Ntional Bank Internship Final 2009 by Uzair

8/8/2019 Ntional Bank Internship Final 2009 by Uzair

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CHAPTER # 1

1.1 Introduction of National Bank of Pakistan

National Bank of Pakistan maintains its position as Pakistanis premier Bank

determined to set higher standards of achievements. It is the major business partner

for the government of Pakistan with special emphasis on fostering Pakistanis

economic growth through aggressive and balanced lending policies, technologically

oriented branches.

The National Bank of Pakistan came into existence on 20th November 1949 under the

National Bank of Pakistan Ordinance No.21 of 1949.It is a semipublic bank and

functions like other commercial banks. Therefore it receives funds from the depositors

and provides loans/credit facilities in all sectors including trade, industry and

agriculture. It also functions as an agent of the Central Bank and operates the

treasuries at places where no branch of State Bank of Pakistan exists. The National

Bank of Pakistan was also nationalized, along with other banks, in January 1974. The

Bank of Bahawalpur was also merged into this Bank.

1.2 History

1949 National Bank of Pakistan (NBP) was established under the National Bank of

Pakistan Ordinance 1949 and was 100% govt.-owned. NBP acted as an agent of the

Central Bank wherever the State Bank did not have its own Branch. It also undertook

Government Treasury operations. Its first branches were in jute growing areas in East

Pakistan. Offices in Karachi and Lahore followed.1950 NBP established a branch in Jeddah , Saudi Arabia .

1955 By this time NBP had branches in London and Calcutta .

1957 NBP established a branch in Baghdad , Iraq .

1962 NBP established a branch in Dar-es-Salaam , Tanganyika .

1964 The Iraqi government nationalized NBP's Baghdad branch.

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http://en.wikipedia.org/wiki/Jutehttp://en.wikipedia.org/wiki/Jutehttp://en.wikipedia.org/wiki/Karachihttp://en.wikipedia.org/wiki/Karachihttp://en.wikipedia.org/wiki/Lahorehttp://en.wikipedia.org/wiki/Jeddahhttp://en.wikipedia.org/wiki/Jeddahhttp://en.wikipedia.org/wiki/Saudi_Arabiahttp://en.wikipedia.org/wiki/Saudi_Arabiahttp://en.wikipedia.org/wiki/Londonhttp://en.wikipedia.org/wiki/Calcuttahttp://en.wikipedia.org/wiki/Baghdadhttp://en.wikipedia.org/wiki/Iraqhttp://en.wikipedia.org/wiki/Iraqhttp://en.wikipedia.org/wiki/Dar-es-Salaamhttp://en.wikipedia.org/wiki/Dar-es-Salaamhttp://en.wikipedia.org/wiki/Tanganyikahttp://en.wikipedia.org/wiki/Karachihttp://en.wikipedia.org/wiki/Lahorehttp://en.wikipedia.org/wiki/Jeddahhttp://en.wikipedia.org/wiki/Saudi_Arabiahttp://en.wikipedia.org/wiki/Londonhttp://en.wikipedia.org/wiki/Calcuttahttp://en.wikipedia.org/wiki/Baghdadhttp://en.wikipedia.org/wiki/Iraqhttp://en.wikipedia.org/wiki/Dar-es-Salaamhttp://en.wikipedia.org/wiki/Tanganyikahttp://en.wikipedia.org/wiki/Jute


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1965 The Indian government seizsd the Calcutta branch on the outbreak of hostilities

between India and Pakistan.

1967 The Tanzanian government nationalized the Dar-Es-Salaam branch.

1971 NBP acquired Bank of China 's two branches, one in Karachi and one at

Chittagong . At separation of East Pakistan NBP lost its branches there. NBP merged

with Eastern Mercantile Bank and with Eastern Bank Corporation.

1974 The government of Pakistan nationalized NBP. As part of the concomitant

consolidation of the banking sector, NBP acquired Bank of Bahawalpur (est. 1947).

1977 NBP opened an offshore brain Cairo .

1994 NBP amalgamated Mehran Bank (est. 1991).

1997 NBP's branch in Ashgabat , Turkmenistan commenced operations.

2000 NBP opened a representative office in Almaty , Kazakhstan .

2001 State Bank of Pakistan and Bank of England agree to allow only 2 Pakistani

banks to operate in the UK. NBP and United Bank agreed to merge their operations to

form Pakistan International Bank, of which NBP would own 45% and United Bank

55%.

2002 Pakistan International Bank renamed itself United National Bank Limited

(UNB). The ownership structure of the UNB remained as before. The only change to

the shareholding structure is that UBL had recently been privatised in Pakistan and

was now owned 49% by the Government of Pakistan and 51% by a joint foreign

consortium of Abu Dhabi.

2003 NBP received permission to open a branch in Afghanistan .

2005 NBP closed its offshore branch in Cairo.

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http://en.wikipedia.org/wiki/Bank_of_Chinahttp://en.wikipedia.org/wiki/Karachihttp://en.wikipedia.org/wiki/Karachihttp://en.wikipedia.org/wiki/Chittagonghttp://en.wikipedia.org/wiki/Bahawalpurhttp://en.wikipedia.org/wiki/Bahawalpurhttp://en.wikipedia.org/wiki/Cairohttp://en.wikipedia.org/wiki/Ashgabathttp://en.wikipedia.org/wiki/Turkmenistanhttp://en.wikipedia.org/wiki/Turkmenistanhttp://en.wikipedia.org/wiki/Almatyhttp://en.wikipedia.org/wiki/Kazakhstanhttp://en.wikipedia.org/wiki/State_Bank_of_Pakistanhttp://en.wikipedia.org/wiki/Bank_of_Englandhttp://en.wikipedia.org/wiki/United_Bankhttp://en.wikipedia.org/wiki/Afghanistanhttp://en.wikipedia.org/wiki/Afghanistanhttp://en.wikipedia.org/wiki/Afghanistanhttp://en.wikipedia.org/wiki/Bank_of_Chinahttp://en.wikipedia.org/wiki/Karachihttp://en.wikipedia.org/wiki/Chittagonghttp://en.wikipedia.org/wiki/Bahawalpurhttp://en.wikipedia.org/wiki/Cairohttp://en.wikipedia.org/wiki/Ashgabathttp://en.wikipedia.org/wiki/Turkmenistanhttp://en.wikipedia.org/wiki/Almatyhttp://en.wikipedia.org/wiki/Kazakhstanhttp://en.wikipedia.org/wiki/State_Bank_of_Pakistanhttp://en.wikipedia.org/wiki/Bank_of_Englandhttp://en.wikipedia.org/wiki/United_Bankhttp://en.wikipedia.org/wiki/Afghanistan


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1.3 Hierarchy

4

PRESIDENTPRESIDENT

EXECUTIVE VICE PRESIDENTEXECUTIVE VICE PRESIDENT

VICE PRESIDENTVICE PRESIDENT

ASSISTANT VICE PRESIDENTASSISTANT VICE PRESIDENT

OFFICER GRADE IOFFICER GRADE I

OFFICER GRADE 2OFFICER GRADE 2

OFFICER GRADE 3OFFICER GRADE 3

MESSENGER MESSENGER

PEONPEON

SWEEPER SWEEPER

BRANCH HIERARCHY

BRANCH HIERARCHY

SENIOR VICE PRESIDENTSENIOR VICE PRESIDENT

MEMBER BOARDMEMBER BOARD

SENIOR EXECUTIVE VICE-PRESIDENTSENIOR EXECUTIVE VICE-PRESIDENT


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1.4 Branches

The Bank had a network of 1531branches in the country and 28 branches in foreign

countries. These countries are as follows:1)- United States of America

2)- United Kingdom

3)- France

4)- Germany

5)- Africa, Middle East Region

6)- Bahrain Obu

7)- Asia Pacific Region

8)- Japan

9)- Republic of Korea

10)- Central Asian States

11)- Bangladesh

12)-Peoples Republic of China

13)-Pakistan.

1.5 Office Street Branch Bahawalnagar

This branch was established in 9 th April 1975 by STATE BANK OF PAKISTAN

under section 28(1) of Banking Companies ordinance 1962 wide letter no.

BCD.3309/850/INBP-75. Code of this branch is 0709. This branch is situated in the

middle of Anarkali bazaar Bahawalnagar. The purpose of establishing this branch to

collect savings of the shopkeepers and advances them loans. At that time Mr. S.

Mojib Raza Was senior Deputy Director Of National Bank of Pakistan. This head

office is situated on II Chand Regar Road Karachi. Now a day this branch makes

much progress and capture a big part of market share of Bahawalnagar City.

From the 1 st to 10 th of every month this branch is full with pensioners & salaried

persons. This branch advance loans in the shape of Cash Finance (Hypo, Pledge),

Demand Finance (Advance Salary, Saiban, Gold Finance), Running Finance

(Mortgage), Agri Finance (Production, Development), etc.

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This branch is also providing the facility of Lockers for general public. These

lockers are stored in Strong Room. This is attested by head of building department

that it is secure from earthquake and bullet proof. This branch has authority to keep

cash up to 4 Million. In case of excess amount it transfers to main branch

Bahawalnagar. Branch has 3 guards of which 2 are present there at every time for

security purpose.

Further detail of employees is given in Ch. 8.

1.6 Objectives of NBP

National bank of Pakistan is also a commercial organization and its main objective is

profit maximization. This is achieved in two ways:

1. By increasing deposits.

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

community.

These are explained as:

1. Increase in deposits:

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

private or nationalized tries to increase its deposits by providing better facilities to its

customers. By increasing its deposits a bank can extend greater amount of loan and

hence achieves higher profit. NBP is also improving its facilities and services to

attract customers with higher volume of deposits. There are two main factors involved

in increasing the deposits. These factors are improving the services and courtesy. NBPis continuously working on these two factors to increase its deposits.

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2. Extension of loans:

The profitability of a bank largely depends on the amount given to people as loan andthe type of people to whom credit is given i.e. the credit worthiness of the borrowers.

This strategy has worked quite well for NBP. Deposits are collected from the people

and invested in different projects. NBP prefers to give loans to financially sound and

reliable parties, after securing the collators. NBP has an extremely well organized

section. The staff is adequately trained, and educated and competent. They carry out

extensive financial analysis before deciding on the loan. Interest charged on the loans

potentially contributes to higher profits.

Some of the other objectives of NBP are:

i. Improve customer services.

ii. Quick disposal of credit cases.

iii. Efficient operation of the branches.

iv. Better Public Relations.

v. Operational and advisory services for foreign exchange accounts activities

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CHAPTER # 2

2.1 Account Opening And Closing DepartmentBasically function of A/c opening & closing in NBP is performed under Accounts

department but I am discussing it with separate heading for better understanding.

Firstly all types of Accounts which can be opened in NBP has been described:

2.2 Types of Accounts

Current account

Saving account

Brief explanation of these accounts is as follows:

Current Accounts

Current A/c is basically used to meet the daily transactions. Current account provides

safety to the customers money, gives the advantage for paying debts by the

convenient and safe means of sending cheques through the post thus avoiding the

trouble and loss that units in PKR, Us$ GBP and DM.

Saving Account

In case of saving accounts, account holder gets profit. There is a time limit for

drawing cash; customer cannot draw money before a certain time.

In NBP saving a/c is used as current a/c & there is no main difference between current

& saving account except profit.

This account can be opened by limited company, partnership company ,club societies

& associations, joint & sole proprietorship.

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2.3 How to Open an Account (General)

When a person intend to open account. A card is filled & signed by customer. This

card contain:

i) Six boxes for name.

ii) Opening date

iii) Special instructions

iv) Space for first a/c No.

v) Space for other accounts.

Following points are considered by the bank in this regard.

1)- Another account holder of the bank should properly introduce the new customer.

2)- The account holder should sign the account opening form in the presence of bank

officer and the signature is duly verified.

3)- A copy of identity Card is required by Bank.

4)- Against submission of the Banks prescribed application form, duly introduced in

the manner provided and on supplying such document, as may be required and

account may be opened. The Bank reserves to itself the right to refuse to open and

account without assigning any reason.

5)- Each account shall be allotted a distinct number that is to be quoted in all

correspondence with the bank relation to the account.

6)- Minimum amount for opening and continued maintenance of various types of

accounts is as follows:

Rs. US$

Current 2000 2000

Saving 500 500

The bank reserves the right to change the above mentioned minimum balance

requirement at any time without any notice.

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2.4 Procedure to Open an Account

When a customer wants to open an account, the bank officer gives application form to

him. All information, which is necessary to be known by the bank, is requirements of the application form. From also requires the essential documents to be attached by the

customer.

2.5 Following persons can open an account:

1)-Sole proprietors

2)-Private accounts (individual A/Cs)

3)-Joint account4)-Limited Company

5)-Partnership Company

6)-Club, Society & Association

2.6 Basically following information is required:

Name

Address

Telephone no.

Currency of account

Nature of Business

Residential status

Special instruction regarding the account

Signature of the applicant

2.7 Documents to Be Attached

Documents required to be attached are different for different categories.

1)- Sole Proprietors Account

They have to submit their business registration certificate number.

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2)- Private Accounts

For individual or private accounts following documents & information has to be

given: Name

Residence address

Mail address

Foreign address

Office address & office ph. No.

Position to title

Passport or identification No/

Matrimonial status

Date and place of birth

Nationality

Residence visa No.

Name and address of other Banks in Pakistan

3)- Joint Account

If some one wants to open joint account the following information is needed:

Full name

Address

Specimen of signatures of the joint account holders

4)- Joint CompanyIn this case following information & documents are required:

Certified true copy of the Memorandum and Articles of Association of the

company.

Certified true copy of the resolution of the board of directors / managing

committee / governing body regarding conduct of the account.

Certified list containing names and signatures of the directors / office bearers.

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Certified true copy of the certificate of incorporation or registration.

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Certified true copy of the certificate of commencement of business ( in case of

public limited companies).

I.d. Card copy of each director Original is also enclosed for inspection and return

List of persons authorized to operate on the account.

5)- Partnership Company Account

Documents required in this case are as follows:

Full Names

Address Specimen of signatures of the partners

Certified true copy of partnership deed

6)- Societies / Clubs And Association Account

Documents required in this case are as follows:

Copy of the rules certified by the president and the secretary.

Certified copy of a resolution of the committee and the specimen signatures of

the persons authorized to sign.

2.8 Other Formalities

The majority of the new customers are introduced either by an existing customer or by

bank staff. When the concerned officer is satisfied then he opens the account and

gives an account number that will be used in all communications with the bank in

regard to the account and when making deposits and withdrawal.

Bank has a right not to open and account without assigning any reason or to close the

account, if it is not operated in a satisfactory manner by the head office instructions.

So, opening questionnaire for companies & business accounts includes:

Company name

Address

Mail address

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Telephone, Cable & Telex

Nature of Company

Business registration certificate number Date of incorporation

Nature of Business

Names of main managers & director

Names & address of parent companies

Names & address of other banks

And, introducers declaration

And opening questionnaire for private accounts includes:

Name

Residence address

Mail address

Residence telephones No.

Foreign address

Office address

Office Telephone No.

Position or Title

Passport or identification cards No.

Matrimonial status

Nationality

Residence Visa No. Name & address of other banks in Pakistan

Name & address of other banks in abroad

& Their account No.

& Introducers declaration

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2.9 Issuance Of Cheque Book

When a customer opens an account with the bank, he is provided with cheque book

for withdrawals of account. However, the first cheque book is given to the customer only when all the required documents are checked. A cheque book contains twenty

five, fifty or hundred leaves. The cheque book also carries a requisition slip for the

issuance of the new cheque book. This slip is duly filled and singed by the customer.

The signature of the customer is verified by the bank and new cheque book is issued

to the customer and serial numbers of the cheque are duly entered in the book of the

bank. Along with the signature, person should also write his full name & address.

Usually only one cheque book is issued at a time, however big concerns who need anumber of cheque books at a time, may ask the bank to stock as number of cheque

books in their name and to point their name on these cheque books.

Bank debits the clients account for excise duty of Rs.2.50/- per cheque and keeps the

cheque book ready for the customer, as on his advice.

The officer keeps and maintains the cheque book register Cheque book inventory and

cheque books issued are recorded in this register. The account number for which the

cheque book is issued and the number of leaves are also recorded in this register when

the cheque book issued an entry is passed in the cheque book issue register.

2.10 The Requisites Of A Cheque

There is no prescribed form of words or design of a cheque but in order to fulfil the

requirements the cheque must have the following:

It must be in writing

It must contain an order to pay and addressed a specified bank. The order must be unconditional

The order must direct to pay on demand

The sum ordered to be paid must be certain.

The payment should be ordered to be paid to a certain person or to his order or

the bearer.

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2.11 Checking And Payment Of Cheques

It is the primary function of the bank to repay the money received from his customers

account usually by honouring his cheques. It is a contractual obligation of a banker tohonour his customers cheque, if he has checked the following on a cheque:

Name of the Bank & branch

Amount in figure and words

Signature of the Drawer (verification)

Posting mark by the computer operator

Cancellation by the authorized

Cheque should not be damaged

Funds must be sufficiently available

No legal bar prohibiting payment.

2.12 Stopping The Payment Of Cash On Cheque

The payment of cheque is stopped dishonored on the following grounds:

Effects not yet cleared ,then request to present again.

Drawers signatures differ

Payees endorsement requires banks guarantee

Alteration requires full signatures

Cheque is post dated

Cheque is without date

Amount in figures and word differs

Payment stopped by the drawer.

2.13 How To Close An Account

The account can be closed by the customer. The customer is required to submit and

application for closing the account. Then the account is closed out and his balance is

paid to him. Cheque book is returned back to bank and the officer cancel and the

remaining cheques in cheque book.

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CHAPTER # 3

3.1 Cash Dealing DepartmentCash department of NBP is given the complete responsibility of handling all receipts

& disbursement of cash. As a result of transaction in both local & foreign currencies

& near cash items such as traveler cheque etc ( when they are issued against cash).

As a consequence it is also responsible for the book keeping of these transactions &

the safe custody of cash & near cash securities of NBP.

a)- Cash receipts for receive deposits.

b)- Encashment of chequeCash department of NBP is a separate close part covered with glasses. No one other

than cash departments employee is allowed to enter into that area.

3.2 Cash Receipt

The depositor uses cheque deposit slip (or cash deposit slip) for depositing the

amount. There are two types of cash deposit slip:

a)- One for current account holders &

b)- Other for saving account holders.

Both are in different colors for clear identification. There are two parts of cash

deposits slips:

a)- Counter foil

b)- Adjacent credit voucher.

3.3 Acceptance of ChequeThe cash is paid against the cheque of the client. The following points are kept in

mind while receiving the cheque from the client.

Cheque should be drawn on NBP.

It should not be post dated.

It should be bearer cheque so the word bearer should not be crossed.

Payment is not stopped by the drawer.

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Amount in words & figure should be same.

Alternation in date / figure / word require drawers full signature with

signature on the cheque.

3.4 Types of Cheques

Bankers in Pakistan deal with three types of cheques

a) Bearer Cheques

Bearer cheques are cashable at the counter of the bank. These can also be collected

through clearing.

b) Order cheque

These types of cheques are also cashable on the counter but its holder must satisfy the

banker that he is the proper man to collect the payment of the cheque and he has to

show his identification. It can also be collected through clearing.

c) Crossed Cheque

These cheques are not payable in cash at the counters of a banker. It can only be

credited to the payees account. If there are two persons having accounts at the same

bank, one of the account holder issues a cross-cheque in favour of the other account

holder. Then the cheque will be credited to the account of the person to whom the

cheque was issued and debited from the account of the person who has actually issued

the cheque.

3.5 Affirmation of Signatures

After receiving the cheque the officer verifies the signature of the account holder with

the signature on the cheque. It signatures are not the same then it is returned back

otherwise forwarded to computer terminal.

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3.6 Computer Terminal Process

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

balance of the account holder. The operator also sees whether the stop paymentinstructions are received from account holder or not. After considering these two

points computer operator posts the cheque in account holder ledger & returns the

cheque back to the officer.

3.7 Payment Of Cash

The cheque is cancelled after posting & is returned to cashier. The cashier enters the

cheque in cash paid register & pays against the second signature of the receiver onthe back of the cheque.

3.8 Cash Link

NBP ATM Services For Your Convenience

Services Available On NBP ATMs

Cash withdrawal according to your cyclic limit.

Transfer of funds between PLS Savings Account and Current Account of the

same customer through the same ATM Card.

Account Balance Inquiry.

Instant mini- statement of account listing the last 15 transactions in account.

Request for a new Cheque book which might be collected by the customer from the

branch.

How Much Cash Can Be Withdrawn

There is a 24 hours cyclic cash withdrawal limit imposed on all ATM cards.

Withdrawal limits depend on the type of customers.

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Pin (Personal Identification Number) Mailer

A pin mailer issued to the ATM card holders carries the PIN number in a sealed

envelope. Card holder is required to keep the PIN number in a safe place as all theoperations on the ATM are carried out through the same.

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CHAPTER # 4

4.1 Clearing Department

Nearly all the banks provide a wide variety of services to their depositors. One

valuable service provided is that of clearing. Clearing department also plays an

important role in performing the activities of the bank.

The basic function of clearing department is to provide services to customers in

collection of their cheques of other banks, whether they are in city or outside the city.

The customer can get the money in his account at NBP from the cheques drawn on

another bank. The bank accepts the cheque in the clearing which it is drawn through

the clearing house i.e, State Bank of Pakistan.

4.2 Clearing

We can define clearing as, the transfer of funds from one branch of bank to the other

branch of the same bank or the other bank on which the instrument is drawn, without

involving cash through State Banks clearing house or we can say in other that

cheques which can not be cashed at the ash counter of the bank.

4.3 Clearing House

It is of the service provided by central bank i.e, State Bank of Pakistan to the other

commercial banks. SBP acts as a clearing house. A representative of each bank

represents his bank in the clearing house.

A clearing house is an association of commercial banks set up in a given locality for

the purpose of interchange & settlement of credit claims.

The SBP maintains the accounts of the NBP like other scheduled banks and debits the

account of the drawee bank and credits the presented bank which is NBP in that case.

4.4 Types Of Cheque

Some specific types of cheque are being entertained in the clearing department of

NBP Main Branch, Lahore.

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These types of cheque are:

1)- Local cheque

2)- Out station cheque

3)- In house cheque

1)- Local Cheque

By local cheque we mean collection of cheque from the banks which are the

members of the clearing house and which are located within the city.

2)- Out Station Cheque

By out station cheque we mean collection of cheque from the banks which aresituated outside the city. It means that presenting bank and the bank on which the

cheque is drawn are not situated in the same city.

3)- In House Cheque

In house cheque are drawn on one branch of NBP and presented to another branch of

NBP such cheques are marked with transfer stamp.

4.5 Types Of Clearing

Clearing department deals with the two type of the clearance.

These are stated below:

1)- Inward clearance

2)- Outward clearance

4.6 Inward ClearanceCheque drawn on NBP and presented to other Banks or handed over to NBP agent in

clearing house. That is inward clearance for NBP. So inward clearing results in

outflow of funds to collecting bands reducing the balance in the clearing account.

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4.7 Outward Clearance

Similarly cheque which are drawn on other bank and presented to NB Main branch,

Lahore are known as outward clearance for NBP Main Branch. So outward clearingresults in inflow of funds from paying bank into the clearing account maintained with

clearing house increasing the balance in the clearing account.

Outward clearing thus may be:

Local clearing

Outstation clearing

Excess of outward clearing over inward clearing produces a net increase in the

clearing account balance. Excess of inward clearing over outward. Clearing producesa net decrease in the clearing account balance. The first case is referred to as favorable

clearing & the second case as unfavorable clearing.

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CHAPTER # 5

5.1 Advances Department

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

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

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

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

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

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

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

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

task and the risk cannot be completely eliminated but could be minimized largely with

certain techniques.

Any individual or company, who wants loan from NBP, first of all has to undergo the

filling of a prescribed form, which provides the following information to the banker.

5.2 Name and address of the borrower.

Existing financial position of a borrower at a particular branch.

Accounts details of other banks (if any).

Security against loan.

Exiting financial position of the company. (Balance Sheet & Income

Statement).

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

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

interest.

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5.3 Principles of Advances

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

borrowers. Safety

Liquidity

Dispersal

Remuneration

Suitability

5.4 Forms of Loans

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

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

people in different ways as the case demand.

a) Cash Finance

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

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

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

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

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

amount he actually utilizes.

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

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

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

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

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

b) Overdraft/Running Finance

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

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

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

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

against collateral securities it is called Secured Overdraft and when the borrowing

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

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

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

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

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

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

accommodation occasionally resorted to.

c) Demand Financing/Loans

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

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

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

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

The amount of loan is placed at the borrowers disposal in lump sum for the period

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

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

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

satisfactory security

d) Agricultural Finance

NBP provides Agricultural Finance to solidify faith, commitment and pride of farmers

who produce some of the best agricultural products in the World.

Agricultural Finance Services:

I Feed the World program, a new product, is introduced by NBP with the aim to

help farmers maximize the per acre production with minimum of required input.

Select farms will be made role models for other farms and farmers to follow, thus

helping farmers across Pakistan to increase production.

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Agricultural Credit:

The agricultural financing strategy of NBP is aimed at three main objectives:-

Providing reliable infrastructure for agricultural customers Help farmers utilize funds efficiently to further develop and achieve better

production

Provide farmers an integrated package of credit with supplies of essential

inputs, technical knowledge, and supervision of farming.

Agricultural Credit (Medium Term):

Production and development

Watercourse improvement

Wells

Farm power

Development loans for tea plantation

Fencing

Solar energy

Equipment for sprinklers

e) Farm Credit:

NBP also provides the following subsidized with ranges of 3 months to 1 year on a

renewal basis.

Operating loans

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

Livestock loans for the purchase, care, and feeding of livestock

f) Production Loans:

Production loans are meant for basic inputs of the farm and are short term in nature.

Seeds, fertilizers, sprayers, etc are all covered under this scheme.

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

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g) Corporate Finance

Working Capital and Short Term Loans: NBP specializes in providing Project Finance Export Refinance to exporters Pre-

shipment and Post-shipment financing to exporters Running finance Cash Finance

Small Finance Discounting & Bills Purchased Export Bills Purchased / Pre-

shipment / Post Shipment Agricultural Production Loans

Medium term loans and Capital Expenditure Financing:

NBP provides financing for its clients capital expenditure and other long-term

investment needs. By sharing the risk associated with such long-term investments,

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

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

the banks belief in its client's capabilities, and its commitment to the country.

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CHAPTER # 6

Remittance DepartmentRemittance means a sum of money sent in payment for something. This department

deals with either the transfer of money from one bank to other bank or from one

branch to another branch for their customers. NBP offers the following forms of

remittances.

Demand Draft

Telegraphic Transfer

Pay Order

Mail Transfer

6.1 Demand Draft

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

Application form includes the beneficiary name, account number and a senders

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

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

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

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

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

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

Open DD: Where direct payment is made.

Cross DD: Where payment is made though account.

NBP CHARGES FOR DD

Up to Rs. 50,000/- is Rs 50/- only

Over Rs. 50,000/- is 0.1%

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6.2 Pay Order

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

simple and secure way of transfer of money. NBP takes fixed commission of Rs. 25 per pay order from the account holder and Rs. 100 from a non-account holder.

6.3 Telegraphic Transfer

Telegraphic transfer or cable transfer is the quickest method of making remittances.

Telegraphic transfer is an order by telegram to a bank to pay a specified sum of

money to the specified person. The customer for requesting TT fills an application

form. Vouchers are prepared and sent by ordinary mail to keep the record. TT chargesare taken from the customer. No excise duty is charged on TT. The TT charges are:

Telegram/ Fax Charges on TT = Actual-minimum Rs.125.

Cable telegram transfer costs more as compared to other title of money. In cable

transfer the bank uses a secret system of private code, which is known to the person

concerned with this department and branch manager.

6.4 Mail TransferWhen the money is not required immediately, the remittances can also be made by

mail transfer (MT). Here the selling office of the bank sends instructions in writing by

mail to the paying bank for the payment of a specified amount of money. Debiting to

the buyers account at the selling office and crediting to the recipients account at the

paying bank make the payment under this transfer. NBP taxes mail charges from the

applicant where no excise duty is charged.

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CHAPTER # 7

7.1 Account DepartmentThe main function of the accounts department of NBP is to maintain general ledger

accounts and after the business hours the function of the accounts officer is to close

books.

7.2 Functions

There are many other important functions performed by accounts department of NBP.

So I ma going to discuss these functions in three steps:

General Ledger;

Voucher system;

Types of voucher used.

7.3 General Ledger:

It is the prime record of the branch reflecting its assets and liabilities and serves as the

master control of accounting system of the branch. It consists of only those accounts,

which are authorized by the head office.

7.4 Voucher System:

Voucher is a written authorization sued in approving a transaction for

recording and payment.

Voucher is a system, which is generally designed to provide strong internalcontrol over the transaction, which take place during the business hours.

Whenever a transaction takes place in any department of the bank.

One debit and one credit voucher is prepared. At the end of the day, these

vouchers are collected and recorded i.e.,

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Debit vouchers are used in two cases:

When ever any expense is incurred. When a depositor withdraws some amount from his account

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

The format of the debit voucher includes:

Name of branch

Date Branch No.

Account No.

Transaction Code

Amount and other details (Narration)

7.5 Credit vouchers:

There are two types of transaction in which credit vouchers are used.

When a depositor deposits any amount in his account because the liability of

bank.

Any income received by the bank e.g. bank draft.

Different types of credit vouchers are used.

Now in second set these three important functions of Account department of NBP aredescribed briefly.

All expenses vouchers are routed ask through Accounts Department.

Preparation of various statements.

Preparation daily activity report at the end of each day.

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7.6 Expense voucher:

All the expense vouchers passed by each department are routed through accounts

department. These expenses include:

a) Salaries given to all employees of the bank

b) Wages

c) Rent

d) Lease installments

e) Insurance - vehicle

f) Insurance - cashg) Utility Bills

h) Medical allowances (reimbursed)

i) Cash carrying charges etc.

7.7 Salary structure:

Salary includedBonuses

These bonuses are credited after every six months i.e. June and December. These are

first and second profit bonuses and are equal to one month's basic salary.

Allowances:

Allowances included house allowances, transport allowance and utility allowance.

Provident fund:

Provident fund is provided to each employee on his retirement. Contribution by

employer and employee is 8.3%.

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7.8 Preparation of Statements:

Second major functions of accounts department are the preparation of variousstatements. These statements are:

1)- Weekly Statements:

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

2)- Monthly Statements:

These monthly statements are sent at first to NBP head office Karachi and then these

statements are sent to head office affairs in consolidated form. All vouchers and

statements signed and approved by manager accounts or who has authority to sign on

behalf of the bank and whose signatures appear in one of the banks book of specimen

signatures or a person who has authority to sign internal vouchers and records extent

of its authority will be made by the country manager.

3)- Preparation of Daily Activity Reports:

It is also duty of accounts department to prepare daily activity report at the end of

each day. It includes the details of the following:

Loans transactions

General ledger transactions

Foreign currency related transactions

Fixed deposits transactions

All vouchers prepared by different relative departments on computer.

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In third and last step the following functions of accounts department of NBP are

described as follows:

Approval of daily expenses voucher SBP balance

Tax returns

Budgeting

Forward Cover Fee

Debit Balance Calculation

Pay order/telegraphic commission transfer

Deposit entry

Depreciation

Result/budget

Head office report

Trial balance / Fx position

Commitment return

Sources and uses

Activity report

Statistics of activity

Monthly assets and liability

Liquidity 1, 2, 3, 4, 5 years

Excise duty balancing

EOM/EOY Print files floppy

Customer's/internal A/c statements Computer complete back up

Quarterly statements size wise

FCY interest reporting

FCY interest checking

Service Charges

A/c to be dormant

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Letters to customers

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Classification of deposits

List of deposits

A/c opening and closing Staff loans

A/c blocked and unblocked

Monthly resident and non resident

Zakat Calculations.

7.9 Accounting Procedure In NBP:

Various departments use debit and credit voucher for recording the transactions.

Accounting department receives the departmental journal from the departments to

gather with all the vouchers.

Verify correction of total of all into departmental entries in departmental journals.

Sort vouchers into general ledger a/c order debit separately from debit for each

account.

From departmental journals add all debits and all credits for each general ledger

account and write total for each account in relative account and extend new balances.Prove debit and credit totals to department journal total. Write total obtained from

machines list for each contingent accident in general ledger and up data balances.

Date and sign general ledger and obtain signature of an officer.

Place general ledger includes leaf binder in chronological order.

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CHAPTER # 8

8.1 FOREIGN EXCHANGE/DEPARTMENT:This deptt mainly deals with the foreign business. The main functions of this deptt

are:

L/C dealing.

Foreign currency accounts dealing.

Foreign Remittance dealing.

8.2 L/C Dealing NBP is committed to offering its business customers the widest range of options in

the area of money transfer. If you are a commercial enterprise then our Letter of

Credit service is just what you are looking for. With competitive rates, security, and

ease of transaction, NBP Letters of Credit are the best way to do your business

transactions.

8.3 Foreign Currency Account Dealing

This deptt deals with the foreign currency accounts which mainly include dollar

account, euro account etc.

8.4 Foreign Remittance Dealing

This is very important function of this deptt.

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CHAPTER # 9

Financial Analysis

In this report financial analysis is done in two ways:

Trend analysis Horizontal analysis Vertical analysis

Ratio analysis

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

Horizontal Analy

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

statement figures for a base year equal 100% and subsequent financial statement

items are expressed as percentages of their values in the base year. It is also

called Index Analysis.

Here I have done Horizontal analysis using fixed base method. For which values of

the year 2007 are taken as base.

Formula:- Current Year / Base year * 100

Vertical Analysis

Vertical analysis helps us to show the actual increase or decrease in various items of

Profit and Loss Statement with regard to a specific base as Markup Interest Earnedand for balance sheet items Total Assets are taken as base. This analysis is also called

Common- size Analysis.

Vertical analysis of the balance sheet shows the percentage increase and decrease in

various items in terms of total assets. The above analysis is done by taking total assets

as base and considered this figure equal to 100%.

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Vertical Analysis

Balance SheetFor the year ended

December 31, 2007, 2008, 2009ASSETS 2007 2008 2009Cash and balances with treasury banks 12.45 13.02 12.27Balances with other banks 4.92 4.69 3.01Lendings to financial institutions 2.82 2.09 2.07Investments 27.66 20.89 23.05Advances 44.70 50.50 50.33Operating fixed assets 3.40 2.96 2.66Deferred tax assets - 0.39 0.32Other assets 4.07 5.45 6.28TOTAL ASSETS 100 100 100LIABILITIESBills payable 0.93 1.25 1.12Borrowings 1.43 4.95 4.80Deposits and other accounts 77.66 76.42 76.94Sub-ordinated loans - - -Liabilities against assets subject to

finance lease 0.0044 0.0031 0.0045Deferred tax liabilities - net 0.67 - -Other liabilities 4.05 4.85 4.48

TOTAL LIABILITIES 84.74 87.47 87.34NET ASSETS 15.26 12.53 12.66REPRESENTED BYShare capital 1.07 1.10 1.14Reserves 2.07 2.44 2.40Unappropriated profit 5.95 6.41 6.50Surplus on revaluation of assets - net 6.18 2.58 2.62TOTAL EQUITY 15.26 12.53 12.66

Profit and Loss AccountFor the year ended

December 31, 2007, 2008, 20092007 2008 2009

Mark-up / return / interest earned 100 100 100Mark-up / return / interest expensed 33.50 39.19 50.66

Net mark-up / interest income 66.50 60.81 49.34Provision against non-performing loans

and advances 9.34 17.38 14.17Reversal of provision for diminution in -0.08 0.61 0.78

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the value of investmentsProvision against off balance sheet

obligaions bad debts written off directly - 0.01 0.03Bad debts written off directly 0.08 - -

9.34 18.00 14.97 Net mark-up / interest income after

provisions 57.16 42.81 34.37NON MARK-UP/INTEREST INCOMEFee, commission and brokerage income 13.41 13.00 11.46Dividend income 6.45 4.72 2.46Income from dealing in foreign

currencies 2.06 6.51 3.88Gain on sale and redemption of

securities 4.63 0.65 5.89Unrealized loss/gain on revaluation of

investments classified as held-for-

trading -0.06 0.00 0.00Other income 0.29 2.04 0.71Total non mark-up / interest income 26.78 26.94 24.41

83.95 69.74 58.78

NON MARK-UP/INTEREST EXPENSES

Administrative expenses 28.09 29.82 28.96Other provisions / write offs /

(reversals) 0.33 1.23 0.80Other charges 0.03 0.96 0.41Total non mark-up / interest expenses 28.46 32.00 30.17

55.49 37.74 28.61Extra ordinary / unusual itemsPROFIT BEFORE TAXATION 55.49 37.74 -Taxation - Current 16.44 19.30 11.83- Prior years 0.77 - -5.30

- Deferred 0.64 -6.92 -1.28TOTAL TAX 17.85 12.38 5.24PROFIT AFTER TAXATION 37.64 25.37 23.36

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Horizontal AnalysisBalance Sheet

For the year ended

December 31, 2007, 2008, 2009ASSETS 2007 2008 2009Cash and balances with treasury banks 100.0 112.3 122.1

Balances with other banks 100.0 102.3 75.8Lendings to financial institutions 100.0 79.8 91.3Investments 100.0 81.0 103.3Advances 100.0 121.2 139.5Operating fixed assets 100.0 93.4 97.0Deferred tax assets - 100.0 95.6Other assets 100.0 143.7 191.4TOTAL ASSETS 100.0 107.3 123.9LIABILITIESBills payable 100.0 144.7 150.4Borrowings 100.0 371.7 415.9Deposits and other accounts 100.0 105.6 122.7Sub-ordinated loans - - -Liabilities against assets subject to

finance lease 100.0 75.3 127.0Deferred tax liabilities - net 100.0 - -Other liabilities 100.0 128.5 136.9TOTAL LIABILITIES 100.0 110.8 127.7NET ASSETS 100.0 88.1 102.8REPRESENTED BYShare capital 100.0 110.0 132.0

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

Profit and Loss AccountFor the year ended

December 31, 2007, 2008, 20092007 2008 2009

Mark-up / return / interest earned 100.0 120.5 154.1Mark-up / return / interest expensed 100.0 141.0 233.1

Net mark-up / interest income 100.0 110.2 114.4Provision against non-performing loans

and advances 100.0 224.3 233.8Reversal of provision for diminution inthe value of investments 100.0 -927.4 -1504.7Provision against off balance sheet

obligaions bad debts written off directly - 100.0 505.9Bad debts written off directly 100.0 - -

100.0 232.3 247.1 Net mark-up / interest income after

provisions 100.0 90.2 92.7NON MARK-UP/INTEREST INCOME

Fee, commission and brokerage income 100.0 116.9 131.7Dividend income 100.0 88.2 58.8Income from dealing in foreign

currencies 100.0 380.6 290.4Gain on sale and redemption of

securities 100.0 16.9 196.1Unrealized loss/gain on revaluation of

investments classified as held-for-

trading 100.0 -5.3 -7.4Other income 100.0 845.1 374.7Total non mark-up / interest income 100.0 121.2 140.5

100.0 100.1 107.9

NON MARK-UP/INTEREST EXPENSESAdministrative expenses 100.0 127.9 158.9Other provisions / write offs /

(reversals) 100.0 444.9 369.5Other charges 100.0 3403.3 1876.5

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Total non mark-up / interest expenses 100.0 135.5 163.4100.0 82.0 79.5

Extra ordinary / unusual itemsPROFIT BEFORE TAXATION 100.0 82.0 79.5Taxation - Current 100.0 141.5 110.9- Prior years 100.0 - -1055.8- Deferred 100.0 -1303.6 -308.9TOTAL TAX 100.0 83.6 45.3PROFIT AFTER TAXATION 100.0 81.2 95.7

Basic earnings per share 100.0 73.8 72.5Diluted earnings per share 100.0 73.8 72.5

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9.2 Ratio Analysis

Ratio Analyses is a tool used in financial analysis. It is the most popular technique of

financial analysis. A ratio is the indicator of the quantitative or arithmeticalrelationship between two variables. it can be expressed in terms of fraction,

percentage or proportion. In financial analyses a ratio is used as a yardstick for

evaluating the financial position and performance of a firm.

9.3 Liquidity Ratios:-

Liquidity represents the ability of a bank to efficiently and economically

accommodate deposits withdrawal as well as fund increase in assets. A bank has aliquidity potential when it has the ability to obtain sufficient funds in a timely manner

at a reasonable cost. Liquidity is a primary factor leading to a banks failure whereas

high liquidity helps otherwise weak institutions to remain funded during the period of

difficulty.

Total Advances to Total Deposits Ratio:-

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

Formula: (Total Advances Total Deposits)*100

2007 2008 200957.56 66.08 65.42

ANALYSIS

This ratio, a comparison of funds generation and its funds mobilization, indicates the

total loans sanctioned by the bank in relation to total amount of money deposited with

the bank, stands highest in 2008 ( 66.08%) as compared with the previous year

figures. This shows that the bank has greater potential to advance additional loans.

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During all other years the ratio is quiet satisfactory representing National Bank of

Pakistans credit management decision.

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

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

Formula: (Borrowing from financial intuitions Total Deposits)

ANALYSIS

The due to banks to total deposits ratio of National Bank of Pakistan indicates

increasing trend during all years. The ratio is 1.84 in 2007 and increased to 6.47 in

2008. The ratio is increased in 2009 as the ratio is 6.23. The year 2007 represents the

lowest percentage of 1.84 and the year 2008 represents the peak percentage of 6.47

2007 2008 20091.84 6.47 6.23

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9.4 Leverage Ratios

Any ratio used to calculate the financial leverage of a company to get an idea of the

company's methods of financing or to measure its ability to meet financial obligations.There are several different ratios, but the main factors looked at include debt, equity,

assets and interest expenses.

Debt Ratios:-

A debt ratio of greater than 1 indicates that a company has more debt than assets,

meanwhile, a debt ratio of less than 1 indicates that a company has more assets than

debt. Used in conjunction with other measures of financial health, the debt ratio canhelp investors determine a company's level of risk.

Formula: Total Debt/ total assets) *100

2007 2008 200984.74 87.47 87.34

Debt/Equity Ratio

To a large degree, the debt-equity ratio provides another vantage point on a

company's leverage position, in this case, comparing total liabilities to shareholders'

equity, as opposed to total assets in the debt ratio. Similar to the debt ratio, a lower the

percentage means that a company is using less leverage and has a stronger equity

position.

(Total debt/ Total shareholders equity) *100

2007 2008 200979.20 79.75 76.62

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AnalysisThe debt to equity ratio of National Bank of Pakistan does not show fluctuation in2008 it was just about constant to 80% but deceased in 2009 by 4%.

Debt to Total Assets Ratio:-

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

A ratio under 1 means a majority of assets are financed through equity, above1 means they are financed more by debt. Furthermore you can interpret a highratio as a "highly debt leveraged firm".

Formula: (Total debt Total assets)*100

2007 2008 200984.74 87.47 87.34

Analysis:

Not a particularly exciting ratio, but a useful one. Cory's Tequila Co.'s debt/asset ratio

is fairly low, meaning that its assets are financed more through equity rather than

debt. And if you'll notice Cory's Tequila Co. has zero long term debt and shouldn'thave to worry about creditors getting nervous. Companies with high ratios are placing

themselves at risk, especially in an increasing interest rate market. Creditors are

bound to get worried if the company is exposed to a large amount of debt and may

demand that the company pay some of it back.

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9.5 Profitability Ratios:-

The profitability ratios indicate the efficiency of operations and the organizations

pricing policies. Profitability imitates not only the quantity but also the trend of earning during a specified period but also influences the maintenance of earnings.

Net Profit Ratio:-

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

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

2007 2008 200937.64 25.37 23.36

Analysis:

In 2007 it was 37.64% and decreased to 25.37% in 2008 but again decreased to

23.36% in 2009 so the year 2007 was best year from profitability point of view in

these years.

Operating Expense RatioRatios that are typically used to analyze how well a company uses its assets and

liabilities internally. Efficiency Ratios can calculate the turnover of receivables,

the repayment of liabilities, the quantity and usage of equity and the general use of

inventory and machinery.

Formula: Efficiency = (non interest. expense/ net interest+ non interest. income)*100

2007 2008 200942.79 52.63 61.14

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Total Asset Turnover:-

This ratio shows the overall efficiency of the bank in utilizing its assets to earn mark

up return.

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

2007 2008 20096.63 7.45 8.26

Analysis:

In 2007 it was 6.63and in 2008 it was increased to 7.45and it increased to 8.26 in

2009. So the year 2009 was best year from profitability point of view in these years

.

Return on Total Assets:-

This ratio indicates the profitability of the bank based on total assets, it means that

what is the ratio of net profit after tax to total assets

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

2007 2008 20092.50 1.89 1.93

Analysis:

In 2007 it was 2.5% and then decreased to 1.89% in 2008 and slightly increases to

1.93% in 2009. This decrease shows the banks inefficiency to generate net profit as

compared to last year.

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Return on Equity:-

This ratio shows that what is the ratio of profit after tax to capital funds

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

Capital fund = Share Capital + Reserves + Unappropriated Profit

2007 2008 200927.48 19.00 19.21

Analysis:

In 2007 this ratio was 27.48% and it decreased to 19.00% in 2008 that was a not good

sign especially for shareholders and was slightly increased to 19.21% in 2009. This is

a healthy decrease in view to 2007 and is due to the decrease in profit after tax.

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CHAPTER # 10

Swot AnalysisSWOT analysis is an acronym that stands for strengths, weakness, opportunities, and

threats SWOT analysis is careful evaluation of an organizations internal strengths

and weakness as well as its environment opportunities and threats.

10.1 Strengths:

10.1.1 Oldest Institution:

NBP in one of the oldest bank of Pakistan and first nationalized bank Hence its

customer base is strength from this plus point as customers have more confidence in

the bank. The additional value services as the privilege for the bank.

10.1.2 Alternate Duties In Sbp Absence

The NBP performs additional services for its customers as well as the other bank

customer in the absence of SBP.

10.1.3 More Deposits Than Other Bank

NBP has the relative competence in having more deposits than the other bank. This is

because of the confidence the customer have in the bank. The bank being the

privileged and oldest bank in banking sector of Pakistan enjoys this edge over all

others, lacking it.

10.1.4 Employee Benefits

The employers at NBP are offered reasonable monetary benefit. Normally two

bonuses are given Eid-Ul-Fitar & Eid-Ul-Azha. This serves as an additional benefit

and competency for the bank and a source of motivation for the employees.

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10.2 Weaknesses

10.2.1 Lack Of Marketing Effort:

The bank does not promote its corporate image, services, etc on a competitive way.

Hence lacks far behind in marketing effort .A need for aggressive marketing in there

in the era marketing in now becoming a part of every organization.

10.2.2NBP Under Political Pressure

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

affecting the bank in a negative way. They sometime have to provide loan under the

pressure, which leads to uneven and adjusted feeling in the bank employees.

10.2.3Favoritism And Nepotism

The promotions and bonuses etc in the bank are often powered by seniors favoritism

or depends upon their wills and decision. This adds to the negative factors, which

denominate the employees thus resulting in affecting their performance negatively.

10.2.4Lack Of Finacial Product

The bank falls far behind when the innovative and new schemes are considered. It has

not been involved in the tug of war between the competitors to the accounts and

strengthens the existing customer base. This stands out to be the major incompetence

and weakness of the banks.

10.2.5Inefficient Counter Services In The Rush Hours

During the rush hours, the bank is founded out to be a total flop to handle the mob of

people peaking from windows and doors. The bank has deficiency to operate in the

stages of rush hours where the people find them services entangled in a situation of

nowhere because they are not well served.

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10.2.6Lack Of Computerized Network

The bank lack the strength of being powered by the network of computers, which

have saved time, energy and would have lessened the mental stress, the employeeshave currently. This would add to the strength if it were powered by network of

computers.

10.2.7Lack Of Modern Equipment

The bank lacks the modern Equipment that is note counting machine computers. Even

if there is any equipment they lack to fall in the criteria of being rearmed as update

and upgraded

10.2.8Uneven Work Distibution.

The workload in NBP is not evenly distributed and the workload tends to be more on

some employees while others abscond away from their responsibilities, which server

as a demotivation factor for employees performing above average work.

10.3 Opportunities

10.3.1 Electronic Banking

The world today has become a global village because of advancement in the

technologies, especially in communication sector. More emphasis is now given to

avail the modern technologies to better the performances. NBP can utilize the

electronic banking opportunity to ensure on line banking 24 hours a day. This would

give a competitive edge over others.

10.3.2 Micro Financing

Because of the need for micro financing in the market, there are lot of opportunities in

this regard. Other banks have already initiated, now the time has arrived when the

NBP must realize it and take on step to cater an ongoing demand.

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10.4 Threats

10.4.1 Emergence Of New CompetitorsThe bank is facing threats with the emergence of new competitors especially in terms

of foreign banks. These foreign banks are equipped with heavy financial power with

excellent and innovative ways of promoting and performing their services. The bank

has to take initiative in this regard or will find itself far back in competition.

10.4.2 Political Pressure By Elected Government

The ongoing shift in power in political arena in the country effects the performance of

the bank has to forward loans to politically powerful persons which create a sense of

insecurity and demoralization in the customer as well as employees.

10.4.3 Downsizing

The bank is currently acting upon the policy of downsizing which threaten the

environment of the bank Employees feel insecurity in doing their jobs and work,

hence affecting the over all performance of employees negatively.

10.4.4 Customers Complaints

There exists no regular and specific system of the removal of customer complaints.

Now a day a need for total customer satisfaction is emerging and in their demanding

consequences customer's complaints are ignored

10.5 Pest analysis

10.5.1 Political

Pakistan despite all international and public perceptions, today is a functioning

democracy and gradually there is a change in complexion and composition of

legislatures with more educated people and women (27% of National Assembly and

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17% of Senate) entering into politics. Similarly it helps in designing best strategies to

implement that could support the revival of bank industry. Like in the era of

nationalization bank had to suffer as other industry thats why that impact is still

found in the performance of this industry.

10.5.2 Economical

Although banking sector development is important at the early stage of economic

growth, general liberalization presuming a homogeneous bank role may not

necessarily promote growth. The estimated cost structure indicates that state-owned

commercial banks are large enough, while development financial institutions and

private banks can expect to obtain cost-saving advantages by expanding their operations. Since scope economies are significant, portfolio diversification generally

increases bank profits. In addition, privatized banks are the most efficient, followed

by foreign and private banks. Public banks are the least efficient.

10.5.3 Social

Banks always helped people in improvement of living condition of poor people in

various forms like giving loans to poor for starting business or directly providingthem the instruments that could enhance their living conditions. Similarly National

Bank always tried to provide the needy people loans on soft terms and also helped to

eradicate unemployment by providing job opportunities Recent high growth trends

coupled with enhanced spending on social and 005/2006 has together begun to pay

some dividends a

Technological

Inadequate Communication infrastructure.

Inadequate computer facilities.

Inadequate IT training.

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CHAPTER # 11

My Internship Programme

11.1 Work Done By Me at the Branch

Major activities performed during my internship program are as follows;

11.1.1 Account Opening Department

In this department, I gain the practical knowledge about opening account. This

department deals with opening current and saving account for its customers and all

matters regarding thereof. The customers opening current and saving accounts can be

categorized as following.

Individual

Firm

Company

Trust

Staff

Others

11.1.1.1 Opening an accounts

In order to open an account, first of all the customers have to fill a form prescribed by

the bank. The person is required to bring some reference or introduction for openingthe account. Introducer may be the person who has any account with NBP.

Some important information regarding introducer e.g. the name and account number

of the introducer is written on the space provided on the specimen signature card.

Then in order to find out whether he is a true introducer or not, a letter is sent to him

thanking him for this introduction so that anything wrong may come into notice.

There are different requirements for different types of accounts and accountholders.

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11.1.2 Deposits:

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

Examining the deposit slip to ensure that the name and the account numbers

are clearly indicated.

Counting the cash and cheques and agree the total with the amount on the

deposit slip.

After that the pay in slip is validated for cash transaction and transfer and

clearing transfer as appropriate before the counterfoil is handed over to the customer.

Cheques signed by directors, partners or employees of a company, drawn infavor of them and credited in their account in the bank are to be scrutinized.

11.1.3 Withdrawals:

Cheques can withdraw amount. The withdrawals can be made only at the branch

where the account is maintained. The officer under his full signature authorizes all

cash withdrawals. No third party withdrawal is permitted. In current account, the

bank does not offer any interest. We can deposit or withdraw any amount during banking hours.

11.1.4 Issuance of cheque book:

The accountholders request for the new chequebook by presenting the requisition

slips along with the authority letter to the concerned office. His signatures are

verified before giving him a new chequebook. The presence of the accountholders is

compulsory to get a new chequebook. But if he sends a third person to get hischequebook then the procedure is as follows;

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

The accountholders verify the signature of the third person on that authority

letter.

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The bank officer gets the signature of that third person to confirm whether he

is the same to whom the accountholder has sent.

The bank issues the new cheques book and authority letter is kept buy the bank.

11.1.5 Clearing department:

In this department, I have worked for two weeks. Main branch receives the cheques

from all of its branches and makes the lots of these cheques again. Main branch sends

these cheques to the state bank of Pakistan where a clearinghouse exits. In this

clearinghouse the representatives receive their cheques and go back to their bank'smain branch. Then the main branch sends these cheques to their relevant branches

where the validity of these cheques is verified and the accounts of the relevant clients

are affected.

The statement of clearing was submitted before 1.00 P.M. daily. The whole

procedure of clearing is completed within two days.

11.1.6 Remittances department:I worked in this department for one week. This department deals in transfer of money

from one place to another or country by:

Demand drafts

Mail transfer

Telegraphic transfer

In this department internees are advised only to observe the working of transfer of

money from one place to another place of the country by the above modes of transferring money. During my stay in this department I observed that how demands

draft be issued. The procedure is as follows.

First the bank receives a written request from the customer to issue a bank draft. The

written request is either in banks standard form or separate paper signed by the

applicant enclosed with cash or cheques covering the amount of the draft and other

charges of the bank.

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While issuing a bank draft it is necessary that the draft should be free from

alternations. All the details must be written clearly in ink. After issuance a demand

draft it is handed over to the applicant and its advice containing the particulars of the

draft is sent to drawer branch with its necessary information and payment of the draft

is making on its presentation.

11.1.7 Bills collection department:

I spent one week of my training in bills collection department. Here I collected utility

bills like gas, electricity, water and telephone etc.

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SUGGESTIONS & RECOMMENDATIONS

Although NBP is included in ten top most banks of the world equity as well as assets

wise, but for the further improvement in various sectors may recommendations to the

bank would be as follows:

Planned and Healthy Competitions:

NBP should become very specific about its competitors, so that it can understand who

its competitor is in the first degree and who is in the second degree. Then the first-

degree competitors should be watched closely.

Formation of A Research Cell:

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

can be formulated.

Reward System:

The performance reward linkage should be make strong as it is said, "A happy

employee delivers more than he receives from the organization." The NBP shouldalso try to make its employees happier.

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

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

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N.B.P. even does not have a partially computerized system where as other new

competitor banks are now going towards on-line banking services.

Govt. should take keen interest to recover its bad debts, which can improve its

financial position.

In case of giving the loans, it is necessary to check the repute of customer towards

loan repayment. Bank shouldnt advance the money to those people who are addict of

rescheduling of loans due to their political influences. Instead providing loans to these

persons, loans must be advanced to the well-reputed businesses and industries having

good record of loan repayment.

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

improving their efficiency of work.

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

program instead of improving the efficiency of officers is merely a burden for the

bank in the form of heavy T.A. , D.A. and cost.

Working conditions must be improved for the employees. Bank will definitely

get more benefits after some expenditure on the working conditions as it improves

efficiency and productivity of the employees.

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

giving them certain incentives and beneficial schemes to the customers as other

competitor banks are doing so.

There is also a need of proper recruitment and selection program. New young

talent should be introduced to inject the new ideas.

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

promotions must be awarded on merit and also when due.

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Special attention should be given to the behavior of the employees towards the

customers, as customer is the most important person for any bank.

There are many employees who are working on ad-hoc basis creating

dissatisfaction. The deserved should be made permanent employees.

Political influences in the bank should be eliminated.

To motivate the employees of the bank, regular bonuses and incentives should

be given to them.

There must be a friendly environment among all the employees as it enhances

the trust and sincerity.

NBP should be focus its attention towards the share of traveler cheque.

Branch manager should be trained in the field of selling to serve better

according to the expectation of customers.

The recruitment policy should be fair and transparent.

Management should increase the branch limit of expenditure to fulfill the necessary

expenditure of personnel relation.

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CONCLUSION

As compare to the other banks the working environment of National Bank isvery poor. Most of its branches are still in old and poorly conditioned buildings.

These working conditions effect in two ways. First from employees side if the

working conditions are not reasonable then their work efficiency will be very low and

Second from the customers side that the customers dont like to go in such type of

environment. Being a Govt. Bank, political and beurucratic pressure is much more as

compared to the other banks. As a result the bad debts are high.

Being a Govt. bank it is being ignored from the beginning. It has great burdenof Govt. services, which is not much beneficial for the bank. Due to the pressure of

Govt. activities like payment of pension and receipt of Govt. collection a rush of work

is there, which disturb the normal banking business. Also such type of activities is

performed by the National Bank without any services charges.

Another burden for the National Bank is salaried accounts. Those are in large

numbers. National Bank is not gaining any advantages from these types of accounts

besides of wasting the time. These salaried accounts are dead assets for the bank. National Bank is still working on manual basis. It is very time consuming

activity thats why customers feel uncomforted as they have to wait for long time

even for a single cheque and also the chances of mistakes and frauds are greater in

manual work system. Motivation plays an important role in the success of any

organization. So, there is late schedule for upgrading the employees status.

Promotion should be in time and according to the individuals performance.

Due to the manual work system employees have to spent most of their time inthe bank to complete even their daily routine work. They have to sit till 6:00 to 7:00

PM before going back to their homes. For this reason their normal life is disturbing

which create the irritation in the behavior of employees.

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Bibliography

1. The first important thing is the discussions with the staff of the bank especially with

the manager of the branch.2. The Bank Book of Instructions for the National Bank of Pakistan called the B.B.I.

3. Surfing the website of the National Bank of Pakistan ( www.nbp.com.pk )

4. Reading the annual reports of the bank.

5. Reading the economic bulletin of the bank, which is published by the economic and

business research wing of the bank.

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Annexure-1

Profit and Loss Account

For the yearended December 31, 2007, 2008, 2009

2007 2008 2009Rupees in

'000Rupees in

'000Rupees in

'000Mark-up / return / interest earned 50,569,481 60,942,798 77,947,697Mark-up / return / interest expensed 16,940,011 23,884,768 39,489,649

Net mark-up / interest income 33,629,470 37,058,030 38,458,048Provision against non-performing loans andadvances 4,723,084 10,593,565 11,043,469Reversal of provision for diminution in the

value of investments (40,248) 373,249 605,629Provision against off balance sheet obligaions bad debts written off directly - 4,000 20,237Bad debts written off directly 39,899 - -

4,722,735 10,970,814 11,669,335 Net mark-up / interest income after provisions 28,906,735 26,087,216 26,788,713NON MARK-UP/INTEREST INCOMEFee, commission and brokerage income 6,781,683 7,925,370 8,930,391Dividend income 3,263,246 2,878,932 1,920,336Income from dealing in foreign currencies 1,042,827 3,969,057 3,028,165Gain on sale and redemption of securities 2,341,690 395,427 4,591,894Unrealized loss/gain on revaluation of investments classified as held-for-trading (31,964) 1,707 2,355Other income 147,363 1,245,369 552,216Total non mark-up / interest income 13,544,845 16,415,862 19,025,357

42,451,580 42,503,078 45,814,070NON MARK-UP/INTEREST EXPENSESAdministrative expenses 14,205,911 18,171,198 22,571,470Other provisions / write offs / (reversals) 168,027 747,521 620,780Other charges 17,141 583,361 321,647Total non mark-up / interest expenses 14,391,079 19,502,080 23,513,897

28,060,501 23,000,998 22,300,173Extra ordinary / unusual items - - -PROFIT BEFORE TAXATION 28,060,501 23,000,998 22,300,173Taxation - Current 8,311,500 11,762,650 9,221,513- Prior years 391,497 - (4,133,282)- Deferred 323,731 (4,220,242) (999,904)TOTAL TAX 9,026,728 7,542,408 4,088,327PROFIT AFTER TAXATION 19,033,773 15,458,590 18211846Basic earnings per share 23.34 17.23 16.92Diluted earnings per share 23.34 17.23 16.92

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Annexure-2

Balance Sheet

As at December31, 2007, 2008, 2009

2007 2008 2009Rupees in

'000Rupees in

'000Rupees in

'000ASSETSCash and balances with treasury

banks 94,873,249 106,50