Internship Report on NBP
Title
INTERNSHIP REPORT
ON
NATIONAL BANK OF PAKISTAN
SUBMITTED TO:
Prof. Dr. Liaqat Ali
SUBMITTED BY:
Roll no:
Section:
8th Semester
B.com hons
Session:2007-2011
Hailey College of Commerce
University Of the Punjab
Lahore
Date: 16.09.2011
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Internship Report on NBP
Transmittal Letter:
September 16, 2011
Prof. Abdul Jabbar
Hailey College of Commerce
University of the Punjab Lahore
Dear SIR,
I am submitting to you the report, due September 16, 2011, that you requested.
The report is entitled NATIONAL BANK OF PAKISTAN. The purpose of the
report is to inform you about the financial functioning of NBP. The content of this
report concentrates on the financial functions of the credit department, Foreign
Exchange department, General banking department and Administration
department of NBP. If you have any questions concerning my report kindly ask
me.
Sincerely
Roll no.
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Internship Report on NBP
Acknowledgment
All praise to Almighty Allah, the most merciful and compassionate, who give me
Skills and abilities to complete this report successfully.
Secondly, I am grateful to my parents who are always been a source of
encouragement for me throughout my life. I can never give the return of their un-
tired struggle for me, but I can only prove myself as they expect from me. And I
am also grateful to all other family members and all my friends for their moral
boosting and spiritual support during my study and especially in the internship
period.
I am grateful to Hailey College of Commerce that made this learning
opportunity a part of our education. I am also grateful to all the Teachers of
Hailey College of Commerce, who taught us whole-heartedly and shared great
knowledge with us. Because of their teaching I didn‟t face any problems during
my Internship period, they told us how to co-ordinate, co-operate, and how to
interact with other peoples in practical life.
I am grateful to all the staff members of NBP, branch manager and operational
manager and other staff members. They were all very co-operative, kind and
affectionate. They taught us about practical application of our studies.
I express my great gratitude to my kindhearted Supervisor Sir Abdul Jabbar who
was the Person who made me able to write this report, His enthusiasm shows
the way forward to me to achieve this success and who kept me in high spirit
through his appreciation.
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TABLE OF CONTENTS
LETTER OF TRANSMITTAL………………………………………………………… 2
EXECUTIVE SUMMARY……………………………………………………………… 5
INTRODUCTION/HISTORY………………………………………………………….. 8
MISSION STATEMENT……………………………………………………………… 14
OBJECTIVES…………………………………………………………………………. 17
ORGANIZATIONAL STRUCTURE………………………………………………… 23
RATIO ANALYSIS……………………………………………………………………. 24
WORKING AS INTERNEE…………………………………………………………... 27
GENERAL BANKING………………………………………………………………... 27
FOREIGN TRADE …………………………………………………………………… 46
ACCOUNTS DEPARTEMENT……………………………………………...……… 56
CREDIT ADMINISTRATION………………………………………………………... 60
ADMINISTRATION DEPARTEMENT…………………………………………...… 68
ACHIVEMENTS...…………………………………………………………………….. 73
SWOT ANALYSIS……………………………………………………………………. 77
CONCLUSION ……………………………………………………………………….. 79
RECOMMENDATIONS……………………………………………………………… 80
APPENDIX ……………………………………………………………………………. 81
COMPLETION CERTIFICATE
DOCUMENTS
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Internship Report on NBP
Executive Summary
National Bank of Pakistan (the bank) was established under the National Bank of
Pakistan Ordinance 1949 and is listed on all the stock exchanges in Pakistan. It‟s
registered head office is situated at I.I.Chundrigar road, Karachi. The bank is engaged in
providing commercial banking and related services in Pakistan (GOP) as agent to State
Bank of Pakistan (SBP). The bank operates 1219 branches in Pakistan and 19 overseas
branches (including the Export Processing Zone branch, Karachi). Under a Trust Deed,
the bank also provides services as trustee to National Bank of Pakistan investment Trust
(NIT) including safe custody of securities on behalf of NIT.
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.
Branch network of nbp is, 29RegionalOffices,1, 217Branches,130OnlineBranches,4
Subsidiaries.
National Bank of Pakistan has following distinguishing features:
It acts as the agent of the State Bank of Pakistan (SBP). At places where SBP has
no Branch, it receives money and makes payments on its behalf.
It provides credit for State Trading. It deals in internal and external bills of
exchange and discounts them.
It keeps the deposits of the people and provides lockers and agency services.
It invests in government securities and bonds.
It provides short terms loans to industry, import and export trade, agriculture and
construction.
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Internship Report on NBP
It provides credit lines for project financing like LMM and IDA etc.
The Bank to facilitate the people to have their own houses has recently launched a
big project under the head of SAIBAN.
NDSL a subsidiary of NBP has been established for catering the needs of capital
and money market.
National Bank of Pakistan performs some general Functions on behalf of the
Government of Pakistan.
In this report I analyzed functions of different departments, including General banking,
Accounts department, foreign trade, CAD Administration department.
NBP plays a important role in FOREIGN TRADE AND FOREIGN EXCHANGE
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
Access to different local commercial banks in international banking
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NBP MAJOR ACHEIVEMENTS INCLUDS
CORPORATE AND INVESTMENT BANKING
NEW PRODUCT DEVELOPMENT
RISK MANAGEMENT
HUMAN RESOURCE DEVELOPMENT
CREDIT RATING OF THE BANK
SWOT ANALYSIS
Strength
Custodian of government treasury
Working as agent of SBP
Weakness
Not fast service to the clients
Lethargic and rude attitude of employees towards customers.
Opportunities
Can launch a marketing strategy to capture the business from its peer banks.
Can be number one in Pakistan
Threats
Not fully computerized and on line banking facilities
Competition with foreign banks
From this SWOT Analysis I can conclude that beside the fact that National Bank of
Pakistan is a government based institution but in these days of competition it is not easy
to survive without adopting modern techniques and latest tools of sophisticated
technology. Recommendation for the National Bank of Pakistan (NBP) is that it
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Internship Report on NBP
should give the proper training to those employees are not to trained regarding computer
processing the customers and also by the employees, so there should be proper training
to improve their customers services.
History of "National Bank of Pakistan
National Bank of Pakistan (the bank) was established under the National Bank of
Pakistan Ordinance 1949 and is listed on all the stock exchanges in Pakistan. It‟s
registered head office is situated at I.I.Chundrigar road, Karachi. The bank is
engaged in providing commercial banking and related services in Pakistan
(GOP) as agent to State Bank of Pakistan (SBP). The bank operates 1219
branches in Pakistan and 19 overseas branches (including the Export Processing
Zone branch, Karachi). Under a Trust Deed, the bank also provides services as
trustee to National Bank of Pakistan investment Trust (NIT) including safe
custody of securities on behalf of NIT. At the time of independence in 1947,
Government of Pakistan decided that Reserve Bank of India would act as the
common monetary authority of both countries up to September, 1948. But this
arrangement did not worked due to certain reasons. In October 1947, there was
fighting in Kashmir and India refused to pay the share of Pakistan amounting Rs/-
550 million. Due to Indian government attitude and role of Reserve Bank of India
in creating problems to cater to the banking needs of Pakistan. Government of
Pakistan established its own central bank “SBP” on 1st July 1948.
Soon after independence of Pakistan, most of our foreign trade was with India and Britain.
Britain and other countries of Commonwealth devaluated their currencies. India also
followed Britain and devalued her currency. They were also compelling Pakistan to do
so. But the Government of Pakistan felt that devaluation of currency was not in the
interest of the country, so GOP refused to follow instructions of Commonwealth countries.
It resulted in a very serious situation. Stocks of jute in East Pakistan and that of cotton in
West Pakistan were accumulating. At that time to rescue the economy of the country, the
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Internship Report on NBP
Government of Pakistan established National Bank of Pakistan under National Bank of
Pakistan Ordinance 1949. NBP acted promptly and advanced loans to the farmers.
National Bank of Pakistan was set up with authorized and paid-up share capital of Rs/-30
(M). The government held 75% of shareholding and remaining 25% of the share capital
was held by the private sector.
In 1952 NBP replaced Imperial Bank of India. This arrangement was negotiated
by Mr. Mumtaz Hassan as Acting Governor of SBP. In 1962 when Mr. Mumtaz
Hassan became MD (He had already served NBP for 10 years as its Chairman
or Government Director), at that time NBP‟s branches were increased from 6 to
239 and deposits from Rs/-5 core (50 million) to 106 core (1 billion & 60 million),
profit from 0.3 million (3 lac) to 21 million (2.1 core) and the staff increased from
380 to 7091 as compared to year 1949-50. In December, 1966 its 600th
branches was opened raising the deposits to 2.31 billion and staff to 14, 963. Up
to 1965, the shareholders had received 225% of their original investment.
In 1974 during the era of nationalization, different small banks including Bank of
Bahawalpur were merged in National Bank of Pakistan. In addition to this Bank of Mehran
and NDFC were merged in it. 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.
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BRANCH NETWORK OF NBP
29 Regional Offices
1,217 Branches
130 Online Branches
4 Subsidiaries
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18 Overseas Branches
4 Representative Offices
1 Subsidiary
1 Joint Venture
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The Nation’s Bank
National Bank of Pakistan has following distinguishing features:-
It acts as the agent of the State Bank of Pakistan (SBP). At places where SBP has
no Branch, it receives money and makes payments on its behalf.
It provides credit for State Trading. It deals in internal and external bills of
exchange and discounts them.
It keeps the deposits of the people and provides lockers and agency services.
It invests in government securities and bonds.
It provides short terms loans to industry, import and export trade, agriculture and
construction.
It provides credit lines for project financing like LMM and IDA etc.
The Bank to facilitate the people to have their own houses has recently launched a
big project under the head of SAIBAN.
NDSL a subsidiary of NBP has been established for catering the needs of capital
and money market.
National Bank of Pakistan performs some general Functions on behalf of the
Government of Pakistan
Disbursement of salaries to the government servants, private organizations and
autonomous bodies.
Payment of pensions to hundreds of thousands of pensioners across the country.
Payment of benevolent funds to the public:
Payment of Zakat funds on behalf of government to the needy and deserving person.
Catering of collection and payment of donations for the welfare and charity purposes.
Selling and purchasing of Prize bonds.
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Selling of charity tickets on behalf of charity institutions.
Collection of all types of utilities bills.
Collections of Traffic challan fees and tokens.
Collections of government treasury challans both Federal and Provincial.
Loaning to the talented students of the nation (Qarz-e-Hasna).
Collection of fees for passport and National Identity Cards.
Loaning for the purchase, construction and renovation of houses for the government
employees and businessmen on easy installment and interest rate basis under the
name of “SAIBAN”.
National Bank of Pakistan performs the functions of State Bank of Pakistan in those
areas where SBP has no Office.
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MISSION STATEMENT
“To be recognized in the market place by institutionalizing a merit and performance
culture, creating a powerful and distinctive brand identity, achieving top-tier financial
performance, and adopting and living out its core values”.
VISION STATEMENT
To be the pre-eminent financial institution in Pakistan and achieve market
recognition both in the quality and delivery of service as well as the range of
product offering.
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CORE VALUES
NBP aims to be an organization that is founded on:
Growth through creation of sustainable relationship with its
customers.
Meet expectations through market-based solutions and products.
Reward entrepreneurial efforts
Create values for all stakeholders.
NBP aim to be people who:
Care about relationships
Lead through the strength of its commitment and willingness to excel.
Practice integrity, honesty and hard work. We believe that these are
measures of true success.
NBP have confidence that tomorrow NBP will be:
Leaders in its industry.
An organization maintaining the trust of its stakeholders.
An innovative, creative and dynamic institution, responding to the needs
of the internal and external environment.
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CODE OF ETHICS AND PRACTICES
NBP is very much conscious about the importance of code of ethics to deliver best
services to its customers and introduced Code of Ethics which lays down fundamental
principles of personal and professional conduct for all employees of NBP. These
principles are as follows:-
1. Integrity
2. Confidentiality
3. Professionalism
4. Compliance
INTEGRITY
Employees are required to behave with integrity and honesty in their dealings with
customers and other parties with whom they interact and in respect of all internal
matters.
CONFIDENTIALITY
All employees have a duty to safeguard confidential information obtained in the normal
course of business and respect for customers‟ private affairs which requires the same
care as does the protection of the bank‟s funds or other interests.
PROFESSIONALISM
All employees should carry out their duties in a professional and courteous manner.
Financial matters should be conducted in a fair manner and maintain maximum level
of dignity when interacting with employees of opposite sex.
COMPLIANCE
All employees should be fully committed that all business decisions and actions
comply with all applicable laws and regulations.
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Objectives
Strong emphasis has been laid upon training of branch officers to better equip
them for marketing of retail banking products. In future NBP is going to
introduce modern banking services to keep pace with the competition and
more important our customer needs. These are as follows:
Debit cards
Internet banking
Call centers
Mobile banking
Milestones
“Best Emerging Market Bank from Pakistan” for the year 2005 „Global
Finance‟ USA, May 2005
NBP is one of the “Top 100 Banks of Asia” „Euro money‟ UK, March
2005
Bank of the year 2001, 2003&2004 for Pakistan „The Banker‟ financial
times Group UK.
Best Foreign Exchange Bank in Pakistan „global Finance‟ USA, March
2004
Amongst Top 1000 Banks in the world and Number 1 in Pakistan „the
Banker‟ Financial Times Group UK, July 2005
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ORGANIZATIONAL SETUP AT HEAD OFFICE
President of National Bank of Pakistan is the head /Chief Executive of the
institution and is supported by the following group heads/departmental
heads:-
Operations Group Head
Finance Group Head
Corporate and Investment Banking Group Head
Risk Management Head
Commercial & Retail Banking Head
Audit & Inspection Head
Head IT Planning, Development and Implementation
Head Strategic Planning & Economic Research Wing
Head Special Assets and Remedial Management
Head of HR Management Department
Head of Organization Development & Training Department
Overseas Regional Chiefs Head
COMMITTEES
For smooth running of business and quick decision making on matters relating
to the bank, the following committees have been formed:
Audit Committee,
Credit Committee
Operations Committee
Assets & Liability Committee
IT Steering Committee
Training and HR Committee
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NBP PAST HISTORY
NBP – Past History
1949 – NBP Started Business
1965 – Installation of First Machine IBM 1401
Problems / Challenges
Non Functional I.T. Group Organization
Obsolete Communications Infrastructure
Distributed & Limited Database
Database servers; End-of-life Cycle
Obsolete or non availability of equipment in Branches
Servers unable to support new technologies
Limited automation in branches
COMPUTERIZATION IN NBP
Automation Status
In 2002
On-Line 44 Branches
ATMs 16
Today
On Line Branches 126
ATMs 100+
Western Union Automation 800 + branches
Off Line Automation 850 Branches
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Technology up gradation Plan
4 year Plan (2003 -2006) launched for
* Up gradation of Infrastructure
* Network of 300 on Line Branches
* Automation of remaining branches
* Offer modern facilities to customers
(ATM, Debit Card, Consumer Finance etc..)
* Centralization of Database
1 Link ATM Network
NBP in order to facilitate its customers is installing ATMs all over the country.
In this way customers can withdraw money whenever they desire
NBP has joined 1 Link ATM Network, linking it to the endless ATM Banking
opportunities.
“1Link is the ATM Network that works for you”.
Today marks the formation of a formidable banking technology network - 1
Link. Eleven banking powers bring NBP to the largest nation wide ATM
Network that provides reliable 24-Hours access to cash. ATM Network
supports transactions of following banks: Bank Alfalah, Union Bank ,Allied
Bank Limited ,Askari Bank, Habib Bank, ABN Amro, Soneri Bank, Bank Al
Habib, UBL, PICIC commercial Bank at the following places:
.
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Branches where ATMs are being Operated in Lahore:-
S.NO. BRANCH LOCATION
1 Main Branch Main Branch, Shahrah-e-Quiad
-e-Azam Road,
2 Lahore Cantt. Branch Cantt. Branch, Lahore Cantt.
3 Wapda House Wapda House, Shahrah-e-Quiad
Branch -e-Azam Road
4 ACP Corporate ACP Corporate Branch
Branch Shadman Jail Road
5 Corporate Branch. Corporate Branch. Rehman
Plaza Shahrah-e-Fatima Jinnah Rd.
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Projects Completed
Hardware Upgrade
SWIFT Systems hardware upgrade
Regional Computer Center Hardware Upgrades
Software Upgrade
Computerization of Kabul and Jalalabad Branch
C & RB Group's Debit Card Project Launch
Main Branch Up gradation and Computerization
Human Resource Management System Implementation
Advance Salary Factorization/Revised BBO Implementation (800+branches,
country wide)
Western Union Money Transfer System (400+branches country wide)
Software versions standardization (Country wide)
Consumer Asset Management System Implementation
Software Library Establishment
I.T. Infrastructure Overview
Information Technology Group’s aim is to keep National Bank of Pakistan apprised of
latest technological advancements in Banking automation systems and to offer cost
effective solutions in meeting the bank‟s business automation needs. While also
providing for high performance, efficient, reliable, secure, seamless and scalable
banking technologies, which would easily meet current and future automation needs of
the bank.
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FACTORS EFFECTING THE NBP COMPUTERIZATION
Ineffective means of communication and coordination between the Head Office
and the branches.
Bank has no long term I.T. Plan and Policy.
Lack of coordination between I.T. Group and other Groups of Bank.
No confirmation of management and its style
No special budget has been allocated for IT in the past.
NBP Culture.
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ORGANISATIONAL CHART
Chief Manager
Chief Operation
manager (CRA)
Manager Credit Manager Credit
Processing Operation
Manager Manager
FEX* Manager JB* Manager Admin Compliance
[Sections] [Sections] [Sections]
FEX Inquiry Reconciliation Audit /Inspection
Export Deposits Dispatch To sign all Br. Returns
Import Bills Dead Stock Money laundering
Remittance Clearing Security .etc
F/C A/C Utilities Staff Welfare
Accounts
Cash/Chest
Govt. Collection
*FEX Foreign Exchange
*JB Journal Banking
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FINANCIAL ANALYSIS
BALANCE SHEET
2009 2010
(Rupees in thousands)
ASSETS
Cash 115,827,868 115,442,360
Balance with other banks 28,405,564 30,389,664
Lending to financial institutions 19,587,176 23,025,156
Investments_ net 217,642,822 301,323,804
Advances - net 475,243,431 477,506,564
Operating fixed assets 25,147,192 26,888,226
Other assets net 59,666,438 53,496,240-
Deferred tax assets net 3,062,271 6,952,666
944,582,762 1,035,024,680
LIABILITIES
Deposits and other accounts 727,464,825 832,151,888
Borrowings from financial inst. 45,278,138 20,103,591
Bills payable 10,621,169 8,006,631
Other liabilities 42,269,623 46,160,038
Deferred tax liabilities 0
Sub ordinate loans 0
Liabilities against assets 42,629 106,704
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906,528,852
825,676,384
NET ASSETS 118,906,378 128,495,828
REPRESENTED BY
Share capital 10,763,702 13,454,628
Reserve 22,681,707 24,450,244
Un-Appropriated profit 60,696,510 65,857,438
94,141,919 103,762,310
Surplus on revaluation of assets 24,764,459 24,733,518
118,906,378 128,495,828
INCOME STATEMENT
2009 2010
(Rupees in „000)
Mark-up/return/interest earned 77,947,697 88,472,134
Mark-up/return/interest expensed 40,489,649 45,250,476
Net mark-up/interest income 37,458,048 43,221,658
Provision against non-performing loans and
11,043,469 7,011,046
advances
Provision for diminution in the value of investments 605,629 2,954,678
Bad debts written off directly
Provision of balance sheet obligations 20,237 3,965
11,669,335 9,969,689
25,788,713 33,251,969
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Net mark-up/interest income after provisions
NON MARK-UP/INTEREST INCOME
8,930,391 9,631,579
Fee commission and brokerage income
Dividend income 1,920,336 1,099,493
Income from dealing in foreign currencies 3,028,165 2,211,139
Other income
2,171,336
Gain on sale and redemption of securities – net
552,216
4,591,894 2,512,363
Unrealized gain on revaluation of 6,730
Investments classified as Held-for-trading 2,355
Total non-mark-up/interest income 19,025,357 17,632,640
44,814,070 50,884,609
NON MARK-UP/INTEREST EXPENSES
Administrative expenses 22,571,470 26,202,577
(Reversal) / Other provisions 620,780 148,026
Other charges 321,647 118,887
Total non-mark-up/interest expenses 23,513,897 26,469,490
21300173 24,415,119
PROFIT BEFORE TAXATION 21,300,173 24,415,119
Taxation – current year 8,871,513 9,835,048
Prior years (4,133,282) (939,256)
Deferred (999,904) (2,043,887)
3,738,327 6,851,905
PROFIT AFTER TAXATION 17,561,846 17,563,214
52,456,204 60,696,510
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Un-appropriated profit brought forward
Transferred from surplus on revaluation of fixed
123,934 117,738
Assets
Profit available for appropriation 70,141,984 78,377,462
Basic and diluted earning per share after tax 13.05 13.05
RATIOS
1) Total Assets turnover Ratio
Total Assets turnover Ratio=Interest Earned/Total Assets
2010 2009
Interest earned 88,472,134 77,947,697
Total Assets 1,035,024,680 944,582,762
Total Assets turnover Ratio 8.54% 8.25%
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Interpretation
The total asset turnover ratio measures the ability of a company to use
its assets to generate sales. The total asset turnover ratio considers all
assets. The lower the total asset turnover ratio, as compared to
historical data for the firm and industry data, the more sluggish the
firm's sales. This may indicate a problem with one or more of the asset
categories composing total assets - inventory, receivables, or fixed
assets.
Total Assets turnover Ratio of the bank is good and is intend to
increase in coming years.
2) Net Profit Margin
Net Profit Margin=Net Profit after tax/Interest Earned
2010 2009
Net profit after tax 17,563,214 17,561,846
Interest Earned 88,472,134 77,947,697
Net Profit Margin 19.85% 22.53%
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Interpretation
The net profit margin ratio tells us the amount of net profit per Rs 1 of
turnover a business has earned. That is, after taking account of the
cost of sales, the administration costs, the selling and distributions
costs and all other costs, the net profit is the profit that is left, out of
which they will pay interest, tax, dividends and so on.
As we can show that the profit of NBP has significantly decreased in
2010 as compared with the 2009, so consideration should be paid in
order to enhance the profit.
3) Advances to total Deposits ratio
Advances to total Deposits ratio=Advances/Deposits
2010 2009
Advances 477,506,564 475,243,431
Deposits 832,151,888 727,464,825
Advances to total Deposits 57.38% 65.32%
ratio
I
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nterpretation
This ratio indicates that how much funds gathered by bank are used
efficiently to earn profits. This ratio signifies that advances are very
much less than the deposits, which shows that bank is not very much
considering about making the deposits useful by giving advances to
other parties to earn some handsome amount upon it.
4) Demand Deposit to total deposit ratio
Demand Deposit to total deposit ratio=Demand Deposit/Total Deposit
2010 2009
Demand 68,393,177 75,133,946
Deposits(Remunerative)
Total Deposits 832,151,888 727,464,825
Demand Deposit to total 8.21% 10.32%
deposit ratio
Interpretation
This Ratio describes the degree to which deposits of a bank are liquid.
Demand deposits are such deposits which can be demanded by
customers at any time. Demand deposit ratio of NBP is not high as
compared with the previous year and this is a good sign but more
consideration is required.
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5) Advances to Assets Ratio
Advances to Assets Ratio=Advances/Total Assets
2010 2009
Advances 477,506,564 475,243,431
Total Assets 1,035,024,680 944,582,762
Advances to Assets Ratio 46.13% 50.31%
Interpretation
This ratio shows that how much portion of the total assets is used as
advances. Because advances are the most efficient way of earning
profits for a bank. This ratio is showing downward trends. Proper steps
should be taken to avoid this problem.
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6) Investments to total Assets Ratio
Investments to total Assets Ratio=Investments/Total Assets
2010 2009
Investments 301,323,804 217,642,822
Total Assets 1,035,024,680 944,582,762
Investments to Assets Ratio 29.11% 23.04%
Interpretation
This ratio shows that how much portion of the total assets is used in
Investments. Because investments are the efficient way of earning
profits for a bank. This ratio is showing upward trends. Which is a good
sign that bank is little bit considering about the investments, but more
consideration is also required
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Leverage Ratios
Solvency analysis of a firm indicates the amount of the other people‟s
money being used to generate profit. In general, these analyses are
more concerned with long term debts, because these commit the firm
to a stream of payments over the long run. Solvency analysis includes:
Debt ratio
Debt to Equity rat
7)Debt Ratio / Solvency Ratio
Year 2010 2009
Total Debts 906,528,852 825,676,384
Total Assets 1,035,024,680 944,582,762
Debt Ratio / Solvency Ratio 87.58% 87.41%
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8)Debt to Equity Ratio
Year 2010 2009
Total Debts 906,528,852 825,676,384
Equity 128,495,828 118,906,378
Debt to Equity Ratio 7.05 6.94
Interpretation
The overall leverage position is not a better trend as compare to
previous year. The contribution of equity in total assets is decreasing,
while the debt contribution is increasing which is not better for
business. Equity ratio is decreased which shows the bad condition of
the bank. Solvency Ratio is not in good condition. So we can say that
overall Solvency condition of the NBP is not better with the comparison
to the previous year.
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Profitability analysis
Profitability analysis of a firm indicates the overall efficiently of the
management. Without profit a company can not attract the outside
capital. Profitability analysis includes:
i) Return on total assets
ii) Return on-equity
iii) Return on investment
9)Return on Assets
Year 2010 2009
Net Profit after Tax 17,563,214 17,561,846
Total Assets 1,035,024,680 944,582,762
Return on Assets 1.69% 1.85%
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10)Return on Equity
Year 2010 2009
Net Profit after Tax 17,563,214 17,561,846
Equity 128,495,828 118,906,378
Return on Equity 13.67% 14.77%
11)Return on Investment
Year 2010 2009
Net Profit after Tax 17,563,214 17,561,846
Investment 301,323,804 217,642,822
Return on Investment 5.82% 8.06%
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Investor Analysis Or Market Analysis
Investor analysis or market analysis are related to firm market valve, as
measure by its current share price to certain accounting values.
Investor analysis includes:
Earning per share
Dividend per share
Break up value/Book value per share
12)Earning per Share
Year 2010 2009
Net Profit after Tax 17,563,214 17,561,846
No. of Shares 1,345,463 1,345,463
Earning per share 13.05 13.05
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13)Dividend per Share
Year 2010 2009
Total dividend 8,060,510 5,820,338
No. of shares 1,345,463 1,345,463
Dividend per Share 5.99 4.33
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14)Book Value per Share
Year 2010 2009
Equity 128,495,828 118,906,378
No. of Shares 1,345,463 1,345,463
Book Value per Share 95.50 88.37
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WORKING AS AN INTERNEE
GENERAL BANKING
Account opening
First of all, to secure his interest and to make the transaction with a customer
safe and sound bank conducts proper verification of whole contents of person
who has applied for opening account in NBP.
Know your customer (KYC)
It is the due responsibility and bank regulation that financial institutions and
other regulated companies must perform to identify their clients and ascertain
relevant information pertinent to doing financial business with them.
To prevent the frauds
Know your customer policies have becoming increasingly important globally to
prevent identity theft fraud, money laundering and terrorist financing.
KYC should not be thought of as a form to be filled , it is a process to be
undergone from the start of a customer relationship to the end.
Bank officer makes negotiations with account holder that why he is opening
accounts here in this bank and in this particular branch, if the bank is not
satisfied with contents he can refuse to open an account.
Relation with NADRA
Bank also has an arrangements with NADRA to verify the particulars of the
person .For this purpose NBP have developed a software VERISYS and pays
Rs 50/- oer verification.
In account opening form, even one clause is missing or is not filled by the
account holder and bank has accepted his form then SBP penalizes for this.
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Letter of Thanks
A letter of thanks is sent by the bank at present address of the customer to
verify that he has mentioned his correct residing address, this letter should be
posted back to the bank after signing it. When it is received back by the
customer it is a confirmation and after that cheaque book is issued to
customer.
Types of accounts
Current Account
Basic banking account
PLS saving account
Premium savers account
NIDA (national income daily account)
Premium amadni accounts
PLS term/deposit
Current Account
Current accounts are opened for individuals(single, joint) , charitable
institutions , provident fund and other funds benevolent nature of local bodies
, companies , associations educational institutions , firms etc.
NO PROFIT
No profit is paid on this type of current account.
SERVICE CHARGES
The bank is authorized to deduct service charges levied through its half year
schedule.
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Basic banking account
It is opened for an individuals(single, joint).
Profit
No profit is paid on this type of basic banking account.
In case of basic banking account two deposits transaction and two checking
withdrawals are allowed free of charge in a month.
PLS saving account
This account is opened for
individuals(single, joint)
charitable institutions
provident fund
other funds benevolent nature of local bodies
companies
associations educational institutions
firms
PLS term deposit/ premium amadni accounts are opened by all those who
have this account with NBP.
Service charges
The bank is authorized to deduct service charges levied through its half year
schedule.
There is no restriction on withdrawal of amount and number of cheaques.
Statement of accounts
The statement of account will be dispatched by the bank individually as
advised by the account holder.
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Profit and loss
Profit and loss will be distributed on half yearly basis.
Premium savers account
This is opened for an individual‟s (single, joint).
In case where prescribed minimum balance in premium savers account is not
maintained no profit for the month will be paid to the account holder.
Rate of profit
In this account, a higher rate of profit as per bank discretion will be paid to the
depositors maintaining deposit below the mark of Rs 300,000/- as compared
to maintaining higher deposits in their premium savers account.
Allowed with drawls
Maximum two withdrawals are allowed free of charge.
NIDA (national income daily account)
It is opened for
individuals(single, joint)
charitable institutions,
Provident and other funds of benevolent nature.
Profit
Profit calculated on daily basis but paid half yearly.
Premium amadni accounts
This account can be opened by all persons allowed to open current, PLS
saving and NIDA.
Amount is deposited for the period of five years and is accepted by the bank
with minimum sums as prescribed by the bank from time to time.
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Customers are eligible for the participation of profit and loss on the condition
that they will not be withdrawn before maturity.
Renewal
It will be renewed after for the desired period of time from the date following
the maturity date.
Profit
Profit is calculated and paid on monthly basis and rate changes every year.
PLS term/deposit
It can be opened by all persons allowed to open current, PLS saving and
NIDA.
It is accepted by the bank with minimum sums as prescribed by the bank from
time to time.
PLS term deposits will be accepted for a period of one month of five years.
Profit
Profit on PLS term deposit receipt determined by the bank at the end of each
half year on the basis of net working result and will be paid only if it is not
withdrawn before maturity.
Benefit
Holders of term deposits will be eligible for running finance facility against
pledge of their receipts/certificates.
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DEPOSITS DEPARTMENT
Attracting deposits from the customers is the basic
function of all commercial banks. They do not keep these
deposits in their safe custody but instead they invest
these resources in profitable ways and earn revenues on
it from which they meet cost of these resources and
excess is their profit. . But they accept deposits as debts.
When a bank receives a deposit from a customer
becomes the creditor and the bank a debtor. When the
bank receives the amount of deposit as a debtor, it
becomes the owner of it. It may, therefore, use it as it
deems appropriate. But there is an implicit agreement
that the amount owned would be paid back by the bank to
depositor on demand or often a specified time.
Deposits are the lifeblood of a bank
Deposits are the lifeblood of a bank and their
classification is based on the duration and purpose for
which the deposits are to be kept at the bank before the
depositors can withdraw them.
Local and foreign currency dealing
At present NBP accepts deposits in both local & foreign
currencies and provides a variety of accounts where
these sums are put in at the desire of the customers.
Bank always keeps excess of deposits than advances to
meet the unexpected withdrawal requirements of account
holders.
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Two ways are used to Deposits from customers
1. Account holder fills a cash voucher and presents
to the bank with cash. Bank credit his account
immediately in case of cash.
2. If the account holder is presenting a cheque to
deposit, then after confirmation and clearing bank
credits the account of that client.
Dormant account
o This is also known as dead account.
It is an account that is not in use (no transaction
has been made) for a long time.
Account will be dormant account after six months
if the account is PLS saving account.
1 year is the time spam to declare an account as
dormant account if no transaction is done in the
mentioned time period.
When an account is declared as a dormant
account, NBP sends a notice to the account
holder. If he wants to re operate the account,
account holder gives an application to related
officer. He also shows all necessary documents to
the officer. After verification from the data base of
NBP, we reactivate the account of the client.
Bank does not take any charges for activating the
dormant account.
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Stop Payment
I also learned the process of Stop Payment. Account
holder sends a request to stop the payments from his/her
account. It is needed when he/she loses his/her cheque
book, any person has theft cheque from his/her cheque
book. Banks first of all see the amount in the account of
the applicant. If there is no cash, then there is no need to
make stop payment process. Bank just saves the cheque
numbers that have been lost. If there is an amount in the
account of the applicant, then bank verifies the signature
of applicant, notes the time and the date of stop payment.
It is required because bank want to get surety that no lost
cheque had been presented before the application. Bank
is not liable for that cheque and the amount withdrawal.
After all checking and verification, bank stops the
payments from that account. Payments are stopped until
account holder sends an application for reactivate
payments from his/her account. Stop payments remain
valid up to six months.
Diseased Account
Another account that I learned is Diseased Account. It
is an account where account holder is died. When an
account is declared as a diseased account, NBP sends a
notice to next of kin. A person who is mentioned to run
the account after the absence of the account holder is
called next of kin or nominee. Nominee gives an
application to related officer.
He also shows all necessary documents to the officer
including death certificate, nominee CNIC account holder
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CNIC. Documents are sent to computer section. After
verification from the data base of NBP, we give amount to
nominee, if the amount is less than 10,000. In case of
greater amount in account, NBP sends the case in civil
court. The court distributes amount as in law. NBP get a
succession certificate and then gives the amount to the
nominee.
BILLS AND REMITTANCES DEPARTMENT
Issuance of Mail Transfer (MT)
Issuance of Telegraphic Transfer(TT)
Issuance of Demand Draft (DD)
Issuance of Term Deposit Receipt (TDR)
Issuance of Payment Orders (PO)
DEMAND DRAFTS
NBP offers safe, speedy and reliable way to transfer money through 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. Amount is credited by bank in the
account only when the Demand Draft is crossed. The bank charges for Demand Draft
are given in the NBP Tariff circulated bi-annually.
A DD can be junior or senior. A junior DD means
that its worth is 1000 or less in rupees. A DD will be
senior having worth of greater than Rs. 1000.
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Specification regarding DD
Old methodology
A DD is having two signatures of the party that is
claiming the amount.
Cash required amount should be mentioned on
three places in a single DD.
Latest methodology
A new method of checking a DD is via email.
The bank that is presenter of DD, send an email to
NBP contain the DD number, amount worth.
NBP checks DD with given information .If
information matches, DD is accepted for the
payment.
Bank has an electronic entry system as well.
Through computer data base system all data is
sent directly to Karachi head office.
Note:
DD can be cancelled by giving the application to
bank.
TELEGRAPHIC TRANSFER
TT means telegram/telephonic transfer. When a client or
any party asks to transfer the amount from one city to
another place within one day, then TT or Online transfer
technology is used.(telephone etc.)
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CONDITONS
It is necessary that where we are going to transfer
the amount there should be an account of the
party.
It is not necessary that party should be an account
holder of the bank from where the amount is being
transferred.
Any person can transfer the amount from NBP
without having any account in the branch from
where the amount is being transferred.
MAIL TRANSFERS
MT is another way to send the money to one city to another
city or in foreign country. But it will only work in NBP to
NBP. Its process is just like DD but in MT; bank itself
responsible for delivery of MT.
Move your money safely and quickly using NBP Mail Transfer
service. NBP also offer the most competitive rates in the market.
REQUIREMENT
One of the requirements for Mail Transfer is that the customer should be an
Account Holder.
WAPDA is only one company in Pakistan which is exempted from any bank charges
on Mail Transfer of money. Otherwise, Bank charges a certain amount on for effecting
remittance through Mail Transfer.
BANK CHARGES
Bank Charges are announced through a circular bi-annually.
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DOCUMENT DETAIL
In Mail Transfer two documents sent to the branch where MT will
be sent.
One document is called fanfold (f-15).
Other is an instrument printed and named MT instrument.
Difference between MT and TT
Both are using similar methodology but the basic difference is that
TT is use when there is need to transfer the amount within one day.
Means in MT transferring of amount takes more time as compared
to TT.
Local Special Clearing (LSC)
Any party give a cheque of any bank except NBP then account
holder presents this cheque in NBP. The bank works for the client
as an agent of the client. NBP present the cheque to other branch
and to relevant branch.
I have seen a case that a client gave a cheque to bank for
presenting to MCB as the cheque was drawn by MCB larkana
branch.
The account holder had an account in NBP okara branch. Okara
branch sent the cheque to the main branch NBP Lahore. NBP
works as local branch to all banks in special clearing. Okara branch
NBP also attached a document F-275 with cheque. This document
represents a request that please sir give credit against the following
cheque. NBP sent the cheque to MCB larkana branch. A reply
came to NBP main branch that we can not credit this cheque
because of insufficient balance in the account of drawer. A cheque
was also returned to NBP main branch Lahore. NBP main branch
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sent back the cheque to Okara branch with the notice of error. If
there in MCB the cash were sufficient in drawer, then MCB bank
credits that account and informs NBP that they had done the work.
Demand Deposit Purchase
My learning part in bills section was DDP (Demand Deposit
Purchase). DDP is used by the companies for giving dividend to
the shareholders. Companies didn‟t give dividend in cash to the
shareholders, as it is not a big amount to pay by them. Companies
purchase a specific amount for dividend warrants, is called Demand
Draft Purchase.
DD limit
IT means that companies ask the bank to give them a limit to issue
divided warrants. After this process, Companies issue divided
warrants to shareholders. They (shareholders) present the
instrument in the bank where they have the account. Bank sends
the warrant to a bank where company has the account. The bank of
Company credits the amount to shareholder‟s bank after clearance.
After this process, Bank of client credits the client‟s account to a
particular amount of dividend. So by DDP shareholders get dividend
from companies.
PAY ORDER
For transferring money within the City, NBP provides another product “Pay Order”
which is a secure and easy way to move money. And, as usual, NBP‟s charges for
this service are extremely competitive.
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RETAIL BANKING PRODUCTS
A- NBP Saibaan:
HOUSING FINANCE
In line with vision of President NBP, the Commercial & Retail Banking Group at NBP
has recently launched a housing finance scheme under the brand name of
“NBP – SAIBAN”
This scheme covers all sections of the society with monthly income starting from as
low as Rs.5000/- per month *(Conditions apply)
This retail/consumer financing product is branded as „NBP Saibaan‟ (Housing for all),
the scheme offers a maximum loan of Rs.10 million in accordance with the debt
burden criterion.
Loans are available
Home Construction
Home Purchase
And Home improvement. For Home improvement Loans the maximum
amount is Rs.2.00 Million.
Home Construction and Home Purchase loans can be repaid over a period of 20
years, whereas the repayment period for Home Improvement loan is 15 years.
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WHAT IS NBP SAIBAAN?
NBP Saibaan is the most affordable House Financing Scheme.
You can avail now and repay over a 3 to 20 years period.
Home purchase loans up to 10 million
Home reconstruction loans up to 10 million
Home improvement loans up to 2.0 million 3 to 15 years)
People prefer NBP saibaan
Customers prefer NBP Saibaan because of following reasons:
Affordable
Easy installment
No surprises
Flexible
Mark-up choices
Grace period option
Convenient
Structured and programmed
Minimum approval and Disbursement timing
REQUIRED DOCUMENTS
Applications Form along with
1. Two attested passport size Photographs
2. Two attested copies of your National Identity Card
3. Cheque for the processing charges
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PROCESSING FEE
1. For government employees including NBP employees irrespective of the
finance amount Rs.500/
2. For Others
Financing below Rs.1 million: Rs.1000/-
Financing between Rs. 1 to 4 million: Rs.3000/-
Financing above Rs. 4 million: Rs.6000/-
OTHER CHARGES
Income Estimation, Legal and valuation Fee will be charged as per schedule.
PREPAYMENT (COMPLETE/PARTIAL) CHARGES
2% of the amount being prepaid if pre-payment occurs during the first (5) years
of loan period.
No penalty will be charged after five (5) years.
Rates/Charges are subject to change as per the market factors/SBP
regulations, etc.
Who is eligible for this service
1. You are a Resident Pakistani national
2. You are aged between 21 and 62 years at the time of application/disbursement
of loan
3. You are a salaried person, self-employed professional or business person.
4. You have a Net Take Home income not less than Rs.5000/- per month (Govt.
and related organization employees) and Rs.10,000/- per month (for other
salaried class) Rs.15,000/- per month (for business persons and self employed)
5. Your property is located in NBP approved localities
6. Your duration of service is: Two years for salaried and three years for Self-
Employed/Business Persons.
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Types of loans
1. Home Purchase Loan
Financial assistance can be acquired under the NBP Mortgage Financing for
the purchase of ready residential property (House or Apartment).
Limits
Max. Loan amount: Rs. 35 Million
Tenure 3 to 20 years
Debt to equity 85:15
2. Home Construction Loan
Financial assistance can be acquired under the NBP Mortgage Financing by
mortgaging self owned residential land, which may be open or partially
constructed upon, for construction purposes leading to self-occupancy
Limit
Max. Loan amount: Rs.35 Million
Tenure 3 to 20 years
Debt to equity 85:15
3. Home Improvement Loan
Financial assistance being acquired under the NBP Mortgage Financing by
mortgaging self owned & self occupied ready residential property - House or
Apartment, for renovation purposes.
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Limit
Max. Loan amount: Rs. 15 million
Tenure : 3 to 15 years
Debt to equity 70:30
Balance Transfer Facility
Provide facility to those customers who have already availed housing finance
from some other banks and they intend to switch their loans to NBP.
Limit
Max. Loan amount: Rs. 15 million
Tenure 3 to 15 years
Debt to equity 70:30
RATE
VARIABLE RATE (WITH INSURANCE) 12.50%
VARIABLE RATE (WITHOUT INSURANCE) 14.50%
ELIGIBILITY
All applicants must be Pakistani resident nationals.
CNIC holder.
Having clean CIB/Data Check report and maintaining salary.
Current A/c (if not, then A/c to be opened at NBP branch before finance
disbursement).
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WHO CAN AQUIRE THIS FACILITY
Salaried Class(type A)
Further divided into Two Categories.
First Category A1
Second Category A2
First Category A1
All permanent and confirmed employees of:
Federal
Provincial Govt
Semi-Govt
Autonomous
Semi-autonomous
Local and other bodies
Employee salaries are disbursed through NBP branches and whose
employers are willing to give undertaking on NBP‟s prescribed format. These
will also include permanent employees of NBP.
Second Category A2
All other salaried class employees including:
Permanent Employees of Multinational Companies, scheduled
banks and reputed companies that have been approved by NBP
for Saibaan.
Permanent employees of organizations other than the approved
list.
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Contractual employees of the above categories including NBP
employees.
Employees defined in category “A1” but fail to qualify because
their employer is not willing to give the required undertaking or
whose salary is or will not be disbursed through NBP branches
or is requesting for mode of repayment other than deduction
from salary
Type B
This type includes:
Business Persons
Self–Employed Professional
Co-Applicants
1. Business Persons
Minimum Income:
Net Take Home >=Rs 15,000
Sole proprietor
Partner
Director of a reputed company/business
2. Self–Employed Professional
Minimum Income:
Net Take Home >=Rs 15,000
Doctor, Engineer, Designers
Architect, Chartered Accountant
Cost & Management Accountant
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3.Co-Applicants
Only spouse, parents & adult male children can be co-applicant. The co-
applicant‟s income may be clubbed. In case where co-applicant‟s income is
being clubbed, then he / she should also fall in the prescribed age bracket for
his / her category.
Processing fee
Category Fees
Government employees Rs. 500/=*
For others, amount up to Rs. 1 Million Rs. 1,000/=*
For others, amount Between Rs. 1 Million to 4 Rs. 3,000/=*
Million
For others, amount more than Rs. 4 Million Rs. 6,000/=*
Income
For Type “A1” Salaried class category (Govt. employees):
Minimum net take home income of Rs/5, 000. (Employer will ensure mode
of repayment of salary/installment transfer). For rest of the salaried class,
minimum net take home income of Rs/10,000 will be required.
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For Type B (Business Persons and Self-Employed):
Minimum net take home income required is Rs.15,000 .
Major Terms & Conditions regarding age
Monthly installments
Type A 1st Category
Monthly installment of all the loans deductible from the salary, it is credited to
account at NBP. It is not to exceed 50% of the net take home salary.
Type A 2nd Category
Monthly installment shall not exceed 50% of the net take home salary
.
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Type B
Debts repayment (under the subject loan) should not to exceed 50% of the
net Income.
Major Terms & Conditions regarding Length of Employment
Type A
Minimum 2 years with the same employer for all applicants of salaried class.
If it is less than 2 years, then a past record of collective and continuous
employment of three (3) years should be made available.
Type B
Length of occupation should be minimum three (3) year.
Major Terms & Conditions regarding Property Eligibility
Property should be an already constructed House or Apartment.
Should be having a separate title document and a leased one.
Title document must be clear and chain of documents complete.
Property can be co-owned by family members (spouse, parents,
and adult male children).
The property should be purely residential and self occupied.
Purchase of property from parents, siblings and spouse is not
allowed.
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Special Conditions Related To Home Construction Finance
The customer must be the owner of the land on which construction or/and
extension is to take place.
Required Security
For security purposes, the property for the purchase / construction/
renovation of which the financing is being provided, will be mortgaged.
Mortgage will be created jointly in case of co owners. Joint ownership with
other than spouse/ parent / adult male children not allowed.
1 % token Registered of the finance amount and balance, as Equitable
(reasonable) Mortgage will be created on the property. However, only
Equitable Mortgage will be created on the properties financed at Karachi,
Lahore, Islamabad & Rawalpindi.
All the original property documents are to be reserved by the bank and
charge to be created and registered with the Registrar of
Documents/Assurance.
The bank will also give three undated cheques in favour of NBP. Each
check will amount to one finance instalment
There should be no previous lien / claim on the property and Search
Certificate to be obtained.
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FOREIGN TRADE AND FOREIGN EXCHANGE
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.
Role of financial institutional wing
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
Access to different local commercial banks in international banking
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.
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Local SWIFT Centers
S.NO. CITY
1 FAISALABAD
2 GUJRANWALA
3 HYDERABAD
4 ISLAMABAD
5 LAHORE
6 MULTAN
7 PESHAWAR
8 QUETTA
9 RAWALPINDI
10 SIALKOT
11 MIRPUR
12 MUZAFFARABAD
13 KARACHI
14 KARACHI
15 KARACHI
16 KARACHI
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.
IMPORT DEPARTEMENT
This department is responsible to handle the import processing or functions. Any client
who is interested to purchase any legal goods from out of the boundaries of Pakistan,
that person has to come in this department and has to follow the rules and procedure
given by this department.
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Type of LC
Sight LC
Usuance LC
Procedure
LC opening require following processes:
1. LC opening
2. Amendment
3. Lodgment
4. Retirement
1: LC Opening
For LC opening these different documents are required:
Performa invoice
Annexure
I form
Insurance
Performa invoice:
It is the document containing the specifications of goods to be imported. It is
between importer and exporter dealing and required by the bank. It also have the
details of quantity and rate etc.
IB-8:
It is the only document by which we can go to court.
Annexure:
It has some other details
I form:
It is used to report import processing to SBP.
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Insurance:
100 % margin is taken from unknown person. It is required for opening the LC. It is
vary according customers to customers
CHARGES
Following charges has to be taken:
Commission
FED
P&T(SWIFT)
Margin
Commission
0.4% commission is normally charged but slaps of commission is formed having
different rate according to the worth of business.
FED
16% on commission on every proceeding. This amount is gone to GOVT head.
P&T
It is the sort of the message which is transmitted to the foreign bank.
Charges of P&T
1200 for long message
400 for short message
2.Amendment
If any change is required by the importer in LC documents then after getting some
charges amendment is done.
Commission=Rs/750
FED=16% on commission
P&T=400
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3. Lodgment
It is that date when the documents are received and the bank gives credit to the head
office.
Documents required for it
Bill of lading
Commercial invoice
4: retirement
At this stage file of LC has to be closed as all the proceedings have been taken and
there is no mistake happened in the import process and party has made the payment
to the bank.
Charges
Mark-up
Service charges
Penalties(in case of delay in the payment to the bank)
Formula of calculating mark-up
Formula =bill amount*no of days*rate/36500
Rate=1 month KIBOR+4
Note
If margin has taken during the process then all the amount of margins has to be minus
then calculate the mark-up on that balancing amount (remaining amount)
KIBOR rate is taken from NET
Note
LC documents must not more than the amount of the LC.
Service charges
0.1of the bill amount is calculated as service charges.
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PENALITY
It is impose when the time of payment is expired
Sight LC Usuance LC
Lodgment date has to be taken for 0.1% per month from expiry date
Calculation
FET is calculated Expiry date is within 89 days
Above 15 days= 0.15% This expiry date may be mention iv the LC
35-54 days=0.20% by importer
55 and above=0.25%
R-form
It is used for the purpose of remittance.
NOTE
Tax is imposed at the start of the business.
No tax is imposed for the extension of the business.
Special form
Import /export by contract:
In this case bank will not take the responsibility of payment but it provides security as
documents are not handed over to the party if the permission is not received.
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EXPORTS DEPARTMENT
In exports department there are five major heads which are mentioned bellow:
Packing finance
Export refunds
Foreign currency loans under FE25
Export negotiation
Export collection
Packing finance
The party has to show the documents or contract for the loan availment, it is known as
pre- shipment finance (before shipment)
Limit sanction
Limit is sanctioned up to 100 million if taken 50 million then it can be adjusted.
It is done by judgment of party repayment capacity
Registered mortgage deed is required
Payment is released
When export is made than the exporter informed to exporter bank and submits the
shipping document to it. The exporter bank transmits these shipping documents to
importer bank and then payment is released in favor of exporter.
Note
Imports are not favored and exports are encouraged
At export contract time is estimated and written.
Mark-up rate
It varies according party to party.
And KIBOUR rate is taken monthly basis (one day before the date mentioned
like if the date is 1 of JAN then rate should be taken 31 of DEC)
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Export refinance
Finance is given to the bank by SBP and it is necessary for the party to take the
packing finance. Otherwise it could not be avail the refinance opportunity.
Procedure
SBP make limit and than sanction it.
Maximum days are 180 days to give the shipping documents to NBP.
If the exporters not do export on time penalty is imposed which is very high and
exceeds from the mark – up.
Example
Principle amount is 96.000 million so here refinancing is possible just for amount of
4.000 million because max limit is 100.00 0million
All particulars are mentioned like name of goods, quantity , mark-up and finally amount
in Pak rupee also.
Sequencing of documents
Request by bank
Request by exporter
Sales contract
Undertaking
Refinance claim form as per old schedule
Promissory note
Covering letter to SBP(here internal book entry is made )
Sanction advice documents(here party name and sanctioned amount is
mentioned then
Internal book entry is made which is mentioned bellow)
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Then all the documents are submitted
LC copy
Shipping documents
E- form
PENALITY
Penalty is imposed to NBP if it not make payment to SBP on time
Penalty is imposed to party if it will not pay back the amount of loan to bank
E-Form
E-form is used to report the details of exports made by the bank to the SBP.
When we recovered the amount against export
Note
Imports are not favored and exports are encouraged
At export contract time is estimated and written.
different facilities are given to exporters to boast the exports
If party not pay then wait till 3 years after that security is sale out by court.
Documents required for loan sanction
Loan application form
BBFS
C/P credit information report
Pre sanctioning formalities
Search report
Search report
It is formed through Lawyers and contains details of the loan history.
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Form A
It is similar to the loan application form, it is attested by SECP.
FORM 29
It has details of directors and also attested by SECP.
Financials
Account verification by chartered accountant.
Balance sheet
Profit & loss statement
Cash flow statement
Certificate of incorporation
MOA
AOA
NOTE
If the party not give the export business its account is transferred to cash finance.
Charge (lean marking)
SECP(security exchange commission of Pakistan)
Property tax department
Revenue department
Evaluation report
It is obtain by prescribed private companies.
Foreign currency loans under FE25
Circular issued by which foreign currency accounts are seized then scheme is
launched to used this foreign currency for exporter financing.
Limit is sanction in dollars.
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LIBOR rate
Formula
Rate=libor rate +spread rate
The amount which comes form libor is transferred to treasury (Head office NBP)
And spread rate amount is gone to branch of NBP.
Officer note:
Here we have to estimate that either he is eligible to avail the loan or not, if cushion is
available the more amount of loan is sanctioned.
After sanctioning the loan entry is made :
H.O of NBP……………Dr
Party a/c…………Cr
If the amount is received from the party in foreign exchange then the amount is
multiplied by the exchange rate and converted in Pak rupees
Entry:
Party a/c…………….Dr
H.O of NBP………………….Cr
Form M(Miscellaneous)
By this form we report to state bank of Pakistan that we have received x amount of
foreign currency
Mark-Up
It is calculated when finally all the amount of loan is adjusted
Loan amount is adjusted from proceeds.
Method
Days are calculated from the date of sanctioning of the loan to the current date of the
first proceeding
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Formula
Outstanding loan amount in dollars* days=product
At the end all the products are summed.
Similarly libor and mark-up is also calculated and summed separately. The purpose of
separately calculation of this is that we have to receive this amount of libor and mark-
up from party. And loan amount is adjusted through proceedings.
ACCOUNT DEPARTMENT
Activities being performed in the accounts department are as follows:
Payment of salary to all regular as well as contractual employees.
Payment of all expenditures of bank/ branch Dr. to charge account.
Payment of pension to X employees of bank.
Payment of benevolent fund to govt. employees as well as X
employees of bank.
Preparation of returns i.e. P&L statement, liability statement etc.
Preparation and balancing of clean cash book.
Pension
Retirement at 60 year age.
FORMULAE
Formulae to calculate pension is;
=1.10% * total basic pay*Total length of service
Example
1.10%*35000*40years=1540.
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Gratuity
FORMULAE
Formulae to calculate gratuity is=Pension/2
Example
15400/2 = 7700
15400 amount will be paid as pension and remaining half as gratuity for 15
years.
Amount*12*15=138600
Benevolent fund
The amount of benevolent fund is calculated as 1620 for employees having
above Rs 5000/- basic pay and below it is calculated accordingly. It is paid till
10 years after retirement and if deceased employee than for lifetime to his
widow.
FOR JUNIOR STAFF
For junior staffs who are alive, period of benevolent fund is 5 years.
And if he is deceased then his wife will receive for 10 years.
IN CASE OF OPTIONAL RETIREMENT
In case of optional retirement benevolent fund duration is increased to 15
years (if service is 25 years).
Salary
Basic pay of the employer
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House rent allowance 50% of Basic
Conveyance allowance
Is given to the employees Equivalent to
SVP 400Ltr
VP 290Ltr
AVP 240Ltr
GRADE 1 OFFICER 140Ltr
GRADE 2 OFFICER 130Ltr
GRADE 3 OFFICER 120Ltr
CLERICAL NON- 75Ltr
CLERICAL STAFF
Utility allowance 12% of Basic
Medical allowance 15% of Basic
Education allowance Rs. 2500
Dearness allowance 15% of Basic (For executives)
17% of Basic (clerical staff)
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BONUSES
Three bonuses are given to employees
a. One on Eid-ul-fitr
b. One on Eid-ul-azha
c. One final bonus
PROFIT BONUSES
In case of profit following bonus is given to the employees
200% of basic or 21500
WELFARE FUND
Welfare fund amount ranges from 20,000--- 25,000.
MEDICAL GRANT
Medical grant is given in such a way to employees.
Self 60,000 (officers)
Child 60,000 (clerical)
After two years increase in salary package must takes place
I-e increase in petrol allowance etc.
System of maintaining an account:
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SYSTEM OF ACCOUNTS
Generally there are two types of system for maintaining an account
Journal System
Voucher System
Generally journal system is adopted by some commercial industrial
institutions. In journal system entries are reported on Journal Book and then
posted to main ledger.
In banking voucher system is used for every transaction voucher has to be
prepared.
There are two types of vouchers:
Debit vouchers
Debit voucher is used for recording all expenses and payments. In NBP it
is identified by red colour anh have number F-15.
Credit vouchers
Credit voucher is used for credit and income coming to the bank. They are green
colour and have number F-51.
CREDIT ADMINISTRATION DEPARTMENT FUNCTIONS
This department offers the following products:
House purchase/renovation/construction loans.
Demand Finance
Running Finance
Demand Loan
Small Finance
Small Loan
L.M.M.(locally Manufactured Machinery) loan
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Advance against Gold Ornament
Mortgage Loan
Cash Finance
Student Loan
Marketing of Financial products of the bank.
Liaising with the businessmen and industry.
Preparation of loan proposals
Checking the suitability of the potential Borrowers.
Documentation of the pledged assets and Creation of charge
Disbursement of loans.
Application of mark-up
Recovery of loans.
Visit to the borrowers and checking of hypothecated stocks.
Monitoring of appropriate use of loans.
Preparation of the list of defaulted borrowers.
Sending of notices to the defaulters.
Filing of recovery suits in the courts.
DOCUMENTS REQUIRED BY CREDIT PROCEESING DEPARTEMENT
Standard documents required from client before sanction/disbursement
of loan
Sr.N Document name
1 Brief profile of the business
2 Production capacity of the business
3 Loan application form(LAF) on letter head
4 Borrower basic fact sheet(BBFS) each page to be signed
5 Audit financial a/c for last 3 years
6 Audit quarterly financial accounts if any
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7 Projected financial statements for the next 3 years
8 Status of the existing loan accounts with other banks-separately on letterhead
9 Memorandum & Article of association
10 Board Resolution for financing
11 Form-29
12 Form –A
13 Biographical note of directors/partners/owners
14 Details of net worth of directors-Separately on letterhead
15 Detail of personal guarantees provided to banks- Separately on letterhead
16 NIC copies of all directors/partners/owners
17 Details of associated concerns and transactions with them-separately on letterhead
18 Certificate of incorporation
19 Certificate of commencement of Business
20 Detail of godowns with capacity-separately on letterhead
21 Title deed of collateral property
22 Approved site plan of property
23 NEC
24 Clearance certificate
25 Mutation
26 Fard
27 PT-1
28 Aks shajra
29 Undertaking that bank fund would be utilized for the purpose stated
30 Pledge /hypo reports for the last three months
31 Stock statement
32 Feasibility report
33 3-machinery
34 3-civil work quotation
35 National tax number
36 Partnership deed
37 Form C (registration of partnership concern)
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Details of terms:
F-29:
It is containing the details of the
Directors
Auditors
Company sectary
F-A:
It contains details of share holders along with the details of the number of
shares.
Biographical note:
It is containing the net worth of the business (assets-liabilities)
Associated concerns:
It contains the detail if the company having shares of different companies.
o Subsidiaries:
The company which has more than 50%share.
o Certificate of incorporation:
it is required just in case of private company.
o Title of collateral property:
Registry
PT-1=payment of tax certificate
Transfer letter=in case of society
NEC( non-encumbrance certificate):
It means that the property is free from all kind of charges.
Clearance certificate:
It is the document that shows that this property is clear from tax and given by excise
department.
Mutation:
It contains details of area of property.
Kasra>khatoni>khewat.
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Fard:
missing
Aks shjra:
This document contains the details of surroundings of the site or property.
CREDIT ADMINISTRATION DEPARTEMENT ACTIVITIES
Inland letter of credit
Inland Letter of Credit is issued to meet out the credit requirement for
domestic trade. This is a form of non fund based credit extended by the
banks. This is given to the seller of the goods on behalf of the buyer by the
bank where the buyer deal.
Types of LC
There are two types of letter of credit regarding payment period.
Sight LC
Usuance LC
Sight LC
Exporter get the money immediately after presenting the documents
Usuance LC
In Usance LC, time can be between 30 and 180 days after the bill of lading
date. This is a form of delayed payment. Exporter will get the payment on the
maturity of instrument.
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Required documents
Following documents are necessary to open letter of credit and must be
presented to the bank.
Request letter
Importer will make a request to the bank to open a letter of credit on his behalf
in favor of exporter.
Performa invoice
A Commercial Invoice is a bill prepared by the seller for submission to the
buyer which details all items bought, together with amounts owed major terms
and conditions of the contract.
IB 27
It is the legal document and name as Islamic banking form 27.
Annexure “A”
It contains some additional details of the procedure.
Bill of lading
A Bill of Lading is a receipt that a common carrier gives to the seller for the
goods that the carrier will transport. It frequently serves as a document of
title, giving the person who possesses it ownership of the goods.
Draft:
A draft or bill of exchange is a negotiable instrument that is payable
to the seller and drawn on the issuing bank and/or the buyer.
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Documents are prepared by seller
This document is prepared by the seller, but is analogous to a
check written from the buyer to the seller. Drafts can be either
"sight drafts" where the bank pays the full amount of the draft upon
the seller's presentation, or "time drafts" where the bank's obligation
at the time of presentation is merely to accept the draft for payment
at a later date (e.g. 90 days after the seller's presentation). Time
drafts provide the buyer with short-term financing. Often, banks will
purchase their accepted time drafts at a discounted rate.
Guarantee
Definition under Contract Act under sec 126
“It is a contract to perform a promise or discharge liability of a third person
in case of his default.”
Parties involved
There are three parties involved in a contract of guarantee
Principal debtor
Creditor/beneficiary
When two persons have signed a contract, the beneficiary who performs the
contract will involve bank as guarantor to secure his interests.
Guarantor (NBP itself)
Once a tender is floated then terms and conditions mentioned are agreed
upon by the parties then these will never change and will remain same.
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TYPES OF EXPOSURES
There are two types of exposures
Fund based exposure
In fund based exposures, bank‟s funds are directly involved
Non fund based exposures
In non fund bases exposures, bank‟s funds are not involved but
bank act as a third party or as an intermediary.
Documents
Documents required by the bank in a contract of guarantee are
Letter of request
Stamp paper of Rs 100 with text drafted on it and this text will variy with
respect to transaction.
Date of issuance ,expiry, amount in words and figures ,name of principal
debtor, creditor and guarantor are mentioned in the LC documents.
IB-30 (counter guarantee form) signed by the beneficiary.
Charges
Service charhes
Bank takes service charges 1.6% commission per annam and 16% FED.
Bank will have charge on fixed and current assets of the debtor.
FCO (finance against operations)
Finance allowed to customer against commodities (wheat, cotton, and gram
etc)
Also called SEASONAL FINANCING granted to accommodate the seasonal
needs of customers.
How it is financed
Consortium of different banks (ABL,UBL,MCB,NBP,Bank Alhabib, Habib
Metropolitan, soneri bank limited) is made that will provide finance.
First bid is taken, price is decided then share is allocated among these banks.
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Procedure
There are two main departments/institutes.
Govt of Punjab food
PASSCO (Pakistan agriculture storage and services corporation
limited)
Passco has established their centers within 20 km. Farmer goes to PASSCO
they Check wheat and make purchase bill and handover to the customer.
Farmer take it to the bank and branch manager makes payment on the spot
and debit the passco account and give credit to the NBP general account.
Markup rate
Markup rate = 3-MK rate as of June 30, 2009 + 3.25% p.a for full
Amount
3-MK is defined as 3 month KIBOR (Karachi interbank offered rate)
Markup rate is calculated on quarterly basis and changes on quarterly basis.
Bank will provide written notice of benchmark change before it is deemed to
become mutually applicable.
In the event of discontinuation of base rate
If the base rate ceases to exist, then lenders may in consultation with Punjab
food department decides on an alternative basis for calculation of base rate
and corresponding profit thereon.
Pledge
“Pledge means something delivered as security for the payment of
a debt, and subject to forfeiture on failure to pay or fulfill the
promise. Only commodities of the companies can be pledged. “
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Note
No building can be secured for loan application
Margin
To further secure its interest, NBP takes margin from the customer
as NBP takes 10% margin on cotton and 25% on yarn. These rates
are mentioned in sanction advice.
NBP has monopoly to advance loan against gold ornaments that
are also pledged.
NBP also allows NILL margin when a customer is exporting
something like cotton and LC for this is opened by the NBP then LC
will be pledged as security and no margin will be taken from client.
Advance value
Amount worth = 100000
Margin amount = 10 %
Advance limit = 90000(100000 – 10000)
Where, 10000 is the amount of margin.
Muqqadam
These companies act as agent that receive the cotton and yarn etc
pledged with the NBP. They inform the bank that they have
received the goods and keeps them until it receives the delivery
order and proper record of receipt of these goods is maintained.
Delivery/ Release order
A company can take her commodity back after paying amount and
after presenting delivery order
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ADMINISTARTION DEPARTMENTR
EPORT
EMPLOYEES SERVICES SAFETY, HEALTH AND WELFARE
National Bank of Pakistan is not only a commercial institution but also a welfare
institution, who always strive for the well being and welfare of the employees and in
this regard offers following benefits to its employees.
- Pension, insurance, gratuity and provident fund facility
- Free medical facility for self, family and parents.
- Scholarships for children.
- Housing facility in the shape of housing colony in the big cities.
- School fees for the children.
- Car loan, Computer loan and House loan facility at easy Installments.
- Five bonuses and awards to all employees every year.
- Market based salary structure and increase in the salary every year.
- Establishment of NBP Staff Welfare Trust.
STAFF LOAN
To motivate employees of the bank, NBP is offering different loan facilities at
subsidized rates. Following loan facilities are offered by the bank:-
Computer Loan
Motorcycle Loan
Motorcar Loan
House Building Loan
Clean Running Finance
1. Computer Loan
Eligibility
All confirmed employees can avail this loan facility.
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Limit
Rs 50,000/- (for all employees)
Rate of Interest
4% per annum
2. Motorcycle Loan
Eligibility
All confirmed employees having service of 2 years can avail this loan facility.
Limit
Rs 80,000/- (for all employees)
Rate of Interest
Without interest
Repayment
Loan is repayable in 10 years with equal monthly installments.
3. Motorcar Loan
Eligibility
All confirmed employees having service of 3 years can avail this loan facility.
Limit
Rs 350,000/- (for clerical/non-clerical staff)
Rs 422,000/- (for OG-3 to OG-1 Officers)
Rs 504,000/- (Above OG-1 )
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Rate of Interest
4 % per annum
Repayment
Loan is repayable in 10 years with equal monthly installments.
4. House Building Loan
Eligibility
All confirmed employees having service of 5 years can avail this loan facility.
Limit
Minimum Rs 600,000/- (for clerical/non-clerical staff), if any
clerical/non-clerical staff having basic pay of above Rs 10,000/- then
100 basic pays for all officers
Rate of Interest
Loan amount upto Rs 600,000/- is interest free for all officers, and for loan
amount above Rs 600,000/- rate of mark-up is 3% per annum.
Repayment
Loan is repayable in 20 years with equal monthly installments.
INDUSTRIAL RELATIONSHIP
The bank has developed very good industrial relationships with all the major
industries, which are our borrowers and customers. Some major of these industries
include:
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TEXTILE SECTOR
Adil Textile (Pvt) Ltd.
Sitara Textile Group
Adamjee Textile industries
Al-Karam Textile Industries
National Textile (Pvt) Ltd.
Haris & Hamad Textile Industries (Pvt) Ltd.
FERTILIZERS SECTOR
Pak Arab Fertilizers
Pak Saudi Fertilizers
Pak China Fertilizers
Fauji Fertilizers.
In addition to these all the major Public Sector and Private sector organizations are the
customers of National Bank of Pakistan. NBP is providing them long term loan
facilities to meet their financial needs.
SYSTEM OF COMMUNICATIONS
NBP is one of the top most leading banks of Pakistan Basically it is a government
owned bank and has a sophisticated system of communications within the bank and
outside the bank, which is explained below.
OUTSIDE MEANS OF COMMUNICATION
Fax and Telephones.
Latest Satellite System
Swift
Internet facilities
Web site
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INTERNAL COMMUNICATIONS
All the correspondence is held through proper channel and in a systematic way in the
following manner:
At branch level all the officers report to Operations Manager
1. Operations Manager reports to Branch Manager.
2. Branch Manager can report directly to the following Senior officer at
Regional Head Quarter (RHQ)
a. Regional Business Chief (RBC)
b. Regional Operations Chief (ROC)
c. Regional Risk Management Chief (RRMC)
d. Regional Compliance Chief (RCC)
3 All these Chiefs report directly to the Group of Operations (GOO) at Head Office
Karachi8.
4 All these Groups of Operations directly report to the President of the Bank.
5 President is answerable to State Bank of Pakistan (SBP), Board of Directors
(BOD), Stakeholders and other key government Authorities.
ACHEIVEMENTS
CORPORATE AND INVESTMENT BANKING
The Corporate and Investment banking group provides tailored financial
services to corporate and institutional clients. Our strength in this area is
further supplemented by balance sheet size and consequently the largest per
party limit in the country. In a highly competitive and challenging market
environment, NBP acted as lead advisor and arranger in landmark
syndications, acquisitions, advisory and project financing transactions to
substantially grow the loan book.
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NEW PRODUCT DEVELOPMENT
With the focus on upgrading existing and developing new distribution
channels, creating new and more competitive products, year 2004 was an
excellent year for retail banking. During the year, the bank significantly grew
its customer footings, continued to expand its delivery channels and further
improve its process efficiencies, thus re-enforcing its leadership position in the
market and enhancing its share of income contribution to the bank. This
business segment posted excellent results with strong revenue growth.
NBP is also the market leader in agriculture and commodity financing with
approximately 200,000 customers. There are new products under launch, for
example "NBP Kissan Taqat", a programmed based lending product for dairy
farmers and debit cards branded as "NBP cash card". E-banking products are
set to enhance NBP fee based income considerably. The main objectives are
to remain the market leader with effective MIS ensuring proper tracking and
monitoring, to increase fee based revenue, and to provide best customer
satisfaction as well as loyalty through top class branded products.
RISK MANAGEMENT
Progress was made in improving the overall risk architecture. A
comprehensive risk management manual was put in place in line with Central
Bank guidelines. The bank has initiated a well defined risk rating system. The
bank is well aware of the challenges posed by risk management guidelines
and Basel II accord and is continuously improving the posture to cope up with
the challenges.
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HUMAN RESOURCE DEVELOPMENT
The bank firmly believes that a highly motivated and well trained workforce is
the key factor to success. Heavy emphasis is being placed on
institutionalizing a merit culture through performance based rewards and
career development. The bank remains committed to improve the quality and
banking skills of its human resource, to ensure its position as the market
leader. The regular hiring of 70-80 MBA‟s annually since 2002 will further
improve the quality of the workforce.
INFORMATION TECHNOLOGY
NBP is cognizant of the importance of information technology and is
constantly investing to expand and upgrade its technological platform. The IT
strategy is fully aligned to business requirements to offer IT enabled products
and services for the highest level of customer satisfaction. The bank is about
to install 70 new top of the line ATMs, set up a national call centre, introduce
on-line banking facilities and automate government business. NBP is also on
track for acquisition of a new core banking application to improve operational
efficiency and enhance customer service.
IMPROVEMENT IN PHYSICAL INFRASTRUCTURE
NBP branches are being upgraded with standardized premises and signage
under the new brand. To cater to the needs for Islamic banking, the opening
of the first Islamic banking branch is in the final stages. This initiative is
expected to attract new customers besides increasing revenue. The presence
of NBP in major financial centers of the world allows us to play a key role in
promoting the country‟s trade. NBP further expanded its international
presence in the year by opening branches in Jalalabad and Chittagong to
increase the international presence to 17 countries.
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In recognition of NBP‟s excellent performance, the bank was awarded the
prestigious "Bank of the year” in Pakistan by "The Banker" London in
2004. "Euromoney" magazine, a leading journal in its latest issue of
March 2005 has listed NBP amongst the top 100 banks in Asia, being the
only Pakistani bank.
CREDIT RATING OF THE BANK
JCR- VIS Credit Rating Company Limited re-affirmed the bank‟s entity rating
AAA/ A-1+. The medium to long term standalone rating of the bank has been
upgraded from AA- to AA with a stable outlook. Rating has been upgraded in
view of the bank‟s improving risk profile, with a reduced level of asset
impairment and diversification of risk assets.
CORPORATE AND FINANCIAL REPORTING FRAMEWORK (CODE OF
CORPORATE GOVERNANCE)
The board is fully aware of its responsibilities established by the Code of
Corporate Governance issued by the Securities & Exchange Commission of
Pakistan (SECP). The Directors are pleased to give the following
declarations/statements to comply with the requirements of the Code.
(a) The financial statements (Balance Sheet, Profit & Loss Account, Cash
Flow Statement, Statement of Changes in Equity and notes forming part
thereof), prepared by the management of the bank give the information
required by the Companies Ordinance, 1984 in the manner so required and
respectively give a true and fair view of the state of the bank‟s affairs as at
December 31, 2004 and of the result of its operations, changes in equity and
its cash flows for the year then ended.
(b) Proper books of accounts have been maintained.
(c) Appropriate accounting policies have been consistently applied in the
preparation of the financial statements and accounting estimates are based
on the reasonable and prudent judgment.
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(d) Approved Accounting Standards have been followed in preparation of the
financial statements and there is no departure from the said standards.
(e) The system of internal control is sound in design and has been effectively
implemented and monitored throughout the year. The Board is responsible for
establishing and maintaining the system of internal control in the bank and for
its ongoing monitoring. However, such a system is designed to manage rather
than eliminate the risk of failure to achieve objectives, and provide reasonable
but not absolute assurance against material misstatements or loss.
SWOT ANALYSIS
Strength
Custodian of government treasury
Working as agent of SBP
Job security for employees
Main custodian of public money
Government business owner
Lender to the government agencies
Blind limitation of public over NBP as government bank(PUCCA BANK)
Negotiator with the international institution on behalf of government
World wide network of branches
Lender to the public based projects
Weakness
Not fast service to the clients
Lethargic and rude attitude of employees towards customers.
Less marketing expedition
No innovation and new products
No on line and e-Banking facilities
Worst conditions of branches.
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Opportunities
Can launch a marketing strategy to capture the business from its peer banks.
Can be number one in Pakistan
Can offer new and innovative products to complete rest of the banks.
With proper planning can hunt more and more business from the public and
private sector as people still trust over it.
Threats
Not fully computerized and on line banking facilities
Competition with foreign banks
Not following modern banking system
Growth of mushroom banks.
Awareness of the public with the newly established banks.
Less participation in capital market activities
Use of traditional system of banking like ledgers and book keeping etc.
Political influence.
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CONCLUSION
From this SWOT Analysis we can conclude that beside the fact that National Bank of
Pakistan is a government based institution but in these days of competition it is not
easy to survive without adopting modern techniques and latest tools of sophisticated
technology. Although National Bank of Pakistan is a Government Institution, but in the
modern era it has achieved a destination where other competitive modern banks can
simply reach. From year 2001, The Bank has made a Hat-Trick in winning
International Awards. That is why people have more trust in NBP and they are
willingly depositing their money in it without any threat. The performance of NBP in
previous five years is extra-ordinary. In the stock market, the share of national Bank of
Pakistan is going higher and higher day by day which shows better worth of NBP to
other Banks. In last, we would like to say the National Bank of Pakistan as “The
Nation’s Bank”.
At the end, I would like again to say a lot of thanks to our respected Teachers and
Friends, who guided us in every stage while we were completing this Project
assignment. We pray to Gold to bless whole mankind and guide them to the best way.
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Recommendations
Recommendation for the National Bank of Pakistan (NBP)
NBP should give the proper training to those employees are not to trained
regarding computer processing
In general banking the environment sometimes get tensed by the rode behavior
of the customers and also by the employees, so there should be proper training
to improve their customers services.
In credit processing department I come to know that in pledge, the goods are
under the custodian of the an external party known as Muqqadam , by which
NBP has made contract but it is not the safe mode of custody of the pledge
goods. There is the chance of fraud. So they have to maintain their own
gowdowns.
There is no facility regarding cafeteria so NBP must maintain a small cafe for
their employees.
The services of NBP are good but there is a great need to make the entire
environment of the bank especially the main branch of NBP computerized.
Manual working must be reduced. All the previous data must be computerizes.
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CHAPTER 1
INTRODUCTION OF STUDY
1.1 Background of Studies
As part of the academic requirement for completing MBA (Banking and Finance) 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.
1.2 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.
1.3 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.
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1.4 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
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
1.5 Scheme of Study
SECTION 1
Chapter 1:
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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SECTION 2
Chapter2
This chapter concludes brief history of banking in general, evolution of banking,
banking in Pakistan..
Chapter3:
This chapter consist Nationalization of banking in Pakistan, History of NBP, mission
statement, its objectives and functions of National Bank of Pakistan.
Chapter4: In this chapter the services of NBP were discussed.
SECTION III
Chapoter5: In this chapter the in this section the departmentation of NBP is
explained, and also NBP Hayatabad township branch.
SECTION IV
Chapter6:
It tells about Strengths, Weaknesses, Opportunities and Threats of i.e. SWOT
analysis of NBP.
Chapter 7:
It consists of comprehensive performance of NBP through past several years. Ratio analysis
and those parties, which are interested in financial performance of Bank.
Chapter 8:
It covers the critical analysis of the bank. This chapter has been divided into four
parts i.e. Problems at the Branch, Functional analysis, Administrative analysis, and
Personal Management Analysis.
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SECTION V
Chapter 9:
In this chapter recommendation for improvement on all aspects of the Bank are given.
Chapter 10:
Two implementation plans are given in this chapter. “Mare Gare Car Financing
Scheme” and Need for Telephone Operator.
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CHAPTER # 2
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
2.1 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.
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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 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
2.2 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
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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
2.3 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 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.
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.
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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.
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
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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 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
2.4 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 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
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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 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.8
REFRENCES
1 Siddiqi H Israr Law and practice banking in Pakistan.
2 Gilbert J.W principles and practice.
3 Sir Paged John The law of Banking, page 51.
4 Sir Paged John The law of Banking, page 51.
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CAHAPTER # 3
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 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
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Australia bank limited
Bank of Bahawalpur limited
Premium bank limited
Pak Bank limited
Sarhad bank limited
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
3.1 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
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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.
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.
3.3 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
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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.
3.4 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 December4, 1947
by the former Bahawalpur State.
NBP was undertaking Treasury Operations and Managing Currency Chests or Sub
Chests at 57 of its offices where the turnover of the business under the head amounted
to Rs.2460 million.
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
3.4.1 MISSION STATEMENT “To
make the Bank complete and competitive with all international
Standard in performing, quality of, operations, staff, financial strength. And
products and services To develop a culture of excellence in every spare of activity of
the bank4”.
3.4.2 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
3.4.3 GOALS AND OBJICTIVES NBP
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“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.”7
3.4.4 BOARD OF DIRECTORS
Table 1
NAME DISIGNATION
Ali Raza Chairman & President
Dr Waqar Masood Director
Ifthikhar Ali Malik Director
Syed Shafqat Ali Shah Jamoti Director
M Zubair Motiwala Director
Sikandar Hayat Jamali Director
M. Khalid Malik Director
S.M. Rafique SEVP & Sectorary to BD
(Source Annual report 2003)
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3.5 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.9
NBP have a centralized type of management because all the decisions are taken by the
top management.
3.5.1 SENIOR MANAGEMENT OF NBP.
Table 2
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
Nadeem A. Dogar EVP & Group Chief, Information
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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)
3.6 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.10
.3.7 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:
3.7.1 Increase in deposits:
Competition in banking is intense and every bank whether it is Pakistani, foreign,
private or nationalized tries to increase its deposits by providing better facilities to its
customers. By increasing its deposits a bank can extend greater amount of loan and
hence achieves higher profit. NBP is also improving its facilities and services to
attract customers with higher volume of deposits. There are two main factors involved
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in increasing the deposits. These factors are improving the services and courtesy. NBP
is continuously working on these two factors to increase its deposits.
3.7.2 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 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
3.8 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:
3.8.1 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/-.
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/-
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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.
3.8.2. 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.
3.8.3. 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.
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.
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d. Supply of information
NBP provides operational and advisory service for foreign exchange
accounts/activities.
3.9 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.
ii. AAA+1 rating awarded JCR-VIS Credit Co.Ltd and affiliated of Japan Credit
Rating Agency for 2002
3.10 NBP at the forefront of Pak-Afghan trade
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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.11
REFRENCES
1 Bank Nationalization act 1974.
2 Islamic Banking.
3 www.nbp.com.pk
4 Annual report 1998.
5 www.nbp.com.pk
6 Terry and Franklin Principles of Management.
7 www.nbp.com.pk
8 Terry and Franklin Principles of Management.
9 Terry and Franklin Principles of Management.
10 Annual report 2003.
11 www.nbp.com.pk
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CHAPTER # 4
SERVICES OF NBP
SERVICES
Services are he outputs of the firm which are in intangible form.
NBP offers the following services to the people.
4.1 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.
4.2 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.
4.3 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.
4.4 TRAVELER'S CHEQUES
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.
4.5 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
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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.
4.6 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.
4.7 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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4.7.1 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.
4.8 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.
4.9 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.
4.9.1 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.
4.9.2 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%.
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From Rs 500/- million but below Rs 1000/- the rate is 1.6%.
From Rs 1000/- and above the rate is 1.75%.
4.10 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.
4.10.1 NBP is involved in the following:
Investment into the capital market
Introduction of capital market accounts (under process)
NBP‟s involvement in capital markets is expected to increase its earnings, which
would result in better returns offered to account holders
4.11 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.
4.12 RADE FINANCE OTHER BUSINESS LOANS
There are two types of trade finance.
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4.12.1 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.
4.12.1.1 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.
4.12.1.2 Agricultural Credit:
The agricultural financing strategy of NBP is aimed at three main objectives:-
Providing reliable infrastructure for agricultural customers
Help farmers utilize funds efficiently to further develop and achieve better
production
Provide farmers an integrated package of credit with supplies of essential
inputs, technical knowledge, and supervision of farming.
4.12.1.3 Agricultural Credit (Medium Term):
Production and development
Watercourse improvement
Wells
Farm power
Development loans for tea plantation
Fencing
Solar energy
Equipment for sprinklers
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4.12.1.4 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.
4.12.1.5 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.
4.12.2 CORPORATE FINANCE
4.12.2.1 Working Capital and Short Term Loans:
NBP specializes in providing Project Finance – Export Refinance to exporters – Pre-
shipment and Post-shipment financing to exporters – Running finance – Cash Finance
– Small Finance – Discounting & Bills Purchased – Export Bills Purchased / Pre-
shipment / Post Shipment Agricultural Production Loans
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4.12.2.2 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.
4.12.2.3 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 own capital strength
and by industry teams, who bring specialized knowledge to the structure of a
transaction.
4.12.3.4 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
4.13 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
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Generation of incremental trade-finance business and revenues
4.13.1 NBP offers:
The lowest rates on exports and other international banking products
Access to different local commercial banks in international banking
4.14 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.
4.15 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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REFRENCES
1. http/www.nbp.com.pk .services
2. Annual reports 2001, 2002, 2003.
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CHAPTER # 5
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
5.1 CASH DEPARTMENT
Cash department performs the following functions
5.1.1) 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.
5.1.2) Payments
It is a banker‟s primary contract to repay money received for this customer‟s account
usually by honoring his cheques.
5.1.3) 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:
“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).
5.1.4) 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
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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
5.1.5) 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
5.1.6) 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
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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.
5.1.7) 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 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:
5.2 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
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settled by the internal bank administration and there arises no inter bank debits 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.
5.2.1) 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.
5.2.2) 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.
5.3 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
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task and the risk cannot be completely eliminated but could be minimized largely with
certain techniques.
Any individual or company, who wants loan from NBP, first of all has to undergo the
filling of a prescribed form, which provides the following information to the
banker.
5.3.1) Name and address of the borrower.
a) Existing financial position of a borrower at a particular branch.
b) Accounts details of other banks (if any).
c) Security against loan.
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.
5.3.2) 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
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by their banker. Therefore, the banker must be very careful and ensure that his
depositor‟s money is advanced to safe hands where the risk of loss does not exist. The
elements of character, capacity and capital can help a banker in arriving at a
conclusion regarding the safety of advances allowed by him.
b. Character
It is the most important factor in determining the safety of advance, for there is no
substitute for character. A borrower‟s character can indicate his intention to repay the
advance since his honesty and integrity is of primary importance. If the past record of
the borrower shows that his integrity has been questionable, the banker should avoid
him, especially when the securities offered by him are inadequate in covering the full
amount of advance.
It is obligation on the banker to ensure that his borrower is a person of character and
has capacity enough to repay the money borrowed including the interest thereon.
c. Capacity
This is the management ability factor, which tells how successful a business has been
in the past and what the future possibilities are. A businessman may not have vast
financial resources, but with sound management abilities, including the insight into a
specific business, he may make his business very profitable. On the other hand if a
person has no insight into the particular business for which he wants to borrow funds
from the banker, there are more chances of loss to the banker.
d. Capital
This is the monetary base because the money invested by the proprietors represents
their faith in the business and its future. The role of commercial banks is to provide
short-term capital for commerce and industry, yet some borrowers would insist that
their bankers provide most of the capital required. This makes the banker a partner.
As such the banker must consider whether the amount requested for is reasonable to
the borrowers own resources or investment.
e. Liquidity
Liquidity means the possibilities of recovering the advances in emergency, because all
the money borrowed by the customer is repayable in lump sum on demand. Generally
the borrowers repay their loans steadily, and the funds thus released can be used to
allow fresh loans to other borrowers. Nevertheless, the banker must ensure that the
money he is lending is not blocked for an undue long time, and that the borrowers are
in such a financial position as to pay back the entire amount outstanding against them
on a short notice. In such a situation, it is very important for a banker to study his
borrower‟s assets to liquidity, because he would prefer to lend only for a short period
in order to meet the shortfalls in the wording capital. If the borrower asks for an
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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:
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.
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5.3.3 Forms of Loans
In addition to purchase and discounting of bills, bankers in Pakistan generally lend in
the form of cash finance, overdrafts and loans. NBP provides advances to different
people in different ways as the case demand.
a) Cash Finance
This is a very common form of borrowing by commercial and industrial concerns and
is made available either against pledge or hypothecation of goods, produce or
merchandise. In cash finance a borrower is allowed to borrow money from the banker
up to a certain limit, either at once or as and when required. The borrower prefers this
form of lending due to the facility of paying markup/services charges only on the
amount he actually utilizes.
If the borrower does not utilize the full limit, the banker has to lose return on the un-
utilized amount. In order to offset this loss, the banker may provide for a suitable
clause in the cash finance agreement, according to which the borrower has to pay
markup/service charges on at least on self or one quarter of the amount of cash
finance limit allowed to him even when he does not utilize that amount.
b) Overdraft/Running Finance
This is the most common form of bank lending. When a borrower requires temporary
accommodation his banker allows withdrawals on his account in excess of the balance
which the borrowing customer has in credit, and an overdraft thus occurs. This
accommodation is generally allowed against collateral securities. When it is against
collateral securities it is called “Secured Overdraft” and when the borrowing customer
cannot offer any collateral security except his personal security, the accommodation is
called a “Clean Overdraft”. The borrowing customer is in an advantageous position in
an overdraft, because he has to pay service charges only on the balance outstanding
against him. The main difference between a cash finance and overdraft lies in the fact
that cash finance is a bank finance used for long term by commercial and industrial
concern on regular basis, while an overdraft is a temporary accommodation
occasionally resorted to.
c) Demand Financing/Loans
When a customer borrows from a banker a fixed amount repayable either in periodic
installments or in lump sum at a fixed future time, it is called a “loan”. When bankers
allow loans to their customers against collateral securities they are called “secured
loans” and when no collateral security is taken they are called “clean loans”.
The amount of loan is placed at the borrower‟s disposal in lump sum for the period
agreed upon, and the borrowing customer has to pay interest on the entire amount.
Thus the borrower gets a fixed amount of money for his use, while the banker feels
satisfied in lending money in fixed amounts for definite short periods against a
satisfactory security
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5.4 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
5.4.1) Demand Draft
Demand draft is a popular mode of transfer. The customer fills the application form.
Application form includes the beneficiary name, account number and a 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.
NBP CHARGES FOR DD5
I. Up to Rs. 50,000/- is Rs 50/- only
II. Over Rs. 50,000/- is 0.1%
5.4.2) Pay Order
Pay order is made for local transfer of money. Pay order is the most convenient,
simple and secure way of transfer of money. NBP takes fixed commission of Rs. 25
per pay order from the account holder and Rs. 100 from a non-account holder.
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
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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.
5.4.4) 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 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.
5.5 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:
5.5.1) 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.
5.5.2) 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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5.5.3) 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.
5.5.4) 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.
5.5.5) 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. 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.
5.5.6) 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.
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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.
5.5.7) 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.
5.6) 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
5.6.1 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
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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
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
5.6.2 Issuing of cheque book:
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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.
5.6.3 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 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.
5.6.4 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.
5.6.5 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
5.6.6 Cash
This deptt also deals with cash. Payment of cheques, deposits of cheques etc.
5.7 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.
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5.7.1 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.
5.7.2 Foreign currency account dealing:
This deptt deals with the foreign currency accounts which mainly include dollar
account, euro account etc.
5.7.3 Foreign Remittance dealing.
This is very important function of this deptt.
B) DEPARTMENTATION OF HAYAT ABAD TOWNSHIP BRANCH NBP.
Dividing an organization into different parts according to the functions is
called departmentation. So NBP Hayatabad township branch is divided into two main
parts.
1. Cash Department
2. General Banking Department.
5.1 Cash Department:
Cash department mainly deals in cash. The Head of department is Mr. Imdad
Khan and two cashier Mehraban Shah and Faiq Shah the objective of cash
department.
“To facilitate people in the payments of their bills and taxes and repayments of cash”
There are two main functions of cash department.
i. Payment ii. Receipts
i. Payments are the function that they pay their cheques and pay cash.
ii. Receipts mean collection of utilities bills, taxes etc.
5.2 General Banking
In this section of the bank the general banking function is performed. It is
divided into five departments.
i. Remittances Department.
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ii. Computer Department.
iii. Advances Department.
iv. Clearing Department.
v. Establishment Department.
5.2.1 Remittances Department:
This department is header by Zahoor Ahmad a very competent person. The objective of this department is:-
“To transfer the money of people from one place to another place in safe and
comparable way”
The main functions of this department are:
i. Issuing of demand draft.
ii. Issuing of Mail transfer.
iii. Issuing of Telegraphic transfer.
iv. Issuing of payment order.
v. Issuing of call deposit.
vi. Pension payments etc.
vii. Closing and scrolling of government collections.
5.2.2 Advances department:
Every bank has a department which advances money to borrowers. In NBP
Hayatabad township branch the advances department is head by the Business
Manager Sir Asim and Operation Manager Sir Pervez. Both are very competent
persons. The objective of Advances Department is
“To facilitate people by giving short term and long term loans on easy terms
and conditions”.
The main function of this Department is to take surplus money from the
people at low rates and lend this money to borrowers at high rates to earn profit.
5.2.3 Clearing Department:
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A clearing house is an association of commercial banks set in State Bank of
Pakistan for the purpose of interchange and settlement of credit claims.
In NBP Hayatabad Branch this department is headed by Ameer Shehzad having
experience of about thirty years. The objective of this department is to
“To facilitate customers for payment their Cheques of other banks”.
Two type of clearing books are maintained.
i. 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 detail of the cheques are recorded
in this book.
ii. Out word clearing book:
The bank uses outward clearing register for the purpose of recording all the details
of the cheques that the banks have delivered to other banks.
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5.2.4 Computer Department:
This department headed by the accountant Tariq Afridi and two other persons Mr.
Junaid and Mr. Shahid are performing the real function.
The objective of this Department is to facilitate customers in payment of their
cheques”.
The main functions performed by this department are:
a) Checking balance.
b) Deduction from balance on clearing cheques.
c) Issuing bank statements.
d) Dealing Western Union.
5.2.5 Establishment Department:
NBP Hayatabad Branch having an Establishment Department. This
Department consists of only one person Haji Misri Kha very competent and
experienced person. This department mainly deals with the branch employees. The
main objective of this department is to
“To regulate bank business”.
Main functions of this department are:
a) Keeps the record of attendance of employees.
b) Employee‟s salaries distribution.
c) Employee‟s bonuses etc.
REFRENCES
1 Sir Paged John The law of Banking 4th edition page 431.
2 The Negotiable Instruments. Act, 1881.
3 Dr Hart Law of Banking, p.327
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4 Dr Hart Law of Banking, p.327
5 Circular bank charges June 2003.page 15.
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CHAPTER #6
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.
6.1 STRENGTHS:
6.1.1 OLDEST INSTITUTION:
NBP in one of the oldest bank of Pakistan and first nationalized bank Hence its customer
base is strength from this plus point as customers have more confidence in the bank. The
additional value services as the privilege for the bank.
6.1.2 ALTERNATE DUTIES IN SBP ABSENCE
The NBP performs additional services for its customers as well as the other bank
customer in the absence of SBP.
6.1.3 MORE DEPOSITS THAN OTHER BANK
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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.
6.1.4 EMPLOYEE BENEFITS
The employers at NBP are offered reasonable monetary benefit. Normally two bonuses are
given Eid-Ul-Fitar & Eid-Ul-Azha. This serves as an additional benefit and competency for the
bank and a source of motivation for the employees.
6.1.5 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.
6.1.6 STRICTLY FOLLOWED RULES ®ULATION:
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.
6.1.7 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, economics etc. These
professional competencies enable the employees to understand and perform the function
and operation in better way.
6.1.8 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.
6.1.9 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.
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6.2 WEAKNESSES
6.2.1 LACK OF MARKETING EFFORT:
The bank does not promote its corporate image, services, etc on a competitive way. Hence
lacks far behind in marketing effort .A need for aggressive marketing in there in the era
marketing in now becoming a part of every organization.
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.
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.
6.2.5 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.
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6.2.7 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
6.2.8 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.
6.3 OPPORTUNITIES
6.3.1 ELECTRONIC BANKING
The world today has become a global village because of advancement in the
technologies, especially in communication sector. More emphasis is now given to
avail the modern technologies to better the performances. NBP can utilize the
electronic banking opportunity to ensure on line banking 24 hours a day. This would
give a competitive edge over others.
6.3.2 MICRO FINANCING
Because of the need for micro financing in the market, there are lot of opportunities in this
regard. Other banks have already initiated, now the time has arrived when the NBP must
realize it and take on step to cater an ongoing demand.
6.4 THREATS
6.4.1 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.
6.4.2 POLITICAL PRESSURE BY ELECTED GOVERNMENT
The ongoing shift in power in political arena in the country effects the performance of the
bank has to forward loans to politically powerful persons which create a sense of insecurity
and demoralization in the customer as well as employees.
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6.4.3 DOWNSIZING
The bank is currently acting upon the policy of downsizing which threaten the environment
of the bank Employees feel insecurity in doing their jobs and work, hence affecting the over
all performance of employees negatively.
6.4.4 CUSTOMERS COMPLAINTS
There exists no regular and specific system of the removal of customer complaints.
Now a day a need for total customer satisfaction is emerging and in their demanding
consequences customer's complaints are ignored
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6.5 COMPETITIVE ANALYSIS
Porter’s five forces model: 3
This approach is widely used for competitive analysis. It is because of the high
intensity of competition among companies there five main competitive forces.
6.5.1 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”.
6.5.2 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.
6.5.3 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 and encash it.
The NBP is lacking in this field. It must improve in this field to compete the
competitors.
6.5.4 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.
6.5.5 Bargaining Power of Consumers:
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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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References
1. Daft l Richerd “Management” 4th Edition Pages 254, 256, 269.
2. Kottler Philip “Marketing Management” Millennium Edition Page 76.
3. Fred R. David “Strategic Management Concepts Cases” 7th edition.
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CHAPTER# 7
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.
7.1 National Bank of Pakistan Ten Years Performance at glance
Years 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994
Items
Total
471860 432803 415089 371636 350406 417680 400890 369236 320180 271779
assets
Deposits 395568 362866 349617 316493 294754 273391 254863 235032 208283 170476
Advances 160990 140547 170319 140318 122559 109356 105598 85854 81528 62548
Investment 166196 143525 71759 72609 91486 102356 109485 108206 95649 85094
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 23730 21549 20667
Employees 13272 12195 15163 15351 15541 15785 18096
(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.
7.2 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.
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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.
7.3 Parties interested in ratio analysis
7.3.1 Trade creditors
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.
.7.3.2 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.
7.3.3 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.
7.3.4 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.
7.4 Ratio analysis
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Ratio is the comparison between two figures of balance sheet and income statement.
7.4.1 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
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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.
7.4.2 Gross Profit Margin Ratio:
“This ratio shows the profit margin in sales/ revenue”.
This is calculated as.
Gross profit/ interest earned
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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 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.
7.4.3 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
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Graph3
Net profit Margin %
30
ratio
20 Net profit
10 Margin %
0
97
99
01
03
19
19
20
20
year
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.
7.4.4 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
ratio
20
Return on Equity
10
0
97
99
01
03
19
19
20
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.
7.4.5 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.
7.4.6 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
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Graph6
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.
7.4.7 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
year
Debt to equity
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.
7.4.8 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
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
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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
7.4.9 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.
7.4.10 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
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Table12
Year 1997 1998 1999 2000 2001 2002 2003
Assets turnover ratio 0.099 0.097 0.093 0.079 0.075 0.079 1.07
Graph10
Assets turnover ratio
2003
2001
year
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.
7.4.11 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.
7.4.12 Dividend yield:
Anticipated annual dividend divided by the market price of the stock.
It is calculated as.
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
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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.
7.4.13 Deposit growth Ratio:
This ratio shows the growth rate of deposits.
This is calculated as
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
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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.
7.4.14 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
ratio
Advances
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.
7.5 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 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
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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)
= 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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REFERENCES
1 National Bank of Pakistan (2000, 2003) Annual Report.
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” 11
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
11. Vause Bob “The Economist “Guide to analyzing companies”. 3rd edition.
WEBSITE:
www.onlinewbc.gov/docs/finance/fs.ratio/. Html
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CHAPTER # 8
GENERAL OBSERVATION
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.
8.1 PROBLEMS AT THE BRANCH
8.1.1 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.
8.1.2 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.
8.1.3 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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8.1.4 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.
8.2 FUNCTIONAL ANALYSIS
8.2.1 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.
8.2.2 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.
8.2.3 Bank duty to maintain secrecy.
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.
8.2.4 Excessive paper work
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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.
8.2.5 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
8.2.6 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
8.3 ADMINISTRATIVE ANALYSIS
8.3.1 Job analysis is not effective
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.
8.3.2 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.
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8.3.3 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.
8.3.4 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.
8.3.5 Poor job rotation.
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.
8.3.6 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.
8.3.7 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.
8.4 PERSONAL MANAGEMENT ANALYSIS
8.4.1 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.
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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.
8.4.2 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.
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8.4.3 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.
8.4.4 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.
8.4.5 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.
8.4.6 Marketing at desk
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
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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.
8.4.7 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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Chapter # 9
GENERAL SUGGETIONS
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:
9.1 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.
9.2 Delegation of authority
Employees of the bank should be given a task and authority and they should be asked
for their responsibility.
9.3 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.
9.4 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
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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.
9.5 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.
9.6 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
9.7 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.
9.8 Utility Bill Charges
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.
9.9 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.
9.10 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.
9.11 Installing Validator and ATM
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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.
9.12 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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9.13 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.
9.14 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.
9.15 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.
9.16 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.
9.17 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).
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.
9.18 Staff Relationship
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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.
9.19 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.
9.20 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 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.
9.21 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.
9.22 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.
9.23 Marketing Policy
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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.
They should do more advertising through newspaper and media and through channel
of personal contacts.
9.24 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.
9.25 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.
9.26 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.
9.27 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.
9.28 Credit Monitoring
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.
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The staff members who have done all the paper work of the loan extension should
perform the monitoring, as he/she will be having more information about the
borrower.
9.29 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:
9.30 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
9.31 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 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.
9.32 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.
CHAPTER # 10
IMPLMENTATION PLAN
From the above recommendation, two recommendations are selected for implantation
plan.
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10.1 IMPLEMENTATION PLAN FOR “MARE GARE CAR FINANCING
SCHEME”
Implementation of this financing scheme is initiated to provide long term loans to the
general public for buying their own car in easy installments. This financing scheme
will help bank to increase its revenue immensely
10.1.1 Rules and regulations
Name of finance Mare Gare Car Financing
Minimum amount of finance Rs. 300000
Maximum amount of finance Rs. 1500000
Rate of Mark up (on daily product basis) Rs. 0.43 per Rs. 1000
Period of finance 3 or 5 years
Repayment to Bank Quarterly (12 or 20 equal
installments)
10.1.2 Documents required for extension for loan
Documents of title to car.
Bank monitoring team approval certificate.
Car dealer certificate of authentication.
Insurance.
10.1.3 Securities Required for Extension of Loan
To ensure the safe recovery of loan the car will be hypothecated.
Guarantee of two 17th grade government or semi government officer.
Personal liability of the borrower.
10.1.4 Finding out Quarterly Installments
Mark up will be calculated for the whole time period and will be added to the
principle amount. The total of that will be divided by number of installments to get
the amount for each installment
The formula for extracting mark up is
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Mark up =F*R(1+N)
2M
Where
F = Total amount of financing
R = Rate of mark up for one year
N = Total number of installments
M = Number of installments in one year
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Case study
Amount of finance Rs. 200000
Rate of mark up Rs. 0.43 per 1000
Total number of installments 20 (5 years)
Number of installments in one year 4
Rate of mark up for one year ® = .43 * 365/1000
=.157
Mark up for the whole financing will be
Mark up = 200000 * 0.157*(1+20)
2*4
= Rs. 82425
Now the quarterly installments will be
Quarterly installment = principal amount + total markup
Total installments
=200000 + 82425 / 20 = Rs. 14121/-
The borrower will pay Quarterly installment of Rs. 14121/-
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10.2 Implementation plan for NBP Hayatabad branch “Telephone
Operator”
The ingredients of the implementation plan are.
Need/problem at the branch.
Qualities of a telephone operator
Benefits of a telephone operator.
How the need created and bank‟s staff decision.
The implementation plan cost.
10.2.1 Need problem at the branch.
Every organization has some problems. NBP Hayatabad branch has the problem of
telephone operator. It can save the precious time of not only manager but other staff
as well. On the other hand bank‟s communication system was not doing well overall.
Therefore as an internee I felt that there should be a telephone operator who can easily
handle this situation.
10.2.2 Benefits of the telephone operator
It saves precious time of the manager and staff members.
It saves the time of the customers.
Creates good impression on the customer.
Communication within the bank improves.
Communication of Bank with outside enhances.
10.2.3 How the need was created
The need for telephone operator was created because the staff members would have to
leave their work and attend the telephone but some times it would be a wrong call,
other‟s call or the calls which they wanted to avoid this would not only waste their
time but also affect their performance a great deal. Therefore they think it‟s useful to
have a spare person for this facility.
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10.2.4 ACTION/IMPLEMENTATION PLAN COST
1- Cost of HRM department
Advertisement in newspaper cost 4000
Selection cost 10000
Training cost 12000
Total HRM cost 26000
2- Telephone networking
Additional telephone sets 2500
Cable (Rs. 5/ foot, 5*800) 4000
Telephone mechanic 2000
Labor 2000
Separate cell cost 5000
Other expenses 2000
Total networking 17500
Total action plan cost 435000
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