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INTRODUCTION

1.1 BANKS AND SCOPE OF BANKING

1.1.1 WHAT IS BANK?


A bank is an institution for the custody, loan or exchange of money for sanctioning credit, for
transferring funds by domestic foreign bills of exchange. It is a pipeline through which currency
moves into and out of circulation.
As it is clear from the definition of banking, the main activity or function of banking is
borrowing and lending of money with a margin of gain. However, as far as the present day banking
is concerned, there are a number of different banks, set up under specific different objectives,
performing various functions.
1.1.2 BANKING IN DEVELOPING SOCIETIES
In the developed societies, the banks do not have to make many efforts in mobilizing
savings, as it has become a second habit with the people. The commercial banks are financing the
short and long-term capital needs of the business. The loans and discounts of commercial banks
include real state mortgages and long term loans, which extend to as long a period as ten years.
These banks also administer estates, acts as insurance agents and underwriters, provide brokerage
services and implement domestic as well as foreign economic polices of the government.
Commercial banks in developing countries have to make vigorous efforts of resource
mobilization at all levels. However, with the passage of time the commercial banking operations are
under going remarkable qualitative change. In Pakistan for instance, banking facilities are being
extended to the un-banked places. Planned efforts are being made to enhance the supply of bank
advances to the new priority sectors in consonance with the present day socio-economic needs.
A special scheme to induct commercial banks in the field of agricultural credit was
introduced in December 1972. The scheme provides for short and medium term loans to farmers
under a much-simplified procedure. State Bank’s measures aimed at increasing the flow of credit to
the small man in business and industry as well as to housing and non-traditional exports have also
yielded positive results. The “Credit Guarantee Scheme” is covering the large risk to the commercial
banks in the sphere of agricultural finance and small loans to a reasonable extent. Mandatory targets

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for small loan credit to the agriculture sector and for housing have been prescribed and are being
enforced. Corporate banking is also being reorganized and reactivated on more viable fines.

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1.2 NEW CHALLENGES OF CONTEMPORARY AGE
Banks play a vital role in the economic development of country. They accumulate the idle savings
of the people and make them available for investment. They also create new demand deposits in the
process of granting loans and purchasing investment securities. They facilitate trade both inside and
outside the country by accepting and discounting of bills of exchange. Banks also increase the
mobility of capital. They provide a variety of facilities for remitting a large amount of money from
one place to another by the transfer of a small slip of paper.

In a country like Pakistan, which is still in the initial stages of economic development, and well –
organized banking system is the need of the day. There is acute shortage of capital in Pakistan. The
banks have to play an important role in promoting capital formation, in controlling speculation in
maintaining a balance between requirements and availability and in direction physical resources in to
desired channels. In advanced countries of the world like America, Japan, Germany, the rate of
capital formation ranges from 17% to 30% of their Gross National Product. Whereas in Pakistan the
rate of saving has varied from 13% to 20% only

In order to accelerate the rate of economic development the Government has been acquiring foreign
capital. The banks by launching a vigorous campaign both in the villages and cities can mobilize the
idle savings and can increase the rate of investment. The country thus becomes independent of
foreign capital, which in fact has let us down on almost all the crucial happenings in the country.

This deficiency of capital accumulation is due to so many reasons like, lower per capital income,
disparity of wealth, unorganized banking system, ineffective fiscal measures etc. One reason of this
capital deficiency is the non-adoption of modern marketing tools, such as market research, sales
organization, sales training, sales management, advertising etc. for attracting deposits.

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1.3 WHAT IS A COMMERCIAL BANK?

A bank is a financial institution, which deals with money and credit. It accepts deposits from
individuals, firms, and companies at a lower rate of interest and gives at a higher rate of interest to
those who apply for loan. The difference between the terms at which it borrows and those at which it
lends from the source of its profit. A bank, thus, is a profit-earning institute. Any bank that performs
this functioning is called the commercial bank.

According to Crowther:

“A bank is a firm which collects money from those who have it spare. It lends money to
those who require it.”

According to Banking Ordinance 1962 :


According to Section 5(b) of Banking Ordinance 1962, meaning of banking is as under:

“ Banking company is a company which transacts the business of banking in Pakistan, mainly
of accepting, for the purpose of lending and investments of deposits of money from the public,
repayable on demand or otherwise and withdraw able by Cheque, draft, order, or otherwise ”

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1.4 MANAGEMENT

AND

ORGANIZATION

OF A COMMERCIAL BANK

The ownership, management, and control of all the commercial banks were taken over by the
Government of Pakistan on January 1st, 1974.
A banking council was formed under the Nationalization Act 1974. The banking council
was set up for making policy recommendations to the Federal Government, formulating policy
guidelines for the banks and their reorganization.
The management and organizational structure of the nationalized banks have uniformity.
This management and organizational structure is briefly described as under:
 Board of Directors
 Executive Board
 Chief Executive
 Divisional Chiefs
 Provisional Chiefs
 Circle Executive
 Zonal Heads
 Branch Managers

1.5 BANKER AND CUSTOMER RELATIONSHIP


The relationship between the banker and the customer are of utmost importance. Both serve the
society and the economy to expand. Before we discuss the relationships between the banker and the
customer, it seems necessary that the two terms banker and customer are made clear.
1.5.1 Banker:
A banker is a dealer in capital or more properly a dealer in money. He is an intermediate
party between the lender and the borrower and charges a definite amount of money, which is the
profit of his.

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1.5.2 Customer:
A customer is a person who maintains a regular account with the bank, without taking into
consideration the duration and frequency of operation of his account. The relations between the
banker and the customer are generally studied as under:
Debtor and Creditor:
The general relationship between banker and customer is primarily that of a debtor and
creditor. When customer deposits money with a bank, the bank then is the debtor and the customer is
the creditor. The customer expects from the bank that (I) his money will be kept safe by the bank,
(II) it will be returned on demand within business hours. The position is reverse if the customer is
advanced loan i.e. the banker becomes the creditor and the customer is the debtor.
1.5.3 Principal and Agent:
The special relationship between the customer and the banker is that of principal and agent.
The customer (principal) deposits Cheque, drafts, dividends etc. are for collection with the bank. He
also gives written instruments to the bank to purchase securities, pay insurance premium,
installments of loans etc on his behalf. When the bank performs such agency services, he becomes
an agent of his customer.
1.5.4 Bailer and Bailment Relationship:
A bailment is the delivery of goods in trust. A banker may accept the valuables of his
customers such as jewellery, documents, securities etc. for safe custody. In such a case the customer
is the bailer and the bank is the bailee. It charges a very small amount of money as service charges
for safe custody of valuables.
1.5.5 Pledger and Pledgee:
When a customer pledges goods and documents with the bank as security for an advance, he
then becomes the Pledger and the bank becomes the Pledgee. The pledged goods are to be returned
intact to the Pledger after he repays the debt.
1.5.6 Mortgagor and Mortgagee:
Mortgage is the transfer of an interest in specific immoveable property for the purpose of
securing the payment of money advanced or to be advanced by way of loan. When a customer
pledges specific immoveable property with the bank as security for an advance, the customer
becomes the mortgager and the bank becomes the mortgagee.

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1.5.7 Bank as a Trustee:
The bank acts as a trustee for his customers in those cases where he accepts other valuables
for safe custody. In such case, the customer continues to be the owner of the valuables deposited
with the bank.
Executor, Attorney, Guarantor:
The bank also acts as executor, attorney, and generator for his customers.

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2.1 HISTORICAL BACKGROUND OF NBP

The story of NBP is part of our struggle for economic independence. When we won political
independence, Nona Pakistanis, mostly Hindus controlled our economy. East Pakistan was spared
from massive migration but its economy was also, being dependent on Calcutta, badly hurt. Most
bankers and business experts left Pakistan and the economic life was brought to a standstill, these
mostly branches of Imperial Bank of India were only in partial operation with skeleton staff.
2.1.1 BANKING & FINANCE - HISTORY
It was decided that Reserve Bank of India would act as the common monetary authority of
both countries up to September 1948. But this arrangement did not prove well. In August 1947, we
were given a first installment of Rs.200 million (20 crore) as our share, leaving a balance of Rs.550
million (55 crore) but it was not paid when asked for.
In October 1947 there was fighting in Kashmir, when India refused to give us the amount of
Rs. 55 crore if we did not give up all interest in Kashmir, which we refused. In response, Reserve
Bank of India refused to make even an advance for ways and means.
Despite that India had to pay our 50 crore, (the remaining 5 crore still remains unpaid). There was a
controversy on establishment of our central bank because we had no experience or expertise but it
was resolved and SBP was created, 3 months ahead of schedule, on July 1, 1948, which was the last
public appearance of the Quaid-e-Azam. SBP claimed its share of Assets of Reserve bank of India
against the Indian currency retired from Pakistan, but this 50 crore India disputed and virtually
refused to settle this dispute up till now.
In 1949 (September) U.K. devalued its currency, India followed suit but we did not. India
said we had contravened the agreement of keeping both currencies at par. We said we had not done
that; India had done it arbitrarily without

Consulting us. On October 3, 1949, the two central banks were to announce the new par value of
both currencies but India denied a day earlier. India also froze our trade - balance surplus that is still
an unsettled dispute. India also withdraws the Marwari merchants who were employed annually for
movement of jute crop by financing it. They’re being no jute industry, prices fell sharply, foreign
banks and foreign merchants stood aside and an agrarian unrest was threatening.
Two Ordinances were, therefore, issued.

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1. Jute Board Establishment Ordinance &
2. NBP Ordinance dated 08.11.1949

NBP was established on 20.11.1949 to provide finance to suitable parties. NBP stood behind
jute trade, SBP stood behind NBP and the government stood behind SPB. Speedy it was such that 6
branches came into being at once and the doubts on our ability to handle this situation were dispelled
for ever Now, as the Jute Board and NBP were in the field, the foreign merchants and bankers also
rushed in to get their share in the business and consequently NBP had to lay out much less finance
than it could. Mr.Ghulam Farooq was chairman Jute Board & Mr. Mumtaz Hassan was chairman
NBP. Until June 1950, NBP remained exclusively in jute operations, thereafter-other commodities
were also taken-up. After that Mr. Zahid Hussain,
Governor SBP assumed additional charge also as chairman NBP's Board of Directors, & Mr.
Muhajir became its first M.D.
In 1952 NBP replaced Imperial Bank of India. This arrangement was negotiated by Mr.
Mumtaz Hassan as Acting Governor of SBP.
In 1962 when Mr. Mumtaz Hassan became MD (He had already served NBP for 10 years as
its Chairman of government Director), the number of branches had increased from 6 to 239 and
deposits from Rs.5 crore (50 million) to 106 crore (one billion & 60 million), profit, from 3 million
(3 Lac) to 21 million (2.1. crore) and the staff increased from 380 to 7091, as compared to 1949-50.

In Dec. 1966 its 600th branch was opened raising the deposits to 2.31 billion. and staff to 14,
963. Up to 1965, the shareholders had received 225% of their original investment. Now its has more
than 13745 employees 1226 branches and Rs.465, 572million deposit.
2.1.2 MANAGEMENT:
An Executive Board composed of six Senior Executives of the Bank and the President who is also
the Chief Executive supervises the affairs and business of the Bank.
2.1.2 CAPITAL:
The authorized capital of the Bank is Rs.5000 million divided into 100 million ordinary
shares of Rs.10 each. After nationalization, all the shares held by persons other than the Federal
Government or Corporations i.e., owned and controlled by the Federal Government was considered
as transferred and vested in the Government.

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2.2 GROWTH AT A GLANCE
(2005-2009)

TOTAL ASSETS

600,000
500,000
400,000
300,000
200,000
100,000
0
2005 2006 2007 2008 2009

DEPOSIT

500,000

400,000

300,000

200,000

100,000

0
2005 2006 2007 2008 2009

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ADVANCES

200,000

150,000

100,000

50,000

0
2005 2006 2007 2008 2009

SHAREHODERS EQUITY

20,000

15,000

10,000

5,000

0
2005 2006 2007 2008 2009
AFTER TAX PROFIT

5,000
4,000
3,000
2,000
1,000
0 11
2005 2006 2007 2008 2009
EARNING PER SHARE

25
20
15
10
5
0
2005 2006 2007 2008 2009

RETURN ON ASSETS (PRE TAX PROFIT )

0
2005 2006 2007 2008 2009

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2.3 CATEGORIES OF SHARE HOLDERS
AS AT DECEMBER 31, 2008

PARTICULARS SHARE SHARE %AGE


HOLDERS HOLDING

Govt. of Pakistan 1 1443992 .2932%

President of 2 383464 .0779%


Pakistan

State Bank of 1 370243964 75.1901%


Pakistan

Directors And 2 2640 .0005%


Children

Associated 3 43551 .0088%


companies

NIT & ICP 5 3185080 .6468%


DFI, NBFI & 39 17768776 3.6085%
BANKS

Insurance 15 11449658 2.3252%


Companies

Modarabas 30 23332418 4.7384%


General Public 7963 27421860 5.5689%
(Local)

General Public 296 873514 .1774%


(Foreign)

Others 194 36261705 7.3641%


Total 8551 492410622 100.00%

2.4 BRANCHES:

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The Bank had a network of 1226 branches in the country and 22 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
7) - Asia Pacific Region
8) - Japan
9) - Republic of Korea
10) - Central Asian States
11) - Bangladesh
12)-Peoples Republic of China
13)- Pakistan.

2.5 ORGANIZATION CHART OF NATIONAL BANK OF PAKISTAN

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DESIGNATIONS FOR HIGHER LEVEL OFFICERS

PRESIDENT

SENIOR EXECUTIVE VICE PRESIDENT


GRADE 22

EXECUTIVE VICE PRESIDENT


GRADE 21

VICE PRESIDENT
GRADE 20

ASSISTANT VICE PRESIDENT


GRADE 19

GRADE I OFFICER
GRADE 18

GRADE II OFFICER
GRADE 17

GRADE III OFFICER


(GRADE 16)

2.6 MANAGEMENT STRUCTURE

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The structure of National Bank of Pakistan is shown in the organizational chart. As the chart
shows the top governing body of National Bank of Pakistan is the board of directors. The board of
directors elects a president who then heads the executive board of directors, which comprises of
provincial chiefs and division heads etc.
2.6.1 BOARD OF DIRECTORS:

The board of directors is the supreme governing body of National Bank of Pakistan. It
comprises of a government representative, Pakistan Banking Council Nominee, Nominee of
corporate sector and three directors from National Bank of Pakistan.

2.6.2 EXECUTIVE BOARD OF DIRECTORS

The Executive Board of Directors comprises of the four provincial chiefs, the three directors
from Board of Directors, and the division heads. These people run the organization. They are
answerable to the president and the president is answerable to the Board of Directors.
2.6.3 STRUCTURE OF A PROVINCIAL HEAD OFFICE:

A provincial chief heads a provincial head office. As the organizational chart shows that
under a provincial head office there are regional offices. In Punjab there are about nine regional
offices. Under each regional office there are two or three zonal offices and under each office there
are fifteen to twenty branches.

2.7 CORPORATE INFORMATION

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BOARD OF DIRECTORS Syed Ali Raza
(Chairman & President)
Dr. Waqar Masood Khan
Iftikhar Ali Malik
Syed Shaftat Ali Shah Jamote
M. Zubair Motiwala
Sikandar Hayat Jamil
Muhammad Khalid Malik

AUDIT COMMITTEE Syed Shafqat Ali Shah (Chairman)


M.Khalid Malik
M. Zubair Motiwala

AUDITORS Taseer Hadi Khalid & Co


Chartered Accountants

Ford Rhodes Sidat Hyder & Co


Chartered Accountants

LEGAL ADVISORS Mandiviwala & Zafar


Advocates & Legal
Consultants

REGISTERED & HEAD OFFICE NBPBuilding


I.I.Chundrigar Road,
Karachi, Pakistan.

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REGISTERED & SHARE REGISTRATION
OFFICE
THK Associates (Pvt.) Ltd.
Shares Department, Ground
Floor, Modern Motors House,
Beaumont Road,
Karachi, Pakistan.

2.8 MISSION STATEMENT

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To be recognized in the market place by
Institutionalizing a merit & performance
culture, Creating a powerful & distinctive
brand identity, Achieving top-tier
financial performance, and Adopting &
living out our core values.

2.9 VISION STATEMENT

To be the pre-eminent financial institution


in Pakistan and achieve market
recognition both in the quality and delivery
of service as well as the range of product
offering

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2.10 FUNCTIONS OF NBP
The National Bank of Pakistan performs two types of function. It acts as an ordinary
commercial bank, and at places where there are no branches of State Bank of Pakistan it represents
Pakistan, that is why it cannot be privatized. As a commercial bank it performs the following
functions.

 Accepting of deposits of money on current account, saving, term deposit and other profit and
loss sharing accounts.
 Borrowing money and arranging finance from other banks.
 Advancing and lending money to its clients.
 Financing of projects including technical assistance, project appraisal through long
term/short term loans.
 Buying, selling, dealing and discounting of bills of exchange, promissory notes, drafts, bill of
lading, other instruments of securities etc.
 Foreign exchange business.
 Financing of seasonal crops like cotton, wheat, rice,
 Receiving of bonds, scripts, valuable etc. for safe custody.
 Carrying on agency business of any description other than managing agent on behalf of
clients, including government and local authorities.
 Generating, undertaking, promoting etc. of issue of shares, bonds.
 Transacting guarantees and indemnity business.
 Undertaking and executing trusts.
 Making investments in other banking companies.
 Joint venturing with foreign dealers, agents and companies for its representation abroad.
 Participating World Bank and Asian Development bank's lines of credit.
 Utility services.
 Providing Hajj services to intending Hajis.
 Agent to State Bank of Pakistan for collecting

2.10.1 FUNCTIONS OF NBP AS A REPRESENTATIVE OF STATE BANK OF


PAKISTAN

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 Collection of cheques and bill of exchange for its customers.
 Paying insurance premium, rent or other obligations of the customers.
 Collecting interests due, dividend pensions and other sums due to customers.
 Transferring of money from place to place.
 Acting an executors, trustees for the customers.
 Providing safe custody and jewelry documents or securities.
 Issuing of traveler’s cheques and letter of credit to give credit facilities for travel.
 Purchasing shares for the customers.
 Accepting bills of exchange on behalf of customers.
 Undertaking foreign exchange business.
 Furnishing trade information and tendering advice to customers.
 Formulating operation policy guidelines for the banks.
 Laying down performance criteria for banks and taking steps for ensuring their observance.
 Evaluating the performance of the banks in the context of operational guidelines issued to
the banks.
 Determining the areas of coordination of the banks.
 Formulating schemes under section of the act.
 Making recommendations to the federal government for the appointment of the president and
members of the executive board.
 Analyzing and appraising financial statement including balance sheets and profit and loss
accounts of banks and appointment of auditors of the bank.
 Conducting such surveys, inquiries and appraisals as may be necessary for the purpose of this
act.
 Exercising and performing such powers and functions of the federal government under the
act and such other functions as the federal government may assign to it.
 Establishing a research department or conduct banking research and in particular study
overseas banking operation and problems of the agricultural financing.
 Establishing a central training institution for improving bank services.

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 Coordinating the planning of the operations of nationalized commercial banks, and
exercising general overall checks on the cost of their operations.

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3.0 PRODUCTS AND SERVICES OF NBP

National Bank of Pakistan offers a wide range of products to its customers. Some of them are:
 PC Banking
 Premium Aamadni
 Premium Saver
 Karobar
 Advance Salary
 Investor Advantage
 Cash n gold
 Kisan Dost
 Letter of Credit (L/C)
 Bank Guarantee (L/G)

3.1 PC BANKING
PC Banking is one of the e-banking services being offered by the NBP. This allows two-way
communication between the Bank and its Corporate, Retail and Commercial Customers and gives
the client access to download the information of their account(s) both in Pak Rupees & Foreign
Currency to their desktop PC through a dial-up connection.
With PC Banking customers enjoy the following secured facilities:
• Statement of Account(s)
• Single Account Balances
• Group Accounts Balances
• Account-to-Account Transfers
Payment to Third Party by requesting the following:
• Issuance of Draft
• Issuance of Pay Order
• Issuance of Telegraphic Transfer

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3.2 PREMIUM AAMADNI

3.2.1 Monthly Income Scheme


• Amount of investment required from Rs. 20,000/- to Rs. 5,000,000
• Investment period is 5 years
• Free Demand Draft, Pay Order and NBP Online Aasan Banking*
• Free Cheque Book / NBP Cash Card (ATM + Debit)
• Profit paid every month as follows:

Period
Period ProfitProfit
Rates Rates
1st year 7.50%

2nd year 8.50%


3rd year 9.50%
4th year 10.50%
5th year 11%

• Financing facility available upto 90% of the deposit value


• Premature encashment will attract penalties
• Zakat and withholding tax will be deducted as per rules

3.3 PREMIUM SAVER

PLS Saving Account


•Earn up to 7.25% p.a. +
• Minimum saving balance of Rs. 20,001/- & a maximum balance of Rs. 300,000/-*
• Free NBP Cash Card (ATM + Debit)
• Convenience of NBP Online Aasan Banking (for online banking customers)
• Two debit withdrawals allowed in a month & no limit on number of deposit transactions
• Profit calculated on monthly and paid on half yearly basis.

3.4 KAROBAR

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Mera Apna Karobar
• Minimum down payment, 10% of asset price (5% for PCO & Telecaster)
• Tenure 1 to 5 years (for PCO 2 years)
• Grace period 3 months
• Maximum loan amount Rs. 200,000/-
• Age 18-45 years
• Mark-up (variable) 1 year KIBOR + 2.00% p.a.
• The customer will pay markup @ 6% p.a., rest will be borne by GOP*
• Life & disability insurance paid by GOP*
* subject to the availability of subsidy from GOP

3.5 ADVANCE SALARY

Take up to 20 advance salaries


(currently for NBP account holders of govt. or related organization employees)

Personal Loan
• Easy installments of 1 to 60 months at your choice
• No minimum income collateral & insurance charges required
• Quick processing and fastest disbursement
• the product is for permanent employees of Government, Semi Government
and Autonomous bodies receiving salaries through NBP accounts

NBP Advance Salary, the leading personal loan product of the country, is maintaining its
inimitability ever since it was launched. This was only possible due to its swift growth and
remarkable loan disbursement of over 118 billion.

3.6 INVESTOR ADVANTAGE

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Financing Facility for Stock Investors
• Comfortable environment for trading
• No security requirement, except for the customer’s equity
• Customer’s equity freely available for investment
• Equity acceptable in cash or approved shares

Product Information

Financing Amount Rs.50, 000/ - To Rs.10, 000,000/-

Equity Requirement In the Form of Cash or Shares or Both (Currently Minimum


Rs. 215,000/- @ 30%)

Shares as per NBP Approved List Available. Shares In Physical Form Not Acceptable

Trading: Allowed Only Through Trading Centers Created by NBP and


Operated by Taurus Securities Limited (A Subsidiary of NBP

Requirement:
• Photograph of Applicant
• NBP Account - Current or PLS
• Marginal financing Application form
• Copy of CNIC

• Copy of CNIC of Two (2) References


• Borrower Basic Fact Sheet
• Duly Filled In Statement of Assets & Liabilities
• Listed Shares, Given as Margin (Optional)

3.7 Cash and Gold

Ready Cash against Gold

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• Facility of Rs. 10, 000/-against each 10 gms of net weight of Gold Ornaments
• No maximum limit of cash
• Repayment after one year
• Roll over facility
• No penalty for each repayment

Get extra benefit from your gold

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

• Rate of mark-up 13% p.a.


• Facility of Rs. 10,000 against each 10 gms of net contents of gold
• No maximum limits of cash
• Repayment after one year
• Roll over facility
• Only gold ornaments acceptable
• Weight and quality of gold to be determined by NBP's appointed scruffs
• No penalty for early repayment

3.8 KISAN DOST

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Competitive mark-up rate
• Quick & easy processing
• Delivery at the farmer’s doorstep
• Technical guidance to farmers
• Wide range of financing schemes for farmers
• Finance facility up to Rs. 500,000/- for landless farmers against
personal guarantee
• Financing available against passbook, residential/commercial
property, gold ornaments and paper security
• Loan facility on revolving basis for three years (renewable on yearly basis
without documentation and approval)

3.9 LETTER OF CREDIT (L/C)


Pakistan is developing country and like other developing countries its imports exceed its exports.
The bank offers import letter of credit, which plays an important role in helping the Pakistani
importers to pay in foreign exchange.
A L/C is an instrument or document issued by a bank on behalf of a customer, authorizing a
beneficiary to draw a draft or drafts or sometimes without the requirement of draft(s), which will be
honored on presentation by the bank if drawn in accordance with terms and condition specified in
L/C.
Parties involved in the process are:
• The applicant: The applicant of a credit is importer or buyer
• Issuing bank: It is also called importer’s bank or opening bank. At the request of applicant,
issuing bank issues a credit in accordance with the instructions of the applicant in the favour
of the seller.
• Advising bank: Letter of credit is sent to correspondent bank where the beneficiary resides.
Such bank is called advising bank.
• Beneficiary: The person or body receiving the L/C from the importer is beneficiary.
• Reimbursing bank: It is the bank that on behalf of opening bank honors the reimbursing
claim, lodged by negotiating bank (advising bank)

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3.10 Bank Guarantee (L/G)
It is a contract to perform the promise or discharging the liability of third person in case of default.
A guarantee may either be issued for an indefinite period or with a proper validity period.
SBP has permitted the banks to issue open-ended guarantees, fully secured against cash
collaterals or other liquid securities, for the following purpose:

• Advance payment against performance of ongoing government, semi government and


autonomous body’s contract
• Guarantee requested by public utility companies
• Court guarantees
• Customs shipping guarantees
• Revenue related government departments’ guarantees
The claim might be settled in any of the following manners.

• Customer settles the issue with beneficiary and withdraws claim letter
• He obtains stay-order from the court of law
• He submits the letter of authority to bank for payment

If guarantee is invoked and consented by the customer, a pay order is sent to beneficiary along with
a covering letter showing full participation of guarantee, Beneficiary returns the L/G, which is dully
cancelled and kept in respective closed file.

There are different departments of NBP. The main five departments are given below:

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4.1 Cash Department
4.2 Advance Department
4.3 Deposits Department
4.4 Accounts Department
4.5 Remittances Department.

4.1 CASH DEPARTMENT


4.1.1 Cash Receipt and Payments
Cashier has an important role to play in customer service. He is responsible for receiving cash and
making payment to customers. He sits behind a cash counter to perform this duty. Following
procedure is adopted for the receipt of cash.
When paying-in-slip (credit voucher) is presented to cashier on the counter, he examines the
contents and if found in order, writes denominations of notes on its back, the amount on the face
with red ink, puts its signatures and receives cash by entering the account number and amount in
Receiving Cashier Book against the serial number noted on the paying-in-slip. Receiving Cashier
Book and paying-in-slip is passed on to cash officer who puts “Cash Receiving Stamp” on it and
initials against the entry in the book. Slip and Receiving Cashier Book is returned to cashier who
gives the counterfoil of slip to the depositor.
Following procedure is adopted for payment against cheque/draft etc.
When a cheque is presented to the posting officer, he ensures that:
• Cheque is not post dated (future dated), stale (more than 6 months) or mutilated and belongs
to the branch
• Amount of cheque in words and figures is same
• Cheque is bearer, if it is order, contains proper identification
• The presenter has put his signature on its back
• After scrutiny, token is issued; entry is made in register and token number written on the
back of cheque. Cheque is passed on to cancellation officer (who is CD & PLS incharge as
well) for cancellation

He checks that:
• The cheque pertains to branch where it is presented

30
• Cheque is bearer, order or crossed. If crossed, payment is not made on the counter. If an
order, payment is made after proper identification
• Signature of drawer tallies with his/her signature on specimen signature card.
• Cheque series printed on the cheque tallies with cheque series written on the folio and has not
been altered chemically or otherwise.
• Cancellation officer draws a straight line on the printed number and cancels it with red ink.
The cheque is posted in computer ledger. A stamp “Posted” is affixed on the cheque. If there
is insufficient balance, cheque is returned with reason memo. If the amount requires
supervision, it is done according to the prescribed limit those changes from time to time.
• After posting and supervision, cheque is passed to cashier who calls the token number &
make the payment to the particular token holder
At the close of business hours, cashier balances the cash by taking
• Opening balance
• Total receipts
• Total payments
• Net balance
Then he writes the position of cash denomination-wise and signs. The manager checks the entries
from the respective vouchers, counts the cash, and signs the book and safes in the cash.

4.1.2 Cheque
A Cheque is a written order of a depositor upon a bank to pay to or to the order of a designated party
or to bearer, a specified sum of money on demand.
Types of Cheques
Bankers in Pakistan deal with only two types of cheques,

Open Cheque
They are payable in cash at the counters of a banker in accordance with the practice of the bankers.
• Crossed Cheque
If a Cheque is crossed by drawing two parallel lines across the face of the Cheque, with or without
the words & co. A/c payee only, it is called crossed Cheque. The crossed Cheque cannot be paid on

31
the counter of the drawee’s bank. It will be deposited in the account of a person in whose order of
favour it is drawn.
4.1.3 Dishonor of Cheque
Bank is bound to honor the cheque presented for encashment but a Cheque may be dishonored due
to following reason:
• Not sufficient funds
• Drawer’s signatures differ/required
• Alteration is date/figures/words/require drawer’s full signature
• Payment stopped by drawer
• Cheque is post dated/stale/mutilated
• Drawer has become insane
• Drawer has become insolvent
• Cheque is crossed. Payee’s account is credited but payment is not made on counter
• Payee’s endorsement illegible or proper identification required
• Bank received notice of death of drawer

4.1.4 Cash Feeding


NBP bank road branch Rawalpindi is a cash-feeding branch. It cannot hold the cash amount of Rs:
1500,000. When the cash is in excess of limit and not going to be utilized next day, the officer in-
charge cash department informs the main branch on telephone to take delivery of excess cash. It is
lifting of cash for the feeding branch. The respective officer of feeding branch arranges too take
delivery.
4.2 ADVANCES DEPARTMENT
Advances are the major source of income for the banks. Advances are forwarded with the help of
deposits. People deposit money with the bank but do not withdraw it immediately and in lump sum.
These deposits remain idle for considerable time. Therefore, banks make use of this money by
giving loans to others and earn mark-up.

4.2.1 Demand finance

32
It is granted to individuals and firms for commercial and non-commercial purpose against some
tangible asset or security. It is the buy back agreement. Borrower buys back the project at mark-up
price Borrower has to pay the amount in lump sum.
4.2.2 Running Finance (RF)
This form of financing was previously known as “Overdraft”. It is extended to meet the working
capital requirements of the borrower. It is given against hypothecation of stock. It is also a buy back
agreement on mark-up basis. The mark-up is charged at 16.79% per annum. The maximum limit of
loan is Rs. 200,000 against the hypothecation of stock. If someone want to obtain Running Finance
facility in order it fulfill his working capital needs then the value of his stock should be 4 times
greater the amount of loan which he wants to obtain.
4.2.2.1 Document required
• Promissory Note / DP Note
• Nationality Identity Card
• Acceptance Letter
• SBP Declaration
• Insurance
• Guarantee
• Power of Attorney
4.2.3 Flexi loans
These are given to salaried people for household purpose on mark-up basis. These are to be returned
in monthly installments. These loans are provided specially to the government employers.
4.2.3.1 Eligibility
• The person should be a Pakistani resident
• Salaried person
4.2.3.2 Personal Requirements
• National Identity Card
• National Tax Number (If any)
4.2.3.3 Documents Required
• Employer letter
• Last two months pay slip

33
• Last six months account statement
• Completed Application Form

4.2.4 Finances for Staff


Bank extends credit facility to its staff at concession rates of mark-up. Loans are repayable in
monthly installments but mark-up is not included in them. It is calculated on daily product basis and
charged quarterly. The finance offered to staff is:
4.2.5 NBP Student Loan
Pursuant to the announcement made by the Federal Finance Minister in his 2001-2002-budget
speech, the Government of Pakistan in collaboration with major commercial banks of Pakistan
(NBP, HBL, UBL, MCB and ABL) launched a STUDENTS LOAN SCHEME (SLS) for Education.
Under the Scheme, financial assistance is provided by way of Interest Free Loans to the meritorious
students who have financial constraints for pursuing their studies in Scientific, Technical and
Professional education within Pakistan.

ADMINISTRATOR OF THE SCHEME National Bank of Pakistan

ELIGIBILITY
Under the scheme the students are eligible to apply for loans provided:
He/She has obtained admission on merit through normal course/procedure in the approved
Universities/Colleges of the public sector mentioned hereunder
He/She falls at the time of admission within the age bracket of: -

For Graduation Not exceeding 21 Years


For Post-Graduation Not exceeding 31 Years
For PhD Not exceeding 36 Years

34
• He/She has secured 70% marks in the last public examination.
• He/She has undertaken the study of the subjects given below.
• He/She is unable to pursue studies due to financial constraints.

REPAYMENT

The maximum period of repayment of loan is 10-Years from the date of disbursement of first
installment. The borrower shall repay the loan in monthly installment after six months from the date
of first employment or one year from the date of completion of studies, which ever is earlier.
OTHER INFORMATION

• Application Forms are available from the designated branches mentioned above or may be
downloaded from National Bank of Pakistan website www.nbp.com.pk/studentloan

4.3 DEPOSITS DEPARTMENT


Deposits are the backbone of a bank. To receive deposits is one of the basis functions of all
commercial banks. National bank does not receive these deposits for safekeeping purpose only, but
they accept deposits as debts. When a bank receives deposits from a customer, the relationship of a
debtor and creditor is established where by the customer becomes the creditor, and the bank a debtor.
When the bank receives the amount for deposit as a debtor, it becomes the owner of it. It may,
therefore, use it, as it deems appropriate. But there is an implicit agreement that the amount will be
paid back by the bank to the depositor on demand or after a specified time. There are two major
types of accounts.

4.3.1 Major Types of Accounts


Banks credit can be broadly classified as Current Deposits and profit and loss sharing Deposits. This
classification is based on the purpose for which the deposits are to be kept at the bank before the
depositors can withdraw them.
4.3.1.1 Current account
Deposits in current account are termed as current deposits. These are repayable to the customer
whenever the are demanded. When a banker accepts a demand deposit, he incurs the obligation of
paying all the cheques etc. drawn against him to the extent of the balance of the account. Because of
their nature, these deposits are treated as current liabilities by the banks. Bankers in Pakistan do not

35
allow any profit on these deposits, and customer are required to maintain a minimum balance, failing
which services charges are deducted from such accounts,

Eligibility
All Pakistan’s Resident/Non-Resident, individuals (Single-jointly) companies/firms etc. can open
and operate the account.
Any foreign National Individuals (Single-Jointly) having valid Resident Pakistan VISA/Worker
permit can open and operate the account
Requirements for Opening of Account
Duly filled prescribed A/C opening form
Attested photocopy of N.I.C/Passport of Account Holder(s), Proprietor, Partners, Directors and
office Bearers as the case may be
Features
• Account can be opened with Minimum Balance Rs.5000/- with no maximum limit.
• Checking account
• No profit is paid
• Service Charges Rs.300/- if average balance is less than Rs.5000/- during half year
• Statement of Account dispatched on half yearly basis or a requested
• There is no restriction for withdrawals of amount and number of cheques

4.3.1.2 PLS-Saving Bank Account


The bank’s profit and losses are shared with the customer, as per rate declared by the bank at the end
of every half-year, under this account

Eligibility:

• All Pakistan’s Resident/Non-Resident can open and operate the Account.


• Foreign National having valid Resident Pakistan VISA can open and operate the Account.
• Duly filled prescribed A/C opening form.
• Photocopy of National identity Card (Resident Pakistan)
• Two passport size photographs for shaky Signatures/Thumb Impression (Resident Pakistan)
• Photocopy of Passport with page bearing Resident Visa of Pakistan (Foreign Nationals)

36
Features
• Account can be opened with Minimum Balance of Rs.1000/- with no maximum limit
• Checking account
• Profit is calculated on half yearly basis i.e. on minimum balance of Rs.10000/- and above
from 1st day to the last day of the month.
• Service Charges Rs.300/- if average balance is less than Rs.5000/- during half year.

4.3.2 Account Opening Procedure


The customer fills the Account opening Form (AOF). One consolidated AOF is used for every type
of Account. It also contains the list of documents to be attached with it. An introducer is required for
opening of Account that introduces the customer in the bank. After filling the AOF and attachment
of necessary documents, customer and introducer sign it in the presence of concern officer. A
specimen signature called (SS Card) is filled by the customer. A prescribed form CD-50 is obtained
if the customer sign in shaky hand writing puts a thumb impression and sign in capital letters. One is
pasted on AOF, second is for SS Card and third is handed over the customer the daily attested by the
officer opening the account. This third photograph has the account number and the name of
customer. The customer has to bring this photograph each time encash the Cheque. CD-50 is
countersign by the introducer particulars of Account are noted in account open and close register and
feeding computer.
Customer deposits at least Rs.5000/- in case of current account and Rs.1000/- in case of saving
account as initial deposit. A Cheque book requisition Form A is supplied to him/her. Customer
signature on it is verified and Cheque series is noted on it. Cheque book issue charges are recovered
and entry is made in Cheque book register that has separate folios for profit loss sharing saving bank
account (PLS-SB A/C), current deposit A/C (CD A/C) etc.
If the party requests the issuance of Cheque book in the absence of requisition slip, it is obtain on
form B. If manager knows the customer, he gives the remarks, “Personally know to me” and sign on
the face of form. If he does not know the client, an indemnity is obtained on the reverse of form B
from another account holder who is the regular customer and satisfactory balance. Intimation
regarding loss of requisition slip is obtained in writing and signatures of client are verified. Stop

37
payment instruction in respect of loss of slip and cheques are noted and service charges are realized.
Form B issued is noted in Form B register.
Loose cheques are also issued but to very important clients for cash withdrawals only. They are
issued from a new Cheque book reserved for the purpose. The requisition slip for them is Form C.

4.3.3 Transfers and Closing of Account


A client may want to transfer his/her account to another branch. The client gives written application.
Manager approves the transfer of account. The relatives SS Card and AOF are taken out and original
application is pasted in its place. Final balance of account is remitted to transferee branch through
mail transfer (MT) after recovery of service charge. The client surrenders the unused cheques and
entries are made in Account Opened and Closed Register.
A client may like to close his/her account. On receipt of application from the client, his/her
signatures are verified. The number of unused cheques is noted thereon and application is sent to CD
in-charge. He writes the balance on it and initials. Manager approves the closure and service charges
are recovered. The account holder signs the Cheque that contains the entire outstanding amount. The
client surrenders the unused cheques that are destroyed. An entry is made in Account Opened and
Closed Register under the signature of two attorneys.
4.4 ACCOUNTS DEPARTMENT
Banks maintain a systematic and controlled record of all monetary business dealings. As per
company’s Act 1913, accounts are to be maintained according to British system. Under this system,
every monetary transaction has two fold effects. This is called “Double entry system of accounting”
Financial transactions have double effect i.e., debit and credit.
Function
• Arranging the vouchers
• Preparation of supplementary
• Writing the transfer book
• Recording in cash book cum general ledger
• Balancing and maintenance of books
• Preparation of statement

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4.4.1 Rules for Debit and Credit
• Personal accounts (held by depositor)
Debit the receiver and credit the giver. When money is withdrawn, account is debited and when
money is deposited, account is credited.

• Real accounts (held by bank/branch)


Debit what comes in and credit what goes out.
• Nominal accounts
All expenses are debited and all incomes are credited

4.4.2 Vouchers
A piece of specially designed paper that contains date, head/sub-head of account, particulars of
transaction, nature of transaction and the amount with columns for two authorized signatures is a
voucher after the same has been signed.
Vouchers have the following types:

• Debit voucher
These include cash debit voucher, simple debit voucher, party debit voucher, party debit advice, cash
transfer voucher, Cheque, demand draft, telegraphic transfer, mail transfer, home mail transfer, debit
advice of Pak account
• Credit vouchers
These include simple credit voucher, party credit voucher, party credit advice, credit advice of Pak
account. Vouchers are the permanent record of a branch. They are recorded on daily basis in
Voucher Register.
4.4.3 Cash Book-cum-General Ledger
Asset and liabilities in consolidated form can be seen from cashbook. It is like the balance sheet of
branch and is written and balanced on daily basis. All transaction is recorded under the respective
debit and credit columns pertaining to different heads and subheads.

39
4..4.4 Issuance of Cheque Book
The account holder requests for the new Cheque book by presenting the requisition slip. His
signatures are verified before giving him a new Cheque book. The presence of the account holder is
compulsory to get a new Cheque book.

4.4.5 Stop Payment Instructions


If a customer lost his Cheque book he would make stop payment instruction to cash department of
NBP. Stop payment instruction can be made in two ways.
• Verbal
• Written
The customer could inform the cash department on telephone or face to face meeting to stop
payment, but later a written instruction must be made on a prescribed form.
If customer make stop payment instruction to the bank and bank make payment to some one else
after lodgment of stop payment instruction in the computer, Bank would become liable for this fault
4.5 REMITTANCES DEPARTMENT
Transfer of funds is one of the basis functions of the banking business. Options available to remit
funds are:
• Demand draft (DD)
• Mail transfer (MT)
• Pay orders (PO)
• Pay slip (PS)
4.5.1 Demand Draft
It is a written order drawn by one branch upon another branch in another city to pay a certain amount
to or the order of a specified person. Parties to DD are:
• Purchase
• Issuing branch
• Drawee branch
• Payee

40
There are separate DD blocks is used for up to Rs.1000 and above Rs.1000. The name of branch is
stamped on each leaf. For issuance of DD, purchaser fills the application form. Commission is
calculated and written in the specified place. Purchase deposits amount and commission on the cash
counter and the application is stamped. If the purchaser presents the Cheque, the application form
and Cheque are sent to CD Department (deposits) that verifies the Cheque and payment. Entry is
made in DD issued Register. DD leaf is written neatly and DD block is used serially.

4.5.2 Mail Transfer (MT)


An individual may transfer funds through MT. For issuance of MT, client fills the application form.
Commission and courier charges are calculated and written in the specified place. Receipt of cash for
MT is same as DD. Entry is made in MT issue Register. MT advice is prepared in triplicate. First
copy is sent to drawee branch, second is for Pak account extract and third is office copy. An
authorized officer signs the MT advice that is then dispatched to drawee branch.
On receipt of MT advice, signature on the advice is verified; a party credit voucher is prepared and
payee’s account is credited.
4.5.3 Pay order (PO)
It is a written order by a branch, drawn upon and payable to itself to pay a specified amount of
money to or order of specified person. Parties to PO are same as DD except the issue branch and
drawee branch are the same.
4.5.4 Pay Slip (PS)
A pay slip is a written authorization of for payment made in receipt form, issue and payable by the
bank to the beneficiary name and address in on giving the proper discharge thereon.

41
5.0 WORK DONE BY ME
Major activities performed during my internship program are as follows;

5.1 ACCOUNT OPENNING 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
5.1.1 OPENING 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 opening the 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.

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

42
 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 in favor of them
and credited in their account in the bank are to be scrutinized.
5.1.1.2 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.
5.1.1.3 ISSUANCE OF CHEQUE BOOK
The accountholders request for the new Cheque book by presenting the requisition slips
along with the authority letter to the concerned office. His signatures are verified before giving him
a new Cheque book. The presence of the accountholders is compulsory to get a new Cheque book.
But if he sends a third person to get his Cheque book 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.
 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.

5.2 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's main 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.

43
The statement of clearing was submitted before 1.00 P.M. daily. The whole procedure of
clearing is completed within two days.
5.3 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.
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 made on its presentation.

44
ANNEXTURE # 01

HORIZONTAL ANALYSIS
NATIONAL BANK OF PAKISTAN
BALANCE SHEET
FROM 2005 TO 2006

%AGE
Assets 2005 2006 CHANGE CHANGE
Cash and balance with treasury banks 71,196,956 78,625,227 7,428,271 10.43
Balance with other banks 31,019,330 40,641,679 9,622,349 31.02
Lending to financial institution 16,282,942 23,012,732 6,729,790 41.33
-
Investment 156,985,686 139,946,995 17,038,691 -10.85
Advances 268,838,779 316,110,406 47,271,627 17.58
Operating fixed Assets 9,454,365 9,681,974 227,609 2.4
Deferred tax Assets 0 0
Other Assets 23,941,056 27,113,698 3,172,642 13.25

TOTAL ASSETS 577,719,114 635,132,711 57,413,597 9.93


Liabilities
Bill Payable 1,741,156 10,605,663 8,864,507 509.11
Borrowings 8,756,847 11,704,079 2,947,232
Deposits and other accounts 463,426,602 501,872,243 38,445,641 8.29
sub-ordinated loans 0 0 0
Liabilities against assets subject to finance
lease 16,629 13,235 -3,394 -20.41
Deferred Tax liabilities – net 4,462,718 2,387,073 -2,075,645 -46.51
Other liabilities 24,974,450 26,596,300 1,621,850 6.49
0
TOTAL LIABILITIES 503,378,402 553,178,593 49,800,191 9.89
0
Net assets 74,340,712 81,954,118 7,613,406 10.24

Represented by

Share capital 5,908,927 7,090,712 1,181,785 19.99


Reserves 13,536,041 13,879,260 343,219 2.53
Inappropriate profit 16,713,506 32,074,677 15,361,171 91.9

TOTAL S.H.E 36,158,474 53,044,649 16,886,175 46.7


Surplus on revaluation of assets - net of
tax 38,182,238 28,909,469 -9,272,769 -24.28
0

45
Total liab + S.H.E 74,340,712 81,954,118 7,613,406 10.24

ANNEXTURE # 02

HORIZONTAL ANALYSIS
NATIONAL BANK OF PAKISTAN
BALANCE SHEET
FROM 2006 TO 2007

%AGE
Assets 2007 2006 CHANGE CHANGE
Cash and balance with treasury banks 94,873,249 78,625,227 94,873,249 120.66
Balance with other banks 37,472,832 40,641,679 37,472,832 92.20
Lending to financial institution 21,464,600 23,012,732 21,464,600 93.27
Investment 210,787,868 139,946,995 210,787,868 150.61
Advances 340,677,100 316,110,406 340,677,100 107.77
Operating fixed Assets 25,922,979 9,681,974 25,922,979 267.744
Deferred tax Assets 0 0 0 0
Other Assets 30,994,965 27,113,698 30,994,965 114.31
0
TOTAL ASSETS 762,193,593 635,132,711 762,193,593 120.00

Liabilities

Bill Payable 7,061,902 10,605,663 7,061,902 66.5


Borrowings 10,886,063 11,704,079 10,886,063 93.01
Deposits and other accounts 591,907,435 501,872,243 591,907,435 117.93
sub-ordinated loans 0 0 0 0
Liabilities against assets subject to finance lease 33,554 13,235 33,554 253.52
Deferred Tax liabilities – net 5,097,831 2,387,073 5,097,831 213.55
Other liabilities 30,869,154 26,596,300 30,869,154 116.06

TOTAL LIABILITIES 645,855,939 553,178,593 645,855,939 116.75

Net assets 116,337,654 81,954,118 116,337,654 141.95

Represented by

Share capital 8,154,319 7,090,712 8,154,319 115.00


Reserves 15,772,124 13,879,260 15,772,124 113.63
Unappropriated profit 45,344,188 32,074,677 45,344,188 141.37
0
TOTAL S.H.E 69,270,631 53,044,649 69,270,631 130.58
Surplus on revaluation of assets - net of tax 47,067,023 28,909,469 47,067,023 162.80
0
Total liab + S.H.E 116,337,654 81,954,118 116,337,654 141.95

46
ANNEXTURE # 03

HORIZONTAL ANALYSIS
NATIONAL BANK OF PAKISTAN
BALANCE SHEET
FROM 2007 TO 2008

%AGE
Assets 2007 2008 CHANGE CHANGE
Cash and balance with treasury banks 94,873,249 106,503,756 11,630,507 12.25
Balance with other banks 37,472,832 38,344,608 871,776 2.32
Lending to financial institution 21,464,600 17,128,032 -4,336,568 -20.20
-
Investment 210,787,868 170,822,491 39,965,377 -18.95
Advances 340,677,100 412,986,865 72,309,765 21.22
Operating fixed Assets 25,922,979 24,217,655 -1,705,324 -6.57
Deferred tax Assets 0 3,204,572 3,204,572 0
Other Assets 30,994,965 44,550,347 13,555,382 43.73

TOTAL ASSETS 762,193,593 817,758,326 55,564,733 7.29


Liabilities
Bill Payable 7,061,902 10,219,061 3,157,159 44.70
Borrowings 10,886,063 40,458,926 29,572,863 271.65
Deposits and other accounts 591,907,435 624,939,016 33,031,581 5.58
sub-ordinated loans 0 0 0 0
Liabilities against assets subject to finance lease 33,554 25,274 -8,280 -24.67
Deferred Tax liabilities – net 5,097,831 0 -5,097,831 -100
Other liabilities 30,869,154 39,656,831 8,787,677 28.46

TOTAL LIABILITIES 645,855,939 715,299,108 69,443,169 10.75

-
Net assets 116,337,654 102,459,218 13,878,436 -11.92

Represented by
Share capital 8,154,319 8,969,751 815,432 10.00
Reserves 15,772,124 19,941,047 4,168,923 26.43
Inappropriate profit 45,344,188 52,456,204 7,112,016 15.68

TOTAL S.H.E 69,270,631 81,367,002 12,096,371 17.46


-
Surplus on revaluation of assets - net of tax 47,067,023 21,092,216 25,974,807 -55.18

-
Total liab + S.H.E 116,337,654 102,459,218 13,878,436 -11.92
ANNEXTURE # 04

47
HORIZONTAL ANALYSIS
NATIONAL BANK OF PAKISTAN
BALANCE SHEET
FROM 2008 TO 2009

Assets 2009 2008 change %AGE


Cash and balance with treasury banks 72,976,246 106,503,756 -33,527,510 -31.48
Balance with other banks 26,527,558 38,344,608 -11,817,050 -30.81
Lending to financial institution 5,098,642 17,128,032 -12,029,390 -70.23
Investment 240,518,170 170,822,491 69,695,679 40.80
Advances 435,504,840 412,986,865 22,517,975 5.45
Operating fixed Assets 24,876,923 24,217,655 659,268 2.72
Deferred tax Assets 3,021,712 3,204,572 -182,860 -5.70
Other Assets 56,613,570 44,550,347 12,063,223 27.0

TOTAL ASSETS 865,138,661 817,758,326 47,380,335 5.79

Liabilities

Bill Payable 7,397,468 10,219,061 -2,821,593 -27.61


Borrowings 50,587,500 40,458,926 10,128,574 25.03
Deposits and other accounts 653,518,020 624,939,016 28,579,004 4.57
sub-ordinated loans 0 0 0 0
Liabilities against assets subject to finance lease 24,660 25,274 -614 -2.42
Deferred Tax liabilities – net 0 0 0 0
Other liabilities 37,951,220 39,656,831 -1,705,611 -4.30

TOTAL LIABILITIES 749,478,868 715,299,108 34,179,760 4.77

Net assets 115,658,793 102,459,218 13,199,575 12.88

Represented by

Share capital 10,763,701 8,969,751 1,793,950 19.99


Reserves 21,673,557 19,941,047 1,732,510 8.68
Inappropriate profit 53,970,735 52,456,204 1,514,531 2.88

TOTAL S.H.E 86407993 81,367,002 5,040,991 6.19


Surplus on revaluation of assets - net of tax 29,250,800 21,092,216 8,158,584 38.68

Total liab + S.H.E 115,658,793 102,459,218 13,199,575 12.88

ANNEXTURE # 05

HORIZONTAL ANALYSIS
NATIONAL BANK OF PAKISTAN

48
INCOME STATEMENT
FROM 2005 TO 2006

2005 2006 change %AGE


Mark-up / return / Interest earned 33,633,735 44,100,934 10,467,199 31.12
Mark-up / return / Interest expensed 10,321,768 13,947,218 3,625,450 35.12
Net mark-up / interest income 23,311,967 30,153,716 6,841,749 29.34
Provision against non-performing loans and advances 2,446,739 3,075,723 628,984 25.70
Reversal of provision for diminution in the value of investments -245,881 -709,461 -463,580 188.53
Bad debts written off directly 23,069 5,284 -17,785 -77.09
2,223,927 2,371,546 147,619 6.63
Net mark-up / interest income after provisions 21,088,040 27,782,170 6,694,130 31.74
NON MARK-UP/INTEREST INCOME
Fee, commission and brokerage income 4,926,604 6,144,628 1,218,024 24.72
Dividend income 1,718,478 2,891,755 1,173,277 68.27
Income from dealing in foreign currencies 1,205,638 1,333,840 128,202 10.63354008
Gain on sale of investments 0 1,169,515 1,169,515 0
Unrealized gain/loss on revaluation investment 0 -4,464 -4,464 0
Other income 1,573,905 627,618 -946,287 -60.12
Total non-markup / interest income 9,424,625 12,162,892 2,738,267 29.05
30,512,665 39,945,062 9,432,397 30.91
NON MARK-UP/ INTEREST EXPENSES
30,512,665 -30,512,665 -100
Administrative expenses 11,195,133 13,443,441 2,248,308 20.08
Other provisions / write offs 198,298 -17,283 -215,581 -108.71
Other charges 63,206 208,327 145,121 229.60
Total non-markup / interest expenses 11,456,637 13,634,485 2,177,848 19.00
19,056,028 26,310,577 7,254,549 38.06
Extra ordinary / unusual items 0 0 0
PROFIT BEFORE TAXATION 19,056,028 26,310,577 7,254,549 38.06
Taxation – current 7,154,002 8,695,598 1,541,596 21.54
Prior years -1,098,709 530,652 1,629,361 -148.29
Deferred 291,291 61,981 -229,310 -78.72
6,346,584 9,288,231 2,941,647 46.35
PROFIT AFTER TAXATION 12,709,444 17,022,346 4,312,902 33.93
Inappropriate profit brought forward 9,161,747 19,372,523 10,210,776 111.45
Transfer from surplus on revaluation of fixed assets on
account of incremental depreciation 43,221 41,060 -2,161 -4.99
PROFIT AVAILABLE FOR APPROPRIATION 21,914,412 36,435,929 14,521,517 66.26

ANNEXTURE # 06
HORIZONTAL ANALYSIS
NATIONAL BANK OF PAKISTAN
INCOME STATEMENT
FROM 2006 TO 2007

2006 2007 change %AGE

49
Mark-up / return / Interest earned 44,100,934 50,569,481 6,468,547 14.66
Mark-up / return / Interest expensed 13,947,218 16,940,011 2,992,793 21.45
Net mark-up / interest income 30,153,716 33,629,470 3,475,754 11.52
Provision against non-performing loans and advances 3,075,723 4,723,084 1,647,361 53.56
Reversal of provision for diminution in the value of
investments -709,461 -40,248 669,213 -94.3
Bad debts written off directly 5,284 39,899 34,615 655.09
2,371,546 4,722,735 2,351,189 99.14
Net mark-up / interest income after provisions 27,782,170 28,906,735 1,124,565 4.047
NON MARK-UP/INTEREST INCOME

Fee, commission and brokerage income 6,144,628 6,781,683 637,055 10.36


Dividend income 2,891,755 3,263,246 371,491 12.84
Income from dealing in foreign currencies 1,333,840 1,042,827 -291,013 -21.8
Gain on sale of investments 1,169,515 2,341,690 1,172,175 100.22
Unrealized gain/loss on revaluation investment -4,464 -31,964 -27,500 616.03
Other income 627,618 147,363 -480,255 -76.52
Total non-markup / interest income 12,162,892 13,544,845 1,381,953 11.36
39,945,062 42,451,580 2,506,518 6.27
NON MARK-UP/ INTEREST EXPENSES
Administrative expenses 13,443,441 14,205,911 762,470 5.67
Other provisions / write offs -17,283 168,027 185,310 -1072.21
Other charges 208,327 17,141 -191,186 -91.77
Total non-markup / interest expenses 13,634,485 14,391,079 756,594 5.54
0
26,310,577 28,060,501 1,749,924 6.65
Extra ordinary / unusual items 0 0 0
PROFIT BEFORE TAXATION 26,310,577 28,060,501 1,749,924 6.65
Taxation – current 8,695,598 8,311,500 -384,098 -4.41
Prior years 530,652 391,497 -139,155 -26.22
Deferred 61,981 323,731 261,750 422.30
9,288,231 9,026,728 -261,503 -2.81

PROFIT AFTER TAXATION 17,022,346 19,033,773 2,011,427 11.81


Inappropriate profit brought forward 19,372,523 32,074,677 12,702,154 65.56
Transfer from surplus on revaluation of fixed assets on account
…... of incremental depreciation 41,060 39,007 -2,053 -5
PROFIT AVAILABLE FOR APPROPRIATION 36,435,929 51,147,457 14,711,528 40.37
ANNEXTURE # 07

HORIZONTAL ANALYSIS
NATIONAL BANK OF PAKISTAN
INCOME STATEMENT
FROM 2007 TO 2008

2007 2008 change %AGE


Mark-up / return / Interest earned 50,569,481 60,942,798 10,373,317 20.51
Mark-up / return / Interest expensed 16,940,011 23,884,768 6,944,757 40.99

50
Net mark-up / interest income 33,629,470 37,058,030 3,428,560 10.195
Provision against non-performing loans and
advances 4,723,084 10,593,565 5,870,481 124.29
Reversal of provision for diminution in the value of
investments -40,248 373,249 413,497 -1027.37
Bad debts written off directly 39,899 4000 -35,899 -89.97
4,722,735 10,970,814 6,248,079 132.29
Net mark-up / interest income after provisions 28,906,735 26,087,216 -2,819,519 -9.75
NON MARK-UP/INTEREST INCOME
Fee, commission and brokerage income 6,781,683 7,925,370 1,143,687 16.86
Dividend income 3,263,246 2,878,932 -384,314 -11.77
Income from dealing in foreign currencies 1,042,827 3,969,057 2,926,230 280.60
Gain on sale of investments 2,341,690 395,427 -1,946,263 -83.11
Unrealized gain/loss on revaluation investment -31,964 1,707 33,671 -105.34
Other income 147,363 1,245,369 1,098,006 745.10
Total non-markup / interest income 13,544,845 16,415,862 2,871,017 21.196
42,451,580 42,503,078 51,498 0.121
NON MARK-UP/ INTEREST EXPENSES

Administrative expenses 14,205,911 18,171,198 3,965,287 27.91


Other provisions / write offs 168,027 747,521 579,494 344.88
Other charges 17,141 583,361 566,220 3303.30
Total non-markup / interest expenses 14,391,079 19,502,080 5,111,001 35.51

28,060,501 23,000,998 -5,059,503 -18.03


Extra ordinary / unusual items 0 0 0
PROFIT BEFORE TAXATION 28,060,501 23,000,998 -5,059,503 -18.03
Taxation – current 8,311,500 11,762,650 3,451,150 41.52
Prior years 391,497 0 -391,497 -100
Deferred 323,731 -4,220,242 -4,543,973 -1403.62
9,026,728 7,542,408 -1,484,320 -16.44
PROFIT AFTER TAXATION 19,033,773 15,458,590 -3,575,183 -18.78
Inappropriate profit brought forward 32,074,677 45,344,188 13,269,511 41.37
Transfer from surplus on revaluation of fixed assets on account
…... of incremental depreciation 39,007 130,456 91,449 234.44
PROFIT AVAILABLE FOR APPROPRIATION 51,147,457 60,933,234 9,785,777 19.13
ANNEXTURE # 08
HORIZONTAL ANALYSIS
NATIONAL BANK OF PAKISTAN
INCOME STATEMENT
FROM 2008 TO 2009

2008 2009 change %AGE


Mark-up / return / Interest earned 60,942,798 779,747,697 718,804,899 1179
Mark-up / return / Interest expensed 23,884,768 39,489,649 15,604,881 65.33
Net mark-up / interest income 37,058,030 38,458,048 1,400,018 3.778
Provision against non-performing loans and
advances 10,593,565 11,043,469 449,904 4.247

51
Reversal of provision for diminution in the value
of investments 373,249 605,629 232,380 62.26
Bad debts written off directly 4000 20237 16,237 405.9
10,970,814 11,669,335 698,521 6.367
Net mark-up / interest income after
provisions 26,087,216 26,788,713 701,497 2.689
NON MARK-UP/INTEREST INCOME
Fee, commission and brokerage income 7,925,370 8,930,391 1,005,021 12.68
Dividend income 2,878,932 1,920,336 -958,596 -33.3
Income from dealing in foreign currencies 3,969,057 3,028,165 -940,892 -23.7
Gain on sale of investments 395,427 4,591,894 4,196,467 1061
Unrealized gain/loss on revaluation investment 1,707 2,355 648 37.96
Other income 1,245,369 552,216 -693,153 -55.7
Total non-markup / interest income 16,415,862 19,025,357 2,609,495 15.9
42,503,078 45,814,070 3,310,992 7.79
NON MARK-UP/ INTEREST EXPENSES
Administrative expenses 18,171,198 22,571,470 4,400,272 24.22
Other provisions / write offs 747,521 620,780 -126,741 -17
Other charges 583,361 321,647 -261,714 -44.9
Total non-markup / interest expenses 19,502,080 23,513,897 4,011,817 20.57

23,000,998 22,300,173 -700,825 -3.05


Extra ordinary / unusual items 0 0 0 0
PROFIT BEFORE TAXATION 23,000,998 22,300,173 -700,825 -3.05
Taxation – current 11,762,650 9221513 -2,541,137 -21.6
Prior years 0 -4133282 -4,133,282 0
Deferred -4,220,242 -999,904 3,220,338 -76.3
7,542,408 4,088,327 -3,454,081 -45.8
PROFIT AFTER TAXATION 15,458,590 18,211,846 2,753,256 17.81
Inappropriate profit brought forward 45,344,188 52,456,204 7,112,016 15.68
Transfer from surplus on revaluation of fixed assets on
account
…... of incremental depreciation 130,456 123,934 -6,522 -5
PROFIT AVAILABLE FOR APPROPRIATION 60,933,234 70,791,984 9,858,750 16.18
ANNEXTURE # 09
VERTICAL ANALYSIS
NATIONAL BANK OF PAKISTAN
BALANCE SHEET
FROM 2008 TO 2009
2008 2009 change %AGE
Mark-up / return / Interest earned 60,942,798 779,747,697 718,804,899 1179
Mark-up / return / Interest expensed 23,884,768 39,489,649 15,604,881 65.33
Net mark-up / interest income 37,058,030 38,458,048 1,400,018 3.778
Provision against non-performing loans and
advances 10,593,565 11,043,469 449,904 4.247
Reversal of provision for diminution in the value
of investments 373,249 605,629 232,380 62.26

52
Bad debts written off directly 4000 20237 16,237 405.9
10,970,814 11,669,335 698,521 6.367
Net mark-up / interest income after
provisions 26,087,216 26,788,713 701,497 2.689
NON MARK-UP/INTEREST INCOME
Fee, commission and brokerage income 7,925,370 8,930,391 1,005,021 12.68
Dividend income 2,878,932 1,920,336 -958,596 -33.3
Income from dealing in foreign currencies 3,969,057 3,028,165 -940,892 -23.7
Gain on sale of investments 395,427 4,591,894 4,196,467 1061
Unrealized gain/loss on revaluation investment 1,707 2,355 648 37.96
Other income 1,245,369 552,216 -693,153 -55.7
Total non-markup / interest income 16,415,862 19,025,357 2,609,495 15.9
42,503,078 45,814,070 3,310,992 7.79
NON MARK-UP/ INTEREST EXPENSES
Administrative expenses 18,171,198 22,571,470 4,400,272 24.22
Other provisions / write offs 747,521 620,780 -126,741 -17
Other charges 583,361 321,647 -261,714 -44.9
Total non-markup / interest expenses 19,502,080 23,513,897 4,011,817 20.57

23,000,998 22,300,173 -700,825 -3.05


Extra ordinary / unusual items 0 0 0 0
PROFIT BEFORE TAXATION 23,000,998 22,300,173 -700,825 -3.05
Taxation – current 11,762,650 9221513 -2,541,137 -21.6
Prior years 0 -4133282 -4,133,282 0
Deferred -4,220,242 -999,904 3,220,338 -76.3
7,542,408 4,088,327 -3,454,081 -45.8
PROFIT AFTER TAXATION 15,458,590 18,211,846 2,753,256 17.81
Inappropriate profit brought forward 45,344,188 52,456,204 7,112,016 15.68
Transfer from surplus on revaluation of fixed assets on
account
…... of incremental depreciation 130,456 123,934 -6,522 -5
PROFIT AVAILABLE FOR APPROPRIATION 60,933,234 70,791,984 9,858,750 16.18
ANNEXTURE # 10

VERTICAL ANALYSIS
NATIONAL BANK OF PAKISTAN
INCOME STATEMENT
FROM 2008 TO 2009

Assets 2008 %AGE 2009 %AGE


Cash and balance with treasury banks 106,503,756 13.023867 72,976,246 8.43
Balance with other banks 38,344,608 4.6889902 26,527,558 3.06
Lending to financial institution 17,128,032 2.0945103 5,098,642 0.58
Investment 170,822,491 20.889117 240,518,170 27.80
Advances 412,986,865 50.502312 435,504,840 50.3
Operating fixed Assets 24,217,655 2.9614685 24,876,923 2.87
Deferred tax Assets 3,204,572 0.3918727 3,021,712 0.34

53
Other Assets 44,550,347 5.4478622 56,613,570 6.54

TOTAL ASSETS 817,758,326 100 865,138,661 100

Liabilities
Bill Payable 10,219,061 1.249643 7,397,468 0.85
Borrowings 40,458,926 4.947541 50,587,500 5.84
Deposits and other accounts 624,939,016 76.42099 653,518,020 75.5
sub-ordinated loans 0 0 0 0
Liabilities against assets subject to finance lease 25,274 0.003091 24,660 0.002
Deferred Tax liabilities - net 0 0 0 0
Other liabilities 39,656,831 4.849456 37,951,220 4.38

TOTAL LIABILITIES 715,299,108 87.47072 749,478,868 86.63

Net assets 102,459,218 12.52928 115,658,793 13.36

Represented by

Share capital 8,969,751 1.096871 10,763,701 1.24


Reserves 19,941,047 2.438501 21,673,557 2.505
Inappropriate profit 52,456,204 53,970,735

TOTAL S.H.E 81,367,002 9.950006 86407993 9.98


Surplus on revaluation of assets - net of tax 21,092,216 2.579273 29,250,800 3.38

Total liab + S.H.E 102,459,218 12.52928 115,658,793 13.36

6.3 RATIO ANALYSIS


PROFITABILITY RATIOS

RETURN ON TOTAL ASSETS

ITEMS 2005 2006 2007 2008 2009


Profit After tax
12,709,444 17,022,346 19,033,773 15,458,590 18,211,846
Total Assets 635,132,71 762,193,59 817,758,32
577,719,114 1 3 6 865,138,661
Return On Total
Assets 2.199% 2.68% 2.49% 1.89% 2.10%

54
3
2.5
2
%AGE 1.5
1
0.5
0
2009 2008 2007 2006 2005
Years

Comments:

This ratio is increased from 1.895% in year 2008 to 2.10 % in year 2009.which is a
sign of good performance.

RETURN ON EQUITY

ITEMS 2005 2006 2007 2008 2009


PROFIT After tax 12,709,44
4 17,022,346 19,033,773 15,458,590 18,211,846
Shareholder Equity 36,158,47
4 53,044,649 69,270,631 81,367,002 86407993
Return on equity 35.14% 32.09% 27.47% 18.99% 21.07%

40
35
30
25
20
15
10
5
0
2009 2008 2007 2006 2005

55
Comments:

This ratio is increased from 18.99% to 21.01% due to increased in mark up and
interest which is a sign of better performance. But the performance in 2009 is comparatively low as
compared to 2005

NET PROFIT MARGIN

ITEMS 2005 2006 2007 2008 2009


Profit after Tax 12,709,444 17,022,346 19,033,773 15,458,590 18,211,846
Mark up, Interest
23,311,967 30,153,716 33,629,470 37,058,030 38,458,048
Net profit Margin 54.51% 56.45% 56.59% 41.71% 47.35%

60
50
40
%AGE 30
20
10
0
2009 2008 2007 2006 2005
Years

Comments

Net Profit Margin in year 2008 has increased from 41.71% to 47.35% in year 2009. This shows that
there is good performance of the bank. But it is comparatively low than 2009

Earning per share ratio

56
ITEMS 2005 2006 2007 2008 2009
Net profit after
tax 19,056,028 26,310,577 28,060,501 23,000,998 22,300,173
Number of equity
shares 409895162 549364847 654932093 396307196 377318927
Earnings per
share (EPS) ratio 21.51 20.88 23.34 17.23 16.92

25 23.34
20.88 21.51
20
16.92 17.23
15
%AGE
10

0
2009 2008 2007 2006 2005
Years

Comments

This is very important ratio for shareholder and investor here in this case EPS has decreased to
Rs.16.92 from Rs.23.43 that is not good for shareholders and investors.

Findings
57 & Analysis
COST OF LENDING

ITEMS 2005 2006 2007 2008 2009


Interest Income 23,311,967 30,153,716 33,629,470 37,058,030 38,458,048
Total Advances 316,110,40 340,677,10 412,986,86
268,838,779 6 0 5 435,504,840
Cost of Lending 8.67% 9.53% 9.87% 8.97% 8.83%

10
9.8
9.6
9.4
9.2
%AGE 9
8.8
8.6
8.4
8.2
8
2009 2008 2007 2006 2005
Years

Comments:

This ratio shows the cost bear by the bank while lending the money. Here cost of
lending has decreased from9.87% to 8.83% in 2009. This is good for the bank.

LIQUIDITY OR SOLVENCY RATIOS

LOAN TO ADVANCE

ITEMS 2005 2006 2007 2008 2009


Total Loans 8,756,847 11,704,079 10,886,063 40,458,926 50,587,500
Total Advances 316,110,40 340,677,10 412,986,86
268,838,779 6 0 5 435,504,840
Loan to Advance
Ratio 3.25% 3.70% 3.19% 9.79% 11.61%

58
12
10
8
% AGE 6
4
2
0
2009 2008 2007 2006 2005
Years

Comments

Lower the ratio is better for lending institutions. In this case ratio is increased to 11.61%
from 3.19%. Which is not better for bank.

LOAN TO TOTAL ASSETS

ITEMS 2005 2006 2007 2008 2009


Total Loans 8,756,847 11,704,079 10,886,063 40,458,926 50,587,500
Total Assets 635,132,71 762,193,59 817,758,32
577,719,114 1 3 6 865,138,661
Loan to Total
Assets 1.51% 1.84% 1.42% 4.94% 5.84%

59
6
5
4
% AGE 3
2
1
0
2009 2008 2007 2006 2005
Years

Comments

It shows the empirical relation between loan and assets of bank. Here this ratio has
increasing trend, which shows negative performance of bank.

CASH TO DEPOSIT:

ITEMS 2005 2006 2007 2008 2009


Cash 106,503,75
71,196,956 78,625,227 94,873,249 6 72,976,246
Deposits 501,872,24 591,907,43 624,939,01
463,426,602 3 5 6 653,518,020
Cash to Deposits
15.36% 15.66% 16.02% 17.04% 11.16%

18
16
14
12
10
%AGE
8
6 z
4
2
0
2009 2008 2007 2006 2005
Years

60
Comments

This ratio shows that how much cash is available to meet the demand liabilities of
depositors. Here this ratio has increased from 15.03% to 20.28%.

GENERAL RATIOS

COST OF BORROWINGS

ITEMS 2005 2006 2007 2008 2009


Mark up Paid 10,321,768 13,947,218 16,940,011 23,884,768 39,489,649
Deposits 501,872,24 591,907,43 624,939,01
463,426,602 3 5 6 653,518,020
Cost of
Borrowing 2.22% 2.77% 2.86% 3.82% 6.04%

7
6
5
4
%AGE
3
2 z
1
0
2009 2008 2007 2006 2005
Years

61
Comments

It is a comparison between mark-up paid and deposits, the lower the mark up paid is
better for institution. In this case this ratio is increasing from 3.82% to 6.04%.
Which in a positive sign for the performance of the bank.

ADMIN. EXPENSE TO DEPOSITS

ITEMS 2005 2006 2007 2008 2009


Admin. Exp. 11,195,133 13,443,441 14,205,911 18,171,198 22,571,470
Deposit 501,872,24 591,907,43 624,939,01
463,426,602 3 5 6 653,518,020
Ratio 2.41% 2.67% 2.40% 2.90% 3.45%

3.5
3
2.5
2
%AGE
1.5
1
0.5
0
2009 2008 2007 2006 2005
Years

Comments

It shows the cost incurred to manage and collect the deposits. Here it is decreased from
2.90% to 3.45%. Which is negative for the performance of bank.

62
6.4 SWOT Analysis
6.4.1 Strengths

• The customer of the bank is very loyal to the bank and contains very large customers and
poses as strength of the bank.
• NBP rating was AA for long term and A for short term. The rating shows that bank is doing
good business in the country.
• The minimum balance requirements of the bank are low and its service charges are also not
very high as compared to its competitors. This implies that those customers who are not
satisfied with other bank may come NBP for depositing their money or doing some other
business with the bank.
• The introduction of the Agric-Finance wing was an addition in the bank’s product lines and
thus a means of banking upon the market that has not be fully trapped. This can help increase
profits of the bank in the future.
• The deposits and financing of the bank have increased over the year, which means that the
bank is growing with the passage of time.

6.4.2 Weaknesses

63
• Although the bank’s turnover rate has decreased from previous years but it is still high. Thus
NBP should carefully look into this matter if wants to compete the banking industry
• The basic salary paid to the bank’s employees is compatible with other banks but the fringe
benefits offered are not compatible. This leads to employee dissatisfaction and high turnover.
• NBP has centralized it department to decrease its cost and to generate more and more
business from present customer as attracting new customers is more costly than retaining
present ones. Centralization creates problems for the customers, as they do not find all the
departments at every branch of the bank.

6.4.3 Opportunities

• People are not satisfied with the existing performance of banking system, which creates lot of
problems for them such delays in payments etc. NBP has an opportunity because it has a
young and qualified force now and they don’t make any delay regarding any matter related to
payments.
• The per capital income of Pakistan has increased which is a good economic indicator as
when per capital income increase the disposal income of the people will be more and thus
they can do more business with the bank.
• Due to high defaults in banking sector all the surplus money holder are looking for a newly
bank where saving save and it will give them a reasonable profit. So this time only this
government bank is performing well for getting the opportunity to get the confidence of
public and business sector.
• The GDP of Pakistan has increase and this indicates that the economy of Pakistan is growing
so its opportunity not only for NBP but also for the entire banking industry. If economy
increases at progressive rate then this will help grow the business of the banks.

6.4.4 Threats

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• The competitors of NBP like HBL, Askari Bank, Allied Bank and UBL etc have larger
branch network as compared to NBP and this serves as a threat to the bank.
• Pakistan being part of the Muslim world is facing the problem of being blamed for terrorism
this leads to bad image of Pakistan all over the world and thus foreign banks in any other
country hesitate to do business with Pakistani banks, major factor being unstable economy.
• The recent privatization of nationalized banks shows serious threats to the existing banks in
Government sector.

• All banking sector is going towards privatization. And after privatization they are improve
their performance, which is big threats for NBP.
• Inflation rate in the Pakistan is increase rapidly leads to disposable income, which is then
mainly used for expenditure purpose and thus very little is left for saving.

6.5 PEST ANALYSIS

6.5.1 POLITICAL
• The political situation of Pakistan is not satisfactory.
• Due to the rapid change in the Govt every Govt sets its own trade polices.
• Tax policies are also affected.
• Environmental regulation and protections.

6.5.2 ECONOMICAL
• Economic condition affected by foreign investors.
• Increasing inflation rate makes the cost of production high and that’s reducing the profit
margin of investors.
• Interest rate and Monetary policies
• Bad Debts

6.5.3 SOCIAL
• Inadequate human resources

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• Cultural strain to savings
• Declining education and work ethics
• Inadequate accountability
• Defaulter lobby

6.5.4 TECHNOLOGICAL
• Tech advancement in all the sectors of the country has changed the entire social economic
environment especially in the banking sector.
• Inadequate communication infrastructure
• Inadequate computer facilities
• Inadequate IT training

7.1 Findings
The role of the banks is economic development of a country is very vital. Basically banks remove
the deficiency of capital by mobilizing saving and investment. A sound banking system integration
the small and scattered saving of the community and makes them available for productive purposes.
NBP is playing an important role in mobilizing and allocating finance from and to different
industrial and commercial sectors.
The bank is acting as a bridge between savers and the investors. Without a govt. bank like this
money saved would remain idle and the sectors short of funds would remain unfed. This would
strayed the economic activities of life and enthusiasm although in this report only important
functions have been emphasized, the agency and the utility services provided by the NBP are also of
significant important. The main objection is to provide quick service to the people who will save
their time and money.

7.2Conclusion

The main source of the economic development in every developed and developing country is the
commercial banks. Especially for the developing country like Pakistan, banks prove to be a
backbone of the economy. As for as NBP is concerned, its story is a part of the struggle for
economic development.

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National Bank of Pakistan is performing all those functions that a commercial bank performs. It is
providing agency services, general utility services and customized product. Being one of the oldest
banks of the country, it has a wide network of branches operating inside and outside Pakistan. It is a
nationalized bank. Therefore, it is enjoying patronage and protection of government.
During my internship at National Bank of Pakistan, I have got working experience in a prominent
organization.
I have worked in the different department of bank such a clearing department, cash department, sales
department, bills collection department, marketing department etc, under the sympathetic
supervision of the branch personnel. I worked for a specific period of time in the above-mentioned
department and practically gain the knowledge about the working of the several departments. These
departments are well-organized and esteemed institutions.
I found that the branch personnel are very cooperative and almost satisfied with their jobs. They
assigned me various tasks which I have satisfactorily accomplished in the given time period.
However during my work I observed that the staff members are very punctual and regular in
performing their duties.

7.3 Recommendation and suggestions


During the internship period at NBP I have across certain aspects, which need some attention and
improvement. I would like to give a few suggestion and recommendations, which might assist in the
advancement and achievement of the bank.

• Computerization in Banking
NBP has computerized its accounts but it has not computerized its daily counter services.
Computerized of all the branches may be a difficult task, but it could result in a lot of saving for
the bank.
• Evening Bank
In big cities and especially the branches located in commercial areas should extend evening
banking services to its clients as safe keeping of money after close of business house not free of
danger.
• Proper Safeguard of Bank Branches
In these days many branches of various banks have been looted. In order to avoid any such
incidence, proper safeguard measures should be taken to protect the life and property.

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• Reward System & Timely Promotions
There is no invention of reward for the performance and hard working of employees, promotion
is only based on seniority. As a result, employees do not try to work hard. In order to increase the
productivity and performance of him employees Bank should raise reward system, so that can
accomplish their object successfully and discharge their duties efficiently.
• Professionalism
In NBP, there is lack of professionalism at most of the levels. Employees feel overburdened due
to the shortage of staff. The bank should create now jobs to have competent and professional
persons for various posts, so increase in the number of staff can raise the efficiency of the bank.
• Transformation of the Bank from a bureaucratic organization to a fast paced, modern, and
competitive bank
By extending and targeting NBP’s needs to improve bank earnings, through customer focus of its
commercial and corporate branches, and by enhanced efforts towards the development of human
capital. NBP could very soon transform the bank from a bureaucratic organization to a fast
paced, modern, and competitive bank.
• To generate ancillary business
The main purpose of these centers is to generate ancillary business in addition to funded and
non-funded facilities, with quick turn around time in decisions for customer satisfaction.
• Effective Chequing System
In Pakistan, an effective Chequing system is not prevailing. People prefer to receive payment in
hard cash rather than in the form of a Cheque. This is mainly due to the fact that in Pakistan
collection of cheques takes time. In addition cheques are dishonored mainly due to the reason
there are insufficient fund in the drawers accounts. If the collection of Cheque procedure is
speeded up and the account holders are made bound to write cheques only when they have funds
in their accounts, an effective Chequing system can be developed in our country.
• Loans should be sanctioned on Merit
Unfortunately most of the loans are being given on the basis of political background rather than
on merit. Cash loans are later written off politically resulting in a heavy amount of losses for the
bank. It is suggested that the loan sanctioning body of the bank must consist technical people.
There should be no pressure from the government regarding sanctioning and writing off of the
loans.

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• Recruitment policy

Human resources are the lifeblood of the organization. If the personnel are recruited carefully
they can become asset to the organization in the case of carelessness a liability on the
organization. Bank is not following its recruitment policy properly due to favoritism, nepotism
and political pressure. Both the top authority and staff union tries their best recruit their favorites,
indulgence of political pressure add salt to the wounds. The persons selected through these
channels are infantile and do not work for the betterment for the bank.

• Promotions

Promotion in NBP is purely on the basis of seniority, so the new young person having high
qualification remains behind for quite a lot of time. Top management and staff union put
pressure for the promotion of their favorites, which gives a sense of deprivation to the deserving
employee and their efficiency is affected. As the concept of promotion is attached with better in
terms of greater responsibility, more prestige, greater skills and increased rate of salary. Thus a
better and impartial policy of promotion needs to be followed.

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