

NBP staff code of ethics and practices.

High number of complaints regarding staff behavior

Government Schemes, Government Revenue Collection, Government

Payments and FBR Collections create heavy workload.

65

Conclusion

Being a student of MBA Finance it became compulsory for me to do an internship

for which I got an opportunity at National Bank of Pakistan Model Town Branch Lahore.

I worked there for almost 6 weeks. I have concluded my report with my findings as given

below

Customer SatisfactionIn NBP customer dealing is well, but during rush hour the customer has to wait for a long

time for their turn. It’s quite hard for a new customer or potential customer to get the

required information.

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Poor record management and filing systemDuring my internship I observed that filing system of branch is not good. When

certain record is needed the staff has to struggle to find it out and a lot of time is wasted.

Unequal distribution of workWork is not equally distributed. On one hand some employee have to work all day

without relaxing while some others have nothing to do at all. This not only creates

confusion among employees but also hurting and disturbing for overall setup of the bank.

And above all it results in dissatisfaction among customers as well.

Marketing visitsA useful mode of contact is through personal marketing visits. Such visits are

important in informing and perusing the existing and potential customers about the

products and creating a sense of belongingness with them.

Formal OrganizationFormal organization includes the activities of two or more person, which are

cautiously determined groups and coordinated towards a given objective. It provides base

when people are able to communicate with other, when they have common purpose and

they are willing to work.

In NBP, we find a formal organization. Bernard referred to an organization as a

formal when the activities of two or more persons are coordinated towards a given

objective. The formal organization comes into being when people are able to

communicate with one another or willing to act and share a purpose.

In this formal organization of NBP the activities are carried out in a more formal

way. In theoretical terms it provides basis for communication with one another but in

practice it is not exercised because an employee at high level cannot get straight away to

manager or SVP and ask him about of his problem faced by him, because first he has to

talk to his immediate superior and follow a proper channel of communication.

67

Difference between theory and practiceA vast difference exists between theory and practice and NBP has written

procedure but practical work done by employees is a bit different from written

procedures.

More accounts fewer deposits.Efficient banking is one, which does not emphasize on number of accounts but on

greater amount of deposits. NBP is more interested in increasing its number of account

irrespective to its deposit. The main reason behind it is that bank does not provide

personalize service to all the account holders and does not improve its quality and

services

Delegation of authorityManager has very limited authority; he has to take the approval from his

management authority i-e. In case of advance he has to take the approval of general and

regional manager. The other problem is created, when the manager is not present in his

office, the customer having to wait for hours. This discourages both customer and

officers because they have to suffer a lot

Lack of specialized trainingNBP does not provide adequate facility of specialized training to their staff.

Training is generalized rather than specialized. As the worker finishes his training, he is

inducted into a specific field without having great deal of knowledge about the field.

Poor job rotationThere is absence of job rotation in NBP Model Town. A person placed in one-

department remains their forever. It reduces career opportunities as well boredom and in

the end results in career plaguing. Job rotation is very important for employee especially

for those who are newly recruited. The newly recruit should be rated in all department of

the banking in order to get familiar with working of different departments so that when

they get a responsible position they have know how of the whole system.

68

Lack of appreciationAnother very important thing which is ignored in the bank is appreciation if the

employee on their good performance. If hard work and performance of employees is not

recognized and appreciated they become dishearten which results in decline in

performance.

PromotionsPromotions in NBP are purely on the basis of seniority, so the new young person

having high qualification remains behind for quite a lot of time. Top management and

staff union put pressure for the promotion of their favorites, which gives a sense of

deprivation to the deserving employee and their efficiency is affected.

Marketing at deskBank employee come in daily contact with many people who happen to deal with

the casual remittance, travelers cheques, safe custody, pensioners, depositing license fee

and variety of other functions and variety of other people with whom the Bank has no

account or regular business relationship. The Bank employees are doing very little on

their own to explore the possibilities of selling banking services to them as a marketing

contributor. The entire Bank community should make a conscious effort in addition to

their normal work to explore the possibilities of selling banking services to them. The

market opportunities are hidden in every dealing a banker handles; the question is that if

he has the art and urge to seize such opportunities.

Lack of business communicationThere is no proper way to give information to their customer. To avoid this minor

dissatisfaction and tension in the mind of customer, and deficiency of the service, it is

recommended that the bank should provide brochures etc containing information in

details.

Some general information should be placed in information notice board on the

entrance where customer can see it easily or it should be self-attractive

69

Recommendations for Improvements

The recommendations are as follows:

Professional trainingNBP 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.

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Delegation of authorityEmployees of the bank should be given a task and authority and they should be

asked for their responsibility.

Performance AppraisalThe 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 FurnitureIn 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

especially in deposit department and there should also be convenient sitting place for

customers.

Job RotationJob Rotation 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.

Changes in PoliciesThere should not be any abrupt policies change by the upper management, as this

practice hurts the customer confidences in the bank. Government should make long-term

policies

Link with the Head QuarterMost of the branches of NBP should established a direct link with the, head

quarter In Karachi, through Internet or Intranet. This will make the functions and decision

making of the management easier and convenient.

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Credit CardNational 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 Validator machine is used to count the currency notes and its installation will help

to eliminate to counting errors and will save time.

Interest on Overdraft:Overdraft is a short-term credit facility provided by the bank to its trustworthy

customers free of interest. Only bank commission is charge small amount of mark-up on

the overdraft, which will help the bank to improve its revenue position.

Cash FinancingIn this mode of financing the amount of credit not utilized by the borrower is

remained tax-free. It is recommended that a small amount of interest should be charge on

this amount as well because the bank gas kept-aside the amount for that borrower and can

not advance it anywhere.

Decreasing Administrative ExpensesBank should their administrative expenses. That can be done by downsizing the

surplus pool of employees. The branches that are not much used could also be closed.

Management should be equipped with new ways to control the bank expenses. That will

give positive results in the future.

Needs to be Flexible in credit PolicyAs mentioned earlier, NBP is very conservative in advances and loans policy. It

reduces the investment opportunities. Also loans should be given to the small

businessmen and the agriculture sector at the low markup rate. It should adopt flexible

credit policy while giving credit to the agriculture sector.

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Technological AdvancementI 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.

Staff RelationshipGood relationship among staff member leads to the peak performances in any

organization. I observed that the staff relationship was normal other wise but some time I

noticed that there exists a little conformity among the staff members. Another syndrome

from which the staff suffered was that all of them considered themselves more important

than others. Some of the officers used to say that if I am absent for a day the bank would

stop working. So this sort of attitude is not good because it mars bank image and juniors’

willingness learn and work hard and in the end will hurt the whole team.

Improper Distribution of WorkProper distribution work leads to success in every organization. Proper

distribution of work prevents the employee from over and under work situation. So for a

smooth running of an organization proper distribution of work is the hint to be followed.

During my internship I observed that there was no proper distribution of work in

the bank. I saw that some of the employee worked like ants other sat idle starting here

and there. So this created a lot of over work situation for while relaxation for other.

Favoritism and nepotismIn the branch during my internship I saw that when some of the employees are

transfer to other places, due to their relation with influential people and with top

management they can cancel their transfer in few weeks, when they are unsatisfied at that

place.

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So I suggest that in the organization there should be no favoritism, nepotism and

politics and their transfer and promotion should be made on merit and according to the

rules and regulations of the bank and provided favorable environment to the employee to

show their performances.

Marketing PolicyThe branch should adopt various marketing strategy and promotion strategy to

promote the bank and its product.

The most important in my opinion is personal marketing; it is the most effective

of all when you think in term of branch level. But on the whole organization level, they

should arrange the seminar with in the bank and outside the bank. They should introduce

various prizing schemes.

They should do more advertising through newspaper and media and through

channel of personal contacts.

Complaints of CustomerThere should be an information desk to provide the information and to receive the

complaints of the customer in the bank. There is no complaint box available in the branch

and not any person appointed to hear the complaints.

Every person cannot go to the manager for the complaint because most of the

people are hesitant. So I suggest management to install a compliant box in the branch,

and recruit a special person for that guidance of the customer when they are unable to

manage some difficulties in banking matters.

Organizational CommitmentIt is suggested that employees working on daily wages basis should be given

some benefits, which the other employees are getting. Their salaries must increase

according to efficiency, performance and service which would enhance organizational

commitment of the employees working in the organization.

Credit MonitoringThe credit department of the bank should carries out vigilant credit monitoring.

They should ensure the proper payment of installments and the mark-up by the borrower.

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The staff members who have done all the paper work of the loan extension should

perform the monitoring, as he/she will be having more information about the borrower.

Avoiding Bad DebtsPolicies should be crafted in a way to ensure that no loan is extended on political

pressure. SBP regulation for loan approval should be strictly followed. According to

which the current ration of borrower’s business must be 1:1 and the debt to equity ratio

should be 60:40, means the liquidity position of business should be healthy.

References

Website of the National Bank of Pakistan http://www.nbp.com.pk

http://www.nbp.com.pk/publications/AnReport2008.aspx


http://www.nbp.com.pk/publications/AnnualReport2006.pdf

www.abl.com/thebank/pdf/annual_report08/abl-annual-report-2008.pdf

www.ubl.com.pk/aboutus/financial_report/report_2008/annual_doc08/

http://bankalfalah.com/about/download/Annualreport2008.pdf

http://www.kse.com.pk/listing-companies/analysisreport.php?id=38idsid=3.07

Economic Bulletin September-October 2009

Internship Supervisor

Staff members at NBP Model Town Lahore

Annual Report 2006, published by NBP, Head Office Karachi



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http://www.scribd.com/doc/26594482/Muhammad-Ahmad

http://www.kse.com.pk/listing-companies/analysisreport.php?id=38idsid=3.07

http://bankalfalah.com/about/download/Annualreport2008.pdf

http://www.ubl.com.pk/aboutus/financial_report/report_2008/annual_doc08/

http://www.abl.com/thebank/pdf/annual_report08/abl-annual-report-2008.pdf

http://www.nbp.com.pk/publications/AnnualReport2006.pdf



http://www.nbp.com.pk/

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