Department : M.B.A (Finance)

Internship Report on National Bank

Of Pakistan

Contents

Executive summary

Introduction

History of NBP

Mission, vision & goals

Organizational structure of NBP

Senior management of NBP

Branch management

Organizational levels at NBP

Objectives of NBP

Functions of NBP

Learning as a student internee

Services of NBP

Trade finance and other business loans

Corporate finance

Swot analysis

Conclusion

General suggestions

Bibliography

Executive SummaryThis report is based on internship in National Bank of Pakistan, Main branch lalamusa. It is afamous and reputed bank of Pakistan. National Bank of Pakistan maintains first position inbanking sector in Pakistan. This report is based on the activities, which are performed in thisbank. This report contains marketing analysis, competitive analysis, SWOT analysis, bank tariffsand exchange rates of National bank of Pakistan. There are also stated the activities which Iperformed during my internship in the branch. In this report also discuss the industry analysis ofbanking system in Pakistan. There are also mentioned the way of investment, rates of investment,all types of financing and loans facilities which provides the National bank of Pakistan. Theproblems in this branch are also discussed .This report also intimates about the daily reserveswhich are required by the branch to meet the need of its daily requirements.

Performance of the Branch: No doubt, National bank of Pakistan is a biggest bank of thecountry and its all branches are performing their role for its development and profitability. NBP,Main branch Lalamusa is also providing excellent banking services to their customers as well asother banks in the area.

Being the main branch of National bank of Pakistan in the area, people have deposited theirfunds in different schemes and availing advances facilities, resultantly the deposit andprofitability of the branch is in growing position.

Government employees of all departments have their salary accounts in this branch which areabout 1200. Five types of pensioners, around 8000 beside other banking services are beingfacilitated by the NBP at this branch. The banks services are available to individuals, corporateentities and government. While it continuous to act as trustee of public funds and as the agent tothe State Bank of Pakistan (in places where SBP does not have a presence)it has diversified inbusiness portfolio and is today a major lead player in the debt equity market, corporateinvestment banking, retail and consumer banking, agricultural financing, treasury services and isshowing growing interest in promoting and developing the country’s small and mediumenterprises and at the same time fulfilling its social responsibilities, as a corporate citizen. NBPhas developed a wide range of consumer products to enhance business and cater to the differentsegments of society. Some schemes have been specifically designed for the low to middleincome segments of population. These include NBP Karobar, NBP Advance Salary, NBP KisanDost, NBP Cash and Gold.

It has implemented special credit schemes like small finance for agriculture, business andindustries, administrator to Qarz-e-Hasna loans to students, self employment schemes forunemployed persons, public transport scheme. The banks financial performance has beenremarkable. In 2006, total assets are estimated at PKR 635 million, while deposits have grown tonearly PKR 502 billion. Earnings per share have jumped to PKR 24.01 in 2006. Interest incomeincreased by PKR 10 billion through growth in the loan portfolio as well as increase in spreads.Advances increased by PKR 48 billion to PKR 316 billion. The bank maintains a sound loanportfolio diversified in nature to counter the risk of credit concentration. It ranges fromproviding credit to the un-banked market segment under NBP Karobar, to small and mediumenterprises, to agricultural loans, to large corporate customers.

Introduction As part of academic requirement for completing MBA (Finance) Master of BusinessAdministration. The students are required to undergo for two months of internship with anorganization. The internship is to serve the purpose of acquiring the students with the purpose ofknowledge of the discipline of banking administration.

This report is about National Bank of Pakistan (Main Branch Lalamusa). NBP was establishedunder the under the National Bank of Pakistan Ordinance 1949 and was government-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 just growing areas inPakistan. It offers different product of services to its customers.

Scope of Study: As an internee in National bank of Pakistan, the main focus of my studyresearch was on general banking operations. These operations include remittances, deposits,advances and foreign exchange. Similarly aspects of overall report are also covered in this report.

Objectives of Study:

To understand the various operations and to equip with practical knowledge of the

National Bank of Pakistan. Discuss thorough study of National bank of Pakistan.

History of NBPThe History of National Bank of Pakistan is part of Pakistan’s struggle for economicindependence. National Bank of Pakistan was established on November 9, 1949 under theNational Bank of Pakistan Ordinance, 1949 in order to cope with the crises conditions whichwere developed after trade deadlock with India and devaluation of Indian rupee in 1949.Initiallythe bank was established with the objective to extend credit to the agriculture sector. The normalprocedure of establishing a banking company under the Companies Law was set aside and thebank was established through the circulation of an Ordinance, due to the crises situation that haddeveloped with regard to financing of jute trade. The bank’s Karachi and Lahore offices weresubsequently opened in December 1949. The National bank of Pakistan came forward toestablish its offices in the Cotton growing areas and extended credit facilities liberally in order torestore stability to the market. In 1951, the country was once again faced a crises in the cottontrade when prices was crashed.

The National bank of Pakistan has its headquarters in Karachi. The bank operates 1249 branchesin Pakistan and 22 overseas branches. The National bank of Pakistan has assets worth Rupees737976.44 million on September 30, 2008.

National bank of Pakistan has implemented special credit schemes like small finance foragriculture, business and industries, administrator to Qarz-e-Hasna loans to students, selfemployment scheme for unemployed persons, public transport scheme. The bank has expandedits range of products and services to include Shariah Compliant Islamic Banking products. Forthe promotion of literature, NBP recently initiated the Annual Awards for excellence in literature.More recently it has started Electronic Home Remittances project. The project introducestechnology based system to handle inward remittances efficiently, by ensuring that the bank’sbranches keep a track of the remittance received from abroad till its final receipt .The precisesummary of National bank of Pakistan regarding its countrywide is as follows:

1950 NBP established a branch in Jeddah, Saudi Arabia. The bank in 1950 had one subsidiary “ The bank of Bahawalpur” on December 4,1947by

the former Bahawalpur State. 1955 by this time NBP had branches in London and Calcutta. 1957 NBP established a branch in Baghdad, Iraq. 1965 the Indian government seized the Calcutta branch on the outbreak of hostilities

between India and Pakistan. 1974 the government of Pakistan nationalized NBP. As part of the concomitant

consolidation of the banking sector, NBP acquired bank of Bahawalpur. 1994 NBP amalgamated Mehran bank.

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 formPakistan International Bank, of which NBP would own 45% and United bank 55%.

2003 NBP received permission to open a branch in Afghanistan.

Mission Statement“ To make the bank complete and competitive with all international standard in performing,quality of operations, staff, financial strength and products and services to develop a culture ofexcellence in every spare of activity of the bank”.

Goals of NBP“To be the pre-eminent financial institution in Pakistan and achieve market recognition both inthe quality and delivery of services as well as the range of products offerings”.

Vision“To be recognized as a leader and a brand synonymous with trust, highest standards of servicesquality, international best practices and social responsibility”.

Organizational structure of NBPAfter the elimination of Pakistan Banking Council, each bank was put under the supervision ofan independent board of directors. Since the new organizational structure of the National bank ofPakistan constitutes a board of directors and an executive committee as governing bodies. Thehead office is operationally in charge of central affairs including the delegation of powers andauthor to 9 Regional Headquarters all over the country. These Regional Headquarters direct thefunctions of the 40 zonal offices and 12 corporate branches. The head office has 9 divisions thatare further divided into two wings. The board of directors nominates the members of executivecommittee and this committee nominates divisional heads.

Senior Management of NBPMasood Karim Sheikh SEVP & Group Chief, Corporate &

Investment Banking Group & ChiefFinancial Officer

S.M Rafique SEVP & Secretary Board ofDirectors

Imam Bakhsh Bloch SEVP & Group Chief ComplianceGroup

Shahid Anwar Khan EVP & Group Chief Commercial &Retail Banking Group

Nadeem A. Dogar EVP & Group Chief Commercial,Information Technology Group

Muhammad Sardar Khawaja EVP & Group Chief, Audit &Inspection Group

Dr. Asif A. Brohi EVP & Group Chief, OperationalGroup

Javed Mehmood EVP & Group Chief, RiskManagement Group

Muhammad Nusrat EVP & Group Chief, TreasuryManagement Group

Dr. Mirza Abrar Baig Group Chief, Human ResourceManagement & AdministrationGroup

Uzma Bashir Group Chief, Organizational D&TGroup

Branch ManagementThe National Bank of Pakistan, in order to facilitate its functions on branch level appoints branchmanages and other staff according to branch activities and volume of business. The branchmanagers are responsible for all functions and staff within the branch office. The job of branchmanagers is to take charge of the entire operation of his branch, making sure that everything runssmoothly. The other functions involves scheduling of employees work hours, overseeingtraining, hiring and firing, assuring that proper procedures’ are followed, and reporting to uppermanagement any problems or providing reports and updates as required by banks protocol.

Organizational (Management) Levels At NBP

Successful and profitable banking management depends on two principle factors:

1. The manner in which the function of banking that is, the acquiring of deposits, theinvesting or converting such deposits into earnings assets, and the servicing of eachdeposits are performed.

2. The degree to which officers and employees contribute their talents to the progress andwelfare of bank in discharging duties and responsibilities.National Bank of Pakistan has a centralized type of management because all the decisionsare taken by the top management. The NBP has four types of management levels whichare as follows:

I. Top Managers: Top managers are responsible for making organization wide decisionsand establishing the plans and goals that affect the entire organization. These individualstypically have titles such as executive vice president, managing directors, chief operatingofficers, chief executive officer or chairman of the board. The NBP have its topmanagement in their head office at Karachi. They are responsible for making the plansand establishing goals to run their business smoothly all over the Pakistan around theglobe. Among seven members of group chief executive is called the president. The bankhas directors for superintendence and direction of its business. The government appointssix directors as members and one president. These members are also responsible formaking the policy of bank.

II. Middle Managers: Middle managers include all levels of management between thefirst line level and the top level of the organization. These managers manage the work offirst line managers and may have titles such as department head, project leader, plantmanager or division manager. NBP divided his management into various regions such asRawalpindi Region, Gujranwala Region etc. In NBP, regional management falls under

this category. They are responsible for the planning, organizing, leading and controllingof the resources and staff of the whole region.

III. First level managers are the lowest level of management: They manage thework of non-managerial individuals who are involved with the production or creation ofthe organizations products. The branch managers of NBP fall under this category. Theyare responsible for the planning, organizing, leading and controlling the staff and allaffairs of the branch.

IV. Non- Managerial Employees: These employees are not connected with anydecision making. They are normally specialized in their work. The nature of their job isrepetitive and clerical as they do same work again and again.

Objectives of NBPNational Bank of Pakistan is also a commercial organization and its main objective is profitmaximization. This is achieved in two ways:

1. By increasing deposits2. By charging interest on loans provided to the private sectors and business community.

These are explained as:

1. Increase in deposits: Competition in banking is intense and every bank whether itis Pakistani, foreign, private or nationalizes tries to increase its deposits by providingbetter facilities to its customers. By increasing its deposits a bank can extend greateramount of loans and hence achieve higher profit. NBP is also improving its facilitiesand services to attract customers with higher volume of deposits.

2. Extension of loans: The profitability of a bank largely depends on its amount onthe given to people as the loan and the type of people to whom credit is given i.e., thecredit worthiness of borrowers. Deposits are collected from the people and invested indifferent projects. NBP prefer to give loan to financially strong and reliable parties,after securing the collators. Some other objectives of NBP are as follows:

1. Improve customer services.2. Better public relations.3. Quick disposal of credit cases.4. Efficient operation of the branch.5. Operational an advisory services for foreign exchange account activities.

Functions of NBPFunctions of NBP are as follows:

1. Accepting deposits: This function is important because banks largely depend on thefunds deposited with them by its customers. Deposits are of many types:

I. Current deposits: Current deposits are also called demand liability on currentdeposits. NBP pays no interest on current deposits.

II. PLS saving deposits: Profit and loss saving deposits is also called checking account.Profit on PLS is calculated every month but paid every six months. In NBP currentaccount can be opened with a minimum amount of Rs.500.

III. Fixed term deposit: Fixed term deposits are deposits with the bank for certain fixedperiod before the expiry of which they cannot be withdrawn unless giving due notice. Inthis case the rates of profit will be different depending upon the time period.

1. Agency services: NBP also provides agency services to its customers:I. Collection of individuals: As NBP deals with the purchase and sale of various types

of securities, therefore NBP also provide interest on dividend or interest earned on shareor bonds.

II. Collection of cheques: In the collection and payment of cheques, bills andpromissory notes etc, NBP acts as an agent for its customers.

III. Acting as an agent: NBP also acts as an agent correspondents and representatives forits customers at home or abroad.

2. General utility services: Utilities provided by NBP are as follows:I. Clearance of utility bills: NBP provides the services of clearing the utility bills i.e.,

electricity, gas and telephone bill of its customers.II. Lockers facility: NBP also provides lockers facility to its customers to keep their

valuable assets in it. The charges of different size of lockers are different.III. Supply of information: NBP provides operational and advisory services for foreign

exchange accounts.

Learning as a student interneeThere are following learning points for me in the bank.

In my first week in NBP they assign me worked in pension department. Pension officer trainedme very nicely and I learned lot of things in this department. They give the pension to retiredgovernment employees. There are five types of pensioners given.

1. Provincial2. Central3. Defense4. EOBI5. Railway

These are different according to their PPO numbers. I am fully trained now in this particular joband I serve 1000 people in this week. How to fill form? How to enter in ledgers and balanceaccount and what are file and all other things relating to pension department.

In second week I worked on opening of account. In this week I repeatedly perform this activity.

In third week they assign me with operation manager Mr. Muhammad Ajmal handled theactivities relating to the branch and check all the work in the branch. He gives me officialcomputer. In this week I type and print so many letters for example, statement of account, letterof tax verification, letter of issuance of clearing certificates, letters for cheques clearing. I alsoprint and type the data of advances department and foreign exchange departments. Chequesclearing daily sheet is also made by me in this week and I am assisted by the other officers. I alsolearn about the reserves of the branch and daily finance need by the bank also get some raw awinformation about the opening new account.

In fourth week I assign the same task and learn some more complex and manager deposit. I learnabout accounts in which the branch deals with the main and other branches which are asfollows:

1. General account2. Suspense account3. Commission account4. Exchange account

In general account the branch debt or credit the other branches of the NBP. Usually they debit orcredit the main branch which transfers the cheques on this. In suspense account branch expensesare made and at the end of six months period inform and show the balance to main branch. Incommission account bank charges commission against its services. In exchange account theyalso earn more and branch receives earnings from main branch its services.

Secondly in this week I also learn how to open an account in the branch, it is a procedure andafter it bank open an account. On computer I type and print so many letters like, reconciliationletter joining letter, medical recovery letter and at the end I also scroll the challan of governmentand pass vouchers.

In first three days of fifth week there are busiest days of pension department so I did help withthe pension mananger. So first three days serve in this particular task. In this week I do same jobagain and print letters, reports, statements and daily clearing statement of cheques. I also didwork with Mr. Farhan and from him I learn about opening an account, payment order anddemand draft. Payment order is made to send payment within city and draft is made for paymentoutside the city but inside the country.

In 6th week I perform the duty on the seat of bills where following work is being done. How toopening an account, issue new cheque books, make a payment order, making the draft and how

cheques send for clearing. Along with this task I also enter the daily post letters in the letterregister. This is a very busy task in the bank.

On 2nd day of this week I join the duty with passing cheques of PLS accounts. There are fiftythree books of signatures cards of A/C holders. So I find the accounts in these books and thengave the executive officer to verify. In this whole day I perform this particular task.

Next day is also as above routine to sit in front of computer and scroll following files. Forexample, income tax, sales tax, withholding tax and property tax.

On fourth day of this week Mr. Muhammad Ajmal assigns me the task to rearrange list of agri-finance and set them in a sequence and print them on pages. Particular are these: name, address,security, expiry date, and account no. All the day is served in doing this particular task.

On fifth day of this week the accounts of agri-finance expired limits are checked. Some havebalance in their accounts but most of them have non in this branch. Markup from those accountholders how balance have been deducted from their accounts through vouchers and to remainingaccount holders reminding letters have been sent. This is the end of this duty.

Services of NBPNBP offers the following services to the people:

1. Demand draft: If you are looking for a safe speedy and reliable way to transfermoney, you can purchase NBP’s demand draft at very reasonable rates. Any personwhether an account holder of the bank or not can purchase a demand draft from a bankbranch

2. Letters of credit: NBP is committed to offering the business customers, the widestrange of options in the area of money transfer. If you are a commercial enterprise thentheir of credit is just what you are looking for with competitive rates. NBP letters ofcredit are the best way to do your business transactions.

3. Pay order: NBP provides another reason to transfer your money using our facilities.NBP pay orders are a secure and east way to move your money from one place toanother. The charges of NBP are very low all over the Pakistan. It charges Rs.50 for NBPaccount holders on issuing one payment order. And charges Rs.100 for NBP non-accountholders on issuing one payment order. It charges Rs.25 for students on payment of fees ofeducational institutions. If someone wants a duplicate of payment order they charge Rs.100 for NBP account holders and Rs. 150 for non-account holders.

4. Traveler’s cheques: Traveler’s cheques are negotiable instruments and there is norestriction on the period of validity of the cheques. Rupee traveler’s is available at all 700

branches of NBP. This can be encashed in all 400 branches of NBP. There is no limit onpurchase of this cheque. It is one of the safest ways for carrying money.

5. Mail transfer: Move your money safely and quickly using NBP mail transfer service.And NBP also offer the most competitive rates in the market. They charges Rs.50exchange rate and Rs. 75 postage charges on issuing mail transfer.

6. Short term investment: NBP now offers excellent rates of profit on all its shot terminvestment accounts. Whether you are looking to invest for 3 months r 1 year. NBP rateof profit are extremely attractive along with the security.

7. National income daily account (NIDA): The scheme was launched in December1995 to attract corporate customers. It is a current scheme and is part of the profit andloss system of accounts in operation throughout the country.

Slab rates on NIDA:

Rs.2 million & above but below Rs.25 million 1.00%

Rs.25 million & above but below Rs. 50 million 1.10%

Rs.100 million & above but below Rs.250 million 1.50%

Rs.250 million & above but below Rs.500 million 1.75%

Rs.500 million & above but below Rs.1000 million 2.00%

Rs.1000 million & above but below Rs.1000 million 2.25%

Rs.2000 million & above but below Rs.5000 million 2.50%

Rs.5000 million & above 2.75%

8. Equity investments: NBP has accelerated its activities in the stock market to improveits economic base and restore investor confidence. The bank is now regarded as the mostactive and dominant player I the development of the market.

9. Commercial finance: NBP dedicated team of professionals truly understand theneeds of professionals, agriculturists, large and small business and other segments of theeconomy. They are the customer’s best resource in making NBP’s products and serviceswork for them.

10. Trade finance other business loans: There are two types of trade finance.a. 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. A new program is introduced by NBP with the aim to help farmers maximizethe per acre production with minimum of required input. Select farms will be made rolemodels for other farms and formers to follow, thus helping farmers across Pakistan toincrease production. The agricultural financing strategy of NBP’s aim is to providefarmers an integrated package of credit with suppliers of essential inputs, technicalknowledge and supervision of farming. NBP provides loans or the purchase of tractors,farm implements or any other equipment.

I. Agricultural finance services: “I feel the world” program, a new products, isintroduced by NBP with the aim to help farmers maximize the per acre production withminimum of required input. Select farms will be made role models for other farms andformers to follow, thus helping farmers across Pakistan to increase production.

II. Agricultural credit: The agricultural credit strategy of NBP is aimed at three mainobjectives;

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 suppliers of essential inputs,

technical knowledge and supervision of farming.

III. Agricultural credit (Medium term) Production and development Wells Water course improvement Solar energy Development loans for plantation

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

V. Fram credit: NBP also provides the following subsidized with ranges of three monthsto 1 year on a renewal basis:

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

b. Corporate finance:

1. 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, exportbills purchased and post shipment agricultural loans.

2. Medium term loans and capital expenditure financing: NBP providesfinancing for its clients, capital expenditure and other long term investments needs. Bysharing the risk associated with such long term investments. This type of long termfinancing proves the bank’s belief in its client’s capabilities and its commitment to thecountry.

Network of NBP branched spread across the country .This will enable the customer to managetheir company’s total financial position right from your desktop computer. They will also be ableto take advantage of our outstanding range of payment ejection, liquidity and investmentservices. In fact, with NBP, you’ll be provided everything which takes to manage your cash flowmore accurately.

c. INTERNATIONAL BANKING: National Bank of Pakistanis at the forefront ofinternational banking in Pakistan which is proven by the fact that NBP has its branches in all ofthe major financial capitals of the world. Additionally, we have recently set up the FinancialInstitution Wing, which is placed under the Risk management group. The role of the FinancialInstitution Wing is:

To effectively manage NBP, s exposure to foreign and domestic correspondent.

Manage the monetary aspect of NBP’s relationship with correspondents to support tradetreasury and other key business are there by contributing to the bank’s profitability.

Generation of incremental trade-finance business and revenue.

d. Cash and Gold Finance: cash and gold finance means that loan is given against the gold. Thegold is mortgaged with the bank and loan is taken. It is the area of consumer finance andborrower can take gold for common use.

e. Advance Salary loan: this loan given to those people who are government servants. They canget a loan up to the salary of fifteen month.

Departmentalization

Dividing an organization into different pars according to the functions is calleddepartmentation.so NBP Branch is divided into two main parts.

A. Cash Department: all physical movement of cash in the bank I made through cashdepartment. Cash department performs the following function.

1. Receipt2. Payments 3. Act according to any standing instructions4. Transfer of funds from one account to another5. Handling of ATM6. Verification of signatures7. Handling of prize bond8. Posting

Cash receipt Section: The money which either comes or goes out from the bank, itsrecord should be kept. Cash department performs this function. The deposits of allcustomers of the bank are controlled by means of ledger accounts. Every customers hasits own ledger account and has separate ledger.

Clearance Department: A clearing house is an association of commercial banks setup in given locality for the purpose of interchange and settlement of credit claims. Thefunction of clearing house is performed by central bank of a country by tradition or bylaw. In Pakistan, the clearing system is operated by the SBP. If SBP has no office at aplace, then NBP as a representative of SBP act as a clearing house.

Advance Department: advance department is one of the most sensitive and

important departments of the bank. The major portion of the profit is earned through thisdepartment. The job of this department is to make proposals about the loans. The CreditManagement Division of Head Office directly controls all the advances. As we knownbank is a profit seeking institution. It attracts surplus balances from the customers at lowrate of interest and makes advances at a higher rate of interest to the individuals andbusiness firms. Any individual or company, who wants loan from NBP first of all has toundergo the filling of a prescribed form, which provides the following information to thebanker.

1. Name and address of the borrower a. Existing financial position of a borrower at a particular branch,b. Accounts details of other banks (if any). c. Exiting financial position of the company. (Balance sheet & Income statement). d. Signing a promissory note is also a requirement of lending, through this note borrowerpromise that he will be responsible to pay the certain amount of money with interest.

2. Principles of advances: There are five principles which must be observed whileadvancing money to the borrowers.

Safety

Liquidity

Dispersal

Remuneration

Suitability

3. Forms of loan: In addition to purchase and discounting of bills, bankers in Pakistangenerally lend in the form of cash finance, overdrafts and loans. NBP provides advances todifferent people in different ways as case demand.

i. Cash Finance: This is a very common form of borrowing by commercial and industrialconcerns and is made available either pledge hypothecation of goods, produce or merchandise. Incase finance a borrower is allowed to borrow money from the banker up to a certain limit, eitherat once or as and when required. The borrower prefers this form of lending due to the facility ofpaying markup services charges only on the amount he actually utilizes. If the borrower doesnot utilize the full limit, the banker has to lose return on the un-utilized amount. In order to offsetthis loss, the banker may provide for a suitable clause in the cash finance agreement, accordingto which the borrower has to pay markup service charges on at least on self or one quarter of theamount of cash finance limit allowed to him even when he does not utilize that amount.

ii. Loans: When customer’s borrowers from a banker a fixed amount of repayable either ininstallments or in lump sum at a fixed future time, it is called ''loan''. When bankers allow loansto customers against collateral securities they are called ''secured loans'' and when no collateralsecurity is taken they are called ''clean loans''

iii. Overdraft/Running Finance: This is the most common form of banking lending.When a borrower requires accommodation his banker allows withdrawals on his account inexcess of the balance which the borrowing customer has in credit and an overdraft thus occurs.When it is against collateral securities it is called '' Secured Overdraft'' and when the borrowingcustomer cannot offer any collateral security except his personal security, the accommodation iscalled a ''Clean Overdraft''. The borrowing customer is in an advantageous position in anoverdraft, 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 abank finance used for a long term by commercial and industrial concern on regular basis, whilean overdraft is a temporary accommodation occasionally resorted to.

D. Remittance Department: Remittance means a sum of money sent in payment forsomething. This department deals with either the transfer of money from one bank to other bankor from one branch to another branch for their customers. NBP offers the following forms ofremittances.

a. Demand Draft

b. Telegraph Transfer c. Pay Order

d. Mail Transfer

E. Deposit Department: It controls the following activities: a. Account opening b. Issuance of cheque book c. Current account d. Saving account e. Cheque cancellation f. Cash

a. Accounting opening: The opening an account is an establishment of banker customerrelationship. Before a banker opens a new account, the banker should determine the prospectivecustomer's integrity, respectability, occupation and the nature of business by the introductoryreferences given at the time of account opening. Preliminary investigation is necessary becauseof the following reasons. 1. Avoiding Frauds 2. Negligence 3. Inquiries about clients There are certain formalities which are to be observed for opening an account with a bank.

Formal applications

Introduction

Specimen signature

Minimum initial deposit

Operating the account

Pay-in-slip book

Pass book

Issuing cheque book

b. Issuance of cheque book: This department issue cheque book to account holder.Requirements for issuing cheque book are as follow:

The account holder must sign the requisition slip.

Entry should be made in the cheque book issuing book.

c. Current Account: These are payable to the customer when they are demanded. When abanker accepts a demand deposit, he incurs the obligation of paying all cheques etc. Drawnagainst him to the extent of the balance in the account. Because of their nature, these deposits aretreated as current liabilities by the banks. Bankers in Pakistan do not allow any profit on thesedeposits, and customers are required to maintain a minimum balance, failing which incidentalcharges are deducted from such the accounts. This is because the depositors may withdrawCurrent Account at any time, and such the bank is not entirely free to employ such deposits.

d. Saving Account: Saving Deposits Account can be opened with very small amount ofmoney, and the depositor is issued a cheque book for withdrawals. Profit is paid at a flexible ratecalculated on six-month basis under the Interest-Free Banking System. There is no restriction onthe withdrawals from the deposit accounts but the amount of money withdrawn is deleted fromthe amount to be taken for calculation of products for assessment of profit to be paid to theaccount holder. It discourages unnecessary withdrawals from the deposits.

f. Foreign Exchange Department: This department mainly deals with foreign business.The main function of this department are:

L/C dealing

Foreign currency account dealing

1. L/C Dealing: NBP is committed to offering its business customers the widest range ofoptions in the area of money transfer. If you are a commercial enterprise then our letter of Creditservice 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.

3. Foreign Currency Account Dealing: This department deals with the foreign

currency accounts which mainly include dollar accounts, euro account etc.

Industry analysis: Banking is one of the most sensitive business all over the world. Banksplay very important role in the economy of a country. The banking sector plays a significant rolein a contempory world of money and economy. It influences and facilities many different butintegrated economic activities like resources mobilization, poverty elimination, production anddistribution of public finance. Pakistan has a well-developed banking system which consists of a

wide variety of institutions ranging from central bank to commercial banks and to specializedagencies to cater for special requirements of specific sectors. The country started without anyworthwhile banking network in 1947 but witnessed phenomenal growth in the first two decades.B y 1970 it had acquired a flourishing banking sector.

Comparative study of Domestic Banking Industry: Nationalization of banks in theseventies was a major upset to domestic banking industry of the country, which changed thewhole complexion of the banking industry. With irrigational decision at the top all commercialbanks were made subservient the political leadership and the bureaucracy. Specialized bankinginstitutions were already working in the public sector. The new accountability paradigm changedthe business ethics in the banking industry was accompanied by violent changes in the externalvalue of rupee. The commercial banks thus lost their assets management, equilibrium,bureaucracies. This was accompanied by indiscreet loaning under political pressure. Theysuffered from three terminal disease i.e., loan-higher intermediation cost and loss of initiativeand entrepreneurship. The Muslim Commercial Bank was the first bank to privatize. Followed byAllied Bank limited, United Bank Limited and now the Habib Bank Limited have beenprivatized. One thing good for that particular period was the recruitment of fresh officers in thedomestic banking industry through well-organized policies of Banking Council.

Public Sector Commercial Banks

The government of Pakistan permitted small private sector banks to operate which indulged indoubtful policies to promote business. The public sector banking which constituted thebackbone, thus continued to suffer because of their approach, size and carried over liabilities.Mehran Bank is the prime example to that kind of banking in the country, which ultimatelymerged into National bank of Pakistan i.e. last resort of domestic banking industry.

Local Private Banks

Askari Commercial Bank Limited

Bank Al-Falah limited

Bank Al habib Limited

Bolan bank Limited

Faisal bank Limited

Metropolitan bank Limited

Platinum Commercial bank ltd.

Prime Commercial bank Limited

Saudi Pak Commercial bank Limited

PICIC Commercial B

Soneri bank Limited

Union bank Limited

Muslim Commercial bank Limited

Allied bank of Pakistan

Specialized Banks

Zari Tarqiati bank Ltd.

Industrial Development Bank of Pakistan

Punjab Provincial Cooperative Bank Limited.

There are17 listed banks in Pakistan 2004. Four banks are still not listed, which are Habib bank ,United bank ,Allied bank ,Dawood bank , standard chartered bank Citibank ,and ABN AMRObank are main foreign banks in the country . These four banks continue to enjoy a significantshare in the market, both in terms of deposits and advances .All the foreign banks of the countryare busy to invest heavily in the field technology and e-commerce in order to overcome branchlimitation .All the foreign banks have been busy to introduce new products and idea to grablarger proportion of the local markets. Foreign banks are carrying major proportion of localbusiness in credit cards, consumer finances and housing finance.

Many domestic banks have increased their general standards. Internet –based services areconstantly increasing the number of ATM machines, either by installing their own machines ormaking arrangements with other networks. The number of Debit Cards has also been increasingat an unprecedented rate. The borrowing to private sector has increased many domestic bankshave been suffering from surplus liquidity crises mainly due to low demand for credit andslowdown of manufacturing sector in the country . Almost all the banks are now bought to investin capital markets to increase their exposure in equities. To stop that risky trend the State Bank ofPakistan issued the introduction to follow the prudential regulations in letter and spirit and notinvest in the capital markets beyond the limits. The domestic banks lending under consumerfinance and housing finance has also been growing .the analysis of annual reports of banksshows that their income from core banking activities has been growing .the other positive pointis that that there are growing expectation for increase in interest rates.

The growth in advances has started matching growth in deposit .The quality of asset as wellliability product have been improving. The ratios of non-performing loans have decreased. TheSBP 29 Scheme has benefited the banks as well as the borrowers to pay off their long – standingdues. Bank ALFALFA is the first to opt for the listing policy of the government and also offeredits share to general public. Two of the state – owned banks, Habib Bank and United Bank, havebeen privatized.

Allied Bank of Pakistan was privatized in early nineties .But due to many internal and externalreasons it continues to suffer. Some meaning full managerial changes would be batter at theearliest .Dawood Bank has recently emerged on the banking scenario of Pakistan and operationsof a Sri Lanka bank by a local business group. It is also not listed at the local stockexchanges. .Meezan bank is the first bank of the country, which is carrying complete Islamicbanking.

COMPARATIVE POSITION OF BRANCH FOR LAST FOUR YEARS.

ANALYSIS

1. DepositsI. Current deposit are on increasing tread which shows confidence of business community

on branch business.II. Foreign currency accounts were to the introduced to the consumers of the branch in

mid-2011 and within a short span of time equivalent to Rs. 7.29 million were depositedby the holder.

III. PLS term deposit certificates are fixed deposits for 1 to 10 years. They are redeemed ontheir maturity. Branch on deposits business of these deposits was on increasing trendfrom 2009 to 2010 due to dwindling economy. In 2011, term deposits dropped by %because the economy starts to boost and SBP cut the policy rates hence profit ratesdropped.

IV. Saving deposits are the major part of deposit base of the branch which shows year onyear increase from 2008 to2011 but the rate of change is ranged between 1% to 9%.in2011 rate of increase dropped due to reasons mentioned in PLS term deposit section.These deposits show household deposits that’s why they increase in absolute term in thesame time deposits (mainly business deposits) decreased due to drop in profit rates.

2. Profits: as depicted by the figures shown above, profitability of branch has increased inevery year and shows a growth spectrum in the performance.

3. Deposits:

I. Cash finance is the credit line extended to some business on the basis of pledge,hypothecation, mortgage or cash flow projections. Branch increased its business in thisarea with the advances in this facility increased from 19 million to 27.5 million.

II. Agriculture finance is the advance to farmers to meet their needs against some tangiblesecurity. These advances also increased from 37 to 57 million in the period under review.

III. Staff Loan are no profit no loss advances for branch. Loans availed by employee of NBPare placed in this head.

IV. Advanced salary is the scheme for salaried individuals of government or non-governmentemployees to get their 18 months’ salary in advance but amount should not exceed1,000,000.

V. NBP Karobar-transport scheme announced by Federal Government and since 2008 itstands replaced. Advance granted before 2008 are placed in this head which aredecreasing ever year as the installments are received for them

Swot analysisStrengths

1. Oldest institution: NBP is one of the oldest bank of Pakistan and first nationalizedbank. Hence its customer’s base is strength from this plus point as customers have moreconfidence in the bank. The additional value services as the privilege for the bank.

2. More deposits than other banks: NBP has the relative competence I having moredeposits than the other bank.This is because of the confidence the customer have in thebank. The bank being the privileged and oldest bank in banking sector of Pakistan enjoysthis edge over all others, lacking it.

3. Western union facility: National bank of Pakistan, main branch lalamusa, is one ofthose service providers which are being facilitated to the customers of western union. Inthis particular scheme money is transfer in Pakistan from abroad. This is the fastest wayto money transfer. You can receive the money from this branch to see the name, passwordof particular client.

4. Customer satisfaction: Because of government bank, it is enjoying the customer’ssatisfaction. Customer’s feel secure their money in NBP.

5. Online banking: This is also strength of NBP that 130 branches are online. It helps thespeedy services giving to the customers. There is also help in checking the balances anddaily transactions just at one key press.

6. Employee benefits: The employers at NBP are offered reasonable monetary benefits.Normally two bonuses are given Eid-ul-Fitar & Eid-ul-Azha. This service as anadditional benefit and competency for the bank and a source of motivation for employees.

7. Employee’s loyalty:Employees are very much loyal to NBP. Employee’sturnover is very low in NBP. Very few employees are leaving the jobs in NBP. So it isvery big strength that your employees are loyal o you organization.

8. Wide area of services: They provide the wide area of services. They offer lot ofservices relating to the banking system like, pension to retired government employees,utilities bills, deposits, sales tax, withholding tax, property tax and various loan schemes.

Weaknesses

1. Lack of communication between employees: During the internship in NBP Ifound the problem of lack of communication between the employees and management.They have not very much understanding with each other and not share the work of eachother.

2. Punishment is not very strong for employees: Punishment threat is not verystrong for employees. Some employees are not very professional in their field but topmanagement not takes the action against such employees.

3. Public dealing is not very effective: Public dealing is not very effective in NBP.Employees are not taking care of the customers, especially in pension and billsdepartment.

4. Lack of respect of seniors: This is not a healthy sign for NBP that respect of seniorsis not up to the manners. Juniors try to avoid the seniors and no take the help from them.

5. NBP under political pressure: The strong political hold of some parties andgovernment and their dominance is affecting the bank in a negative way. They sometimehave to provide loan under the pressure, which leads to uneven and adjusted feeling in thebank employees.

6. Favoritism and nepotism: The promotions and bonuses etc in the bank are oftenpowered by senior’s favoritism or depends upon their wills and decision. This adds to thenegative factor, which dominate the employees and thus resulting their performancenegatively.

7. Ineffective counter services I the rush hours: During the rush hours, the bank isfounded out to be a total flop to handle the mob of people peaking from windows anddoors.

8. Lack of computerized network: The bank lack the strength of being powered bythe network of computers, which have saved time, energy and would have lessened themental stress, the employees have currently. This would add to the strength if it werepowered by network of computers.

9. Lack of modern equipment: The bank lacks the modern equipment that is notcounting machine computers. Even if there is any computer they lack to fall in the criteriaof being rearmed as update and upgraded.

Opportunities:1. Growing banking system: Now-a-days banking system is growing quickly so NBP

have opportunities to improve the standard and get the more share in the market.2. NBP have government back: In growing area there is a chance for NBP to improve

itself and increase the share in the market because it is most trustable due togovernment’s bank.

3. Increase to economic activities: The economic activities are increase now-a-days.So banks are contributing more in economic activities. Banks play a role in trade andcommerce. So the business of commercial banks increases.

4. Electronic banking: The world today has become a global village because ofadvancement in the technologies, especially in communication sector. More emphasis isnow given to avail the modern technologies to better the performance. NBP can utilizethe electronic baking opportunity to ensure on line banking 24 hours a day. This wouldgive a competitive edge over others.

Threats

1. Increase in no. of banks: Increase in no. of banks is a threat for National bank ofPakistan. A no. of private banks operating their business and provide the same facilities.So increase in no. of banks is a threat for NBP.

2. Modern type of banking: Modern and computerized banking is required to fulfillthe customer’s need and maximum branches of NBP are worked in old traditional ways.Highly skilled people and management required to meet the standard of banking. In NBPsome employees are irresponsible and lack of complete knowledge of banking system. Sothese employees are creating problems in the system of NBP.

3. The whole structure change to online: NBP have wide network of branches.Only 130 branches are online, so it is very difficult and time consume to convert allbranches to online system. So there is also risk involves that if one computer of branchsuffers in problem, all system and all computers of all branches must be turnoff.

4. Customer’s complaints: There exists no regular and specific system of the removalof customer’s complaints. Now a day a need for total customer satisfaction is emergingand their demanding consequences customers’ complaints are ignored.

5. Emergence of new competitors: The bank is facing threats with the emergence ofnew competitors especially in terms of foreign banking. These foreign banks areequipped with heavy financial power with excellent and innovative ways of promotingand performing their services. The bank has to take initiative in this regard or will finditself for bank in competition.

Conclusion

No doubt the National bank of Pakistan is a biggest bank of the country and its main branch,Lalamusa is providing excellent banking services to customers as well as other banks in thearea but due to shortage of staff I found great rush at all the times. All the governmentemployees have salary account in this branch which is about 1200 and five type ofpensioners around 8000 beside other banking services while it has seen that all other banksare waiting for customers.

During my internship at this particular branch of NBP, there are following problems I havefound which are directly affect on efficiency and performance of the branch. These problemsare called as internal problems. So these are discussing below.

1. Lack of communication among the employees: During the period of myinternship I found this problem as a biggest problem that they are not very effective incommunication between themselves. They do not share the experience with each otherand do not care the other employees. If one employee has a problem, then he asked toothers, but he did not give clear solution for that problem. Pension managers and otheremployees are always tried to gain cash performance award and use the references to getit. They are talk against each other in front of me. So finally it is very needy for a publicservices organization to keep atmosphere friendly among the management andemployees.

2. Ineffective public dealing: There is also a big issue that they think its governmentbank so it does not care customers. It is a wrong perception. There must be a good publicdealing in public service organization. If one customer asked a question twice, they angryon him and stop work. So this problem should be solve to create a good environment ofthe NBP.

3. Not very regular and punctual: Regularity and punctuality shows the character of a biggood executive. But this problem is also faced by the NBP because many executive notcome at time.

4. Lack of computing skills: Computing skills are also low, some executives are veryefficient in computing skills but some are not totally aware from this system. Forexample, ATM machine at this branch is only handled to Mr. Muhammad Ajmaloperation manager. When operation manager is on leave due to some problem, ATMmachine is off and not worked because nobody knows to run this machine.

5. Poor record management and filing system: During my internship I observedthat filing system of branch is not good. When certain record is needed the staff has tostruggle to find it out and a lot of time is wasted.

6. Misuse of resources: Resources are very needy, so there must be avoid to misuse theresources but in this branch it is reserved case. There is very wrong use of resources,because employees does not take care of resources and not used them in right direction.Finally it is suggested that if these problems are solved there are much more chances forincrease the performance of NBP particularly at this branch.

7. Delays in loan advancement: It has been observed that there in sanctioning of casesfrom the head office, which results in customer dissatisfaction.

8. Lack of appreciation: Another very important thing which is ignored in the bank isappreciation of the employees in their good performance. If performance of employees isnot recognized and appreciated they become dishearten which results in decline inperformance.

9. Low profit rates: Most of the customers shifted their accounts to the National SavingCenter because of the low rates of saving deposits discourages the customers. Bankshould increase their profit rates to attract customers.

10. Excessive paper work: It is notified that due to the lengthy procedure of paper work,the bank employees are over burdened. They are unable to give proper attention to theclients and face difficulties in getting their job done One reason for lengthy procedureand excessive paper work in the ban is lack of computerized technologies.

11. Promotions: Promotion in NBP is purely on the basis of seniority, so the new youngperson having high qualification remains behind for quite a lot of time. Top managementand Staff union put pressure for the promotion of their favorites, which gives a sense ofdeprivation to the deserving employees and their efficiency is affected. As the concept ofpromotion is attached with better in terms of greater responsibility, more prestige, greaterskills and increased rate of salary. Thus a better and impartial policy of promotion needsto be followed.

12. Lack of business communication: There is no proper way to give information totheir customers. 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 brochuresthat containing information notice board on the entrance where customer can see it easily.

13. Need for better training program: Need of training is greatly emphasized alaround the world. Training of the personnel is part of Human Resource Management. Ithas been noticed that the training program of NBP is not adequate. Once the candidate isselected and placed on the respective job. It becomes essential to train him adequately forthe task. They should learn new methods for motivation customers. The training programof the bank should include scientific techniques to improve the decision making andinterpersonal as well individual needs of the employee both specialized to fresh as well ason the job to maintain the high standard of service.

General suggestionsNBP is an effectively operating and profit making organization and carrying out its activitiesunder a specified system of procedure. The main regulatory body is State bank of Pakistan,which provides policy guidelines and ensures that the money market operates on soundprofessional bases, while the head office specifies the whole procedure of function andoperations. This procedure has been modernized with the passage of time with a view tostreamline the approach and under lying procedure for effective overhauling of its owncapabilities so as to bring them at par with international policies.

Here I am giving some suggestions, which in my view can add some input for efficiency andbetter performance of NBP. These recommendations are as follows:

1. Professional training: NBP staff lacks professionalism. They lack thenecessary training to do the job efficiently and properly. Although stall colleges in allmajor cities but they are not performing well. For this purpose these staff colleges shouldbe reorganized and their syllabus should be made in such away to help the employeesunderstand the ever changing global economic scenario. Banking council of Pakistanshould also initiate some programs to equip the staff with much needed professionaltainting.

2. Delegation of authority: Employees of the bank should be given a task and authorityand they should be asked for their responsibility.

3. Transfer: Transfer is not properly carried out. Some of the employees are continuouslyserving at the same post. They are simply rotated at the same branch. Therefore it isrecommended that rotation of every employee should take place after every three years indifferent branches of the bank.

4. Need of qualified staff: Required qualified staff should be provided to branch inorder to improve the functioning of the branch. Especially a telephone operator should beappointed.

5. Credit card: National bank of Pakistan should start its operation in credit card. Thesecards are very helpful for the ordinary customers in general and the business people inparticular. To make it more secure and to eliminate the misuse of it, the management isrequired to keep proper security against the card.

6. Installing validator and ATM: Validator machine is used to count the currencynotes and its installation will help to eliminate the counting errors and will save time.This branch is situated in the city, which is supported to be the hub of business activities.In this area an auto teller machine (ATM) is the need of the businessman through whichthey can easily check their balance in the bank and also with dram their moneyconveniently.

7. Improve distribution of work: Proper distribution of work leads to success inevery organization. Proper distribution of work prevents the employee’s from over andunder work situation. So for a smooth running of an organization proper distribution ofwork is the hint to be followed.During my internship I observed that there was no proper distribution of work in thebank. I saw that some of the employees worked like ants other sat idle starting here andthere. So this created a lot of over work situation for while relaxation for other.

8. Technological advancement: I would like to suggest that at least all the mainbranches of NBP should be fully computerizes in order to expedite the dealing processamong bankers and their customers. Every department should be provided a computerwith adequate training (especially advances, deposits and foreign exchange departments).Daily records should be entered directly into these computers, (instead entering theoverall daily transactions after the banking hours). It will not only reduce transactiontime, but also will increase accuracy and it will be efficient as well.

9. Staff relationship: Good relationship among staff members leads to the peakperformances in any organization. I observed that the staff relationship was normalotherwise but sometime I noticed that there existed a little conformity among the staffmembers. Another syndrome from which the staff suffered was that all of themconsidered themselves more important than others. Some of the officers used to say thatif I am absent for a day the bank would stop working. So this sort of attitude is not good.

10. Favoritism and nepotism: In the city branch during my internship I saw that whensome of the employees are transfer to other places, due to their relation with influentialpeople and with top management they can transfer their transfer in few weeks, when theyare unsatisfied at that place.

11. Inter departmental transfer: I watched during my internship that, there is numberof employees who have worked on one seat for many a year. It can negative effectmotivation of employees who is hard working and intelligent. Take the example odadvances section. In advances section if the employees are transfer after six month orseven month, how can be able to show his performance and how can be able to know thebank customer in a short period of time.

12. Complaints of customers: There should be an information desk to provide theinformation and to receive the complaints of the customer in the bank. There is nocomplaint box available in the branch and not any person appointed to hear thecomplaints. Every person cannot go to the manager for the complaint because most of thepeople are hesitant. So I suggest management to install a complaint box in the branch,and recruit a special person for that guidance of the customer when they are unable tomanage some difficulties in banking matters.

BIBILIOGRAPHY Website of National Bank of Pakistan www.nbp.com.pak Annual report of National Bank of Pakistan Newspaper Dawn Newspaper the Nation Newspaper Business Recorder Mr. Ijaz Ahmad (Branch Manager) Auditors report of National Bank of Pakistan Searching from different websites from internet