MC060401631_MBA_HRM

Internship Report

On

National Bank of Pakistan

District Courts Branch(1924)
(Toba Tek Singh)

By

Hussain Ahmad
ID: MC060401631
M.B.A. (HRM)
Session 2006-2008
Phone# 046-2512788
Cell#0334-6267499
House - 11, Street - 103, Housing Colony No 1,
Toba Tek Singh
Virtual University of Pakistan

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DEDICATION

I dedicate my this internship report

to Allah Almighty
Who has created me as human being
and helps me in difficulties, and my
parents (especially father, mother
and maternal uncle) by whom
whishes, I have reached
at this stage

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PREFACE

The internship is an essential part of M.B.A degree program because through this
training students come to know the real difference between theory and practice
and they also introduced to the outside business world. An important requirement
of this training program is to compile a report about the activities of that
organization in which student has done the internship.

I have done my internship in National Bank of Pakistan, District Court Branch

(1924) Toba Tek Singh. The internship provided me great opportunity to equip
myself with knowledge, techniques, application and tools used in an organization.
I have tried to choose suitable words to lighter the subject of this report. Because
words are the symbols used to express ideas. There are the tools of affective
writing. There importance lies in the power, when they have suitably chosen and
arranged to convey and through to other in language, that is the understandable
clearly and understood readily.

An important requirement of this report is that it should be comprehensive and

written in good style, I have tried my best to make the style of this report as good,
as possible, because style in writing as in other walks of life, is a quietly peculiar
to the individual, as not to people write alike. Background, training, experience
and the way a person thinks determine it.

The source of information for the preparation of report includes the written notes
extracts from banking literature and verbal discussion with bank officials.
I hope this report will help in understanding various aspects and features of NBP,
and will be equally important for Administrative students and persons making
future banking.

Hussain Ahmad

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ACKNOWLEDGEMENT

Internship, in fact, for the students of M.B.A (HRM) is a golden chance to

develop their capability and skill of administration and management in the
practical environment of different business organization. In this contest, I select
the Main Branch National Bank of Pakistan. This is among the leading domestic
BANKING institution, as it is one of the leading institute of Pakistan. Moreover,
particularly being a student of management sciences, it is necessary for me to get
practical knowledge of the managerial and financial activities of the organization.

This work is a collection of my observation and experience during the internship

period and afterward. The source of my information for the preparation of this
report also includes the written notes, literature on sugar mills, and verbal
discussion with officials, senior students working in the institute and my
classmates. In the preparation of this report, I have received valuable assistance
from the staff of NATIONAL BANK OF PAKISTAN Distt. Courts Branch
(1924) TOBA TEK SINGH. I am thankful to BRANCH MANAGER and the
WHOLE STAFF for their co-operation.

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EXECUTIVE SUMMERY

In this report you will know about the banking sector, different banking
departments and their working. How the banking system works and how they
organize different departments. I have tried my best to prepare this report as
simple as possible so that new users can understand the concept of banking and
working of its various departments. In the very short time that I have utilized in
knowing how the organizations works and how to get the required knowledge
from the different departments. I am of the opinion that this report will prove to
satisfy my seniors as well as my instructor and checking team.

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Internship Certificate

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Table of Contents
DEDICATION...................................................................................................................................2
PREFACE..........................................................................................................................................3
ACKNOWLEDGEMENT.................................................................................................................4
EXECUTIVE SUMMERY................................................................................................................5
Internship Certificate..........................................................................................................................6
Introduction of Study.........................................................................................................................8
Background of Studies...................................................................................................................8
Purpose of the Studies....................................................................................................................8
Scope of Studies.............................................................................................................................8
Research Methodology...................................................................................................................8
Scheme of Study.............................................................................................................................9
Introduction of the organization’s Business Sector,.........................................................................10
Definitions of Bank......................................................................................................................11
Evolution of Banking in Pakistan.................................................................................................12
Banking Growth during (1948-1970)...........................................................................................12
Banking Reforms 1972.................................................................................................................16
Islamization of Banking...............................................................................................................21
INTEREST FREE BANKING.....................................................................................................22
Overview of the Organization .........................................................................................................23
HISTORY OF NBP:.....................................................................................................................23
Organizational Structure..............................................................................................................26
SERVICES OF NBP....................................................................................................................33
Plan of Internship Program..........................................................................................................42
Training Program.........................................................................................................................43
REMITTANCE DEPARTMENT ...............................................................................................54
DEPOSIT DEPARTMENT: -......................................................................................................56
FOREIGN EXCHANGE/DEPARTMENT:................................................................................60
HUMAN RESOURCE MANAGEMENT.......................................................................................61
Critical Analysis ..............................................................................................................................66
SWOT ANALYSIS .........................................................................................................................68
STRENGTHS:..............................................................................................................................68
WEAKNESSES...........................................................................................................................70
OPPORTUNITIES ......................................................................................................................72
THREATS....................................................................................................................................72
FINANCIAL ANALYSIS................................................................................................................74
Ratio Analysis..............................................................................................................................75
Table12.........................................................................................................................................86
Conclusion & Recommendations....................................................................................................94
PROBLEMS AT THE BRANCH................................................................................................94
Poor record management and filing system.....................................................................................94
FUNCTIONAL ANALYSIS........................................................................................................95
ADMINISTRATIVE ANALYSIS...............................................................................................96
Low Profit Rates...............................................................................................................................97
Delays in Loan Advancement..........................................................................................................98
PERSONAL MANAGEMENT ANALYSIS...............................................................................98
Lack of Business Communication..................................................................................................100
General Suggestions.......................................................................................................................101
REFERENCES...............................................................................................................................110
Annex.............................................................................................................................................111

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Introduction of Study

Background of Studies
As part of the academic requirement for completing MBA (HRM) Master
Business Administration of the students are required to under go six months of
internship with an organization. The internship is to serve the purpose of
acquainting the students with the practice of knowledge of the discipline of
banking administration.

This report is about National Bank Pakistan. NBP was established in 1949 and
since then, it has expended its network, becoming the largest commercial Bank of
the country. It offers different products of services to its customers.

Purpose of the Studies

The main of the study in hand is together relevant information to compile
internship report on National Bank of Pakistan.

To observe, analyze and interpret the relevant data competently and in a useful
manner.

• To work practically in an organization.

• To develop interpersonal communication.

Scope of Studies
As an internee in National Bank of Pakistan the main focus of my study research
was on general banking procedures in one of the branches of NBP. These
operations include remittances, deposits, advances and foreign exchange.

Similarly different aspects of overall of NBP are also covered in this report.

Research Methodology
The report is based on my two months internship program in National Bank of
Pakistan. The methodology reported for collection of data is primary as well as

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secondary data. The biggest source of information is my personal observation

while working with staff and having discussion with them. Formally arranged
interviews and discussions also helped me in this regards.

• Primary data:

Personal observation

Interviews of staff

• Secondary data:

Manuals

Journals

Magazine

Annual reports

Internet

Scheme of Study
An introductory chapter that discuss the introduction of study of report, its
Background, Purpose, Scope, Methodology, limitations and Scheme of the report.

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Introduction of the organization’s Business Sector,

EVOLUTION OF BANKS IN PAKISTAN

There are different opinions that how the word ‘Bank’ originated. Some of the
author’s opinion that this word is derived from the word ‘Bancus’ or Banque’,
which means a bench. The explanation of this origin is attributed to the fact that
the Jews in Lombard transacted the business of money exchange on benches in
the market place; and when the business failed, the people destroyed the ‘bench’.
Incidentally the word ‘Bankrupt’s said to have evolved from this practice.

Some of the authors are of opinion that the word ‘Bank’ is derived from the
German word back, which means ‘joint stock fund’. Later on when the German
occupied major part of the Italy the word ‘Back’ was italicized into ‘Back’.

In fact human left the need of bank when it begins to realize the importance of
money as a medium of exchange. Perhaps it where the Babylonian who developed
banking system as early as 2000 BC. At that time temples were used as banks
because of their prevalent respect. During the rule of king Hamurabi (1788 – 1686
BC) the founder of Babylonians Empire, loans were started being granted for
interest. The borrower has to provide guarantee or he had to pledge his goods or
valuables. King Hamurabi drew up a code wherein he laid down standards rules
for procedures for banking operations by temples and great landowners. Also in
Greece, the temples were used as banks, where the people deposited their money
and other valuables for safe custody and security. In Europe with the ‘revival of
civilization’ (Renaissance) in the middle of twelve century, trade and commerce
started expanding and this development compelled the business community to
borrow the money from the Hebrew money lenders on high rates of interest and
usury. Seeing the great demand, these moneylenders started organizing
themselves and bank started up at the principle seaports of southern Europe. Soon
Venice and Geneva became the most important money markets of the time and
banking though different from its present form, flourished. What we know as
‘modern banking’ originated in the 14th century in Barcelona.1

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Definitions of Bank
“Bank”

"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 higher rate of interest to those who need them.”2

A financial establishment which uses money deposited by customers for

investment, pays it out when required, makes loan at interest, exchanges currency,
etc.

J.W Gilbert in his principles and practice banking defines a banker in these words:

“A banker is dealer in capital or more properly, a dealer in money. He is

intermediate party between the borrower and the lender. He borrows of one and
lends to another”.3

Sir John Paget defines banker in these terms:

“That no person or body, corporate or otherwise, can be a banker who does not

 Take deposits accounts.

 Take current accounts,

 Issue and pay Cheques and

 Collect Cheques crossed and uncrossed for his customers”4 (The law
of Banking by Sir John Paged, page 51).

The American defined the term banker in a very broad sense as under:

“By banking, we mean the business of dealing in credits and by a ‘Bank’

we include every person, firm or company having a place of business where
credits are opened by deposits of collection of money or currency. Subjects to be

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paid or remitted on Cheques or order, money is advanced or loaned on stocks,

bonds, bullion, bill of exchange, promissory notes are received for discount or
sale”.5

Evolution of Banking in Pakistan

The first phase in evolution of banking in Pakistan sees very hard days for the
whole banking sector. Starting virtually from scratch in 1947, the country today
possesses a full range of banking and financial institutions to cope with various
needs of the economy.

The area now constituting Pakistan was, relatively speaking, fairly well provided
with banking facilities in undivided India, in March 1947 there were 3496 offices
of Indian scheduled banks out of which as many as 487 were situated in territories
now constituting Pakistan.

The Reserve bank of India was the central banking authority in India. At the time
of partition it was decided that in the interest of smooth transition it should
continue to function in newly emerging state of Pakistan, until 30th Sep.1948.

In 1947 due to uncertainty and unsuitability the banking sector suffer heavy
losses.

This resulted in a negative effect on baking service in Pakistan. The banks, which
had their registered offices in Pakistan, transferred them to India. In an effort to
bring about the collapse of the new state by pushing a deliberate policy of
withdrawals the Indian bank offices closed quickly. Those banks, which stayed,
operated only in name pending the winding up of their business. The number of
scheduled banks thus declined form 487 branches before independence to only
195 branches by 30th June1948.5

Banking Growth during (1948-1970)

In this tense situation, a committee was immediately setup to formulate a scheme
of central banking legislation for Pakistan. Many specialists were of the opinion
that in view of the acute shortage of trained staff, any idea of establishing a

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central bank was I impractical and the best that could be attempted was the setting
up of a currency board until such times as sufficient staff could be organize to
operate a central bank.

The questions as to whether the institution should be only a currency board or a

full-fledged central bank had exercised the mind of the Pakistan government since
independence. Through, it was realized that the shortage of trained personal to run
the central bank would present serious difficulty in view of the tangible
advantages that a central bank enjoyed over currency board, the government
ultimately decided to take the bold step of setting up a full fledged central
banking authority. Among other factors, which led to this decision, there was the
fact the banking facilities in the country had been totally disrupted and there was
an urgent need for their rehabilitation, which a central ban alone could meet. As
there was hardly any time to pass as Act, an order was drafted, known as the state
bank of Pakistan order, which was promulgated by the government of Pakistan on
12th may 1948. The state bank declared open on July 1, 1948 by the father of the
nation.

One of the first tasks of the state bank was to arrange for the replacement of the
Reserve bank of India notes, which had continued to circulate in Pakistan during
the transitional period, by Pakistan currency.

The first Pakistan notes were issued in October 1948 in the denominations of Rs.
5, 10 & 100.

An equally urgent task, which the new central bank had to address itself, was the
creation of a national banking system. To this end, while extending every help
and encouragement to Habib Bank to expand its organization, the state bank
recommended the setting up of a new banking institution to serve both as an agent
to the state bank recommended the setting up of a new banking institution to serve
both as an agent of the state bank as well as the spearhead of its credit polices.

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Accordingly the NATIONAL BANK OF PAKITSN was setup under an

ordinance in November 1949. It started with six offices in the former East
Pakistan. In view of the special role assigned to the new institution, contrary to
traditional practices the Governor of the state bank was appointed to head its
board of Director in 1950. Under the fostering care of the state bank and the
support of the government, the new institution developed rapidly. By using its
special powers, the state bank made liberal advances to the new bank to help it
expand credit facilities in the country. By 1952, the National bank of India.
Shortly, afterwards, in November 1952, the governor of the state bank ceased to
function as the president of National bank of Pakistan.

With a view to broadening the institutional framework of the financial system, the
state bank also sponsored the establishment of specialized credit institutions in the
filed of agriculture and industry. Banking companies (control) act was passed in
December 1948 specifically empowering the state bank to control the operations
of banking companies in Pakistan.

Moreover realizing that the most serious limitation on the expansion of banking
services in Pakistan was the lack of trained personal, the state bank sponsored a
banking training scheme, which was repeated after year and turned out a large
number of bankers.

As the Commercial Banking facilities continued to expand, a new Pakistani bank,

the National Commercial Bank was established and registered as a scheduled
bank. In the filed of industrial finance a new institution known as the industrial
credit and investment cooperation was set up.

The year 1958 marked the completion of the first decade of the working of the
State Bank of Pakistan. When it was established there were only 195 bank offices
in existence. At the end of June 1958 their number had increased to 307, of which
Pakistani banks accounted for 232 against 25 in mid 1948. Moreover at the end of
June 1958. Pakistani banks held 60% of the total banks deposits, and were
responsible for 65 of total bank credit.

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When the Ayub Government took over in 1958, the banking and monetary scene
was significantly affected by Developments such as the liberalization of imports,
transfer of business in food grains to the private sector, and the firming up of
commodity markets. The demand of funds picked up and there was a substantial
expansion of bank credit to the private sector. The pace of expansion in the
institutional frame work of the country’s banking system quickened and a new
Pakistani, bank, namely the United Bank Limited was established.

Owning the five years 1960-65, the credit structure in Pakistan made rapid
progress. The bank extended its network by opening six new offices located at
Chitagong, Peshawar, Quetta, Khulna, Layallpur and Rawalpindi. The number of
scheduled bank offices rose from 430 at the end of June 1960 to 1591 in June
1965. Several new banks were added to the list of scheduled banks.

Two principal additions were the commerce bank, and the standard bank. The
number of scheduled banks, which stood at 29 in June 1960 rose to 36 by June
1965.

Under the impact of economic growth and dear scope of private enterprises, bank
credit to the private sector rose from Rs. 1,458 millions to Rs. 5759 million. Thus
the total expansion in bank credit to the private sector during this period
amounted to Rs. 4300 million, which gave a annual expansion of Rs. 860 million
compared to the annual average increase of Rs. 144 million over the preceding
five years. Banks deposits increased from Rs. 2,493 million to Rs. 6883 million
during the five years period ended June 1965 compared to Rs. 231 million in the
proceeding five years. Time deposits during this period increased from Rs. 946
million to Rs. 3228 million, where demand deposits rose from Rs. 1997 million to
Rs 3655 million. The increase in time deposits was particularly rapid. The ratio of
time deposits to total deposits in June 1965 stood at 49.6 percent age as against
32.01 percent age five years earlier. Another salient feature of banking
development during this period was that since the rate of increase in bank deposits
lagged behind the rate of expansion in bank credit, the banked has to depend

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increasingly on central bank finance. They borrowing from the state bank rose
from Rs. 11 million in June 1960 to Rs. 1688 million in June 1965. Owing keen
demand for bank credit, bank’s investments could not increase as rapidly as their
advances. Their investments totaled to Rs. 1,874 million at the end of June 1965
compared to Rs. 1,231 million in June 1960. Investments which were almost
equal to their advances in June 1960 were only about one third of the advances in
June 1965.

The third plane period witnessed a further expansion of banking facilities in the
country the total number of scheduled banked offices increased from 1,591 at the
end of June 1965 to 3133 at the close of June 1970. During the same bank credit
to the private sector rose from Rs. 5,789 million to Rs. 9492 million. There was
also a substantial growth in the bank deposits, which increased from Rs. 6883
million June 1965 to Rs. 13147 million at the end of June 1970. A remarkable
change occurred during this period related to the composition of deposits. Time
deposit becomes greater than demand deposits forming about 54 percent age of
the total deposits. As oppose to what happened in the previous period, banks were
able to finance a mush higher level of credit expansion without having to increase
their borrowings from the central bank.7

Banking Reforms 1972

After the assumption of office by a new government in 1971, may 1972 different
reforms were introduced to make the banks more responsive to the requirements
of economics growth with social justice. The reforms aimed at bringing about a
more purposeful and equitable distribution of bank credit, improving the
soundness and efficiency of the banks, and securing greater social accountability
of the banking system as a whole.

The role of the banking system had been truly spectacular in mobilizing savings
of the community and meeting the credit needs of the economy. But at the same
time, the banks had generally neglected their role in promoting social justice and
had failed to play an effective role in ensuring a wider and more equitable
dispersal of the benefits of economic growth. In particular the inter locking of

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ownership with commercial and industrial interests had led to the misuse of bank
resources. There was a heavy concentration of credit in big accounts and in urban
area. Credit facilities for agriculture, small business, newly emerging exports and
housing had remained obviously inadequate while the banks indulged in capital
financing in few selected business sectors and issued guarantees on behalf of
favored clients, term clients, term financing facilities for industry were wholly
absent.

Under the banking reforms introduced in May 1972 the state bank of Pakistan was
accorded wider powers. It was authorized to remove directors or managerial
personnel, if necessary and supersede the board of directors of a banking
company and appoint administrators during the period of such super session. It
was also empowered to nominate directors on the board of every bank. As regard
bank directors, it was provided that anyone defaulting in meeting his obligations
to bank would forfeit his directorship. Moreover, it was laid down that no person
could serve as director of a bank for more than six years continuously. Each bank
was required to have a paid up capital of not less than 5 percent age of its deposits
to be progressively build up to 10 percent age over a period of time. The banks
were also required to transfer 10 percentage of their profit their reserves every
years after the reserve became equal to the paid up capital. With a view to
diversity the ownership of the banks, the banks were required to raise new capital
from the market. Unsecured loans to directors, their families or firms and
companies, were totally prohibited.

The bank reforms also brought about the establishment of new institutions to
achieve new objectives.

A national credit consultative was setup under the supervise of the state bank with
representation form the government and the private sector. It was assigned the
task of determining of economy’s annual credit needs within the safe limits of
monetary and credit expansion with reference to the annual development plan.
Such a credit plan was to cover the public and private sectors. Alongside the

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National credit council and Agricultural Advisory Committee was formed to

allocate agriculture credit for various purposes, to coordinate the operation or the
agriculture credit agencies and to oversee the flow of credit to the designated
targets. A standing committee on exports in general and the new emerging exports
in particular, was also established. With a view to encourage the banks to extend
credit to small borrowers, a credit guarantee scheme was introduced under which
the state bank under took to share any bonfire losses incurred by the commercial
banks in case of small loans of advances to agriculture.

At the same time two financing institutions were established. The people’s
Finance Corporation was designed to provide finance to people of small means
while the National Development Finance Corporation was setup of finance public
sector owned and managed industries and enterprises.

NATIONALIZATION OF BANKS (1974)

The banking reforms turned to be transitional and interim step and when they
were hardly eighteen months old the government nationalized the banking
systems, with the following main objectives.

To enable the government to use the capital concentrated in the hands of a few
rich bankers for the rapid economic development of the country and the more
urgent social welfare objectives.

To distribute equitably credit too different classes sectors and regions.

To coordinate the banking policies in various area of feasible joint activity

without eliminating healthy competition among banks.

The act passed for the nationalization of banks is known as the banks
Nationalization Act 1974.

Thus under this act the state bank of Pakistan and all the commercial banks
incorporated in Pakistan and carrying business in or outside the country were

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brought under government ownership with effect from Jan 1, 1974. The
ownership, management and control of all Pakistani banks stood transferred to
and vested in the Federal government. The shareholders were provided
compensation in the form of federal government bonds redeemable at par anytime
within the period of fifteen years. Under the Nationalization act, the Chairman,
Directors and Executives of various banks, other than those appointed by federal
government were removed from their offices and the central boards of the banks
and all local bodies were dissolved. Pakistan banking council was established to
coordinate the activities of the Nationalized Commercial banks. At the time of
Nationalization on December31, 1973 there were following 14 Pakistani
commercial banks with 3323 offices allover Pakistan and 74 offices in foreign
countries:

National banks of Pakistan

Habib bank limited

Habib bank (overseas) limited

United bank limited

Muslim commercial bank limited

Commerce bank limited

Standard bank limited

Australia bank limited

Bank of Bahawalpur limited

Premium bank limited

Pak Bank limited

Sarhad bank limited

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Lahore commercial limited

Punjab provincial co-operative bank limited

The Pakistan banking council prepared a scheme for the recognition of banks. The
bank (amalgamation) scheme 1974 was notified in April, providing for the
amalgamation of the smaller banks with bigger ones and following the five units
in there phases:

National bank limited

Habib bank limited

United bank limited

Muslim commercial bank limited

Allied bank of Pakistan limited

The first phase was completed on 30th June. 1974. When the bank Bahawalpur
was merged with the National Bank of Pakistan. The premier Bank Limited with
Muslim Commercial Bank limited and Sarhad Bank Limited and Pak bank limited
and renamed as Allied Bank of Pakistan limited.

The second phase was completed on 31st Dec.1974, when the commerce bank
limited merged with the United Bank limited.

The third and the final phase were completed on 30th June, 1975 when the
standard bank limited was merged with Habib Bank limited.

The nationalization was very smooth and gave very positive results.

The number of branches, which stood at 3397 on Dec31, 1973, reached on 7661
by end June 1992. The bank deposits which stood at Rs. 1925 corers at the end
1973 reached the highest mark about 323 corers.1

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Islamization of Banking
Another major development in the history of Pakistan Banking System was the
introduced of interest free banking in selected Commercial Banks with effect
form Jan1, 1981. This followed the effort to eliminated interest from the operation
of Nation investment trust, the House Building Finance Corporation of Pakistan.
Certain amendments were made in banking and other laws with the object of
ushering in a new system of banking, which would confirm of Sharia. A new law
Modaraba Companies Ordinance 1980 was promulgated. Separate interest free
counters began to operate in all the nationalized commercial banks free counters
began to operate in all the nationalized commercial banks. The state bank
provides finance against participation term certificate and also against promissory
notes supported by Modaraba certificate.

In order to cover interest free transactions certain banking definitions such as

creditors, debtor, and advances credits and deposits were revised. Stipulations
concerning form of business in which banking companies may engage may also
have been modified schemes were introduced to provide interest free loans to
formers and deserving students.

A private Limited Company named as Bankers Equity limited was incorporated in

1979 to provide financial assistance to the industrial sector primarily on interest
free basis.

A scheme to extend interest free productive loans to farmers and fisherman has
also been introduced. Instead of interest, a system based on mark-up in price,
exchange rate differential, and profit and loss sharing accounts were introduced.

Different financial schemes introduced in the Islamization process are: 2

♦ Musharika Financing.

♦ Hire Purchase Financing.

♦ Modaraba Financing.

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♦ Specific Purpose Modaraba.

3.2 Dis-Investment and Deregulation of Banking – 1991

When it was realized that the role of public sector in the economy is over
extended and the banking sector has more earning potential in the private sector
the process of privatization banking sector restarted in 1991 by the Muslim
League Government. Muslim Commercial Bank was Dis-invested in to two
phases while ABL was sold to its employees. Since then allot of investment is
being made in the banking sector and several new banks were established and still
the process is going on. Now only NBP is government bank other than SBP. The
performance of this bank will be analyzed and judged in the following chapters.

INTEREST FREE BANKING

A new concept of interest free banking was introduced in 1981 and by now it has
been established on sound footing and new trends and techniques are being
implemented to make this system result oriented. New products and their
systematic consumption are making Pakistani banking comparable to their several
modern counterparts anywhere in the developed world.

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Overview of the Organization

HISTORY OF NBP:
The NBP was established vide NBP Ordinance No. XIX of November 9. 1949.

British Govt. devalued its currency in September 1949, India devalued its rupees
but Pakistan did not. It led to a crisis in trading between the two countries and
India refused to lift the Pakistan Jute. To solve this problem i.e. to export jute
NBP was established through an Ordinance of GOP. National Bank of Pakistan
maintains its position as Pakistan's premier bank determined to set higher
standards of achievements. It is the major business partner for the Government of
Pakistan with special emphasis on fostering Pakistan's economic growth through
aggressive and balanced lending policies, technologically oriented products and
services offered through its large network of branches locally, internationally and
representative offices.

The Bank in 1950 had one subsidiary ‘The Bank of Bahawalpur’ on December 4,
1947 by the former Bahawalpur State.

NBP was undertaking Treasury Operations and Managing Currency Chests or Sub
Chests at 57 of its offices where the turnover of the business under the head
amounted to Rs.2460 million.

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

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

ii) Growth in Deposits was accompanied by increase in Bank portfolio in

advances. NBP lent out to Textile, Yarn, Iron and Steel and played a pioneer role
in support of agriculture and commerce.

iii) NBP advances reached Rs.554.4 million by December 1959, which was
one third of the total schedule bank credit.3

MISSION STATEMENT
“To make the Bank complete and competitive with all international

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Standard in performing, quality of, operations, staff, financial strength. And

products and services To develop a culture of excellence in every spare of activity
of the bank4”.

GOALS AND OBJICTIVES

“An organizational objective is the intended goal that prescribes definite scope
and suggests direction to the panning efforts of a organization.”6

GOALS AND OBJICTIVES NBP

“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 offerings.”

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MANAGEMENT

Management is a distinct process consisting of activities of planning, organizing,

actuating and controlling performed to determine and accomplish stated
objectives with the use of human being and other resources.8

The management has two types.

1 Centralized.

2 Decentralized.

Centralized Management tends to concentrate decision making at the top of the

Organization .

Decentralized disperses decision making and authority throughout and further

down the organizational hierarchy.

NBP have a centralized type of management because all the decisions are taken
by the top management.

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Organizational Structure
SENIOR MANAGEMENT OF NBP.

SEVP & Group Chief, Corporate &

Masood Karim Sheikh Investment Banking Group and Chief
Financial Officer

S. M. Rafique SEVP & Secretary Board of Directors

SEVP & Group Chief, Special Assets &

Derick Cyprian
Remedial Management Group

SEVP & Group Chief, Compliance

Imam Bakhsh Baloch
Group

EVP & Group Chief, Commercial &

Shahid Anwar Khan
Retail Banking Group

EVP & Group Chief, Information

Nadeem A. Dogar
Technology Group

EVP & Group Chief, Audit &

Muhammad Sardar Khawaja
Inspection Group

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

EVP & Group Chief, Risk Management

Javed Mehmood
Group

EVP & Group Chief, Treasury

Muhammad Nusrat Vohra
Management Group

Amim Akhtar EVP & PSO to the President

Group Chief, Human Resources

Dr. Mirza Abrar Baig
Management & Administration Group

Group Chief, Organization D&T

Uzma Bashir
Group

(Source www.nbp.com.pk)

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Net Work of Branches:

NBP have wide range of branches inside the country and outside the country.

In Pakistan it has 29 regional offices, 1189 Branches and 4 Subsidiaries.

In overseas it has 16 overseas branches, 6 other branches.

Objectives of NBP

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

objective is profit maximization. This is achieved in two ways:

1. By increasing deposits.

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

community.

These are explained as:

Increase in deposits:

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

private or nationalized tries to increase its deposits by providing better facilities to
its customers. By increasing its deposits a bank can extend greater amount of loan
and hence achieves higher profit. NBP is also improving its facilities and services
to attract customers with higher volume of deposits. There are two main factors
involved in increasing the deposits. These factors are improving the services and
courtesy. NBP is continuously working on these two factors to increase its
deposits.

Extension of loans:

The profitability of a bank largely depends on the amount given to people as loan
and the type of people to whom credit is given i.e. the credit worthiness of the
borrowers. This strategy has worked quite well for NBP. Deposits are collected

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from the people and invested in different projects. NBP prefers to give loans to
financially sound and reliable parties, after securing the collators. NBP has an
extremely well organized section. The staff is adequately trained, and educated
and competent. They carry out extensive financial analysis before deciding on the
loan. Interest charged on the loans potentially contributes to higher profits.

Some of the other objectives of NBP are:

i. Improve customer services.

ii. Quick disposal of credit cases.

iii. Efficient operation of the branches.

iv. Better Public Relations.

v. Operational and advisory services for foreign exchange accounts activities

Functions of NBP

Since NBP is a commercial bank, it performs a variety of functions.

Like other commercial banks, NBP is engaged in financing international trade.

Its other major functions include receiving deposits, advancing loans and
discounting of exchange. The functions performed by NBP are:

Accepting Deposits

This function is important because banks largely depend on the funds deposited
with them by its customers. Deposits are of many types:

i. Current deposits

Current deposits are also called demand liability on current deposits. NBP pays
practically no interest on current deposits. Businessmen usually open current
accounts. In NBP current account can be opened with a minimum amount of
Rs.500/-.

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ii. PLS saving deposit

Profit and loss sharing deposits (PLS) are also called checking accounts. One can
deposit and draw money easily. Profit on PLS is calculated every month but paid
after six months. PLS account can be opened with a minimum amount of Rs.500/-

iii PLS term deposits

Fixed term deposits are deposits with the bank for certain fixed period before the
expiry of which they cannot be withdrawn unless giving due notice. In this case
the rates of profit will be different depending upon the time period.

Discounting bills of exchange

Discounting of bill is practically speaking lending for exchange at their market

rate i.e. it pays to holder of the bill an amount equal to the face value after
deducting interest at the current market rate for the period. This bill has to be
mature. This is the common way used for keeping a part of assets of the bank in a
liquid form.

Agency service

NBP also provides best and unique service to its valued customers. NBP provide
the following agency services to the customers:

i. Collection of dividends

As NBP deals with the purchase and sale of various types of securities, therefore
NBP also provide dividend or interest earned on share or bonds or invested
money.

ii. Collection of Cheques

In the collection and payment of Cheques, bills and promissory notes etc.
National bank of Pakistan acts as an agent for its customers.

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iii. Acting as an agent

NBP also acts as an agent correspondent or representative for its customer at

home or abroad.

iv. General utility services:

Utilities provided by NBP are as follows:

a. Clearance of utility bills

NBP provides the service of clearing the utility bills i.e. electricity, gas and
telephone bills of its customers. For this purpose it also provides evening banking
services.

b. Lockers facility

National bank of Pakistan also provides locker facilities to its customers to keep
their valuable assets in it. The charges of different size of lockers are different.

c. Acts as a referee

NBP provides useful services to its customers by acting as a referee to their credit
worthiness.

d. Supply of information

NBP provides operational and advisory service for foreign exchange

accounts/activities.

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Unmatched Banking Facilities

 Deposit security, Guaranteed by Government of Pakistan.

 Highest rates of return to attract the savings.

 Lowest rates on exports and other borrowings.

 Largest contribution towards Government and Semi-Government

requirements.

 Agents of the SBP handling Treasury Functions, receipts of Taxes &

other Revenues.

 Handling of salaries & pensions of federal/provincial/defense

personnel.

 Utility Bills collections.

 Hajj arrangements.

 Sale and encashment of prize Bonds.

 Sale and encashment of Defense Savings and Special Savings

Certificates.

 Safe Deposit Lockers for customers.

 Rational Human Resource Management.

The prestigious periodical “The Banker” UK recognized NBP as the best bank for
2001-2002 and NBP is the bank of the year for 2003-2004 of Pakistan.

i. AAA rating awarded JCR-VIS Credit co. Ltd and affiliated of Japan
Credit Rating Agency for 2001.

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ii. AAA+1 rating awarded JCR-VIS Credit Co.Ltd and affiliated of Japan
Credit Rating Agency for 2002

NBP at the forefront of Pak-Afghan trade

i. Booth at dry port Peshawar

ii. Booth at Pak Afghan border (Torkham) NWFP

iii. Booth at Pak Afghan border (Chamman).Baluchistan.

iv. Establishing branch at Kabul in near Future.

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SERVICES OF NBP
SERVICES

Services are he outputs of the firm which are in intangible form.

NBP offers the following services to the people.

DEMAND DRAFTS

If you are looking for a safe, speedy and reliable way to transfer money, you can
now purchase NBP’s Demand Drafts at very reasonable rates. Any person
whether an account holder of the bank or not, can purchase a Demand Draft from
a bank branch.

SWIFT SYSTEM

The SWIFT system (Society for Worldwide Inter bank Financial

Telecommunication) has been introduced for speedy services in the area of home
remittances. The system has built-in features of computerized test keys, which
eliminates the manual application of tests that often cause delay in the payment of
home remittances. The SWIFT Center is operational at National Bank of Pakistan
with a universal access number NBP-APKKA. All NBP overseas branches and
overseas correspondents (over 450) are drawing remittances through SWIFT.

Using the NBP network of branches, you can safely and speedily transfer money
for our business and personal needs.

LETTERS OF CREDIT *

NBP is committed to offering its business customers the widest range of options
in the area of money transfer. If you are a commercial enterprise then our Letter
of Credit service is just what you are looking for. With competitive rates, security,
and ease of transaction, NBP Letters of Credit are the best way to do your
business transactions.

TRAVELER'S CHEQUES

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Traveler’s cheques are negotiable instruments, and there is no restriction on the

period of validity of the cheques. Rupee traveler’s cheque is available at all 700
branches of NBP. This can be encashed in all 400 branches of NBP. There is no
limit on purchase of this cheque. It is one of the safest ways for carrying money.

PAY ORDER

NBP provides another reason to transfer your money using our facilities. NBP
pay orders are a secure and easy way to move your money from one place to
another. And, as usual, NBP charges for this service are extremely competitive.
The charges of NBP are very low all over the Pakistan. It charges Rs 50/- for NBP
account holders on issuing one payment order. And charges Rs 100/- for NBP
non-account holders on issuing one payment order. It charges Rs 25/- for students
on payment of fees of educational institutions. If some one want a duplicate of
payment order they charges Rs 100/- for NBP account holders and Rs 150/- for
non account holders.

MAIL TRANSFERS

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 50/-
exchange rate and RS 75/- postage charges on issuing mail transfer.

FOREIGN REMITTANCES:

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

Pakistan has taken a number of measures to:

• Increase home remittances through the banking system

• Meet the SBP directives/instructions for timely and prompt delivery of

remittances to the beneficiaries

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New Features:

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

and well-trained field functionaries are posted to provide efficient and reliable
home remittance services to nonresident Pakistanis at 15 overseas branches of the
Bank besides Pakistan International Bank (UK) Ltd., and Bank Al-Jazira, Saudi
Arabia.

• Zero Tariffs: NBP is providing home remittance services without any

charges.

• Strict monitoring of the system is done to ensure the highest possible

security.

• Special courier services are hired for expeditious delivery of home

remittances to the beneficiaries.

SHORT TERM INVESTMENTS

NBP now offers excellent rates of profit on all its short term investment accounts.
Whether you are looking to invest for 3 months or 1 year, NBP’s rates of profit
are extremely attractive, along with the security and service only NBP can
provide.

National Income Daily Account (NIDA)

The scheme was launched in December 1995 to attract corporate customers. It is

a current account scheme and is part of the profit and loss system of accounts in
operation throughout the country.

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Salient Features:

• Rs 2-million is required to open an account and there is no maximum

limit.

• Profit is paid on half yearly basis on monthly balances.

• The rates of profit vary according to the slabs of deposit. On Deposits of

Rs.2 million to 2,000 million, the rate fluctuates from 1.4 to 1.75

• It is a checking account and there is no limit of withdrawals.

Rates on NIDA

• From Rs 2/- million to Rs 50/- the rate is 1.4%.

• From Rs50/- million but less than Rs 500/-million, the rate is 1.5%.

• From Rs 500/- million but below Rs 1000/- the rate is 1.6%.

• From Rs 1000/- and above the rate is 1.75%.

QUITY INVESTMENTS

NBP has accelerated its activities in the stock market to improve its economic
base and restore investor confidence. The bank is now regarded as the most
active and dominant player in the development of the stock market.

NBP is involved in the following:

• Investment into the capital market

• Introduction of capital market accounts (under process)

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

would result in better returns offered to account holders

COMMERCIAL FINANCE

NBP dedicated team of professionals truly understands the needs of professionals,

agriculturists, large and small business and other segments of the economy. They
are the customer’s best resource in making NBP’s products and services work for
them.

RADE FINANCE OTHER BUSINESS LOANS

There are two types of trade finance.

AGRICULTURAL FINANCE

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

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

Agricultural Finance Services:

“I Feed the World” program, a new product, is introduced by NBP with the aim
to help farmers maximize the per acre production with minimum of required
input. Select farms will be made role models for other farms and farmers to
follow, thus helping farmers across Pakistan to increase production.

Agricultural Credit:

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

• Providing reliable infrastructure for agricultural customers

• Help farmers utilize funds efficiently to further develop and achieve better
production

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• Provide farmers an integrated package of credit with supplies of essential

inputs, technical knowledge, and supervision of farming.

Agricultural Credit (Medium Term):

• Production and development

• Watercourse improvement

• Wells

• Farm power

• Development loans for tea plantation

• Fencing

• Solar energy

• Equipment for sprinklers

Farm Credit:

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

• Operating loans

• Land improvement loans

• Equipment loans for purchase of tractors, farm implements or any other

equipment

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

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Production Loans:

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

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

Working Capital and Short Term Loans:

NBP specializes in providing Project Finance – Export Refinance to exporters –

Pre-shipment and Post-shipment financing to exporters – Running finance – Cash
Finance – Small Finance – Discounting & Bills Purchased – Export Bills
Purchased / Pre-shipment / Post Shipment Agricultural Production Loans

Medium term loans and Capital Expenditure Financing:

NBP provides financing for its clients’ capital expenditure and other long-term
investment needs. By sharing the risk associated with such long-term
investments, NBP expedites clients’ attempt to upgrade and expand their
operation thereby making possible the fulfillment of our clients’ vision. This type
of long term financing proves the bank’s belief in its client's capabilities, and its
commitment to the country.

Loan Structuring and Syndication:

National Bank’s leadership in loan syndicating stems from ability to forge strong
relationships not only with borrowers but also with bank investors. Because we
understand our syndicate partners’ asset criteria, we help borrowers meet
substantial financing needs by enabling them to reach the banks most interested in
lending to their particular industry, geographic location and structure through
syndicated debt offerings. Our syndication capabilities are complemented by our

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own capital strength and by industry teams, who bring specialized knowledge to
the structure of a transaction.

Cash Management Services:

With National Bank’s Cash Management Services (in process of being set up), the
customer’s sales collection will be channeled through vast network of NBP
branched spread across the country. This will enable the customer to manage
their company’s total financial position right from your desktop computer. They
will also be able to take advantage of our outstanding range of payment, ejection,
liquidity and investment services. In fact, with NBP, you’ll be provided
everything, which takes to manage your cash flow more accurately

INTERNATIONAL BANKING

National Bank of Pakistan is at the forefront of international banking in Pakistan

which is proven by the fact that NBP has its branches in all of the major financial
capitals of the world. Additionally, we have recently set up the Financial
Institution Wing, which is placed under the Risk Management Group. The role of
the Financial Institution Wing is:-

• To effectively manage NBP’s exposure to foreign and domestic

correspondence

• Manage the monetary aspect of NBP’s relationship with the

correspondents to support trade, treasury and other key business areas,
thereby contributing to the bank’s profitability

• Generation of incremental trade-finance business and revenues

NBP offers:

• The lowest rates on exports and other international banking products

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• Access to different local commercial banks in international banking

Cash and Gold Finance.

Cash and Gold finance means that loan is given against the gold. The gold is
mortgaged with the bank and loan is taken. It is the area of consumer finance.
And borrower can take loan for common use.

Advance salary loan:

This loan is given to those people who are govt servants. They can get a loan up
to the salary of fifteen months.

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Plan of Internship Program

I have done my internship in National Bank of Pakistan, District Court Branch

(1924) Toba Tek Singh. This is the branch where the work load is very much.

I started the internship program on 20-04-2009 and my internship has completed

on 30-05-2009

I worked in different departments like, A/C opening, Deposits and operational

activities. My internship period was 6 weeks.

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Training Program

DEPARTMENTALIZATION

Dividing an organization into different parts according to the functions is called

departmentation. So NBP Hayatabad township branch is divided into two main
parts.

A) DEPARTMENTATION

CASH DEPARTMENT

Cash department performs the following functions

Receipt

The money, which either comes or goes out from the bank, its record should be
kept. Cash department performs this function. The deposits of all customers of the
bank are controlled by means of ledger accounts. Every customer has its own
ledger account and has separate ledger cards.

Payments

It is a banker’s primary contract to repay money received for this customer’s

account usually by honoring his cheques.

Cheques and their Payment

The Negotiable Instruments. Act, 1881,

“Cheque is a bill of exchange drawn on a specified banker and not expressed to

be payable otherwise than on demand”2.

Since a Cheque has been declared to be a bill of exchange, it must have all its
characteristics as mentioned in Section 5 of the Negotiable Instruments Act, 1881.
Therefore, one can say that a Cheque can be defined as an:

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“An unconditional order in writing drawn on a specified banker, signed by the

drawer, requiring the banker to pay on demand a sum certain in money to, or to
the order of, a specified person or to the bearer, and which does not order any
act to be done in addition to the payment of money” 3. (Law of Banking by Dr.
Hart, p.327).

the Requisites of Cheque

There is no prescribed form of words or design of a Cheque, but in order to fulfill

the requirements mentioned in Section 6 above the Cheque must have the
following.

a) It should be in writing

b) The unconditional order

c) Drawn on specific banker only

d) Payment on Demand

e) Sum Certain in money

f) Payable to a specific person

g) Signed by the drawer

Parties to Cheque

The normal Cheque is one in which there is a drawer, a drawee banker and a
payee, or no payee but bearer.

a) The Drawer

b) The Drawee

c) The Payee

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Types of Cheques

Bankers in Pakistan deal with three types of cheques

a) Bearer Cheques

Bearer cheques are cashable at the counter of the bank. These can also be
collected through clearing.4

b) Order cheque

These types of cheques are also cashable on the counter but its holder must satisfy
the banker that he is the proper man to collect the payment of the cheque and he
has to show his identification. It can also be collected through clearing.

c) Crossed Cheque

These cheques are not payable in cash at the counters of a banker. It can only be
credited to the payee’s account. If there are two persons having accounts at the
same bank, one of the account holder issues a cross-cheque in favour of the other
account holder. Then the cheque will be credited to the account of the person to
whom the cheque was issued and debited from the account of the person who has
actually issued the cheque.

Payment of Cheques

It is a banker’s primary contract to repay money received for his customer’s

account usually by honouring his cheques. Payment of money deposited by the
customer is one of the root functions of banking. The acid test of banking is the
receipt of money etc. from the depositors, and repayment to them. This paying
function is one, which is the distinguishing mark of a banker and differentiates
him from other institutions, which receive money from the public. However the
bankers’ legal protection is only when payment is in ‘Due Course’. The payment

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in due course means payment in accordance with the apparent tenor of the
instrument, in good faith and without negligence to any person in possession
thereof under circumstances, which do not afford a reasonable ground of
believing that he is not entitled to receive payment of the amount therein
mentioned. It is a contractual obligation of a banker to honor his customer’s
cheques if the following essentials are fulfilled.

a) Cheques should be in a proper form:

b) Cheque should not be crossed:

c) Cheque should be drawn on the particular bank:

d) Cheque should not mutilated:

e) Funds must be sufficient and available:

f) The Cheque should not be post dated or stale:

g) Cheque should be presented during banking hours:

CLEARANCE DEPARTMENT

A clearinghouse is an association of commercial banks set up in given locality for

the purpose of interchange and settlement of credit claims. The function of
clearinghouse is performed by the central bank of a country by tradition or by
law. In Pakistan, the clearing system is operated by the SBP. If SBP has no office
at a place, then NBP, as a representative of SBP act as a clearinghouse.

After the World War II, a rapid growth in banking institutions has taken place.
The use of cheques in making payments has also widely increased. The collection
as settlement of mutual obligations in the form of cheques is now a big task for all
the commercial bank. When Cheque is drawn on one bank and the holder (payee)
deposits the same in his account at the bank of the drawer, the mutual obligation
are settled by the internal bank administration and there arises no inter bank debits

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from the use of cheques. The total assets and total liabilities of the bank remain
unchanged.

In practice, the person receiving a Cheque as rarely a depositor of the cheque at

the same bank as the drawer. He deposits the cheque with his bank other than of
payer for the collection of the amount. Now the bank in which the cheque has
been deposited becomes a creditor of the drawer’s bank. The depositor bank will
pay his amount of the cheque by transferring it from cash reserves if there are no
offsetting transactions. The banks on which the cheques are drawn become in debt
to the bank in which the cheques are deposited. At the same time, the creditors’
banks receive large amounts of cheques drawn on other banks giving claims of
payment by them.

The easy, safe and most efficient way is to offset the reciprocal claims against the
other and receive only the net amount owned by them. This facility of net inter
bank payment is provided by the clearinghouse.

The representatives of the local commercial banks meet at a fixed time on all the
business days of the week. The meeting is held in the office of the bank that
officially performs the duties of clearinghouse. The representatives of the
commercial banks deliver the cheques payable at other local banks and receive the
cheques drawn on their bank. The cheques are then sorted according to the bank
on which they are drawn. A summary sheet is prepared which shows the names of
the banks, the total number of cheques delivered and received by them. Totals are
also made of all the cheques presented by or to each bank. The difference between
the total represents the amount to be paid by a particular bank and the amount to
be received by it. Each bank then receives the net amount due to it or pays the net
amount owed by it.

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In-Word Clearing Books

The bank uses this book for the purpose of recording all the cheques that are
being received by the bank in the first clearing. All details of the cheques are
recorded in this book.

Out-Word Clearing Book:

The bank uses outward clearing register for the purpose of recording all the
details of the cheques that the bank has delivered to other banks.

ADVANCES DEPARTMENT

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

the bank. The major portion of the profit is earned through this department. The
job of this department is to make proposals about the loans. The Credit
Management Division of Head Office directly controls all the advances. As we
known bank is a profit seeking institution. It attracts surplus balances from the
customers at low rate of interest and makes advances at a higher rate of interest to
the individuals and business firms. Credit extensions are the most important
activity of all financial institutions, because it is the main source of earning.
However, at the same time, it is a very risky task and the risk cannot be
completely eliminated but could be minimized largely with certain techniques.

Any individual or company, who wants loan from NBP, first of all has to
undergo the filling of a prescribed form, which provides the following
information to the banker.

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) Security against loan.

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

Statement).

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

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

Principles of Advances

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

Safety

Liquidity

Dispersal

Remuneration

Suitability

a. Safety

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

on various accounts such as Current Account, Savings Bank Account, Call
Deposit Account, Special Notice Account and Fixed Deposit Account. It indicates
that whatever money the banker holds is that of his customers who have entrusted
the banker with it only because they have full confidence in the expert handling of
money by their banker. Therefore, the banker must be very careful and ensure that
his depositor’s money is advanced to safe hands where the risk of loss does not
exist. The elements of character, capacity and capital can help a banker in arriving
at a conclusion regarding the safety of advances allowed by him.

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b. Character

It is the most important factor in determining the safety of advance, for there is no
substitute for character. A borrower’s character can indicate his intention to repay
the advance since his honesty and integrity is of primary importance. If the past
record of the borrower shows that his integrity has been questionable, the banker
should avoid him, especially when the securities offered by him are inadequate in
covering the full amount of advance.

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

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

c. Capacity

This is the management ability factor, which tells how successful a business has
been in the past and what the future possibilities are. A businessman may not have
vast financial resources, but with sound management abilities, including the
insight into a specific business, he may make his business very profitable. On the
other hand if a person has no insight into the particular business for which he
wants to borrow funds from the banker, there are more chances of loss to the
banker.

d. Capital

This is the monetary base because the money invested by the proprietors
represents their faith in the business and its future. The role of commercial banks
is to provide short-term capital for commerce and industry, yet some borrowers
would insist that their bankers provide most of the capital required. This makes
the banker a partner. As such the banker must consider whether the amount
requested for is reasonable to the borrowers own resources or investment.

e. Liquidity

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Liquidity means the possibilities of recovering the advances in emergency,

because all the money borrowed by the customer is repayable in lump sum on
demand. Generally the borrowers repay their loans steadily, and the funds thus
released can be used to allow fresh loans to other borrowers. Nevertheless, the
banker must ensure that the money he is lending is not blocked for an undue long
time, and that the borrowers are in such a financial position as to pay back the
entire amount outstanding against them on a short notice. In such a situation, it is
very important for a banker to study his borrower’s assets to liquidity, because he
would prefer to lend only for a short period in order to meet the shortfalls in the
wording capital. If the borrower asks for an advance for the purchase of fixed
assets the banker should refuse because it shall not be possible for him to repay
when the banker wants his customer to repay the amount. Hence, the baker must
adhere to the consideration of the principles of liquidity very careful.

f. Dispersal

The dispersal of the amount of advance should be broadly based so that large
number of borrowing customer may benefit from the banker’s funds. The banker
must ensure that his funds are not invested in specific sectors like textile industry,
heavy engineering or agriculture. He must see that from his available funds he
advances them to a wide range of sector like commerce, industry, farming,
agriculture, small business, housing projects and various other financial concerns
in order of priorities.

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

because it reduces the risk of recovery when something goes wrong in one
particular sector or in one field.

g. Remuneration

A major portion of the banker’s earnings comes form the interest charged on the
money borrowed by the customers. The banker needs sufficient earnings to meet
the following:

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a) Interest payable to the money deposited with him.

b) Salaries and fringe benefits payable to the staff members.

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

the bank.

d) An adequate sum to meet possible losses.

e) Provisions for a reserve fund to meet unforeseen contingencies.

f) Payment of dividends to the shareholders.

h. Suitability

The word “suitability’ is not to be taken in its usual literary sense but in the
broader sense of purport. It means that advance should be allowed not only to the
carefully selected and suitable borrowers but also in keeping with the overall
national development plans chalked out by the authorities concerned. Before
accommodating a borrower the banker should ensure that the lending is for a
purpose in conformity with the current national credit policy laid down by the
central bank of the country.

Forms of Loans

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

lend in the form of cash finance, overdrafts and loans. NBP provides advances to
different people in different ways as the case demand.

a) Cash Finance

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

and is made available either against pledge or hypothecation of goods, produce or
merchandise. In cash finance a borrower is allowed to borrow money from the
banker up to a certain limit, either at once or as and when required. The borrower

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prefers this form of lending due to the facility of paying markup/services charges
only on the amount he actually utilizes.

If the borrower does not utilize the full limit, the banker has to lose return on the
un-utilized amount. In order to offset this loss, the banker may provide for a
suitable clause in the cash finance agreement, according to which the borrower
has to pay markup/service charges on at least on self or one quarter of the amount
of cash finance limit allowed to him even when he does not utilize that amount.

b) Overdraft/Running Finance

This is the most common form of bank lending. When a borrower requires
temporary accommodation his banker allows withdrawals on his account in
excess of the balance which the borrowing customer has in credit, and an
overdraft thus occurs. This accommodation is generally allowed against collateral
securities. When it is against collateral securities it is called “Secured Overdraft”
and when the borrowing customer cannot offer any collateral security except his
personal security, the accommodation is called a “Clean Overdraft”. The
borrowing customer is in an advantageous position in an overdraft, because he has
to pay service charges only on the balance outstanding against him. The main
difference between a cash finance and overdraft lies in the fact that cash finance is
a bank finance used for long term by commercial and industrial concern on
regular basis, while an overdraft is a temporary accommodation occasionally
resorted to.

c) Demand Financing/Loans

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

periodic installments or in lump sum at a fixed future time, it is called a “loan”.
When bankers allow loans to their customers against collateral securities they are
called “secured loans” and when no collateral security is taken they are called
“clean loans”.

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The amount of loan is placed at the borrower’s disposal in lump sum for the
period agreed upon, and the borrowing customer has to pay interest on the entire
amount. Thus the borrower gets a fixed amount of money for his use, while the
banker feels satisfied in lending money in fixed amounts for definite short periods
against a satisfactory security

REMITTANCE DEPARTMENT
Remittance means a sum of money sent in payment for something. This
department deals with either the transfer of money from one bank to other bank or
from one branch to another branch for their customers. NBP offers the following
forms of remittances.

a) Demand Draft

b) Telegraphic Transfer

c) Pay Order

d) Mail Transfer

Demand Draft

Demand draft is a popular mode of transfer. The customer fills the application
form. Application form includes the beneficiary name, account number and a
sender’s name. The customer deposits the amount of DD in the branch. After the
payment the DD is prepared and given to the customer. NBP officials note the
transaction in issuance register on the page of that branch of NBP on which DD is
drawn and will prepare the advice to send to that branch. The account of the
customer is credited when the DD advice from originating branch comes to the
responding branch and the account is debited when DD comes for clearance. DD
are of two types.

a) Open DD: Where direct payment is made.

b) Cross DD: Where payment is made though account.

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NBP CHARGES FOR DD5

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

II. Over Rs. 50,000/- is 0.1%

Pay Order

Pay order is made for local transfer of money. Pay order is the most convenient,
simple and secure way of transfer of money. NBP takes fixed commission of Rs.
25 per pay order from the account holder and Rs. 100 from a non-account holder.

5.4.3) Telegraphic Transfer

Telegraphic transfer or cable transfer is the quickest method of making

remittances. Telegraphic transfer is an order by telegram to a bank to pay a
specified sum of money to the specified person. The customer for requesting TT
fills an application form. Vouchers are prepared and sent by ordinary mail to keep
the record. TT charges are taken from the customer. No excise duty is charged on
TT. The TT charges are:

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

Cable telegram transfer costs more as compared to other title of money. In cable
transfer the bank uses a secret system of private code, which is known to the
person concerned with this department and branch manager.

Mail Transfer

When the money is not required immediately, the remittances can also be made
by mail transfer (MT). Here the selling office of the bank sends instructions in
writing by mail to the paying bank for the payment of a specified amount of
money. Debiting to the buyer’s account at the selling office and crediting to the
recipient’s account at the paying bank make the payment under this transfer. NBP
taxes mail charges from the applicant where no excise duty is charged. Postage

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charges on mail transfer are actual minimum Rs. 40/- if sent by registered post
locally Rs.40/- if sent by registered post inland on party’s request.

DEPOSIT DEPARTMENT: -
It controls the following activities:

a) A/C opening.

b) Issuance of cheque book.

c) Current a/c

d) Saving a/c

e) Cheque cancellation

f) Cash

Account opening

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

Before a banker opens a new account, the banker should determine the
prospective customer’s integrity, respectability, occupation and the nature of
business by the introductory references given at the time of account opening.
Preliminary investigation is necessary because of the following reasons.

i. Avoiding frauds

ii. Safe guard against unintended over draft.

iii. Negligence.

iv. Inquiries about clients.

There are certain formalities, which are to be observed for opening an account
with a bank.

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• Formal Application

• Introduction

• Specimen Signature

• Minimum Initial Deposit

• Operating the Account

1. Pay-In-Slip Book

2. Pass Book

3. Issuing Cheque Book

a) Qualification of Customer

The relation of the banker and the customer is purely a contractual one, however,
he must have the following basic qualifications.

• He must be of the age of majority.

• He must be of sound mind.

• Law must not disqualify him.

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

• Not expressly declared void.

b) Types of Accounts

Following are the main types of accounts

1) Individual Account

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2) Joint Account

3) Accounts of Special Types

 Partnership account

 Joint stock company account

 Accounts of clubs, societies and associations

 Agents account

 Trust account

 Executors and administrators accounts

 Pak rupee non-resident accounts

 Foreign currency accounts1

Issuing of cheque book:

This deptt issue cheque books to account holders.

Requirements for issuing cheque book

a) The account holder must sign the requisition slip

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

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

Current account

These are payable to the customer whenever they are demanded. When a banker
accepts a demand deposit, he incurs the obligation of paying all cheques etc.
drawn against him to the extent of the balance in the account. Because of their

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nature, these deposits are treated as current liabilities by the banks. Bankers in
Pakistan do not allow any profit on these deposits, and customers are required to
maintain a minimum balance, failing which incidental charges are deducted from
such accounts. This is because the depositors may withdraw Current Account at
any time, and as such the bank is not entirely free to employ such deposits.

Until a few decades back, the proportion of Current Deposits in relation to Fixed
Deposits was very small. In recent years, however, the position has changed
remarkably. Now, the Current Deposits have become more important; but still the
proportion of Current Deposits and Fixed Deposits varies from bank to bank,
branch to branch, and from time to time.

Saving account

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

In order to popularize this scheme the State Bank of Pakistan has allowed the
Savings Scheme for school and college students and industrial labor also. The
purpose of these accounts is to inculcate the habit of savings in the constituents.
As such, the initial deposit required for opening these accounts is very nominal.

Cheque Cancellation:

This deptt can cancel a cheque on the basis of;

a) Post dated cheque

b) Stale cheque

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c) Warn out cheque

d) Wrong sign etc

Cash

This deptt also deals with cash. Payment of cheques, deposits of cheques etc.

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

a) L/C dealing.

b) Foreign currency accounts dealing.

c) Foreign Remittance dealing.

L/C dealing

NBP is committed to offering its business customers the widest range of options
in the area of money transfer. If you are a commercial enterprise then our Letter
of Credit service is just what you are looking for. With competitive rates, security,
and ease of transaction, NBP Letters of Credit are the best way to do your
business transactions.

Foreign currency account dealing:

This deptt deals with the foreign currency accounts which mainly include dollar
account, euro account etc.

Foreign Remittance dealing.

This is very important function of this deptt.

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HUMAN RESOURCE MANAGEMENT

Human Resource plays a vital role in the success of every service organization.
They interact between man and machine. Their attitude can win or loose the
customer. The positive attitude could only be created in a conducive environment,
which can make the staff dedicated towards the organization and its objectives. In
reality the man is more important than machine as it is the human which could get
maximum out of machine to keep a happy customer. However, most
organizations give little importance to this very important asset.

Various aspects related to human resource of National Bank of Pakistan are

critically examined in the following text:

Selection & Recruitment

Although the Bank believes in merit but in practice the selection of employees is
not done on merit. Most of the employees are low educated. This shows that
candidates with some strong family background or political pressure are given
preference in recruitment and qualified candidates are sometimes left behind.

Job for Life

Like the employee of public sector organizations in Pakistan, the employees of

NBP also enjoy their job for life. Since there is no risk of early retirement or
redundancy in rank, they do not perform with their full potentials. This is one
redundancy in rank, they do not perform with their full potentials, and this is one
of the reasons responsible for the low productivity of the employees of the Bank.

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Performance Appraisal

The performance of employees of the Bank are appraised though their annual
confidential reports at the end of each year. This has become an outdated method
of performance appraisal and no longer used due to the following reasons:

1. The performance of employees is evaluated after quite a long time.

2. Element of subjectivity is involved in this method.

3. Employee’s participation is not ensured in the process of evaluation.

4. Objectives of employee’s are not quantified.

Inter Personal Relationship

Modern management acknowledges human resources as one ‘of the most

important assets of an organization. But by their very nature, human beings are
also the most unpredictable. Where a number of persons work together,
interactions among them, of necessity, will lead to conflicts and NBP is no
exception. Most interpersonal conflicts in NBP can be traced back to the
following major heads.

Lack of Communication

Lack of communication is for the biggest reason for conflicts. Not only it is due to
the failure to send a massage but to an interpretation given to the massage by the
receiver is different from that intended.

Diversity in Values

Diversity in values, perceptions, cultural background and life-style is another

reason responsible for inter personal conflicts in NBP. Different values and
perceptions about the same issue, event or personality hinder understanding.

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When things come to such a pavement, therefore, interpersonal conflicts are

generated.

The dominant trend in all modern industrial societies of the world is merit and
expertise, which helps promote cohesion and reduce conflicts. But the feudalistic
mindset is still very strong in our set up and there is no tradition of tolerance for
differing viewpoints. Hence, interpersonal conflicts are generated.

Corruption

Our social acceptance of corruption gives rise to corruption at every level of

social and organizational set up. Corruption involves financial embezzlement,
favoritism, nepotism, cronyism and other number of such practices. All these
cause resentment that keep building up and lead to conflict sooner or later.

In the past few years, some cases of frauds have happened in different branches.
The reasons can be linked with the employee dissatisfaction of NBP.

Discipline & Authority

Maintaining discipline and implementation of authority (tables) in letter and spirit

is the key to success of any organization. In NBP, The authority tables are not
strictly maintained. Line managers are not fully equipped with the authority with
no vertical or horizontal interference.

Introduction

NBP is the employer of choice. The whole NBP family comprises of committed
and dedicated members with passion to serve in their respective functional areas.
The Bank has challenging work environment where merit and performance help
the individuals to explore their true potential. As a caring employer the Bank
enables the employees to excel and grow in highly congenial employment
conditions and culture. The career path is full of challenges and opportunities. The
Bank has absolutely open culture where members share and communicate freely.

HR Mission

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Provide more talented Human Resource in all NBP functional areas in relation to
competition keep motivated all the employees and maintain total industrial
harmony.
Our Values

We believe that;

• People make the organization

• People collectively yield results

• People have ambitions and aspirations to be distinguished and rewarded

• People form the human capital to be developed and invested in.

Job Opportunities
• Management Trainees
• Professionals

Training Developments

• JNMDC: For Executive Development Programmes only

• Staff College Karachi : Karachi South, Karachi West, Hyderabad , Sukkur,

Larkana, Gwadar, Quetta and Regional Audit Office Karachi

• Staff College Lahore : Lahore Central, Lahore East, Multan , Sahiwal, D.G
Khan, Gujranwala , Sialkot , Bahawalpur and Regional Audit Office Lahore .

• Staff College Peshawar : Peshawar , Abbottabad, Mardan, D .I Khan.

• Staff College Peshawar : Islamabad , Rawalpindi , Jhang, Faisalabad , Gujrat,

Jhelum , Sargodha , Mirpur, Muzaffarabad, Gilgit and Regional Audit Office
Islamabad .

• Training Programs
January

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February
March
April
May
June

HR Forum

• Employee Communication Programme

Employee Communication is considered a vital tool for employee motivation and

promoting their commitment and loyalty with the organization. It also helps the
organization to get the employee feedback on important matters.

Employee Communication Program has been developed to keep our employees

informed about the Bank's products and services, prudential regulations, system
and controls, compliance of standard procedure and regulatory requirements,
customer service requisites as well as technological developments particularly
automation in banking functions.

• NBP Newsline
• Management Brief

HR Events

• Conference

• Female Empowerment
Work shop
Dialogue Sessions
Quiz Programs

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Critical Analysis
Porter’s five forces model:

This approach is widely used for competitive analysis. It is because of the high
intensity of competition among companies there five main competitive forces.

Rivalry among competitive firms:

It is a very powerful force among the competitive forces the strategies

pursued by one firm can be successful only to extent that they provide
competitive advantages over the competitor. These competitive strategies may
be lowering prices, best quality series. The NBP offering very low charges an
demand draft, telegraphy transfer, mail transfer and give other additional
services to the customers and to the Nation. Because NBP is a “Nation’s
Bank”.

Potential entry of new competitors:

Whenever new firms ca easily enters a particular industry, the competition

increases. The gout restriction, tariffs, patents etc can stop new firm to enter
into the business as per Banking industry is concerned this market is already
very situated in Pakistan and there are banks with quality services and low
charges. So there is no threat to NBP from potential entry and NBP is also a
public sector bank because of that no other new bank not takes over it.

Potential Development of substitute products:

This is the third factor affecting the competitions. There may be some other
product can be substitute the product of that industry. For example banks
offering sawing schemes in Pakistan and these schemes are also offered by
GPOs in Pakistan so they must compete them in this field. If they offer low
rates than GPOs so people will go to deposit in GPOs. People concentration
high rates so that’s why sawing PLS accounts are more then current accounts.
The next examples will ATM which substitute presenting cheques at counter

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and encash it. The NBP is lacking in this field. It must improve in this field to
compete the competitors.

Bargaining Power of Suppliers:

The bargaining power of supplier affects the intensity of competition,

especially when there are a large number of suppliers. In case of banks the
suppliers are customers they supply the money to banks. Now they must offer
good services, quality, and safety. Low charges etc to customers. In this field
NBP is very good. B/C at offers good quality services to customers. They
charge low charges on remittances. So that’s it is competitions other banks.

Bargaining Power of Consumers:

When customers are concentrated or large, or buy in volume, their bargaining

power represents a major force affecting intensity of competition. Now the
number customers in Pakistan for banks are very high. Banks offering variety
of products and services to their customers. NBP have a large number of
customs. Now it must offer good services and products to their customers to
attract them to come to NBP.

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SWOT ANALYSIS

SWOT analysis is an acronym that stands for strengths, weakness, opportunities,

and threats SWOT analysis is careful evaluation of an organization’s internal
strengths and weakness as well as its environment opportunities and threats.

“SWOT analysis is a situational which includes strengths, weaknesses,

opportunities and threats that affect organizational performance.”1

“The overall evaluation of a company strengths, weaknesses, opportunities and

threats is called SWOT analysis.”2

In SWOT analysis the best strategies accomplish an organization’s mission by:

1. Exploiting an organizations opportunities and strength.

2. Neutralizing it threats.

3. Avoiding or correcting its weakness.

SWOT analysis is one of the most important steps in formulating strategy using
the organization mission as a context, managers assess internal strengths
distinctive competencies and weakness and external opportunities and threats. The
goal is to then develop good strategies and exploit opportunities and strengths
neutralize threats and avoid weaknesses.

STRENGTHS:

OLDEST INSTITUTION:

NBP in one of the oldest bank of Pakistan and first nationalized bank Hence its
customer base is strength from this plus point as customers have more confidence
in the bank. The additional value services as the privilege for the bank.

ALTERNATE DUTIES IN SBP ABSENCE

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The NBP performs additional services for its customers as well as the other bank
customer in the absence of SBP.

MORE DEPOSITS THAN OTHER BANK

NBP has the relative competence in having more deposits than the other bank.
This is because of the confidence the customer have in the bank. The bank being
the privileged and oldest bank in banking sector of Pakistan enjoys this edge over
all others, lacking it.

EMPLOYEE BENEFITS

The employers at NBP are offered reasonable monetary benefit. Normally two
bonuses are given Eid-Ul-Fitar & Eid-Ul-Azha. This serves as an additional
benefit and competency for the bank and a source of motivation for the
employees.

BROAD NETWORK

The bank has another competency i.e. it has broad-basses network of branches
throughout the country also more than one branch in high productive cities. The
customers are provided services at their nearest possible place to confirm
customer satisfied.

STRICTLY FOLLOWED RULES &REGULATION:

The employees at NBP are strict followers of rule & regulation imposed by bank.
The disciplined environment at NBP bolsters its image and also enhances the over
all out put of the organization.

PROFESSIONAL COMPETENCE

The employees at NBP here have a good hold on their descriptions, as they are
highly skilled Professionals with back ground in business administration, banking,

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economics etc. These professional competencies enable the employees to

understand and perform the function and operation in better way.

HEALTHY ENVIROMNMENT

The working condition in the NBP branch here is very conductive and favorable
for better output. The informal environment affects the performance of the
employees in a positive way.

RELATION BETWEEN STAFF AND OTHER EMPLOYESS

The bank enjoys a good plus point when it comes to the employee manager
relationship the hearing as removing of discrepancies if any, between the
employees, and between the manager and employees.

WEAKNESSES

LACK OF MARKETING EFFORT:

The bank does not promote its corporate image, services, etc on a competitive
way. Hence lacks far behind in marketing effort .A need for aggressive marketing
in there in the era marketing in now becoming a part of every organization.

6.2.2 NBP UNDER POLITICAL PRESSURE

The strong political hold of some parties and government and their dominance is
affecting the bank in a negative way. They sometime have to provide loan under
the pressure, which leads to uneven and adjusted feeling in the bank employees.

6.2.3 FAVORITISM AND NEPOTISM

The promotions and bonuses etc in the bank are often powered by senior’s
favoritism or depends upon their wills and decision. This adds to the negative
factors, which denominate the employees thus resulting in affecting their
performance negatively.

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6.2.4 LACK OF FINACIAL PRODUCT

The bank falls far behind when the innovative and new schemes are considered. It
has not been involved in the tug of war between the competitors to the accounts
and strengthens the existing customer base. This stands out to be the major
incompetence and weakness of the banks.

INEFFICIENT COUNTER SERVICES IN THE RUSH HOURS

During the rush hours, the bank is founded out to be a total flop to handle the mob
of people peaking from windows and doors. The bank has deficiency to operate in
the stages of rush hours where the people find them services entangled in a
situation of nowhere because they are not well served.

6.2.6 LACK OF COMPUTERIZED NETWORK

The bank lack the strength of being powered by the network of computers, which
have saved time, energy and would have lessened the mental stress, the
employees have currently. This would add to the strength if it were powered by
network of computers.

LACK OF MODERN EQUIPMENT

The bank lacks the modern Equipment that is note counting machine computers.
Even if there is any equipment they lack to fall in the criteria of being rearmed as
update and upgraded

UNEVEN WORK DISTIBUTION.

The workload in NBP is not evenly distributed and the workload tends to be more
on some employees while others abscond away from their responsibilities, which
server as a demotivation factor for employees performing above average work.

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OPPORTUNITIES

ELECTRONIC BANKING

The world today has become a global village because of advancement in the
technologies, especially in communication sector. More emphasis is now given to
avail the modern technologies to better the performances. NBP can utilize the
electronic banking opportunity to ensure on line banking 24 hours a day. This
would give a competitive edge over others.

MICRO FINANCING

Because of the need for micro financing in the market, there are lot of
opportunities in this regard. Other banks have already initiated, now the time has
arrived when the NBP must realize it and take on step to cater an ongoing
demand.

THREATS

EMERGENCE OF NEW COMPETITORS

The bank is facing threats with the emergence of new competitors especially in
terms of foreign banks. These foreign banks are equipped with heavy financial
power with excellent and innovative ways of promoting and performing their
services. The bank has to take initiative in this regard or will find itself far back in
competition.

POLITICAL PRESSURE BY ELECTED GOVERNMENT

The ongoing shift in power in political arena in the country effects the
performance of the bank has to forward loans to politically powerful persons
which create a sense of insecurity and demoralization in the customer as well as
employees.

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DOWNSIZING

The bank is currently acting upon the policy of downsizing which threaten the
environment of the bank Employees feel insecurity in doing their jobs and work,
hence affecting the over all performance of employees negatively.

CUSTOMERS COMPLAINTS

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

complaints. Now a day a need for total customer satisfaction is emerging and in
their demanding consequences customer's complaints are ignored

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FINANCIAL ANALYSIS

Financial analysis, though varying according to the particular interests of the

analyst, always involves the use of various financial statement primarily the
balance sheet and income statement. The balance sheet summarizes the assets,
liabilities, and owner’s equity of a business at a point in time, and thee income
statement summarizes revenues and expenses of the over a particular period f
time. A conceptual framework for financial analysis provides the analyst with an
interlocking means for structuring the financing.

National Bank of Pakistan Ten Years Performance at glance

Years 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994
Items
Total 47186 43280 41508 37163 35040 41768 40089 36923 27177
320180
assets 0 3 9 6 6 0 0 6 9
39556 36286 34961 31649 29475 27339 25486 23503 208283 17047
Deposits 8 6 7 3 4 1 3 2 6
16099 14054 17031 14031 12255 10935 10559 85854 81528 62548
Advances 0 7 9 8 9 6 8
Investme 16619 14352 10235 10948 10820 95649 85094
nt 6 5 71759 72609 91486 6 5 6
S,s holder 7046 7842 7233
equity 18134 14279 11959 11378 10358 9987 9203
pre tax (1260) 3081 2799
profit 9009 6045 3016 1023 520 2135 996
After tax -------- ------ -------
profit 4198 2253 1149 461 31 0 0
Earning ------- ----- -------
per share 10.23 5.49 3.08 1.24 0.21 0 0
Return on -------- ------ -----
assets 2% 1.40% 0.80% 0.30% 0.20% 0 0.00% --
No of 1555 1537 1463
Branches 1189 1204 1245 1428 1431 1434 1468
No of 13272 12195 15163 15351 15541 15785 18096 23730 21549 20667

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Employee
s
(Source Annual reports 1998, 2000, 2002, 2003)

From the above table it is very much clear that the NBP performance is going
higher and higher total assets are at the crest in 2003. If we draw a graph this will
shows that the graph is upward trend. Profit is increasing from year to year. NBP
decrease the number of its branches and employees because of automation and
large networks of other banks. But this bank can compete and now NBP is the
best bank of year.

Ratio Analysis
Financial analysis is the process of identifying the financial strengths and
weakness of the firm by properly establishing relation ship between the items of
balance sheet and profit and loss account, in order to make rational decision in
keeping with the objective of the organization, for that purpose the management
use analytical tools. To evaluate the financial condition and performance of the
business entity, the financial analyst needs to perform "checkups" on various
aspects of the business financial health.

A tools frequently used during these checkups is a financial ratio analysis, which
relates two piece of financial data by dividing one quantity by the other we
calculate ratios because in this way we get a comparison that may prove more
useful than the raw number by themselves. The business itself and outside
providers of capital (creditors and investors) all undertake financial statement
analysis. The type of analysis varies according to the specific interest party
involved. The nature of analysis is depending at the purpose of analyst.

Parties interested in ratio analysis

Trade creditors

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Trade creditors are interested in firm's ability to meet their claims over a very
short period of time. Their analysis will, there fore confine to the evaluation of the
firm's liquidity positions.

Suppliers of long-term debt

Suppliers of long-term debt on the other hand are concerned with firm's long-term
solvency and survival. They analysis the firms profitability over time, its ability to
generate cash to be able to pay interest and repay interest and repay principal and
the relationship between various source of funds. (Capital structure relationship).

Long-term creditors do analyses the historical financial statements but they place
more emphasis on the firm's projected financial statement to make analysis about
its future solvency and profitability.

Investors

Investors who have invested their money in the firms share are most concerned
about the firm steady growth in earning. As such, they concentrate on the analysis
of the firm's present and future profitability. They are also interested in the firms
financial structure of the extent it influence the firms earning ability and risk.

Management.

An organization would be interested in every aspect of the financial analysis. It is

their overall responsibility to see that the resources of the firm are used most
effectively and efficiently and that the firm's financial condition is sound.

So thus management employee financial analysis for the purpose of internal

control and to better provide what capital supplier seeks in financial condition and
performance from the business and from an internal control standpoint,
management needs to take financial analysis in order to plan and control
effectively.

Ratio analysis

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Ratio is the comparison between two figures of balance sheet and income
statement.

Cash Ratio:

“This ration is obtained by dividing cash by current liabilities / liabilities”.

This ratio shows that the cash is enough for payment of current liabilities or not.

It is calculated as cash Ratio=Cash/current liabilities

Table 3

Year 1997 1998 1999 2000 2001 2002 2003

Cash
Ratio 0.118 0.169 0.19 0.21 0.22 0.15 0.134

Graph 1

Cash Ratio

0.25
0.2
0.15
ratio
0.1
0.05 Cash Ratio
0
1997 1999 2001 2003
years

It means that how much cash is available for payment its current liabilities. This
ratio of NBP shows a downward trend. Because of high advances cash is less to
cover its current liabilities.

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Gross Profit Margin Ratio:

“This ratio shows the profit margin in sales/ revenue”.

This is calculated as.

Gross profit/ interest earned

Table 4

Year 1997 1998 1999 2000 2001 2002 2003

Gross profit
margin% 24.8 27.7 28.9 29.59 39.67 46.6 51.9

Graph2

Gross profit margin%

2003
2001
year

Gross profit
1999 margin%

1997
0 20 40 60
ratio

G. profit margin relates profit of the organization to its sales (interest earned in
case of Bank).

From calculation it is very much clear that the gross profit margin ration have
upward trend which shows that how much they using their deposits to earn

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interest. This show the profit of the firm relative to its revenue. It is a measure of
the efficiency of the firm’s operations too. As it is clear that the ratio gong high
this is the indication of good performance.

Net Profit Margin:

This ratio measure the firm’s profitability of sales/ interest earned after taking
account of all expenses and income taxes.

This ratio can be calculated as:

Net profit margin ration = Net Profit after taxes / interest earned

Table5

Year 1997 1998 1999 2000 2001 2002 2003

Net profit
Margin % 0.2 1.6 1.7 1.55 3.67 3.18 21.6

Graph3

Net profit Margin %

30
20
ratio

Net profit
10 Margin %
0
97

99

01

03
19

19

20

20

year

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Explanation: from the calculation and graph it is very much clear that the
performance of NBP is very good. And the trend is upward. It tells us a firm’s net
income per rupee of revenue. As the trend is upward it shows the high profits in
revenue per rupee in case of NBP. It is because of high advances the NBP has
given to the people.

Return on Equity:

Dividing profit after taxation by share holder’s equity. ROE compares net profit
after taxes to the Share holder’s Equity.

This ratio is calculated as:

ROE=Profit after taxes/Share holder’s Equity

Table6

Year 1997 1998 1999 2000 2001 2002 2003

Return on
Equity 0.67 5.3 0.2 2.7 6.55 9.4 23.1

Graph4

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Return on Equity

30
20
ratio 10
Return on Equity

0
7

03
9

20
19

19

20
year

Explanation: from the calculation it is clear that the ROE Ratio have an upward
trend of NBP. It is because of high net profit they have earned. It tells us the
earning power on the shareholder’s investments. It is because of high investments
by NBP and effective expense management.

Return On Assets:

This ratio shows the efficiency of organization that how efficiently utilizes their
assets. This ratio relates profits to assets.

It is calculated as:

Profit after Tax/Total Assets

Table7

Year 1997 1998 1999 2000 2001 2002 2003

Return on assets 0.01 0.16 0.008 0.124 0.225 0.52 0.9

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Return on assets

2003
2001

year
Return on
1999 assets
1997
0 0.5 1
ratio
Graph5

From calculation it is clear that this ration of NBP is going high and high. It
shows that NBP using it’s assets very efficiently. That is why they are earning
very high profits. This shows that how efficiently they investing the assets that’s
why they are earning high profits.

Investment deposit Ratio:

This ratio shows the comparison of investments and deposits. This is calculated
as.

Investment deposit Ratio=Investment/deposits

Table8

Year 1997 1998 1999 2000 2001 2002 2003

Investment Deposit
ratio 42.9 37.7 31.03 22.94 20.54 39.66 42.01

Graph6

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Investment Deposit ratio

50
40
30
ratio
20 Investment
10
Deposit ratio
0
1997 2000 2003
year

Explanation: From above table and graph it is very much clear that NBP are using
their deposit very efficiently. And earning high profits. The ratio has an upward
trend, which shows the performance of NBP is very good. Now it is the retraction
from top management to invest 30% of its deposits. This may reduce its profits.
But can be fruitful in long term.

Debit to Equity Ratio:

This ration shows the amount contributed by creditors and shareholders. It shows
to what extent the firm is using borrowed money. It is computed simply dividing
the total debt of the fire by its shareholders equity.

This calculated as.

Total debt/shareholder’s equity

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Table9

Year 1997 1998 1999 2000 2001 2002 2003

Debt to equity
ratio 32.42 31.4 30.4 20.9 22.7 28.6 24.5

Graph7

Debt to equity ratio

2003
2001 Debt to equity
year

1999 ratio
1997
0 20 40
ratio

From the table and graph it is clear that this ratio is decreasing which show the
high efficiency of NBP. In 2002 it was high but in 2003 it decreases to 24.5 from
28.6 which is a good sign. Here the creditors are interested in low ratio. The lower
the ratio the high the level of the fire’s financing that is being provided by the
shareholders.

Debt to assets ratio:

This ratio shows that to which extent the organization assets are financed by debit.
It is calculated as.

Total debt/total asset

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Table1

Year 1997 1998 1999 2000 2001 2002 2003

Debt to asset
ratio 0.94 0.944 0.957 0.954 0.92 0.954 0.961

Graph8

Debt ratio

0.98
0.96
0.94
ratio
0.92
0.9 Debt ratio
0.88
1997 1999 2001 2003
year

This ration is directly related to risk high ratio means high risk and low ratio
means low risk. From calculation it is clear that the ratio is decreasing which
show low risk. This ratio serves the similar purpose to the debt to equity ratio.
This ratio is high because of more deposits in the bank, and deposits are the
liability of customer on bank

Advances deposit Ratio:

This ratio show that how much efficiently the bank advances the deposits of their
customer to borrower.

It is calculated as.

Advances deposit ratio = Advances/ deposit

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Table11

Year 1997 1998 1999 2000 2001 2002 2003

Advances
deposits ratio 0.414 0.399 0.416 0.443 0.487 0.387 0.406

Graph9

Advances Deposits ratio

0.5
0.4
0.3
ratio
0.2 Advances
0.1
Deposits ratio
0
1997 2000 2003
year

From above table and graph it is clear that the ratio is going high. Which means
the efficiency on NBP is good and they use their deposits efficiently in advancing
to borrowers. Here high ratio is required. The next side of the picture is that the
people will think that is risky to deposit the money in the bank.

Assets Turnover Ratio:

The relationship of net sales /revenue to total assets is known as the total asset
turnover ratio. It is calculated as.

Total revenue / total assets

Table12
Year 1997 1998 1999 2000 2001 2002 2003

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Assets turnover ratio 0.099 0.097 0.093 0.079 0.075 0.079 1.07

Graph10

Assets turnover ratio

2003
year

2001
1999 Assets turnover
1997 ratio
0 0.5 1 1.5

ratio

Explanation: This ratio shows us the relative efficiency with which a firm utilizes
its total assets to generate revenue. We can see that the ratio is going high and
which is a good sign and shows that NBP is utilizing its assets efficiently.

Price to earning Ratio:

This ratio show the relation ship b/w face price per share and earning per share.
This ratio is calculated as:

Price to earning ratio= face price of share/earning per share

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Table13

Year 1997 1998 1999 2000 2001 2002 2003

Price to
earning Ratio 2.4 2.7 47.62 3.17 3.25 1.6 0.97

Graph11

Price to earning Ratio

2003
2001
ratio

1999 Price to earning

1997 Ratio
0 20 40 60

year

As from the above calculations it is clear that the ratio decreased tremendously in
2003, it is because of the reason that earning per share increased resulting in
decreasing price to earning ratio.

From calculation it is clear that it have a downward slope. It is b/c of increase in

earning per share.

Dividend yield:

Anticipated annual dividend divided by the market price of the stock.

It is calculated as.

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Dividend yield =Total dividend/ market price

Table14

Year 1997 1998 1999 2000 2001 2002 2003

Dividend
Yield 0.2 0.1 2.3 3.32 1.63 2.45 0.23

Graph12

Dividend Yield

4
3
ratio 2
1 Dividend Yield
0
1997 2000 2003
year

Year 2000 was best as far as dividend yield is concerned; it was mainly due to
the decreased amount of number of shares outstanding. In year 2001 increase in
outstanding shares decreased dividend yield, but due to increase in total dividend
in 2002 it has recovered to 2.45.

From the above table it is clear that the dividend is increasing but in 2003 it is
low. It is because of high market price and low dividend.

Deposit growth Ratio:

This ratio shows the growth rate of deposits.

This is calculated as

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Current year deposits- previous year deposits /previous year deposit

Table15

Year 1997 1998 1999 2000 2001 2002 2003

Deposit
growth ratio 0.08 0.07 0.08 0.07 0.1 0.037 0.09

Graph13

Deposit growth ratio

0.1
0.08
0.06
ratio
0.04 Deposit growth
0.02
ratio
0
1997 2000 2003
year

Explanation: This ratio shows an excellent move from 1997 to 2003. It upward
slope which shows that the people trust NBP and its management that our money
is in safe hands. The reason for this good move is only govt support to this bank.

Advances Growth Ratio:

This ratio shows the growth rate of advances. This is calculated as

Current year advances- previous year advances / previous year advances.

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Table16

Year 1997 1998 1999 2000 2001 2002 2003

Advances
Growth
ratio 0.23 0.04 0.12 0.14 0.21 -0.17 0.15

Graph14

Advances Growth ratio

0.4

0.2
Advances
ratio

Growth ratio
0
97

99

01

03

-0.2
19

19

20
20

year

Explanation: from calculation and graph it is clear that NBP show a good growth
rate in respect of advances. Only in 2002 it is negative b/c of high advances in
2001 and low advances in 2002. This shows that NBP is utilizing the deposits
efficiently.

The over all performance of NBP is very good. That’s why it is declare the best
bank of the year 2003.

Predicting failure:

Where one wants to lend money to a company that is about to fail. The ability to
predict corporate failure before the event has been the holy grail of financial
analysis for move than 50 years. The collapse comes much unsaddled. One a

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company will be successful and next year it will be fail. For this a tool is used
which is

Z=0.012A+ 0.014B + 0.033C + 0.006D = 0.010E

Where

A = net current assets ÷ total assets.

B = Retained earnings ÷ total assets.

C = Profit before interest and tax ÷ total assets

D = capitulation ÷ total debt

E = Sales ÷ total assets

Now Z score blow 1.8 was an indicator of probable failure, and a score of over 3
was seen as a clean bill of health the advantage of this approach is that using a
combination of several financial ratios makes it less likely that the result will be
affected by manipulation of financial statements.

If the portion of current asset is greater compared with total assets the healthier is
short term position.

If the retained earning is greater the greater is the extent of the company’s self
financing. The profit before tax and interest in the third ratio indicates the
contribution of a company’s profitability toward the end index score. In fourth
ratio the investor’s view of the further potential of the company is set against total
debt. The last ratio shows the ability of the company to use its assets to generate
revere.

Predicting failure of NBP - 1998.

Z = 0.012(.86) + 0.014(0.026) + 0.033(0.014) + 0.006(0.13) +0.010 (0.11)

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= 0.010 + 0.0004 + 0.0005 + 0.0008 + 0.001 = 0.0129

This shows that the calculation is below 1.8 and it is an indicator of failure

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Conclusion & Recommendations

I have divided general observation in four parts. Which are as under? This
analysis is mainly based on my general observation.

• Problems at the branch.

• Function analysis.

• Administrative analysis.

• Personal management’s analysis.

PROBLEMS AT THE BRANCH

Customer Satisfaction

In NBP customer dealing is will, but during rush hour the customer has to wait for
a long time for their turn. It’s quite hard for a new customer or potential customer
to get the required information.

Poor record management and filing system

During my internship I observed that filing system of branch is not good. When
certain record is needed the staff has to struggle to find it out and a lot of time is
wasted.

Unequal distribution of work

Work is not equally distributed. On one hand some employee have to work all day
without relaxing while some others have nothing to do at all. This not only creates
confusion among employees but also hurting and disturbing for overall setup of
the bank. And above all it results in dissatisfaction among customers as well.

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Marketing visits

A useful mode of contact is through personal marketing visits. Such visits are
important in informing and perusing the existing and potential customers about
the products and creating a sense of belongingness with them.

FUNCTIONAL ANALYSIS

Formal Organization

Formal organization includes the activities of two or more person, which are
cautiously determined groups and coordinated towards a given objective. It
provides base when people are able to communicate with other, when they have
common purpose and they are willing to work.

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

formal when the activities of two or more persons are coordinated towards a given
objective. The formal organization comes into being when people are able to
communicate with one another or willing to act and share a purpose.

In this formal organization of NBP the activities are carried out in a more formal
way. In theoretical terms it provides basis for communication with one another
but in practice it is not exercised because an employee at high level cannot get
straight away to manager or SVP and ask him about of his problem faced by him,
because first he has to talk to his immediate superior and follow a proper channel
of communication.

Difference between theory and practice

A vast difference exists between theory and practice and NBP has written
procedure but practical work done by employees is a bit different from written
procedures.

Bank duty to maintain secrecy.

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They don’t care about maintaining secrecy, especially during the rush hours. They
speak loudly about the account position and while getting clearance of cheque the
person can easily get the whole information from the ledge. The deposit clerk
must be careful while passing any cheque. In this regard another shortfall is in
giving the information about the balance on telephone.

Excessive paper work

It is notified that due to the lengthy procedure of paper work the bank employee
are over burdened. They are unable to give proper attention to the clients and face
difficulties in getting their job done. One reason for lengthy procedure and
excessive paper work in the bank is the lack of computerized technology.

More accounts fewer deposits.

Efficient banking is one which does not emphasize on number of accounts but on
greater amount of deposits. NBP is more interested in increasing its number of
account irrespective to its deposit. The main reason behind it is that bank does not
provide personalize service to all the account holders and does not improve its
quality and services

Delegation of authority

Manager has very limited authority; he has to take the approval from his
management authority i-e. In case of advance he has to take the approval of
general and regional manager. The other problem is created, when the manager is
not present in his office, the customer have to wait for hours. This discourages
both customer and officers because they have to suffer a lot

ADMINISTRATIVE ANALYSIS

Job analysis is not effective

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Only on the basis of job analysis it can be decided how a right person can be
hired, trained, compensated or promoted. It is very important for an organization
that nature of the job is described and job specifications are mentioned. Most of
the employees are simple graduate and do not have proper background about their
job. This creates problems both for organization and for the employees. In NBP
salaries are given according to the seniority and grades. People with simple or
complex responsibility are getting the same salary and facilities. This creates
dissatisfaction among employees.

Carelessness in opening of account

When customer comes to open an account, the staff does not bother to check
his/her place phone number and permanent address. It is important because in
case of overdraft by mistake or anything which places his account in debit it will
be difficult to trace him. On the other hand he may be involved in any fraudulent
activities against the bank. In this case the bank will be in awkward position.

Lack of specialized training

NBP does not provide adequate facility of specialized training to their staff.
Training is generalized rather than specialized. As the worker finishes his
training, he is inducted into a specific field without having great deal of
knowledge about the field.

In the Hayatabad branch the newly recruited employee training was not imparted,
they all learned things on the job.

Low Profit Rates

Most of the customers shifted their account to the National Saving Center because
of the low rates of saving deposit discourages the customers. Bank should
increase their profit rates to attract customers.

Poor job rotation.

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There is absence of job rotation in NBP Hayatabad branch. A person placed in

one department remains their forever. It reduces career opportunities as well
boredom and in the end results in career platueing. Job rotation is very important
for employee especially for those who are newly recruited. The newly recruit
should be rated in all department of the banking in order to get familiar with
working of different departments so that when they get a responsible position they
have know how of the whole system.

Delays in Loan Advancement

It has been observed that there are delays in sanctioning of cases form the head
office, which results in customer dissatisfaction.

Lack of appreciation

Another very important thing which is ignored in the bank is appreciation if the
employee on their good performance. If hard work and performance of employees
is not recognized and appreciated they become dishearten which results in decline
in performance.

PERSONAL MANAGEMENT ANALYSIS

Need for better training program

Need of training is greatly emphasized all around the world. Training of the
personnel is part of human resource management. It has been noticed that the
training program of NBP is not adequate.

Once the candidate is selected and placed on the respective job. It becomes
essential to train him adequately for the task. They should learn new methods for
motivating customers. The training programmed of the bank should include
scientific techniques to improve the decision making and interpersonal as will
individual needs of the employee both specialized to fresh as well as on job to
maintain the high standards of service.

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Developing Managerial Leadership

Leadership is a practical term of visible, clear on objective and communicating

better control on financial and administrative matters. Manager is not only
responsible for their own units in business, but also in people terms i.e. training,
recruiting, grievance handling and taking immediate initiative in crisis situation to
take major decision affection the future of the bank and banking community.

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.

Transfer

Transfer means when a person is shifted from one place to another place. It is
done either that person is needed more on the other branch or for improving his
skill variety. It is the policy of the Bank to transfer each employee 3 to 4 years.

Marketing at desk

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Bank employee come in daily contact with many people who happen to deal with
the casual remittance, travelers cheques, safe custody, pensioners, depositing
license fee and variety of other functions and variety of other people with whom
the Bank has no account or regular business relationship. The Bank employees are
doing very little on their own to explore the possibilities of selling banking
services to them as a marketing contributor. The entire Bank community should
make a conscious effort in addition to their normal work to explore the
possibilities of selling banking services to them. The market opportunities are
hidden in every dealing a banker handles; the question is that if he has the art and
urge to seize such opportunities.

Lack of Business Communication

There is no proper way to give information to their customer. To avoid this minor
dissatisfaction and tension in the mind of customer, and deficiency of the service,
it is recommended that the bank should provide brochures etc containing
information in details.

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

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

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General Suggestions

NBP is an effectively operating and profit making organization and carrying out
its activities under 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 sound professional basis. While the head office
specifies the whole procedure of function and operations. This procedure has been
modernized with the passage of time with a view to streamline the approach and
underlying procedure for effective overhauling of its own capabilities so as to
bring them at par with international practices.

Here I am giving some suggestions, which in my view can add some input for
efficiency and better performance of NBP as an organization in genera and City
branch in particular.

The recommendations are as follows:

Professional training

NBP staff lacks professionalism. They lack the necessary training to do the job
efficiently and properly. Although staff colleges in all major cities but they are not
performing well. For this purpose these staff colleges should be reorganized and
their syllabus should be made in such a way to help the employee understand the
ever changing global economic scenario.

Banking council of Pakistan should also initiate some programs to equip the staff
with much needed professional training.

Delegation of authority

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

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Performance Appraisal

The manager should strictly monitor the performance of every staff member. All
of them should be awarded according to their performance and result in the shape
of bonuses to motivated and incite them to work more efficiently.

To Over Come Problem of Space and Furniture

In the critical analysis this, problem is discussed. To overcome this problem it is

suggested that a special section should be made inside the branch. Which should
only handle the treasury function, salaries and pensions of federal personnel or the
bank should do these functions in the evening time. Also management should
purchase more furniture and arrange them in such a way which provides
maximum space and convenient specially in deposit department and there should
also be convenient sitting place for customers.

Transfer

Transfer is not properly carried out. Some of the employees are continually
serving at the same post. They are simply rotated at the same branch. Therefore it
is recommended that evenly rotation of every employee should take place after
every three years in different braches of the bank.

Changes in Policies

There should not be any abrupt policies change by the upper management, as this
practice hurts the customer confidences in the bank. Government should make
long term policies

Need of Qualified Staff

Required, qualified staff should be provided to branch in order to improve the

functioning of the branch. Especially a telephone operator should be appointed.

Utility Bill Charges

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Bank gets Rs. 2 to 3 to processes a utility bill, and it is very tire, tough and hard
job despite this working resulting in a loss to then Rs 3 to5 per transaction. These
charges should be increased to RS 10 per bill to enable the branch to cover their
handling costs and make some profit.

Link with the Head Quarter

100 major branches of NBP should established a direct link with the, head quarter

In Karachi, through Internet or Intranet. This will make the functions and decision
making of the management easier and convenient.

Credit Card

National bank of Pakistan should start its operation in credit card. These cards are
very helpful for the ordinary customer in general and the business people in
particular. To make it mores secure and to eliminate the misuse of it, the
management is required to keep proper security against the card.

Installing Validator and ATM

Validator machine is used to count the currency notes and its installation will help
to eliminate to counting errors and will save time.

This branch is situated in the City, which is supported to be the hub of business
activates. In this area an auto teller machine (ATM) is the need of the hour
businessmen can easily check their balance in the bank and also with draw their
money conveniently.

Interest on Overdraft:

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

customers free of interest. Only bank commission is charge small amount of
mark-up on the overdraft, which will help the bank to improve its revenue
position.

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Clean Loans

Clean loan or clean overdraft is the credit facility extended to the customers to the
customers without any security. These types of small term loans should not be
extended to anybody, because sometime these loans are provided to blue-eyed
people of the management and they become a part of bad debts.

Cash Financing

In this mode of financing the amount of credit not utilized by the borrower is
remained tax-free. It is recommended that a small amount of interest should be
charge on this amount as well because the bank gas kept-aside the amount for that
borrower and can not advance it anywhere.

Decreasing Administrative Expenses

Bank should their administrative expenses. This was Rs 8 billion in the year 2000.
That can be done by lying off the surplus pool of employee with golden
handshakes scheme. The branches that are not much used could also be closed.
Employee can also be how to control the bank expenses. That will give positive
results in the future.

Needs to be Flexible in credit Policy

As mentioned earlier, NBP is very conservative in advances and loans policy. It

reduces the investment opportunities. Also loans should be given to the small
businessmen and the agriculture sector at the low markup rate. It should adopt
flexible credit policy while giving credit to the agriculture sector.

Technological Advancement

I would like to suggest that at least all the main branches of NBP should be fully
computerized in order to expedite the dealing process among bankers and their
customers. Every department should be provided a computer with adequate
training (especially Advances, Deposits and Foreign Exchange departments).

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Daily records should be entered directly into these computers, (instead entering
the overall daily transactions after the banking hours). It will not only reduce
transaction time, will increase accuracy but will also be efficient as well.

Not only it will be economical but will also reduce the extra burden of work of the
bank. It will also help in reducing the use of excessive paper work.

Staff Relationship

Good relationship among staff member leads to the peak performances in any
organization. I observed that the staff relationship was normal other wise but
some time I noticed that there existed a little conformity among the staff
members. Another syndrome from which the staff suffered was that all of them
considered themselves more important than others. Some of the officers used to
say that if I am absent for a day the bank would stop working. So this sort of
attitude is not good because it mars bank image and juniors’ willingness learn and
work hard and in the end will hurt the whole team.

Improper Distribution of Work

Proper distribution work leads to success in every organization. Proper

distribution of work prevents the employee from over and under work situation.
So for a smooth running of an organization proper distribution of work is the hint
to be followed.

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

the bank. I saw that some of the employee worked like ants other sat idle starting
here and there. So this created a lot of over work situation for while relaxation for
other.

Favoritism and nepotism

In the City branch during my internship I saw that when some of the employees
are transfer to other places, due to their relation with influential people and with

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

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

politics and their transfer and promotion should be made on merit and according
to the rules and regulations of the bank and provided favorable environment to the
employee to show their performances.

Inter Departmental Transfer

I watched during my internship that, there is number of employee who have

worked on one seat for many a year. It can have negative effects motivation of
employee who is hard working and intelligent. Take the example of advances
section. In advance section if the employee is transfer after sixth month or seven
month, how can he be able to show his performances and how can he be able to
know the bank customer in a short period of time.

Foreign currency Account

For the internship the place I have selected was City branch, which is my
forefather land and I know that from area many people have traveled to other
country for different kind of jobs, and I have heard personal complaint about the
unavailability of foreign currency account in banks. So I thick it is wonderful
opportunity for the bank to open foreign currency account.

Marketing Policy

The branch should adopt various marketing strategy and promotion strategy to
promote the bank and its product.

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

of all when you think in term of branch level. But on the whole organization level,
they should arrange the seminar with in the bank and outside the bank. They
should introduce various prizing schemes just like Allied Bank. Karamad Scheme,
Bank Al-Falah (monthly income earning scheme) and various others.

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They should do more advertising through newspaper and media and through
channel of personal contacts.

Complaints of Customer

There should be an information desk to provide the information and to receive the
complaints of the customer in the bank.

There is no complaint box available in the branch and not any person appointed to
hear the complaints.

Every person cannot go to the manager for the complaint because most of the
people are hesitant. So I suggest management to install a compliant box in the
branch, and recruit a special person for that guidance of the customer when they
are unable to manage some difficulties in banking matters.

Analysis of the Business:

Proper analysis of the business reports should be conducted before extending any
type of loan. For this purpose professional training of the stuff member is
required.

Organizational Commitment

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

some benefits, which the other employees are getting. Their salaries must increase
according to efficiency, performance and service.

Managerial Leadership

In the analysis, we have discussed the difficulties of the assistant in taking any
initiative; therefore it is recommended that the assistants should he given special
training to make them ready for the leadership.

Credit Monitoring

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The credit department of the bank should carries out vigilant credit monitoring.
They should ensure the proper payment of installments and the mark-up by the
borrower.

The staff members who have done all the paper work of the loan extension should
perform the monitoring, as he/she will be having more information about the
borrower.

Extended Banking Hours

The banking hours may be extended up to six, as being practiced by HBL

opposite to it.

Some of the business community due to law and order situation are now reluctant
to keep the fund in their premises and would want to depart with it. Therefore,
City Branch may extend the night banking to cater to demand of this business
community. The branch could also be opened to cater the requirements of this
business community

Limited staff:

Housing and House Hold Goods loans

Bank should initiate these loans because most of bank’s customers are middle
class and they cannot afford to buy house or house hold goods at once by their
own

Avoiding Bad Debts

Great care should be taking while extending the loan. Loans should be awarded
against reasonable securities, where market value should be equal to the loan
granted.

Policies should be crafted in a way to ensure that no loan is extended on political

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

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to which the current ration of borrower’s business must be 1:1 and the debt to
equity ratio should be 60:40, means the liquidity position of business should be
healthy.

Car Financing Scheme

Another financing scheme with the name of “MARE GARE CAR FINANCING
SCHEME” should be initiated This finance scheme will help the general public to
buy the car of their choice in easy quarterly installments The bank monitors will
do strict monitoring and the car will be hypothecated with the bank against the car
loan.

Scheme’s implementation plan is give in the next chapter.

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REFERENCES

1 Annual Report National Bank of Pakistan.

2 Block, Stanley B and Hirt Geoffrey A (1994). “Foundations Of Financial

Management” 7th edition USA: Michael W Junior, p121-148

3. Van Horne James C and JR Wachowicz M. Jhon” Financial management”

11th editions

4. Meigs “Financial Accounting” 11th edition.

5. R.B Hisrich and Peter P Michael “Entrepreneurship” 5th edition.

6. Simons Harry and Smith J.M “Intermediate Accounting” 5th edition.

7. Watson James “Fundamentals of Accounting” 7th edition.

8. Sober P Parey “Advance accounting” 2nd edition .

9. Tarry Franklin “Principles of Management” 8th edition

WEBSITE:

www.nbp.com.pk

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Annex

This portion has been emailed to the HRMI619@vu.edu.pk as the size of the
forms, broachers etc was greater and I was unable to send through VULMS.

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