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Internship Report on NBP

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TABLE OF CONTENTS
Objectives of Studying the Organization ........................................................................................ 6
Brief History of National Bank of Pakistan .................................................................................... 7
Nature of National Bank of Pakistan ............................................................................................ 10
Business volume of National Bank of Pakistan ............................................................................ 12
Branch Network of National Bank of Pakistan............................................................................. 16
Number of Employees of National Bank of Pakistan ................................................................... 18
Product Lines ................................................................................................................................ 19
   1.        Deposits.............................................................................................................................. 19
        a)      Current Deposits ............................................................................................................. 20
        b)      PLS Saving Deposits ...................................................................................................... 20
        c)      Fixed Deposit Account (Time Deposits) ........................................................................ 21
        d)      Foreign Currency Account ............................................................................................. 22
        e)      NBP Premium Aamdani ................................................................................................. 22
        g)      National Income Daily Account (NIDA) ....................................................................... 23
   2.        Advances ............................................................................................................................ 25
        a)      NBP Saibaan .................................................................................................................. 25
        b)      NBP Advance Salary...................................................................................................... 25
        c)      NBP Cash & Gold .......................................................................................................... 27
        d)      Students Loan Scheme ................................................................................................... 27
        e)      NBP Karobar- President’s Rozgar Scheme .................................................................... 27
   3.        Corporate Advances ........................................................................................................... 30
        a)      Cash Finance .................................................................................................................. 30
        b)      Running Finance/ Overdraft ........................................................................................... 30
        c)      Demand Finance ............................................................................................................. 30
   4.        Remittances ........................................................................................................................ 31
        a)      Demand Drafts ............................................................................................................... 31
        b)      Travelers Cheques .......................................................................................................... 32
        c)      Letter Of Credit .............................................................................................................. 32

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       d)      Foreign Remittances ....................................................................................................... 33
       e)      Swift System .................................................................................................................. 33
       f)      Mail Transfer .................................................................................................................. 33
       g)      Telegraphic Transfer ...................................................................................................... 34
       h)      Pay Order........................................................................................................................ 34
  5.        Miscellaneous .................................................................................................................... 35
       a)      Lockers ........................................................................................................................... 35
       b)      NBP Cash Card .............................................................................................................. 35
       c)      International Banking ..................................................................................................... 36
Organizational Structure of National Bank of Pakistan ................................................................ 37
  Board of Directors ..................................................................................................................... 37
  Senior Management ................................................................................................................... 40
       1.      Corporate & Investment Banking Group ....................................................................... 41
       2.      Compliance Group ......................................................................................................... 43
       3.      Islamic Banking Group .................................................................................................. 43
       4.      Treasury Management Group......................................................................................... 44
       5.      Credit Management Group ............................................................................................. 47
       6.      Audit & Inspection Group .............................................................................................. 48
       7.      Human Resource Management & Administration Group .............................................. 50
       8.      Information technology group ........................................................................................ 51
       9.      Financial control Division .............................................................................................. 52
       10. Overseas Coordination & Management Group .............................................................. 53
       11. Commercial & Retail Banking Group ............................................................................ 54
       12. Special Assets Management Group................................................................................ 55
       13. Employee Benefits, Disbursements & Trustee Division ................................................ 56
       14. Core Banking Application .............................................................................................. 58
       15. Operations Group ........................................................................................................... 59
  Provincial & Regional Management ......................................................................................... 60
  Branch Management .................................................................................................................. 60



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Organizational (Management) levels at NBP ............................................................................... 61
  Top Managers ............................................................................................................................ 62
  Middle Managers ....................................................................................................................... 62
  First Line Managers or Lower Level Management ................................................................... 62
  Non Managerial Employees ...................................................................................................... 62
Hierarchy of National Bank of Pakistan ....................................................................................... 63
Organization Structure of the Branch ........................................................................................... 64
  a)        Centralized Decision Making ............................................................................................ 64
  b)        Downward Communication ............................................................................................... 65
  c)        Chain of Command ............................................................................................................ 65
  d)        Authority and Responsibility ............................................................................................. 66
  e)        Delegation .......................................................................................................................... 66
Departments of the Branch ........................................................................................................... 67
  1.        Clearing House Department ............................................................................................... 67
  2.        Remittance Department ..................................................................................................... 71
  3.        Account Opening Department ........................................................................................... 73
  4.        Cash Department ................................................................................................................ 74
  5.        Deposits Department .......................................................................................................... 76
  6.        Advances Department ........................................................................................................ 77
  7.        Computer Department ........................................................................................................ 78
       a)      Online branches .............................................................................................................. 78
       b)      Batch Branches ............................................................................................................... 79
       c)      Manual Branches ............................................................................................................ 79
  8.        Pension Disbursement Department .................................................................................... 80
  9.        Accounts Department......................................................................................................... 80
Structure of Branch’s Accounts Department ................................................................................ 83
Bank Accounting Operations ........................................................................................................ 86
Role Of CFO (Chief Financial Officer) ........................................................................................ 88
Use of Electronic Data in Decision Making ................................................................................. 92



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   Information System Resources of NBP ..................................................................................... 93
      a)     People Resources............................................................................................................ 93
      b)     Hardware Resources ....................................................................................................... 94
      c)     Software Resources ........................................................................................................ 94
      d)     Data Resources ............................................................................................................... 94
      e)     Network Resources ........................................................................................................ 94
Sources of Funds ........................................................................................................................... 95
Generation of funds....................................................................................................................... 98
Allocation of Funds..................................................................................................................... 100
Critical Analysis (Theory vs Practical) ....................................................................................... 106
Balance Sheet .............................................................................................................................. 107
Income Statement........................................................................................................................ 107
Financial Statements Analysis .................................................................................................... 109
   Ratio Analysis.......................................................................................................................... 110
      a)     Profitability Ratios ....................................................................................................... 110
      b)     Liquidity Ratios ............................................................................................................ 116
      c)     Debt Ratios ................................................................................................................... 120
      d)     Capital Adequacy Ratios .............................................................................................. 123
      e)     Operating Performance Ratios ..................................................................................... 124
   Horizontal Analysis ................................................................................................................. 127
   Horizontal Analysis of Balance Sheet ..................................................................................... 128
   Horizontal Analysis of Income Statement ............................................................................... 137
   Vertical Analysis ..................................................................................................................... 146
   Vertical Analysis of Balance Sheet ......................................................................................... 147
   Vertical Analysis of Income Statement ................................................................................... 156
Bank Analysis with refernce to commercial Banks listed on stock exchange ............................ 164
Future prospects of National Bank of Pakistan........................................................................... 167
Short falls/ Weaknesses of National Bank of Pakistan ............................................................... 169
Conclusions ................................................................................................................................. 171



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Recommendations ....................................................................................................................... 172
References ................................................................................................................................... 174




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OBJECTIVES OF STUDYING THE ORGANIZATION
The primary purpose of this study is to fulfillment of the requirements for the degree of MBA
(Banking & Finance).For this connection each student of this particular course is required to
undertake training in a relevant organization selected by them, for a period of 6-8 weeks.

The secondary purpose of this internship is to understand how the theoretical knowledge can be
applied to the practical situations and examine an organization’s financial issues and identify its
opportunities/ problems and also suggest corrective measures. This internship is also very
necessary to gain confidence and become aware of the mechanism of an organization. As an
internee I want to achieve following objectives during my internship and organization study:

   1. To familiarize with a business organization.
   2. To familiarize with the different departments in the organization and their functioning.
   3. To enable myself to understand how the key business process are carried out in
       organization.
   4. To understand how information is used in an organization for decision making at various
       levels.
   5. To relate theory with practice.
   6. I was also keen to gain professional experience in an actual testing environment.
   7. I want to develop my skills in the application of theory to practical work situations.
   8. To develop my attitude conducive to effective interpersonal relationships.
   9. To acquire good work habits and sense of responsibility.
   10. To enhance my learning experience by application of fundamental concepts previously
       learned.

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

   12. To develop my interpersonal communication.

   13. I want to enhance my knowledge of the discipline of banking administration.




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BRIEF HISTORY OF NATIONAL BANK OF PAKISTAN
The history of National Bank of Pakistan is part of Pakistan’s struggle for economic
independence. National Bank of Pakistan was established on November 9, 1949 under the
National Bank of Pakistan Ordinance, 1949 in order to cope with the crisis conditions which
were developed after trade deadlock with India and devaluation of Indian Rupee in 1949.
Initially the Bank was established with the objective to extend credit to the agriculture sector.
The normal procedure of establishing a banking company under the Companies Law was set
aside and the Bank was established through the promulgation of an Ordinance, due to the crisis
situation that had developed with regard to financing of jute trade. The Bank commenced its
operations from November 20, 1949 at six important jute centers in the then, East Pakistan and
directed its resources in financing of jute crop. The Bank’s Karachi and Lahore offices were
subsequently opened in December 1949. The National Bank of Pakistan came forward to
establish its offices in the Cotton growing areas and extended credit facilities liberally in order to
restore stability to the market. In 1951, the country was once again faced with a crisis in the
cotton trade when prices was crashed and touched the lowest level since independence following
the cessation of hostilities in Korea. The bank in collaboration with the cotton board provided the
necessary Credit facilities to the trade and the crisis was tided over.              The nature of
responsibilities of the Bank is different and unique from other banks/financial institutions. The
Bank acts as the agent to the State Bank of Pakistan for handling Provincial/Federal Government
Receipts and Payments on their behalf. The Bank has also played an important role in financing
the country’s growing trade, which has expanded through the years as diversification took place.1

The National Bank of Pakistan has its headquarters in Karachi, Pakistan. The bank operates
1249(2008) branches in Pakistan and 22(2008) overseas branches. Under a trust Deed, the bank
also provides services as trustee to National Investment Trust (NIT) including safe custody of
securities on behalf of NIT. The National Bank of Pakistan has assets worth Rupees 737976.44
million on September 30, 2008.2

National Bank of Pakistan is today a progressive, efficient, and customer focused institution. It
has developed a wide range of consumer products, to enhance business and cater to the different
segments of society. Some schemes have been specifically designed for the low to middle



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income segments of the population. These include NBP Karobar, NBP Advance Salary, NBP
Saibaan, NBP Kisan Dost, and NBP Cash n Gold.

The National Bank of Pakistan has implemented special credit schemes like small finance for
agriculture, business and industries, administrator to Qarz-e-Hasna loans to students, self
employment scheme for unemployed persons, public transport scheme. The Bank has expanded
its range of products and services to include Shariah Compliant Islamic Banking products. For
the promotion of literature, NBP recently initiated the Annual Awards for Excellence in
Literature. NBP will confer annual awards to the best books in Urdu and in all prominent
regional languages published during the defined period. Patronage from NBP would help
creative work in the field of literature. The Bank is also the largest sponsor of sports in Pakistan.
It has provided generously to philanthropic causes whenever the need arose.

It has taken various measures to facilitate overseas Pakistanis to send their remittances in a
convenient and efficient manner. In 2002 the Bank signed an agreement with Western Union for
expanding the base for documented remittances. More recently it has started Electronic Home
Remittances Project. This project introduces technology based system to handle inward
remittances efficiently, by ensuring that the Bank's branches keep a track of the remittance
received from abroad till its final receipt.

A number of initiatives have been taken, in terms of institutional restructuring, changes in the
field structure, in policies and procedures, in internal control systems with special emphasis on
corporate governance, adoption of Capital Adequacy Standards under Basel II framework, in the
up gradation of the IT infrastructure and developing the human resources.

National Bank has earned recognition and numerous awards internationally. It has been the
recipient of The Bank of the Year 2001, 2002, 2004 and 2005 Award by The Banker Magazine,
the Best Foreign Exchange Bank –– Pakistan for 2004, 2005, 2006 and 2007, Global Finance,
Best Emerging Market Bank from Pakistan for the year 2005, Global Finance, Kisan Time
Awards – 2005 for NBP's services in the agriculture field. It is listed amongst the Region's
largest banks and also amongst the largest banks in South Asia 2005, The Asian Banker. It has
also been presented a Recognition Award –– 2004 for having a Gender Sensitive Management
by WEBCOP AASHA besides other awards.3



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The precise summary of National Bank of Pakistan regarding its countrywide and overseas
operations is as fallows:

       1949 National Bank of Pakistan (NBP) was established under the National Bank of
       Pakistan Ordinance 1949 and was 100% govt.-owned. NBP acted as an agent of the
       Central Bank wherever the State Bank did not have its own Branch. It also undertook
       Government Treasury operations. Its first branches were in jute growing areas in East
       Pakistan. Offices in Karachi and Lahore followed.
       1950 NBP established a branch in Jeddah, Saudi Arabia.
       The Bank in 1950 had one subsidiary ‘The Bank of Bahawalpur’ on December4, 1947 by
       the former Bahawalpur State
       1955 By this time NBP had branches in London and Calcutta.
       1957 NBP established a branch in Baghdad, Iraq.
       1962 NBP established a branch in Dar-es-Salaam, Tanganyika.
       1964 The Iraqi government nationalized NBP's Baghdad branch.
       1965 The Indian government seized the Calcutta branch on the outbreak of hostilities
       between India and Pakistan.
       1967 The Tanzanian government nationalized the Dar-Es-Salaam branch.
       1971 NBP acquired Bank of China's two branches, one in Karachi and one at Chittagong.
       At separation of East Pakistan NBP lost its branches there. NBP merged with Eastern
       Mercantile Bank and with Eastern Bank Corporation.
       1974 The government of Pakistan nationalized NBP. As part of the concomitant
       consolidation of the banking sector, NBP acquired Bank of Bahawalpur (est. 1947).
       1977 NBP opened an offshore brain Cairo.
       1994 NBP amalgamated Mehran Bank (est. 1991).
       1997 NBP's branch in Ashgabat, Turkmenistan commenced operations.
       2000 NBP opened a representative office in Almaty, Kazakhstan.
       2001 State Bank of Pakistan and Bank of England agree to allow only 2 Pakistani banks
       to operate in the UK. NBP and United Bank agreed to merge their operations to form
       Pakistan International Bank, of which NBP would own 45% and United Bank 55%.
       2003 NBP received permission to open a branch in Afghanistan.
       2005 NBP closed its offshore branch in Cairo.


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NATURE OF NATIONAL BANK OF PAKISTAN
National Bank of Pakistan was incorporated in Pakistan under the National Bank of Pakistan
Ordinance, 1949 and is listed on all the stock exchanges in Pakistan. The bank is engaged in
providing commercial banking and related services in Pakistan and overseas. The bank operates
1,249 (2007:1,232) branches in Pakistan and 22 (2007:18) overseas branches (including the
Export Processing Zone branch, Karachi). Under a Trust Deed, the bank also provides services
as trustee to National investment Trust (NIT) including safe custody of securities on behalf of
NIT.4

The nature of responsibilities of the Bank is different and unique from other banks/financial
institutions. The bank also handles treasury transactions for the Government of Pakistan as an
agent to the State Bank of Pakistan for handling provincial/Federal Government receipts and
payments on their behalf. The National Bank of Pakistan has also played an important role in
financing the country’s growing trade, which has expanded through the years as diversification
took place. The bank is providing all banking services of mercantile and commercial banking
permissible in the country, which include:

        Accepting of deposits of money on current, fixed, saving, term deposit and profit and loss
        sharing accounts.
        Borrowing money and arranging finance from other banks.
        Advancing and lending money to its clients.
        Financing of projects, including technical assistance, project appraisal through long term/
        short term loans, term finance and musharika certificates, etc.
        Buying, selling, dealing, including entering into forward contracts of foreign exchange.
        Financing of seasonal crops like cotton, wheat, rice, sugar cane, tobacco, etc.
        Receiving of bonds, valuables, etc. for safe custody.
        Carrying on agency business for any description other than managing agent, on behalf of
        clients including Government and local authorities.
        Generating, undertaking, promoting, etc. of issue of shares and, bonds etc.
        Transacting guarantee and indemnity business.
        Undertaking and executing trusts.



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Joint venturing with foreign dealers, agents and companies for its representation abroad.
Participating in “World Bank” and “Asian Development Bank’s” lines of credit.
Providing personalized Hajj services to intending Hajjis.




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BUSINESS VOLUME OF NATIONAL BANK OF PAKISTAN

Rupees in
Millions
Year                        2004            2005           2006           2007           2008
Total Assets          553,231,467     577,719,114    645,132,711    762,193,593    817,758,326
Deposits              465,571,717     463,426,602    501,872,243    591,907,435    624,939,016
Advances              220,794,075     268,838,779    316,110,406    340,677,100    412,986,865
Reserves               10,813,914      13,536,041     13,879,260     15,772,124     19,941,047
Investments           149,350,096     156,985,686    139,946,995    210,787,868    170,822,491
                                     Horizontal
                                    Analysis (%)
Total Assets                  100             104            117           138              148
Deposits                      100             100            108           127              134
Advances                      100             122            143           154              187
Reserves                      100             125            128           146              184
Investments                   100             105             94           141              114


The business volume of National Bank of Pakistan is stated in terms of total assets, deposits,
advances, reserves and investments. To analyze the trend in these items the Horizontal analysis
of each item is calculated.




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A NALYSIS
The Total Assets of National Bank of Pakistan fluctuates during all years as they show an
increasing trend. The total assets are increased 4 % in 2005 and 17 % in 2006. The year 2007
represents second highest percentage on account of total assets as it was increased to 38%. There
was an increase of 48 % in 2008 as compare to base year and 10% as compare to 2007.




A NALYSIS
The deposits and other accounts of National Bank of Pakistan show a mixed trend during all
years. In the year 2005, the deposits were increased very marginally, with the year 2006
represents an increase of 8%. The deposits are increased 27% & 34% in the years 2007 and 2008
respectively.




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A NALYSIS
The advances made by National Bank of Pakistan shows an increasing trend in all years as
compare to base year. This implies that National Bank of Pakistan is keener to advance money to
lenders. The advances were increased 22 % in the year 2005 and 43 % in 2006 as compare to
base year. The year 2007 represents an increase of 54 % and 2008 represents highest percentage
among all years that is 87 % as compare to base year.




A NALYSIS
The Banks’ reserves are banks' holdings of deposits in accounts with their central bank plus
currency that is physically held in bank vaults (vault cash). The reserves of National Bank of
Pakistan fluctuate during all years as they show an increasing trend. The reserves are increased
25 %, 28 % & 46 % in the years 2005, 2006 & 2007 respectively. The year 2008 represents
highest increasing percentage of 84% as compare to base and previous years.




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A NALYSIS
The investments made by National Bank of Pakistan fluctuate during all years. There was an
increase of 5 % in 2005. The year 2006 indicates a decrease of 6% in investments. The year 2007
represents an increase of 41 %, highest among all years. The investments are increased 14 % in
2008 as compare to base year; however investments are decreased 27 % as compare to the year
2007.




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BRANCH NETWORK OF NATIONAL BANK OF PAKISTAN
With the geographical development of its branches, the National Bank of Pakistan has been able
to extend its services to a much larger number of Pakistanis all over the country. Today the Bank
has more than 8.8 million accounts & Bank maintains its presence in all the major financial
centers of the world through its 22 (2008) overseas branches and 5 representative offices. Of
these, three representative offices have recently been set up at Tashkent (Uzbekistan), Baku
(Azerbaijan) and Almaty (Kazakhstan) to take advantage of the emerging opportunities in CIS
countries. Bank’s role Apart from having a vast branch network, Bank is at the forefront in the
acquisition and application of new technologies in every aspect of its banking facilities. It has
acquired leased telephone lines for on-line banking. The Bank has 12 Regional Computer
Centers to cover various on-line and batch system requirements of branches and controlling
offices.

Presently the National Bank of Pakistan is divided into various Groups headed by SEVPs/EVPs.
Its field operations are controlled by 29 regions ( Annexed II) reporting to as many Regional
chiefs, who control 40 zones and 15 single Branch zones headed by Zonal Chiefs; 12 corporate
branches and 1249 domestic branches headed by Branch Managers. The bank has 12 SWIFT
local centers.

Apart from having a vast branch network, Bank is at the forefront in the acquisition and
application of new technologies in every aspect of its banking facilities. It has acquired leased
telephone lines for on-line banking. Bank has also a presence on the internet. The National Bank


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of Pakistan has 156 online branches throughout the country. It has modernized its services by
installing Automated Teller Machines (ATMs) called “CASH LINK” at selected branches.

The Bank's organizational structure reflects the three levels at which it operates: international,
national and local. The Head Office formulates and implements the strategic, management and
operational policies.

The Bank's geographical organization consists of branches located in the regional capitals and in
some provincial capitals. The branches' activities relate to the State treasury service, payment
system services, currency circulation, banking and financial supervision, and the analysis of
economic and financial developments at the local level.

The Bank has representative offices abroad, in London, New York and Tokyo; a number of
officers are seconded as financial experts to Italian embassies and consulates. The Bank has
representative offices in Beijing, Tashkent, Chicago and Toronto. It has agency arrangements
with more than 3000 correspondent banks worldwide. Its subsidiaries are Taurus Securities Ltd,
NBP Exchange Company Ltd, NBP Capital Ltd, NBP Modaraba Management Company Ltd,
and CJSC Bank, Almaty, Kazakhstan. The Bank's joint ventures are, United National Bank
(UK), First Investment Bank and NAFA, an Asset Management Company (a joint venture with
NIB Bank & Fullerton Fund Management of Singapore).5

The Branch network of National Bank of Pakistan is divided into following categories

       ATM network ( Total ATMs 101 & Total ATMs machines 104)
       Domestic network ( 1249 Branches)
       Islamic network ( 5 Branches)
       Online network ( 156 Branches)
       Overseas network ( 29 Branches)
       Swift network ( 12 Branches)
       Customer Facilitation Centers (6 Customer Facilitation Centers)
       Agriculture branches ( 825 Branches)




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NUMBER OF EMPLOYEES OF NATIONAL BANK OF PAKISTAN

Permanent                                                                                     13237
Temporary/ On Contractual basis                                                                 842
Bank's own staff strength at the end of the year                                              14079
Outsourced                                                                                     2350
Total Staff Strength                                                                          16429


An employee may be defined as: "A person in the service of another under any contract of hire,
express or implied, oral or written, where the employer has the power or right to control and
direct the employee in the material details of how the work is to be performed." 6An employee
contributes labor and expertise to an endeavor. Employees perform the discrete activity of
economic production. Of the three factors of production, employees usually provide the labour.
Specifically, an employee is any person hired by an employer to do a specific "job". In most
modern economies, the term employee refers to a specific defined relationship between an
individual and a corporation, which differs from those of customer, or client. The relationship
between National Bank of Pakistan and its employees is usually handled through the Human
Resource Management & Administration Group & Employees benefit disbursement & trustee
division. These groups handle the incorporation of new hires, and the disbursement of any
benefits which the employee may be entitled, or any grievances that employee may have.

There are differing classifications of workers within National Bank of Pakistan, these are:

       Permanent


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       Temporary / On Contractual
       Outsourced

The Employees of National Bank of Pakistan are organizing into trade unions, which represent
most of the available work force in National Bank of Pakistan. These trade Unions utilize their
representative power to collectively bargain with the management of bank in order to advance
concerns and demands of their membership.




PRODUCT LINES
The most precise definition of product is anything capable of satisfying needs, including tangible
items, services and ideas. In marketing, a product is anything that can be offered to a market that
might satisfy a want or need.7      Since 1575, the word "product" has referred to anything
produced. Since 1695, the word has referred to "thing or things produced”. The economic or
commercial meaning of product was first used by political economist Adam Smith. In general
usage, product may refer to a single item or unit, a group of equivalent products, a grouping of
goods or services, or an industrial classification for the goods or services. The consumer banking
products include personal accounts, credit cards, loans, investment products, treasury products
and many more. The National Bank of Pakistan offering for sale several related products
individually, which is commonly known as product lining. A product line is defined as “A group
of products that are closely related because they function in a similar manner, are sold to the
same customer groups, are marketed through same types of outlets, or fall within the given price
ranges”.8 The followings are the main consumer banking products of NBP.


   1. DEPOSITS
The National Bank of Pakistan offers to their clients a variety of Deposit Schemes with
personalized services at competitive rates of interest. Any Pakistani citizen can open his/her
account for any deposit scheme at any of its Branches strategically located throughout Pakistan.
The Bank with its huge network of 1243 branches garners savings from both the rich and the
poor in urban as well as rural areas. Even a poor farmer in a remote village, with his meager



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annual income, feels secure to safe keep his minuscule savings in National Bank of Pakistan,
Because National Bank of Pakistan has a long heritage of trust and professional commitment.

   a) CURRENT DEPOSITS
These are payable to the customer when ever 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 nay 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 Current Deposits may be withdrawn by the
depositors at any time, and as such the bank is not entirely free to employ such deposits. 9 Current
Accounts/ Basic Banking accounts are opened, on proper introduction and submission of
required documents along with initial deposit prescribed from time to time. Basic banking
accounts are opened for an individuals (single or joint) only whereas current accounts are opened
for individuals (single or joint) Charitable institution, provident and other funds of benevolent
nature of local bodies, autonomous corporations, companies, associations, educational
institutions, firms etc. and in all other cases where the accounts are to opened under the order of
a competent court of law. No profit is paid on the balances of current/basic banking accounts.
The bank is authorized to deduct service charges (incidental charges) on current accounts levied
through its half yearly schedule of charges, in case the average balance falls below the minimum
balance as prescribed by the bank. No balance maintenance condition is applied on basic banking
account.

   b) PLS SAVING DEPOSITS
In Pakistan a Savings Deposits Account can be opened with a 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 monthly basis under the Interest Free Banking System. There is no restriction on the
withdrawals from the deposit accounts but the amount of money withdraw 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 the
scheme the SBP has allowed the Savings Scheme for school and college students and industrial
labour also. The purpose of these accounts is to inculcate the habit of savings in the constituents.

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As such, the initial deposits required for opening these accounts are very nominal.10NBP charge
Rs.500 for opening of PLS Savings deposits.

The silent features of profit and loss sharing and saving accounts of NBP are as fallows

   1. These accounts can be opened by individuals in their own single or joint name. The PLS
       savings account can also be opened for provident fund or other benevolent funds of
       companies, firms, organizations, NGO’s and educational institutions.
   2. PLS saving account can be opened with a minimum amount of Rs.500/- only
   3. To share in the profit a minimum balance of Rs.500/- must be maintained in the account.
       The minimum balance on sixth and last of month will qualify for the profits. The profits
       will be calculated on the basis of monthly minimum balance for the periods of six months
       i.e. from January to June and July to December
   4. The head office of NBP determines the profit or loss on PLS saving deposits and advice
       its branches the rate and time of distribution of these profits.
   5. There shall be no restrictions on maintaining the maximum balance in PLS saving
       account.
   6. On the first day of Ramzan each year the Zakat at the rate of 2.5% will be deducted from
       these deposits on the balance of that day. But if depositors affix an affidavit of Zakat
       deduction along with account opening form or he is a non-Muslim, no Zakat will be
       deducted from his account.

   c) FIXED DEPOSIT ACCOUNT (TIME DEPOSITS)
The deposits that can be withdrawn after a specified period of time are referred to as Fixed or
Term Deposits. The period for which these deposits are kept by the bank ordinarily varies from
three months to five years in accordance with the agreement made between the customer and the
banker. Profit/Return is paid to the depositors on all fixed or Time deposits, and the rate of
profit/Return varies with the duration for which the amount is kept with the banker. By lending
out or investing these funds, the bank earns more than the Profit/Return that it has to pay on them
to the depositors.11 By giving an advance notice to the bank the deposit can be withdraw from
the bank before the expiry of the period. Fixed deposit accounts have higher rate of interest as
compare to other accounts. The rate of interest rises with the length of period and the amount of



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deposit. The bank grants to the depositor a fix deposit (FDR) which is not transferable to any
other person. The silent features of fixed deposit account of NBP are as fallows

   1. The PLS term deposit are opened for individuals in their own single or joint names,
       companies firms and other organizations.
   2. The PLS term deposit receipt are issued for any amount. There is minimum or maximum
       limit or deposits in a single term deposit account.
   3. PLS term depositors may be allowed some facilities against the security of these receipt
       credits, after making “Lien” on the relevant receipt and subject to recovery of service
       charges.
   4. Under term deposit scheme the depositors not cease to earn the profit immediately, after
       the respective maturity date.

   d) FOREIGN CURRENCY ACCOUNT
Government of Pakistan has introduced many important reforms in Foreign Exchange Control in
the country since February, 1990, for the purpose of strengthening the Foreign Exchange
Reserves. One of these reforms relates to foreign currency accounts, which can be opened in
United States Dollars, Pound Sterling, Euro and Japanese Yen in any of the authorized branches
of commercial banks throughout the country.12 Foreign currency accounts are opened, on proper
introduction and submission of required documents along with an initial deposit prescribed from
time to time. Rates of return on foreign currency deposits are subject to fluctuation as determined
in accordance with State Bank of Pakistan directives and will be paid on six monthly basis
whereas the return on term deposit/SNTD will be paid on maturity or as prescribed by SBP. The
bank shall have no responsibility for or liability to the account holders for any diminution due to
taxes imposed or depreciation in the value of funds credited to the account whether due to
devaluation or fluctuation in the exchange rate or other wise.

   e) NBP PREMIUM AAMDANI
NBP Premium aamdani is a retail product of the bank. The amount of investment required for
this account is Rs. 20,000/-to Rs. 5,000,000.The investment period is 5 years. Zakat and
withholding tax will be deducted as per rules. In NBP premium aamdani, the account holders
have benefit of free demand draft, pay order; free cheque book and NBP cash card


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(ATM+Debit). The Financing facility is available up to 90% of the deposit value.13 Profit paid
every period as follows:

                                    Period          Profit Rates
                                    1st year              7.50%
                                    2nd years             8.50%
                                    3rd years             9.50%
                                    4th years            10.50%
                                    5th years               11%
   f) NBP Premium Saver

NBP Premium saver is a retail product of the bank. The minimum saving balance of Rs. 20,001
and a maximum balance of Rs. 300,000 are required for opening a premium saver account. Two
debit withdrawals allowed in a month and no limit on number of deposit transactions. The profit
is calculated monthly and Paid on half yearly basis. Free NBP Cash Card (ATM + Debit) facility
is available to account holder.14

   g) NATIONAL INCOME DAILY ACCOUNT (NIDA)
The scheme of National income daily account 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. Deposits in the NIDA accepted on the condition
that the depositor shall always maintain a minimum balance as prescribed by the bank in his
account. In the event however, that any depositor wishes to withdraw the amount and the balance
in his account is less than the required amount, the account will be converted to the ordinary PLS
SB account for the purpose of calculating profit. An example of how the NIDA accounts are
maintained is shown on the next page.

R ATES ON N ATIONAL INCOME DAILY ACCOUNT

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

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

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

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


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S ALIENT F EATURES

       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.




                                                                                       

NIDA 1
Date             Description of Transaction   C   Debit (-) Credit (+)   Balance       Days Products

01/05/2008       Balance                                      10,000,000 10,000,000
05/05/2008       Cash                             500,000                9,500,000     4     38000000
08/05/2008       Cash                                         100,000    9,600,000     3     28800000
11/05/2008       Transfer                                     75,000,000 84,600,000    3     253800000
15/05/2008       Cash                             3,000,000              81,600,000    4     326400000
18/05/2008       Cash                                         78,600,000 160,200,000   3     480600000
20/05/2008       Cash                             1,000,000              159,200,000   2     318400000
22/05/2008       Cash                                         5,000,000 164,200,000    2     328400000
23/05/2008       Cash                             700,000                163,500,000   1     163500000
25/05/2008       Cash                                         10,000     163,510,000   2     327020000
27/05/2008       Cash                             300                    163,509,700   2     327019400
31/05/2008       Transfer                                     500,000    164,009,700   4     656038800
01/06/2008       Cash                             2,100,000              161,909,700   1     161909700
06/06/2008       Transfer                                     36,000,000 197,909,700   5     989548500
10/06/2008       Cash                             9,870,000              188,039,700   4     752158800




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   2. ADVANCES
National Bank of Pakistan plays a pivotal role in translating the government's development plans
in terms of growth in industrial, commercial and agricultural sectors in Pakistan. Accordingly the
Bank has formulated its Credit Policy under the guidelines of SBP-the Central Bank of Pakistan.

   a) NBP SAIBAAN
The NBP Saibaan is retail product of the bank. It has different product items which are home
purchase, home construction, home renovation and purchase of land plus construction. If anyone
has a Home Finance Facility outstanding with another bank he can have it transferred to NBP
through a hassle-free process. 15 A brief description of these products is as fallows

TYPE OF ADVANCE                          Financing Amount     Financing Period     Debt to equity
                                                                                   Ratio
Home Purchase (House or Apartment)       Rs. 35 Million       3 to 20 years        85:15 (maximum)
Home                                     Rs. 35 Million       3 to 20 years        85:15 (maximum)
Construction
Home Renovation                          Rs. 15 Million       3 to 15 years        80:20 (maximum)
Purchase of land Plus Construction       Rs.35 Million        3 to 20 years        80:20 (maximum)



   b) NBP ADVANCE SALARY
The NBP Advance salary has been the flag-ship product for NBP. NBP Advance Salary, the
leading personal loan product of the country, is maintaining its inimitability ever since it was
launched. This was only possible due to its swift growth and remarkable loan disbursement of
over 118 billion.16 You can avail up to 20 net take home salaries with easy repayment
installments. Its hassle free acquisition with no prior formalities and easy availability in a short
turn around time is attributed as the most distinguishing features of the product. The product is
offered countrywide. The terms and conditions of NBP Advance salary is shown on next page:




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T ERMS & C ONDITIONS

   Eligibility             Permanent Employees of Govt., Semi-Govt.,
                           Autonomous, Semi Autonomous, Local & other bodies
                           who are maintaining their Salary A/Cs at NBP.
   Repayment               Direct deduction from Salary A/C
   Maximum Loan            Rs. 490,000/-
   Amount
   Security                Employer will provide undertaking that borrower’s Salary
                           and end of service benefits will route through his/her
                           Salary A/C maintained at NBP during the tenure of the loan
                           and his/her end of service benefits are at least equal to the
                           amount of Advance Salary required.

                           Hypothecation of Consumer durables owned by the
                           borrower.

                           Three (3) Undated Cheques
   Max. Repayment          5 years (60 months)
   Period
   Advance in terms of #   Up to 20 net take home salaries
   of net take home
   salaries
   Markup Rate             15 %
                           (Based on diminishing balance method)
   Processing Fee          1% of Loan Amount
   Verification Charges    Rs 500/-
   Life Insurance          No Insurance of any kind.
   Documentation           at actual
   Charges
   Contact                 Your Salary disbursing NBP Branch.
   Remaining Service       At the time of approval and disbursement the applicant’s
   Age                     remaining service age should be 6 months after maturity of
                           the loan
   Debt Burden             50%
   Minimum net take        no minimum take home requirement
   home salary




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   c) NBP CASH & GOLD
With NBP’s Cash & Gold, the customers meet their need for ready cash against their idle gold
jewelry. The rate of mark up is 13% p.a. This product has following features17

       Facility of Rs. 7,000 against each 10 grams of net contents of gold
       No maximum limits of cash
       Repayment after one year
       Only gold ornaments acceptable
       Weight and quality of gold to be determined by NBP's appointed schroffs
       No penalty for early repayment

   d) STUDENTS LOAN SCHEME
Pursuant to the announcement made by the Federal Finance Minister in his 2001-2002 budget
speech, a Student Loan Scheme (SLS) for Education was launched by the Government of
Pakistan in collaboration with major commercial banks of Pakistan (NBP, HBL, UBL, MCB and
ABL). Under the Scheme, financial assistance is provided by way of Interest Free Loans to the
meritorious students who have financial constraints for pursuing their studies in Scientific,
Technical and Professional education within Pakistan. The Scheme is being administered by a
high powered committee comprising Deputy Governor, State Bank of Pakistan, Presidents of the
commercial banks and representative of Ministry of Finance, Government of Pakistan. 18


   e) NBP KAROBAR- PRESIDENT’S ROZGAR SCHEME
The solution of Pakistan’s major socio-economic problems primarily lies in the development and
growth of small & micro businesses. These will not only provide employment opportunities to
ever-growing population demand but will also become the catalyst for breaking the vicious circle
of poverty. In this regard, NBP has developed a full range of Products under the President’s
Rozgar Scheme with a brand name of “NBP KAROBAR”. The scheme will be offered to eligible
young and literate citizens of Pakistan, falling within an age group of 18-40 years having a
minimum qualification of Matriculation (except for females in the PCO/Tele-center product).
The eligible borrowers will be required to make a down payment of 15%. Asset and Life &


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Disability insurances will be mandatory under this scheme. The 15% down payment will include
1st year’s asset insurance premium. However, the cost of life and disability insurance will be
borne by GOP. The mark-up rate for the 1st year will be 12% and for the subsequent years it will
be 1 year KIBOR + 2%. Fifty percent (50%) of this rate will be paid by the customer i.e. 6% and
the balance of 6% will be borne by GOP. Additionally, first 10% of the losses under the scheme
will be taken-up by GOP. Initially, under the President’s Rozgar scheme, NBP will offer
following products:

    a) NBP Karobar Utility Store (under a Franchise with Utility Stores Corporation)
    b) NBP Karobar Mobile General Store (without USC Franchise)
    c) NBP Karobar Transport
    d) NBP Karobar PCO
    e) NBP Karobar Tele-center

    a) NBP K AROBAR U TILITY S TORE
The product has been designed in collaboration with “UTILITY STORES CORPORATION OF
PAKISTAN (USC)” to provide financing facility of an average amount of Rs.100, 000/- for a
maximum period of five years with grace period of three months. This is available to all eligible
citizens of Pakistan for setting-up small-scale Retail Outlet or Mobile Utility Store. The USC
will give its franchise to qualifying Pakistani citizens. Following two financing options are
available under this product:

    1. NBP KAROBAR Utility Store (Shop)

The Financing facility is available to set-up a small scale Retail Outlet (Utility Store in a shop)
for purchase of furniture & fixtures. This is also applicable on payment of security deposit /
advance rent under franchise from the USC. However, stocks will be purchased by the customer.

    2. NBP KAROBAR Mobile Utility Store

Financing facility available to purchase a 2/3 wheeler, 4 stroke Petrol/CNG/LPG Vehicle (Auto
Scooter / Motorcycle Rickshaw) with attached Loader body (Thehla type) under franchise from
the USC to carry utility goods for retail sale ideally in areas where accessibility to conventional
utility stores is difficult.


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   b) NBP K AROBAR M OBILE G ENERAL S TORE ( WITHOUT USC F RANCHISE )
This financing program has been designed on the similar pattern of Mobile Utility Store. The
only difference is that the borrower will have the liberty of procuring stock/supplies/grocery
items from open market. Under this product the average loan size of Rs.100, 000/- will be given
for a maximum period of five years with a grace period of three months.

   c) NBP K AROBAR T RANSPORT
The NBP Karobar Transport is designed to finance 2/3 wheeler, 4 stroke Petrol/CNG/LPG
Vehicle (Auto Scooter / Motorcycle Rickshaw) to the eligible citizens of Pakistan for providing
less expensive environment friendly transport facility. Under this product average loan size of
Rs.100, 000/- will be provided for a maximum period of five years with a grace period of three
months.

   d) NBP K AROBAR PCO
This product is designed to finance setting-up a PCO. NBP will be providing financing for the
purchase of Mobile/Wireless Telephone Set with connection, Credit Balance. The average
amount of financing under this product will be Rs.5, 000/- for a maximum period of two years
with a grace period of three months.

   e) NBP K AROBAR T ELE - CENTER
This product is specially designed to finance setting-up a Tele-center. NBP will be providing
financing for the purchase of Mobile/Wireless Telephone Set with connection, Computer, Printer
and Fax machine cum Photocopier etc. to establish tele-center on a rented shop or owned
premises. The average amount of financing under this product will be Rs.50, 000/- for a
maximum period of two years with a grace period of three months.




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      3. CORPORATE ADVANCES
      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) RUNNING FINANCE/ OVERDRAFT
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 FINANCE
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




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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.


   4. REMITTANCES
   a) DEMAND DRAFTS
Drafts drawn by one branch on another branch or on the Head Office of same bank or vice versa,
are not cheques or bills, as these have no distinct drawer and drawee. Section 85-A reads:

“ Where any draft, that is, an order to pay money, drawn by one office of bank upon another
office of the same bank for a sum of money payable to order on demand, purports to be issued by
or on behalf of the payee, the bank is discharged by payment in due course”.

Banker’s drafts payable to order on demand are within the protection of Sections 10 and 131-A
of the Negotiable Instruments Act. However, if a demand draft drawn on a bank by its own
branch bears a forged endorsement, the person in possession of it cannot compel that bank to pay
it. As far as possible the banker’s draft should be crossed and it should never be drawn payable
to bearer.

When a person requires a draft he should be asked to complete the prescribed application form in
which he should state the amount of the draft, the name of the payee, and the place of payment.
This application form should be signed by the purchaser or by those persons who have been duly
authorized to act on his behalf. When a customer requests his banker to provide him with a
banker’s draft, the amount of which is to be debited to his account, he should enclose with his
written request a cheque covering the amount of the required draft and other charges etc. payable
to banker.19




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The National Bank of Pakistan provides demand drafts at very reasonable rates with safety,
speedy and reliable way to transfer money. Any person whether an account holder of the bank or
not, can purchase a Demand Draft form a bank.




    b) TRAVELERS CHEQUES
They are generally issued for the convenience of person travelling abroad, but some Pakistani
banks issue them in Pakistan currency also for use within the country as well. Before issuing, the
bankers receive an amount equal to the face value of the cheques, and also charge a small
commission. The travelers’ cheques are for fixed amount and are treated as Order cheques
payable only to the purchaser whose specimen signature appears on each traveler’s cheque itself.
Foreign currency travelers cheques are issued and encashed in accordance with the provisions of
the Exchange Control Regulation Act, 1947. While making payment, the paying banker must
insist that the holder signs in his presence.20

The National Bank of Pakistan provides their services for traveler’s cheque at very reasonable
and competitive rates. It has following features

  Negotiability           Pak Rupees Traveler’s Cheques are a negotiable
                         instrument
  Validity                There is no restriction on the period of validity
  Availability            At 700 branches of NBP all over the country
  Encashment              At all 400 branches of NBP
  Limitation              No limit on purchase
  Safety                  NBP Traveler’s Cheques are the safest way to carry our money



    c) LETTER OF CREDIT
Letters of credit are very useful instruments in facilitating commercial relations between
businessmen at various places. Letter of credit state the limit of the credit and the time during
which it is held at the disposal of the grantee, but they are neither negotiable nor transferable.
Letter of credit may be revocable. There are many kinds of letter of credit such as Revolving
credit, Back to Back credit, Claused credit etc.21 NBP is committed to offering its business
customers the widest range of options in the area of money transfer. If you are a commercial


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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.




   d) 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.

The new features of NBP foreign remittances include:

       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
       United National Bank (the joint venture between NBP and UBL in UK)., 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.

   e) 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-PKKA. All NBP overseas branches and overseas




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correspondents (over 450) are drawing remittances through SWIFT. Using the NBP network of
branches, we can safely and speedily transfer money for our business and personal needs.

   f) MAIL TRANSFER
A Mail Transfer is a form of remittance in which the amount remitted by a customer or a non-
customer is directly credited to the account of the beneficiary with another branch. 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. 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.


   g) TELEGRAPHIC TRANSFER
Telegraphic Transfer is a form of remittance, which is advised by telegram, telex or fax
machines. The fundamental principles of such transfer are otherwise identical with the Mail
Transfer. It is the message, which is sent from one branch to another on the order of payer to
payee through wire.     It is one of the quickest means to transfer fund through the use of
telex/fax/internet or cable. Payment to the beneficiary is affected directly by the drawee office
upon identification or through credit into beneficiary’s bank account. As such remitting office is
not required to issue any instrument payment to the remitter for delivery to the beneficiary.

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



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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.




   5. MISCELLANEOUS
   a) LOCKERS
National of Pakistan also provides lockers facility in the country. The lockers issued only to the
depositors. No lockers are issued to any unknown person. The dual control system is used for
lockers. The officer has master key to apply on the locker but he cannot open the locker of any
person. The locker holder provides the bank has specimen signature. Whenever the locker
holders come to open the locker, his signatures are verified by the officer and then will be able to
open his locker. If the key of the locker is lost company providing these lockers breaks the locker
and new lock is fitted in its locker and lock is destroyed in the presence of the locker holder and
bank charges RS 1200 for that. In case the locker holder dies, the court opens his locker in the
presence of his heir as mentioned in his will or and his belongings are given to them and the
locker is closed.

   b) NBP CASH CARD
NBP Cash Card is a 24-hour direct access ATM/Debit card to your bank account, which lets you
pay directly from your account as an alternative payment method to cash. The transaction is
authorized and processed by entering PIN. The NBP Cash Card holders are able to transact at
any of the 4000 + Merchants where Orix logo is displayed and can withdraw cash from NBP, 1-
Link & M-NET ATM’s across the country. The followings are the main features of this product:

       You won't need to carry a lot of cash with you every time you go out.
       Secure and Safe transaction.




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       Account Information on tips (like: Mini Statement, Balance Inquiry, Utility Bill Payment
       etc.)
       Enable To Withdraw Cash From 1-Link ATMs / MNET ATMs.
       Enable to Make Purchases from Around 4000 POS (Merchants) Countrywide including
       2500+ POS in Karachi.
       No Card Issuance Fee for first 12 Months




   c) 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, the Bank has 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




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ORGANIZATIONAL STRUCTURE OF NATIONAL BANK OF
PAKISTAN
A well-developed and properly coordinate structure is an important requirement for the success
of any organization. It provides the basic framework within which functions and procedures are
performed. Any organization needs a structure, which provides a framework for successful
operations. The operation of an organization involves a number of activities, which are related to
decision making, and communication of these decisions. These activities must be well
coordinated so that the goals of the organization are achieved successfully.

The Organization Structure (Annexed I) shows the internal operations and reporting lines of the
National Bank of Pakistan. The bank has clearly defined organizational structure, which supports
clear lines of communications and reporting relationships. There exists a properly defined
financial and administrative power of various committees and key management personnel, which
supports delegations of authority and accountability.

The internal operations of the Bank are organized into 15 main departments and divisions
headed by senior management of the bank and are report directly to the Board of Directors. The
organizational structure of National Bank of Pakistan is centralized because all the decisions of
the bank are taken by the top Management. The National Bank of Pakistan’s Departmental key
roles and functions are as follows:


BOARD OF DIRECTORS
Pursuant to Section 11 of The Banks’ (Nationalization) Act, 1974, the number of Directors of
the Bank shall not be less than 5 and not more than 7, excluding the President. The Federal
Government may, if deems necessary, appoint a Chairman of the Board in respect of the Bank.
At present National Bank of Pakistan’s Board of Directors consist of 6 Directors and a President
who is the Chief Executive of the Bank and presides over the meetings of the Board. The
responsibilities of Directors include the followings:22
    1. The Board of Directors shall assume its role independent of the influence of the
        Management and should know its responsibilities and powers in clear terms. it should be
        ensured that the Board of Directors focus on policy making and general direction,




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   oversight and supervision of the affairs and business of the Bank and does not play any
   role in the day-to-day operations, as that is the role of the Management.
2. The Board shall approve and monitor the objectives, strategies and overall business plans
   of the institution and shall oversee that the affairs of the institution are carried out
   prudently within the framework of existing laws & regulations and high business ethics.
3. All the members of the Board should undertake and fulfill their duties & responsibilities
   keeping in view their legal obligations under all the applicable laws and regulations.
4. The Board shall clearly define the authorities and key responsibilities of both the
   Directors and the Senior Management without delegating its policy-making powers to
   the Management and shall ensure that the Management is in the hands of qualified
   personnel.
5. The Board shall approve and ensure implementation of policies, including but not limited
   to, in areas of Risk Management, Credit, Treasury & Investment, Internal Control
   System and Audit, IT Security, Human Resource, Expenditure, Accounting &
   Disclosure, and any other operational area which the Board may deem appropriate from
   time to time. The Board shall also be responsible to review and update policies
   periodically and whenever circumstances justify.
6. As regards Internal Audit or Internal Control, a separate department shall be created
   which shall be manned preferably by professionals responsible to conduct audit of the
   Bank, Various Divisions, Offices, and Units Branches etc. The Head of this department
   will report directly to the BOD or Board Committee on Internal Audit.
7. The business conditions and markets are ever changing and so are their requirements. The
   Board, therefore, is required to ensure existence of an effective ‘Management
   Information system’ to remain fully informed of the activities, operating performance
   and financial condition of the institution, the environment in which it operates, the
   various risks it is exposed to and to evaluate performance of the Management at regular
   intervals.
8. The Board should meet frequently (preferably on monthly basis, but in any event, not less
   than once every quarter) and the individual directors of an institution should attend at
   least half of the meetings held in a financial year. The Board should ensure that it




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   receives sufficient information from Management on the agenda items well in advance of
   each meeting to enable it to effectively participate in and contribute to each meeting.
9. The Board should carry out its responsibilities in such a way that the external auditors
   and supervisors can see and form judgment on the quality of Board’s work and its
   contributions through proper and detailed minutes of the deliberations held and decisions
   taken during the Board meetings.
10. To share the load of activities, the Board may form specialized committees with well-
   defined objectives, authorities and tenure. These committees, preferably comprising of
   ‘Non- Executive’ Board members, shall oversee areas like audit, risk management,
   credit, recruitment, compensation etc. these committees of the Board should neither
   indulge in day-to-day affairs/operations of the bank and enjoy any credit approval
   authority for transaction/limits. These committees should apprise the Board of their
   activities and achievements on regular basis.
11. The Board should ensure that it receives management letter from the external auditors
   without delay. It should also be ensured that appropriate action is taken in consultation
   with the Audit Committee of the Board to deal with control or other weaknesses
   identified in the management letter. A copy of that letter should be submitted to the State
   Bank of Pakistan so that it can monitor follow-up actions.
   The Following table mentioned the names & designation of Board of Directors of
   National Bank of Pakistan:




         Name                                      Designation
         Syed Ali Raza                             Chairman & President
         Mr. Sikandar Hayat Jamali                 Director
         Mian Kausar Hameed                        Director
         Mr. Ibrar A. Mumtaz                       Director
         Mr. Tariq
         Kirmani                                   Director
         Mr. Muhammad Arshad Chaudhry              Director
         Mr. Mohammad Ayub Khan Tarin              Director
         Mr. Ekhlaq                                Secretary Board of
         Ahmed                                     Directors



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SENIOR MANAGEMENT
The senior management of National Bank of Pakistan is consists of Group chiefs, who report
directly to the Directors of Bank. The whole functions of National Bank of Pakistan are
performed under these Groups. The National Bank of Pakistan has following groups and
divisions:

       Corporate and investment Banking Group
       Operations Group
       Credit Management Group
       Audit & Inspection Group
       Compliance Group
       HRM & Administration Group
       Commercial & Retail Banking Group
       Treasury Management Group
       Special Assets Management Group
       Employees benefit & Disbursements Group
       Overseas & Coordination Group
       Islamic Banking
       Core Banking Application, PMO
       Financial Control Division
       Information Technology Group




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Name                                  Group Name & Designation
Masood Karim Shaikh                   SEVP & Group Chief, Corporate & Investment Banking Groupa g e | 41
                                                                                            P
Shahid Anwar Khan                     SEVP & Group Chief, Credit Management Group
Dr. Asif A. Brohi                     SEVP & Group Chief, Operations Group
Imam Bakhsh Baloch                    SEVP & Group Chief, Audit & Inspection Group
Ziaullah Khan                         SEVP & Group Chief, Compliance Group
Dr. Mirza Abrar Baig                  SEVP & Group Chief, Human Resources Management & Administration Group
Amer Siddiqui                         SEVP & Group Chief, Commercial & Retail Banking Group
Muhammad Nusrat
Vohra                                 SEVP & Group Chief, Treasury Management Group
Amim Akhtar                           EVP & PSO to the President
Ekhlaq Ahmed                          EVP & Secretary Board of Directors
Tajammal Hussain Bokharee             EVP/Divisional Head, Special Assets Management Group
Mrs. Khurshid Maqsood Ali             EVP & Divisional Head Employee Benefits, Disbursements & Trustee Division
Tahir Yaqoob                          EVP & Group Chief, Overseas Coordination & Management Group
Anwar Ahmed Meenai                    EVP & Divisional Head, Islamic Banking
Naeem
Syed                                  EVP & Head, Core Banking Application, PMO
Aamir                                 Financial Controller & Divisional Head, Financial Control
Sattar                                Division
Atif Hassan Khan                      Group Chief (A), Information Technology Group


          1. CORPORATE & INVESTMENT BANKING GROUP
       The corporate & investment banking group is headed by Mr. Masood Karim Shaikh. This group
       performs its function through its following two units:
              Corporate Banking
              Investment Banking
       The corporate and investment banking will continue to play a major role in loan syndications,
       structured financing and debt / capital raising transactions with the objective of providing entire
       range of corporate and investment banking solutions to its valued clients under one umbrella.

       The Corporate Banking Group achieved excellent results in 2007 with a number of landmark
       transactions in cement, energy, communication and fertilizer sectors. In addition to the funded
       income, our corporate and investment banking has substantially increased its fee base income
       this year by being the lead advisor in a number of transactions in the corporate world of Pakistan

       The challenges to corporate business in year 2007 were manifold including reduction in Private
       Credit Investment as a result of slowing down of economy as well as rising interest rates. The
       increasing pressure on the textile industry reduced the lending to this sector. In addition the
       bank's corporate loans yields also faced pressure as substitute form of funding sources are



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available in the market in form of Islamic financing, mutual funds, issuance of debt instruments
like TFCs and Bonds and the Capital markets.

Despite these threats and challenges at NBP, our corporate team not only increased the volume
as well as the yield of the loans they also maintained a strong franchise with the leading
Pakistani corporate so as to ensure that NBP not only maintains its market share but is in a
position to meet any challenges in future. NBP during the year also participated in a number of
TFC issues and mutual funds subscriptions thereby increasing the overall yield on investment
portfolio.

NBP has the largest equity portfolio in the banking sector primarily due to 27% holding in NIT
units, the largest mutual fund in Pakistan. During the year 2008 the bank redeemed 10% of its
NIT holding covered under LoC, which resulted in capital gain of Rs. 1.8 billion in 2008.

The National Bank of Pakistan has initiated a structured approach to corporate banking by
introducing a single point of contact through Relationship Managers. For this purpose, new
Relationship Managers as well as team leaders has been inducted to expedite this process. The
Area Managers of National Bank of Pakistan are appointed to manage relationships and to better
service the needs of multinationals and large local corporate. An investment banking team has
also been formed by National Bank of Pakistan to offer specialized services to major
relationships including advisory and debt syndications. The National Bank o Pakistan have
special focus on Corporate Banking with a presence in all major locations through out the
country, offering full range of Banking products / services and one window interface through
designated Relationship Managers. Corporate Banking offers tailor made products / solutions as
required by corporate customers which includes:

The key features of corporate Banking includes:

        Funded facilities, ranging from short to medium and long term lending

        Trade related financing.
        Foreign currency financing.
        All sorts of non-funded facilities / services which include Cash receipts / payments,
        Remittances, Collections, guarantees, letter of credit etc.



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       Customized products / solutions

   2. COMPLIANCE GROUP
The Compliance Group of National Bank of Pakistan is headed by Mr. Ziaullah Khan and is
report directly to the President/ Chief executive of NBP. In order to keep the working of Audit
Department aligned with the best international practices 'Compliance Group’ has been created.
This group is responsible for monitoring compliance of various administrative / operative
instructions, rules, and regulations by constantly reviewing and reporting status of compliance
and non-compliance. The Compliance Group of NBP is set to ensure that all relevant laws are
complied with, in letter and spirit, and, thus, minimize legal and regulatory risks. The
Compliance officers will primarily be responsible for Bank’s effective compliance relating to:
       Relevant provisions of existing laws and regulations.
       Guidelines for KYC.
       Anti money laundering laws and regulations.
       Timely submission of accurate data / returns to regulator and other agencies.
       Monitor and report suspicious transactions to President / Chief Executive Officer of the
       bank and other related agencies.
       The Compliance Officers will serve as a contact point between President /Chief executive
       officers and senior management, with regard to functioning of compliance program
       provide assistance in this area to branches and other departments of the bank, and act as
       liaison with State Bank of Pakistan concerning the issues related to compliance.
The functions of compliance group of National Bank of Pakistan are as fallows:
       Study and emphasize compliance of best international practices in audit of various
       functions of NBP.
       Monitor compliance of Administrative/Operational Instructions, Rules, Regulations
       issued from time to time by the Management.
       Review over the compliance carried out by the audit departments.
       Prepare and put up a consolidated Report to the Directors of National Bank of Pakistan
       regarding the status of compliance and non-compliance of the recommendations agreed
       by the Departmental Management.

   3. ISLAMIC BANKING GROUP


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The divisional head of Islamic Banking group is Mr. Anwar Ahmed Meenai. Islamic Banking is
one of the emerging field in global financial market, having tremendous potential and growing at
a very fast pace all around the world. Al-Hamdulillah, the progress of Islamic Banking in
Pakistan has also been commendable during the last Five years. The year 2007 marked the first
year of Islamic Banking operations. During the year under review, in addition to active
participation in various Sukuk transactions, two more Islamic Banking branches at Lahore and
Peshawar started operations. NBP's plans for the year 2008 include opening of Faisalabad and
Rawalpindi branches with the focus on growing organically by opening more standalone Islamic
Banking branches, utilizing NBP's existing branch network of 1,200 plus conventional branches
and looking into strategic acquisitions for expansion in this field. The products & services being
offered by National Bank of Pakistan’s Islamic Banking are fully Shariah Compliant and have
been certified by NBP’s Shariah Advisor. Deposit Schemes being offered by NBP’s Islamic
Banking Branches include the following:
   a) Current Deposit Scheme
   b) Profit & Loss Sharing (PLS) Deposit Scheme
Commercial and Corporate customers requiring financing will have the following financing
facilities available to them to meet their requirements:
   a) Murabaha
   b) Murabaha Facility
   c) Ijarah (Leasing)
In addition to Shariah acceptable standard general banking services, following services are also
being offered at the Islamic Banking Branches:
       Letter of Credit Facility
       Handling of Remittances
       Issuance of Bank Drafts and Pay Orders.
       Collection of Export Bills.
       Collection of Local Bills.
       Government Collections
       Utility Bills Collection


   4. TREASURY MANAGEMENT GROUP

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The group chief of Treasury management group of National Bank of Pakistan is Mr. Muhammad
Nusrat Vohra. The NBP treasury and capital market group has developed a reputation of being
the market leader in coming up with customized solutions for a large and varied client base that
is spread virtually all across the country. The client base does not consist of only blue chips ones
but encompasses public sector clients, retail sector, multinationals, local conglomerates as well
as individuals.
National bank treasury is currently regarded as a market leader in both foreign exchange and
rupee denominated products because of its emphasis on service quality. The Treasury
management group of National Bank of Pakistan’s offer:23
       Narrowest bid / offer spread and quickest on line quotes
       Customized solutions to minimize risk and optimize returns as per the needs and
       circumstances of the clients
       Focus on building sustained and long term relationship with institutional, corporate and
       retail clients.
       Local presence across the nation as well as internationally.
Currently the National Bank of Pakistan offer following Treasury Products:24

   a) P LAIN V ANILLA FX P RODUCTS
NBP Treasury Management Group is a market price maker and trend setter in the plain vanilla
Foreign Exchange products. Its ability to offer tight prices, coupled with timely and accurate
research making it a bank of choice for clients seeking to favorably position their currency risk
As a result, National bank has one of the largest FX book in the country.

   b) P AKISTAN I NVESTMENT B ONDS
Pakistan Investment Bonds issued by Government of Pakistan are a preferred means for a
majority of institutional investors to invest their surplus funds for a longer time horizon. This
way they are able to lock a higher yield for a relatively long term rather than take the risk of re-
pricing after relatively shorter time periods. Furthermore, PIBs are highly secured and risk free
as they are guaranteed by the government of Pakistan.

NBP is the leading Primary Dealer for PIBs primarily because of its inventory size and the
appetite for such a long-term instrument given its deposit base. While most foreign / private



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banks would have to go to the secondary market in order to satisfy a large order from an
institutional investor, NBP can execute such large orders through its own book. This means that
it can offer tight prices for large amounts even under volatile market conditions.




   c) D ERIVATIVES P RODUCTS
NBP treasury Management group has been at the forefront in developing the derivatives market
in Pakistan and has contributed both individually and from the FMA (Financial Market
Association) front as well. The first ever Derivative transaction of the Pakistani banking sector
was done by NBP. Some of the more common derivative structures being offered include:

   1) C URRENCY O PTIONS
An option gives the buyer the right but not the obligation to buy or sell an asset at a pre-specified
date and price. So the upside profit potential is unlimited whereas the downside loss is protected
at a pre determined level. Various structures of currency options are available including
       Knock-ins / Knock outs
       Participating Forwards

   2) INTEREST R ATE S WAPS AND FRA S
A client can convert a fix rate loan into floating rate one or vice versa by using these derivative
instruments. This allows the clients to develop and implement their views about the evolving
interest rate scenario. For example, if the borrower feels that the interest rate might go up in the
future, than he may choose to enter into a Pay Fixed – Received Floating swap with its bank to
effectively hedge its floating rate loans.

   3) C ROSS C URRENCY S WAPS
This product allows a client to convert its rupee based loans into a dollar based loan. The client’s
exposure is shifted from PKR KIBOR to USD LIBOR.
The functions of Treasury management group include:




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       The Management of National Bank of Pakistan’s holdings in and trading in government
       and corporate bonds, currencies, financial futures, options and derivatives, payment
       systems and the associated financial risk management.
       The management of cash flows, banking, money-market and capital-market transactions;
       the effective control of the risks associated with those activities; and the pursuit of
       optimum performance consistent with those risks.
       Presentations of information on which treasury-management decisions are to be taken
       reflect the principles of trustworthiness, honesty, truthfulness and objectivity.
       Employing National Bank of Pakistan’s treasury-management policies and practices
       accurately reflect the legal and regulatory regimes under which the Bank operates.
       Review of National Bank of Pakistan’s treasury-management policies and practices on a
       regular basis with a view to identifying ways of minimizing the risks of losses through
       improved checks and safeguards and through clarity and segregation of responsibilities
       and dealing procedure.

   5. CREDIT MANAGEMENT GROUP
The group chief of Credit Management Group is Mr. Shahid Anwar Khan. This group usually
deals with Bank’s allocations of payments or cash application, internal fund movements,
reconciliations and also maintaining positive working relationships with customer during the
debt collection or credit review and approval process, screening of customers and only those who
is credit worthy are allowed to do business. The divisions of this group are distributed according
to different areas which are:
   1) NWFP Azad Kashmir Sind & Balochistan area wing
   2) Karachi area wing
   3) Special Credit Cell & Punjab area Wing
The functions of this department include:
       Enforcing the State Policies, financial regulations, and credit rules of the bank
       Framing credit policies and regulations; supervising the staff to execute orders
       Putting forward the proposal of credit management and development; guiding and
       supervising the branch-banks to deal with credit business
       Managing the authorized business; dealing with the legal affairs consulted and
       coordinated


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       Establishing development rules on credit; dealing with the acceptance draft; estimating
       the loaning accounts
       Responsible for reporting the credit statistic statement
       Responsible for training client managers
       Responsible for dealing with other work according to the directors of the bank
       Responsible for the credit-registered consulting system; regulating the five-graded loans

   6. AUDIT & INSPECTION GROUP
The group chief of National Bank of Pakistan’s Audit & inspection group is Mr. Imam Bakhsh
Baloch. It is one of the core departments at NBP. Its mission is to strive for soundness & stability
of the financial system and safeguard interest of stakeholders through proactive inspection,
compatible with best international practices. This group plays a vital role in meeting NBP’s main
responsibility of supervising the bank’s soundness of the system and protection of the interest of
depositors, thereby ensuring public confidence in the system. In order to assess the branches,
Audit & inspection group conducts regular audit & inspection of branches. Bank's management
has established and is managing an adequate and effective system of internal control which
encompasses the policies, procedures, processes and tasks as approved by the Board of Directors
that facilitate effective and efficient operations. The management and the employees at all levels
within the Bank are required to perform as per these approved Internal Control System
components. The Internal Control System ensures quality of external and internal reporting,
maintenance of proper records and processes, compliance with applicable laws and regulations
and internal policies with respect to conduct of business. The management ensures that an
efficient and effective Internal Control System is in place by identifying control objectives,
reviewing existing procedures and policies and ensuing that control procedure and policies are
amended for time to time wherever required. However, Internal Control System is designed to
manage rather than eliminate the risk of failure to achieve objectives and provide reasonable but
not absolute assurance against material misstatement or loss.25 The audit system of National
Bank of Pakistan consists of following:
    a) Internal Audit
    b) External Audit
    c) Statutory Audit




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    a) I NTERNAL A UDIT
The Bank has an independent Internal Audit Group that conducts audit of all Branches, Regions
and Groups at Head Office on an on-going basis to evaluate the efficiency and effectiveness of
Internal Control System. In addition to that, Compliance Group is also in place with independent
Compliance Officer in 119 Branches and 29 Regional Compliance Chiefs with supporting staff
to take care of compliance related issues to strengthen the control environment.26

For the purpose of inspection the National Bank of Pakistan inspects its branches through
inspectors. Inspections are conducted on regular basis in the branches. The current chairmen of
audit committee of NBP are Azam Faruque, Ibrar. A. Mumtaz & Mian Kausar Hameed. The
State Bank of Pakistan conducts the regular full scope examination of banks pursuant to an
inspection schedule; however, flexibility exists in policy for frequency of inspections depending
upon the need to maintain safety & soundness. The CAMELS (Capital, Asset Quality,
Management, Earnings, Liquidity, Sensitivity and System & Controls) rating is a criteria to
determine the frequency of inspection of banks as weak institutions are given greater attention.
Special investigations (targeted inspections) are also conducted as and when circumstances so
warrant on the basis of complaints or market reports about specific institution.

    b) E XTERNAL A UDIT
The Board of Directors on the recommendations of Audit Committee has also recommended
name of Messer’s Ford Rhodes Sidat Hyder, Chartered Accountants and Yousaf Adil Saleem &
Co. as auditors of National Bank of Pakistan.

    c) S TATUTORY A UDIT
The statutory audit of National Bank of Pakistan is conducted to meet the particular requirements
of State Bank of Pakistan. The scope and audit programs are set by the State Bank of Pakistan.
The National Bank of Pakistan has to pay a penalty of Rs.20000 for each mistake in the Books
and procedures as prescribed by the law plus surcharge of per day from the date of mistake to the
date of statutory audit.

The functions of Audit & inspection group of National Bank of Pakistan are as fallows:




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       Examine and evaluate adequacy and effectiveness of the internal control systems in the
       Bank.
       Review the applications and effectiveness of risk management procedures and risk
       assessment methodologies in financial, operational and Corporate Governance aspects of
       the Bank’s activities.
       Review financial, automation technology and MIS.
       Review and ensure accuracy and reliability of accounting records and financial reports.
       Perform testing of both transactions and functioning of specific internal control
       procedures.
       Evaluate and ensure that approved policies and procedures meet legal and regulatory
       requirements.
       Examine and evaluate effectiveness of existing policies, procedures and give
       recommendations for improvements.
       Identify opportunities for cost savings in Bank operations and make recommendations.
       Examining those resources are acquired economically, used efficiently and safeguarded
       adequately.
       Review various reports of Bank’s subsidiaries, recommend improvements and provide
       policy guideline

   7. HUMAN RESOURCE MANAGEMENT & ADMINISTRATION GROUP
The group chief of Human resource management & administration group is Mr. Dr. Mirza Abrar
Baig. This Division is responsible for fresh induction of employees and other professionals
through a rigorous induction process in order to ensure presence of quality professionals.
Following units and areas of work are the part of this division. This group is responsible to
develop annual manpower plan for National Bank of Pakistan, conduct job analysis, prepare job
descriptions, and conduct job evaluation process. The other functions of this group include
attracting, selecting and recruiting the right people from the market. The group firmly works on
adopting latest organizational theories & change management processes to bring in efficiency.
This group also performs following functions:
       Deals from placing job advertisements to timely recruitment of competent personnel by
       using modern selection techniques.




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       Systematically observes & measures employee’s/candidate’s performance for the purpose
       of recruitment, selection and promotions.
       Facilitates in establishing successful productive working relationships through effectively
       orienting new employees to their respective departments/divisions and to their positions.
       Encourages employees to seek promotion/transfers to fill internal openings and meet
       employees’ personal objectives.
       Foster a culture of acknowledgement and appreciation amongst employees for
       introducing innovative business practices, showing extra ordinary efforts for achievement
       of goals and enhancing Bank’s corporate image uses various methods of recognition
       ranging from simple “Thank you” letters to elaborate celebrations and monetary rewards.
       Conducting motivation surveys and developing market based employee satisfaction &
       retention strategies.
       Conduction of evaluation of positions and grades to ascertain employees’ position in the
       grade structure.
       This Group supervises all the staff colleges, at Karachi, Islamabad, Lahore and Peshawar.

    8. INFORMATION TECHNOLOGY GROUP
The group chief of Information technology group is Mr. Atif Hassan Khan. This group is formed
to implement latest technology to keep National Bank of Pakistan online with the domestic and
international financial industry, and other stakeholders in order to promote efficiency and
stability in the financial market. The group’s objective is to provide appropriate technical
solutions to business requirements and develop state of the art integrated system that will
facilitate internal and external stakeholders to acquire accurate information in the most effective
manner. The National Bank of Pakistan with its capabilities, methodologies and experience aims
at technological advancement in bank, focusing on solutions that intend to reduce operating
costs, improves end user performance, and meet overall business goal.
The group provides services and solutions to improve and strengthen NBP’s technology portfolio
and identify future requirements. Besides providing these useful resources, IT group focuses on
safeguarding the information assets and relevant systems, critical to NBP, through its Security
plans and policies. The information technology group has following divisions:
       In-house Development
       Software development


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       Web development
       Central Server
       System Admin – UNIX
       System Admin – Windows
       Customer Support
       Database Management
       Network Management
       Production Support
       Administration
       Director Section

    9. FINANCIAL CONTROL DIVISION
This division is headed by Mr. Atif Hassan Khan, who is also financial controller of National
Bank of Pakistan. The financial control division is responsible to perform and manage following
functions:
       Maintenance of books of accounts and preparation of financial statements of the Bank in
       accordance with the IAS, as adopted by the Bank.
       Coordination and facilitation for Business planning and budgeting function in the Bank
       and periodic reporting to the management and to the Board.
       Preparation of Annual Financial Statements Accounting Policies for the bank.
       Quarterly profit updates to the Board of Directors.
       Consolidation of Departmental Budgets.
       Maintenance of Federal & Provincial Government Account on the basis of receipt and
       payments.
       Monthly Abstract, Daily Reserves and Weekly review reporting.
       Short/Medium term investment and Swap deposits and maintenance of Foreign Currency
       accounts and revaluation of Foreign Currency Assets & Liabilities.
       Making of payments to external suppliers and employees of the Bank after independent
       verification of transaction documents on the basis of bills/ invoices/claims approved by
       the processing units.
       Checking and verifying the selected financial transactions to ensure accuracy and
       compliance to respective rules and regulations.


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       Assets capitalization, assets transfers and overall responsibility to manage and maintain
       assets physical inventory, keeping track of physical location of assets.
       To ensure the smooth and unhampered running of the Fixed Assets Management
       function.
       To record all the expenses regarding repair/ maintenance and rent taxes for NBP
       buildings and equipments.
       To deal with various administrative matters arising in the Finance Department.
       To respond to various queries rose from various internal and external sources.

    10.       OVERSEAS COORDINATION & MANAGEMENT GROUP
The group chief of NBP’s overseas coordination & management group is Mr. Tahir Yaqoob.
This department is in charge of the management and operation of foreign exchange business
including marketing and operating of the financial products and trade financing of foreign
exchange in the light of National foreign exchange management policy, and is the governing
department of foreign exchange. The functions of this group are as follows:
       Establishing marketing strategy, policy and management system of foreign exchange.
       Making annual operating and working plan.
       Selecting and opening overseas account under supervision, and establishing and
       harmonizing the business among agent banks.
       Corresponding and dealing with foreign exchange business among branches.
       Showing business requirement of costumers and development of new products;
       publicizing foreign exchange business; training managers of customer-service for foreign
       exchange business.
       Managing and operating foreign fund of the whole bank.
       Making deposit and loan rate of each wholesale foreign exchange according to
       management and market situation of deposit and loan rate of foreign exchange
       Focusing on direct marketing of VIP customers and overall plans to put all resources
       together so as to provide one-stop service.
       Examining and approving international business financing(import & export bill purchase,
       foreign exchange      bill discount, acceptance, documentary credit, stand-by L/C,
       international non-financing guarantee and so on) .
       Auditing foreign exchange business.


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       Management and operation of researching credit, and consult and testimony business.
       Managing turnover position of exchange settlement and sales.
       Declaring international balance, register foreign loans and manage foreign exchange
       account.
       Supervising wholesale foreign exchange deposit and payment to defend money
       laundering and bank swindle.
       Managing and operating SWIFT system and foreign exchange system.
       Organizing international business research and statistic; establishing and improving
       foreign exchange files; making accounting report forms and business report forms.
       Regularly examining the executive results of all system of foreign exchange and renovate
       all the problems.
       Contacting and corresponding with National foreign trade department, customs, industry
       governing department and foreign exchange department.
       Examining and approving the branches launching foreign exchange business, applying
       for new foreign business category to the People’s Bank of China according to current
       foreign exchange policy.
The National Bank of Pakistan is shifting focusing on expanding its market share in trade
finance, home remittance and foreign investments. The Bank is setting high-speed satellite link
along with the extension of S.W.IF.T service to large domestic and international branches.

    11.        COMMERCIAL & RETAIL BANKING GROUP
The group chief of National Bank of Pakistan’s commercial & retail Banking group is Mr. Amer
Siddiqui. Retail banking includes retail lending and deposits, banking services, trust and estates,
private lending and deposits, banking service, trust and estates investment advice, merchant /
commercial / corporate cards and private labels and retail.27 Commercial banking includes
project finance, real estate, export finance, trade finance, factoring, lending, guarantees, bills of
exchange and deposits.
This group is responsible for serving the needs of the retail and commercial market, focusing on
individual consumers and small and medium size enterprises. This group is responsible for
developing and managing brands which serve the investment needs of the consumer market, and
focuses on deposit mobilization, provision of value added services based on modern technology
and undertaking the centralized marketing and advertising for the Bank. This group is engaged in


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the development and management of retail credit schemes. The consumer market in Pakistan has
not only grows exponentially over the last decade or so, but the needs of this segment have
become extremely diverse. In order to sustain competition, it is but imperative to continue
offering innovative consumer credit schemes.

The National Bank of Pakistan plan to establish commercial centers across the country looking at
the business potential in the area, size of the branch and its capabilities to deliver the desired
service in order to attract quality customers. The objective is to target the untapped sectors and
provide them professional quality service, through one window operations and Relationship
Managers stationed at those centers. We expect and hope to reduce the turn around time and
become more competitive and market oriented. Further this customer friendly and dedicated set
up at convenient locations would help in improving the image of the Bank as well. These Centers
would work in conjunction with the existing set–up of Commercial Lending done throughout the
NBP branch network. The main purpose of these centers is to generate ancillary business in
addition to funded and non-funded facilities, with quick turn around time in decisions for
customer satisfaction.

    12.        SPECIAL ASSETS MANAGEMENT GROUP
The group chief of Special assets management group is Mr. Tajammal Hussain Bokharee. The
Special Asset Management Group (SAMG) is a group of people with specialized skills in
managing the "stressed" assets of National Bank of Pakistan. The group was created with a view
to enable restructuring and recoveries through various initiatives like innovative work-outs,
merger & acquisition strategies, asset stripping, security enhancements and structured sell-
downs. The group has also been working with / advising various governmental and regulatory
bodies in evolving a framework for implementing international best practices like asset
reconstruction companies in the country.
With provision coverage of 84% we believe that going forward our Special Assets Management
Group will make major contribution towards the Bank's profitability through recoveries and
reversal of provision charge as a result of declassification / rescheduling. We have revamped our
special assets management business and have coordinated our efforts to expedite recoveries and
settlements.




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    13.        EMPLOYEE BENEFITS, DISBURSEMENTS & TRUSTEE DIVISION
The divisional head of this division is Mr. Mrs. Khurshid Maqsood Ali. The function of the
National Bank of Pakistan’s Employee benefits, disbursement & trustee division is to handle the
administration of trust funds, provide estate planning support, and in some cases see to the
disposition of the estate of a deceased customer. One of the factors that make the use of this
department so attractive is that it tends to be somewhat conservative with their management
approach. This means that this department is likely to take time to evaluate all options when
involved in settling estates, establishing guardianships, or administering trusts that have been set
up for the survivors of a major depositor. This methodical approach is often in line with the
motivation for establishing the asset in the first place, which was to provide a source of financial
support for loved ones, even after a parent or significant other has died.
Along with estate settlement, this department also provides a number of other agency services,
such as functioning as the trustee of record for corporate bonds or administering a pension or
profit sharing plan. As a means of ensuring that the resources of the bank safely protect the
investments involved, the department makes it relatively easy for the client to deal with other
matters. Thus, the investor can focus more on family or other business matters, and be less
involved in the task of protecting assets that are already established and set on a path of
consistent growth.


EMPLOYEE BENEFITS OF NATIONAL B ANK OF P AKISTAN
D EFINED B ENEFIT P LANS

   1. P ENSION S CHEME
The bank operates defined benefit approved funded pension scheme for its eligible employees.
The bank’s costs are determined based on actuarial valuation carried out using Projected Unit
Credit Method. Net cumulative un-recognized actuarial gains/losses relating to previous
reporting period in excess of the highest of 10% of present value of defined benefit obligation or
10% of the fair value of plan assets are recognized as income or expense over the estimated
working lives of the employees. Where the fair value of plan assets exceeds the present value of
defined benefit obligation together with unrecognized actuarial gains or losses and unrecognized
past service cost, the bank reduces the resulting asset to an amount equal to the total of present



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value of any economic benefit in the form of reduction in future contributions to the plan and
unrecognized actuarial losses and past service costs.

    2. P OST RETIREMENT MEDICAL BENEFITS
The bank operates an un-funded defined post retirement medical benefits scheme for all of its
employees. Provision is made in the financial statements for the benefit based on actuarial
valuation carried out using the Projected Unit Credit Method. Actuarial gains/losses are
accounted for in a manner similar to the pension scheme.

    3. B ENEVOLENT SCHEME
The bank also operates an un-funded defined benefit benevolent scheme for its eligible
employees. Provision is made in the financial statements based on the actuarial valuation using
the Projected Unit Credit Method. Actuarial gains/losses are recognized in the period in which
they arise.

    4. G RATUITY SCHEME
The bank also operates an un-funded defined benefit gratuity scheme for its eligible contractual
employees. Provision is made in the financial statements based on the actuarial valuation using
the Projected Unit Credit Method. Actuarial gains/losses are accounted for in a manner similar to
pension scheme.

O THER EMPLOYEE BENEFITS

    1. E MPLOYEES ' COMPENSATED ABSENCES
The bank accounts for all accumulating compensated absences when employees render service
that increases their entitlement to future compensated absences. The liability is determined based
on actuarial valuation carried out using the Projected Unit Credit Method.

T RUST ACTIVITIES OF N ATIONAL B ANK OF P AKISTAN

    a) N ATIONAL INVESTMENT T RUST (NIT)

Under a trust deed, the bank provides services, as a trustee to NIT and is performing functions of
sale/purchase of NIT units, safe custody and maintaining unit holder’s accounts.



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   b) LONG - TERM C REDIT F UND (LTCF)
Consequent upon the NDFC amalgamation, the bank manages on behalf of the Government of
Pakistan, LTCF established from the proceeds of loans disbursed by various international
funding agencies for financing private sector energy development projects. The National Bank of
Pakistan is in process of negotiating the charge of fee in consideration of administrative services
to the LTCF.




   c) Q ARZ - E -H ASNA F UND
The work relating to Qarz-e-Hasna Scheme was attended by Pakistan Banking Council (PBC)
since inception. PBC was dissolved in January 1997. In order to fill the void created by the
dissolution of PBC and in order to continue the scheme, SBP decided to entrust all funds and
transfer all record relating to Qarz-e-Hasna scheme for education to the bank with the
instructions to perform all work relating to the Fund.

    14.        CORE BANKING APPLICATION
The head of core banking application is Mr. Naeem Syed. The core banking application is an
integrated application that supports real time, multi banking and multi channel strategies. The
single biggest achievement of implementing the Core Banking Solution is that each customer is
truly the customer of the Bank and not just the customer of the Branch, where his/her account is
maintained. The customer can go to a branch anywhere in the country and perform a transaction.
This is possible as the entire Customer Database is centrally located at the central Data Centre
and can be accessed throughout the network of branches. Business processes in all the branches
of National Bank of Pakistan update a common database in a central server located at data
centre, which gives a consolidated view of bank’s operations.
Key features of the Core banking application of NBP
       24X7 Banking
As a result of implementing Core Banking, most of the facilities being offered by bank are
available to Customers 24 hours a day, 7 days a week. The transactions are performed using
multiple channels such as ATMs, Internet Banking, Phone Banking and Mobile Banking.
       Anywhere Banking



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Customers can avail of banking services across the branch and Channel network irrespective of
location where their account is maintained.
       Integration with strategic sectors
Core Banking integrates all strategic sectors of Banking such as Trade Finance, Treasury, Asset-
Liability Management and Corporate Balance Sheet. As a result, the information related to these
areas is centrally available for use or reference.
       Strengthening MIS, DSS and EIS
Core banking application is more than just a transaction processing system. It provides updated
data for generating various reports for Management information system (MIS), and will facilitate
Decision Support System (DSS) and Executive Information System (EIS). As data is located on
CDC, branches and administrative offices can concurrently avail updated data when required.
       Business Process Re-engineering
Core Banking would enable implementation of BPR initiatives of a Bank and facilitate
centralized handling of various processes. Branches would do less and less back office work and
would be able to focus on marketing, customer relationship management and cross selling.

    15.        OPERATIONS GROUP
The group chief of National Bank of Pakistan’s Operation group is Mr. Dr. Asif A. Brohi. This
group is being created to efficiently collect and utilize the feedback from the branches to support
product development and enhance the quality of service. The National Bank of Pakistan is
currently improving the service orientation at its branches, as these constitute the “front line” of
the Bank in terms of contact with its customers. The operations group is in the process of
introducing E-Commerce initiatives based on customer friendly technologies. The group creates
products to utilize the benefits of E-Commerce for its customers.
We are committed and focused towards good quality customer service and in 2007 with the
motto of “Putting a smile on our Customer's face.” We made concerted efforts and took a
number of initiatives. Workshops and seminars were conducted to disseminate the very
important message of “Excellent Customer Service”. We are transforming our branches to give a
modern look and convenience. A number of branches have been shifted to prominent and
spacious locations. We also have established specialized customer facilitation centers to
exclusively cater to pension payments, utility and government collections. These are expected to
reduce counter traffic at our branches and will increase our distribution channels for better and


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convenient services. Business hours have been extended with establishment of customer
facilitation offices at the regional levels to help on the spot resolution of customer complaints.




PROVINCIAL & REGIONAL MANAGEMENT
There are four executives of National Bank of Pakistan to supervise the Bank’s maters of every
province, as they are called Provincial Chiefs. These provincial chiefs are responsible for the
entire banking operations in their respective provinces. The provincial management includes:
       The Provincial Chief Punjab
       The Provincial Chief Sind
       The Provincial Chief Baluchistan
       The Provincial Chief N.W.FP & Kashmir
These provinces are sub-divided into regions, the regions are controlled and manage by Regional
heads, which are responsible for the supervision in their circles and deal with the problems of
their respective Regions. The regional management of National Bank of Pakistan is divided into
two areas which are:
       Overseas
       Countrywide
The overseas regions include Middle East, Far East, Europe & USA, and Central Asia. The
country has been divided into 29 regions by National Bank of Pakistan to facilitate its functions.
The detail about National Bank of Pakistan’s regions is shown as Annexed-II at the end of the
report. These regions are sub divided into Zones, the in charge of a Zone is called Zonal Chief.


BRANCH MANAGEMENT
The National Bank of Pakistan, in order to facilitate its functions on branch level appoints
Branch Managers & other staff according to branch’s activities and volume of business. The


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branch managers are responsible for all functions and staff within the branch office. The job of
branch managers is to take charge of the entire operation of his branch, making sure that
everything runs smoothly. The other functions involves scheduling of employee work hours,
overseeing training, hiring and firing, assuring that proper procedures are followed, and reporting
to upper management any problems or providing reports and updates as required by bank’s
protocol.




ORGANIZATIONAL (MANAGEMENT) LEVELS AT NBP
Successful and profitable banking management deepens upon two principal factors:

   a) The manner in which the function of banking, that is, the acquiring of deposits, the
       investing or converting such deposits into earning assets, and the servicing of each
       deposits, are performed.

   b) The degree to which officers and employees contribute their talents to the progress and
       welfare of the bank in discharging duties and responsibilities.

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.28 The management has two types i.e..,

   a) Centralized (Centralized Management tends to concentrate decision making at the top of
       the organization)

   b) Decentralized (Decentralized disperses decision making and authority throughout and
       further down the organizational hierarchy)

National Bank of Pakistan has a centralized type of management because all the decisions are
taken by the top management. The National Bank of Pakistan has four types of management
levels which are as fallows:




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TOP MANAGERS
Top managers are responsible for making organization-wide decisions and establishing the plans
and goals that affect the entire organization. These individuals typically have titles such as
executive vice president, president, managing director, chief operating officer, chief executive
officer or chairman of the board. The NBP have its top management in their head office at
Karachi. They are responsible for making the plans and establishing goals the run their business
smoothly all over Pakistan & around the globe. Among seven member of group Chief Executive
is called the president. The bank has directors for superintendence and direction of its business.
The Government appoints six directors as members and one president. These members are also
responsible for making the policy of the bank.


MIDDLE MANAGERS
Middle managers include all levels of management between the first line level and the top level
of the organization. These managers manage the work of first line managers and may have titles
such as department head, project leader, plant manager or division manager.29 NBP divided his
management into various regions such as Rawalpindi region, Gujranwala region etc. In NBP,
regional management falls under this category.           They are responsible for the planning,
organizing, leading and controlling of the resources and staff of the whole region.


FIRST LINE MANAGERS OR LOWER LEVEL MANAGEMENT
First level managers are the lowest level of management and manage the work of non-managerial
individuals who are involved with the production or creation of the organizations products. The
branch managers of NBP fall under this category. These managers are responsible for planning,
organizing, leading and controlling the staff and all affairs of the branch.


NON MANAGERIAL EMPLOYEES
Non managerial employees are not concerned with any decision making. They are normally
specialized in their work. The nature of their job is repetitive & clerical as they do same work
again & again. The non managerial employees of NBP consist of OG-II, OG III and clerical
staff.


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HIERARCHY OF NATIONAL BANK OF PAKISTAN
The Hierarchy (An arrangement of objects, people, elements, values, grades, orders, classes etc.,
any system of persons or things ranked one above another) of National Bank of Pakistan is
shown as Annexed III at the end of this report. The hierarchy may include:

       Categorization of a group of people according to ability or status.
       A body of clergy organized into successive ranks or grades with each level subordinate to
       the one above.
       A series in which each element is graded or ranked
       A body of officials disposed organically in ranks and orders each subordinate to the one
       above it; a body of ecclesiastical rulers.
       An organization with few things, or one thing, at the top and with several things below
       each other thing.

The President of National Bank of Pakistan is ranked Top at the hierarchy. The other six
directors of National Bank of Pakistan are ranked second in the hierarchy. The Provisional,
Regional & Zonal chiefs are ranked 3rd, 4th & 5th respectively. The vice President & assistant vice
Presidents of National Bank of Pakistan are ranked 6th & 7th respectively. The Officers Grade I,
II & III are ranked 8th at the hierarchy of National Bank of Pakistan. The lower level of National
Bank of Pakistan is consist of Clerical & non- clerical staff.




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ORGANIZATION STRUCTURE OF THE BRANCH
A well-developed and properly coordinate structure is an important requirement for the success
of any organization. It provides the basic framework within which functions and procedures are
performed. Any organization needs a structure, which provides a framework for successful
operations. The operation of an organization involves a number of activities, which are related to
decision making, and communication of these decisions. These activities must be well
coordinated so that the goals of the organization are achieved successfully.

The organization chart & Organogram of National Bank of Pakistan Rawat Branch is shown on
Annexed IV & Annexed V at the end of this report. This chart defines the line of authority in the
branch and its departments. It is a sort of visual presentation of the organizational structure. It
specifies the duties and responsibilities of the personnel or staff of the branch. The purpose of an
organizational structure is to help in creating an environment for human performance. Although
the structure must define the task to be done, the rules so established must also be designed in the
light of abilities and motivation of the human recourse available. By analyzing the organization
structure of the branch following elements can be found in the structure.


   a) CENTRALIZED DECISION MAKING

The Branch Manager of National Bank of Pakistan is responsible for all the affairs of the Bank.
All the decisions relating to Branch are made by him and the subordinates have to obey these
decisions. All the employees of the Bank are report directly to the Branch Manager. The branch
has two operation Managers. Operation Manager I controls Clearing house & Remittance


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Department and Operation Manager II controls Deposits, Advance & Branch accounts
department. Both of them are report directly to the Manager regarding affairs of their
departments. The Chief Accountant controls Accounts department & is report directly to branch
Manager. The branch also has two cashiers responsible for cash & Pension disbursement
department reports directly to branch Manger. The BBO (Branch Back Office System) Operator
controls computer department of the branch and is report directly to Operation Manager I and
Branch Manager.




   b) DOWNWARD COMMUNICATION

Communication is the process by which information is exchanged and understood by two or
more people, usually with the interest to motivate or influence the behavior of others in the
organization. Downward communication is the message and information sent from top
management to subordinates in a downward direction. The same pattern is followed at National
Bank of Pakistan Rawat branch, the Manager of the branch sent orders, information & messages
to following subordinates

       Operation Manager I
       Operation Manager II
       BBO ( Branch Back Office System) Operator
       Chief Accountant
       Cashier I
       Cashier II
       Clerk I
       Clerk II
       Non Clerical Staff


   c) CHAIN OF COMMAND



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The chain of command is an unbroken line of authority that links all persons in an organization
and shows who reports to whom. By analyzing the organizational structure of the National Bank
of Pakistan Rawat branch it can be found that there is a scalar principle followed with in the
branch because each and every employee of the branch knows to whom they can report. The
authority and responsibility for different tasks and duties are different, as well as every one
knows the successive levels of management all the way to the top.




   d) AUTHORITY AND RESPONSIBILITY

The chain of command illustrates the authority structure of National Bank of Pakistan Rawat
Branch. Authority is the formal and legitimate right of the manger to make decisions, issues
orders and allocates resources to achieve organizational desired outcomes. By analyzing the
chain of command of NBP, one can come to the conclusion that, as there is scalar pattern
followed at the organizational setup of NBP, therefore it is implied that everyone in his position
knows that what is one’s authority and what is the responsibility and the authority it allocated.


   e) DELEGATION
Delegation is the process, which managers use to transfer the authority and responsibility to
position below in the hierarchy. Most organizations today encourage managers to delegate
authority to the lowest possible level to provide maximum flexibility to meet customer needs and
adapts to the environment. At National Bank of Pakistan Rawat branch Operation Managers have
some authority & responsibility relating to affairs of the Branch.




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DEPARTMENTS OF THE BRANCH
Banking procedures are divided between various departments. Different departments do their
jobs in occurrence with the bank policies. In National Bank of Pakistan each branch is divided
into various departments depending on their size and volume of business. Head of department
manages each department & officials of the branch follow procedures. The departments working
within National Bank of Pakistan Rawat branch are as under:

   1. Clearing House Department
   2. Remittance Department
   3. Computer Department
   4. Deposits Department
   5. Advances Department
   6. Account Opening Department
   7. Accounts Department
   8. Cash Department
   9. Pension Disbursement Department


   1. CLEARING HOUSE DEPARTMENT
As part of their daily business activity, banks receive cheques and other financial instruments
from their customers drawn on other banks, to be collected and credited to their accounts.
Similarly, banks receive cheques/instruments from other banks, deposited by customers of the



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banks drawn on the customers of the drawee banks. Therefore, the banks act as Collecting Banks
when they send cheques/instruments for collection and as paying Banks, when they receive
cheques/instruments for collection from other banks. Since each bank receive and sends
cheques/instruments for collection to and from an number of banks, the process of settlement
would clearly be very cumbersome and time consuming if every cheques/instrument had to be
sent by the collection bank to each of the drawee banks or branch upon which different collection
items are drawn and to individually pay the proceeds to each of the bank sending
cheques/instrument in for collection. Therefore, the banks have evolved what is called the
Bankers Clearing arrangement.

The Clearing System enables cheques to be paid or cleared centrally and settlement made for
receivables and payables between the banks. The SBP co-ordinates clearing activity through its
offices, called the Clearing Houses, set up in big cities and towns. Where SBP does not maintain
its own office, some other bank, usually National Bank of Pakistan (NBP) performs this
function. But the clearing house facility is available only for cheques/instruments drawn on
banks situated within the same city/clearing house area.

W ORKING OF THE C LEARING P ROCESS
Under the clearing arrangements, the State Bank of Pakistan (SBP) offers a Clearing House or a
centralized exchange facility, which works on the following general lines:

       All the banks operating in a city who are members of the Clearing House maintain an
       account with the SBP’s Clearing House.
       Every day representatives of all the banks in every city meet the Clearing House, first
       meeting in the morning, at an appointed time, for the purpose of depositing their own
       customers , cheques/instruments to be collected from other banks and receiving
       cheques/instrument drawn on their account holders from the others banks.
       At the Clearing House accounts of all the banks are debited by the total amount of
       cheques/instruments drawn on their customer’s accounts and credited with the amount of
       their customer’s cheques/instruments drawn on other banks, as per the list of cheques
       submitted by each bank.




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       The cheques/instruments received, also called Inward Clearing, and are taking back by
       each bank to its bank/branch. The amounts of each cheques/instrument is debited or
       recovered from each drawee customers’ account and credited to the Clearing House
       account. Similarly, against the amount credited by the Clearing House as Outward
       Clearing, the appropriate customers’ accounts are credited and clearing House account is
       debited.
       Any cheques/instruments received by a bank that cannot be paid, due to insufficient
       balance in its customer’s account or for any other reason, are returned back to the
       Clearing House and a credit is claimed and obtained there against.




R ULES & R EGULATIONS OF C LEARING H OUSE
       Timing:(Monday to Saturday)
                    i.        1st Clearing at 10:00 a.m.

                    ii.       2nd Clearing at 2.30 p.m.

       Each bank will send competent representative to exchange the cheques.
       Each bank is required to insure that all cheques and other negotiable instruments are
       properly stamped and suitably discharged
       An objection memo must accompany each and every cheque when return unpaid duly
       initialed.
       Each bank is required to maintain sufficient funds in the principal account with SBP to
       meet the payment obligations.
       The State Bank of Pakistan debit the account of each member of the clearinghouse with
       the proportionate working expenses incurred on the operation of clearing house. These
       expenses are very nominal.

O UTWARD C LEARING AT THE B RANCH
The following points are to be taken into consideration while an instrument is accepted at the
counter to be presented in outward clearing:



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           The name of the branch appears on its face where it is drawn o.
           It should not stale or post dated or without date.
           Amount in words and figures does not differ.
           Signature of the drawer appears on the face of the instrument.
           Instrument is not mutilated.
           There should be no material alteration, if so, it should be properly authenticated.
           If order instrument suitably indorsed and the last endorsee’s account being credited.
           Endorsement is in accordance with the crossing if any.
           The amount of the instrument is same as mentioned on the paying-in-slip and
           counterfoil.
           The title of the account on the paying-in-slip is that of payee or endorsee (with the
           exception of bearer cheque).
           If an instrument received other than National Bank of Pakistan then special crossing
           stamp is affixed across the face of the instrument. Clearing stamp is affixed on the
           face of the instruments, paying-in-slip and counterfoil (The stamp is affixed in such a
           manner that half appears on counterfoil and paying-in-slip). The instrument is
           suitably discharged, where a bearer cheque does not require any discharge and also an
           instrument in favor a bank not need be discharged.

The instrument along with pay-in-slip is retained while the counterfoil is given to the customer
duly signed. Then the following steps are to be taken:

   1. The particulars of the instrument and the pay-in-slip or credit voucher are entered in the
       outward clearing register.

   2. Serial no is given to each voucher.

   3. The register is balanced; the credit vouchers are balanced from the instruments and are
       released to the respective departments against acknowledgement in the register.

   4. The instruments are arranged bank wise.

   5. The schedules are prepared in triplicate, two copies which are attached with the relevant
       instrument and the third is kept as office copy.



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   6. The house page is prepared from schedules in triplicate.

   7. The schedules and house pages are signed by the house in charge with branch stamp.

   8. The grand total of the house page is taken and agreed with that of the outward clearing
       register.

   9. The instrument along with duplicate schedule and house page are sent to the main office.

   10. The entry of the instrument returned unpaid is made in Cheques returned Register. If the
       instrument is not to be presented again in clearing then a covering memo is prepared. The
       covering memo along with returned instrument and objection memo is sent to the
       customer who sent the same to his account.

I NWARD C LEARING OF THE B RANCH
   1. The particulars of the instruments are compared with the list.

   2. The instruments are detached and sort out department wise.

   3. The entry is made in the inward clearing register (serial no. Instrument no. Account No)

   4. The instruments are sent top the respective departments

   5. The instruments are scrutinized in each respect before honoring the same.

S PECIAL C LEARING
In addition to the normal clearing function at Clearing house it is mutually agreed to hold an
extra clearing at the clearing house on the particular day and time which is known as “special
clearing” it is arranged due to the rush of work arising out of say, more Holidays declared by the
Central Govt. at a time, but normally special clearing is held on last working day of half yearly
and yearly closing i.e. 30th June and 31st Dec. every year.


   2. REMITTANCE DEPARTMENT
The Remittance department deals with the transfer of money from one place to another. Funds
transfer facility or remittance of funds is on of the key functions of the banks all over the world.
Remittances through banking channels save time, costs less and eliminate the risks involved in

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physical transportation of money from one place to another. National Bank of Pakistan transfers
money in the following ways.

       Pay Order
       Demand Draft
       Mail Transfer
       Telegraphic Transfer
       Pay Slip
       Call Deposit Receipt
       Letter of Credit
       Traveler’s Cheque

The Job responsibilities & requirements of remittance department include:

       Responsible for money transfers, issuance of pay-orders & drafts, collection items,
       maintenance of cheque books & ATM cards and all other counter specific products and
       services
       Ensure highest level of customer service in a professional and competent manner
       Must ensure that the activities are carried out strictly in accordance with the laid down
       procedures/processes, and SBP/Compliance guidelines
       Responsible for Cash, Clearing, Inland remittances including Demand Drafts and Pay
       Orders
       Ensure high standards of customer services within the assigned turn around time
       Ensure compliance with SBP's regulations and internal controls
       handling cash, clearing, local remittances, and other related activities at branch level


P ARTIES INVOLVED IN R EMITTANCES
There are four parties involved in Remittance, which are

       Remitter
       Remittee
       Issuing Bank
       paying Bank



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R EMITTER
One who initiates, or requests for a remittance. The remitter comes to the issuing or originating
branch, asks for a remittance to be made, and deposits the money to be remitted. The bank
charges him a commission for this service. He may or may not be the branch’s customer.

R EMITTEE
A Remittee is also called the beneficiary, or the payee. The person in whose name the remittance
is made. A Remittee is also the one who receive the payment.




I SSUING B ANK
The bank that sends or affects the remittance through demand drafts, telegraphic transfers, Mail
Transfers, Pay order etc

P AYING B ANK
Paying Bank also knows as the drawee branch, the branch on which the instrument is drawn. It
has to make the payment (usually located in a different city or country).

K INDS OF R EMITTANCES
   Transfer within the branch
   Transfer from one branch to another
   Transfer from one bank to another bank in the same city
   Transfers from one bank to another bank in two cities.


   3. ACCOUNT OPENING DEPARTMENT
The opening of an account is the establishment of banker-customer relationship. This department
performs the duty of opening accounts for customers. It also issues checkbooks to customers. A
person who wishes to open an account with the bank has to fill an account opening form
obtained from any branch of National Bank of Pakistan. The bank officer tactfully obtains
information about character, integrity, responsibility, occupation and the nature of business of


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the perspective customer. Any individual, who has attained the age of majority and is of sound
mind can open and maintain his/her account. Two or more individuals may open an account
jointly. Similarly, business organizations such as sole proprietary concerns, partnership firms,
and limited liability companies as well as non-profit organizations like clubs, trusts, societies,
associations and NGO’s etc, may open their accounts. The documents required for National
Bank of Pakistan’s Account opening are showed as Annexed VII at the end of this report.

The following requirements are necessary for opening an account.

       Identification of the new customer.
       Ascertaining the genuineness of the stated occupation business of the customer.
       Determining the correct residential and permanent address.
       Completion of all relevant columns of the Account opening form.
       Proper completion of documentation.

F UNCTIONS OF A CCOUNT O PENING D EPARTMENT
       Providing account opening form according to the customer's requirements,
       Guide the customer about the requirements of the account opening and form filling,
       Check the forms whether they are correctly completed or not,
       Preparing checklist,
       Stamping on the form,
       Maintaining account opening register,
       Pasting of forms in register after release from general banking in charge,
       Issuance of cheque books,
       Issuance of accounts maintenance certificate,
       Closure of account
       Verification of signature in case of cheque presented before releasing of account opening
       from SS card is not yet scanned


   4. CASH DEPARTMENT
All physical movement of cash in the bank is made through the cash department. As bank is
borrowing and lending institution, therefore cash is the top most priority of Bank. Another aspect


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is that cash department is for the security purpose, security in a sense that there should be no
embezzlement of funds or in money leaded to bank by any party or person. The efficiency of
bank is also related to this department the more efficient the bank is the stronger and busy is the
cash department. Cash department perform following functions

Cash department owes its important to the fact that it is a major point of contract between the
bank and the customer, the bank’s most valued relationships. This department is the showcase of
the bank and conveys the first impressions about the bank’s commitment to professionalism in its
systems and procedures and to courteous and efficient customer service.

Normally cash department performs following functions

       Collection of funds
       Acceptance of deposits
       Collection of utility bills
       Payment of checks
       Remittances
       Act according to any standing instructions
       Transfer of funds from one account to another
       Verification of signatures
       Posting
       Handling of Prize bond

The two main activities of cash department are as fallows:

D EPOSIT C ASH I N C USTOMER ’S A CCOUNT
When the customer want to deposit amount in his account at opening of account or after that then
he has to fill a deposit slip that shows the amount and the account in which the cash will be
deposited. Then teller will receive amount and credit the customer’s account that shows increase
in customer’s bank account.

M AKE P AYMENTS F ROM C USTOMER ’S A CCOUNT
When the customer draws a cheque on the bank to pay a certain amount then BBO Operator will
debit the customer’s account that shows reduction in his account balance.


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C HEQUE ENCASHMENT PROCEDURE

R ECEIVING O F C HEQUES
The cash is paid against the cheques of the client. The following points are important.
       Cheque is drawn on same branch
       Cheque is not post dated.
       Amount in words and figure are same.
       It should be bearer cheques so the word bearer should not cross.




V ERIFICATION OF S IGNATURE
After receiving the cheques the cheques the operation manager verify the signature of the
account holder and the signature on the cheques. If the signature is not same it is returned back
otherwise forward to BBO Operator for posting.

C OMPUTER T ERMINAL P ROCESS
The cheque is received in computer terminal, where BBO operator checks the balance of the
account holder. The BBO operator also sees the stop payment instructions, whether received
from account holder or not. After considering these points BBO Operator post the cheque in
BBO (Branch back office system) and forward to operation manager.

P AYMENT O F C ASH
After posting the cheque the operation manager cancelled the cheque and returned back to
cashier. The cashier enters the cheque in cash paid registered and pays against the second
signature of receiver on the back of the cheque.


   5. DEPOSITS DEPARTMENT
The primary function of National Bank of Pakistan is to accept and receive surplus money from
the people, which they willingly deposit with the Bank. Like all other Banks, National Bank of
Pakistan also take incitation to attract as much depositor’s as it can. The deposit department
accepts/collects deposit from accountholders.



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The National Bank of Pakistan offer different deposit schemes to its customers, which includes
the following:

       Current Deposits
       PLS Saving Deposits
       Fixed Deposit Account ( Time Deposits)
       Foreign Currency Account
       NBP Premium Aamdani
       Foreign Currency Account
       National Income Daily Account (NIDA)


   6. ADVANCES DEPARTMENT
The bank is profit seeking institution. It attracts surplus balance from the customer 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 the financial institutions, because it is the
main source of earnings. Advances department is one of the most sensitive and important
department of the bank. The major portion of the profit is usually 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.

The advances Department receive application from intending borrowers. After receiving
application the advance department processes it further. After analyzing and detailed
investigation, they decide whether to approve the loan or not. Some loan approvals are made by
the Manager of the branch within his powers as prescribed by the bank’s higher authorities,
while some loan applications are submit to higher authorities for their approval. Some advances
are of the following nature

       Loan against Gold
       Agriculture advance to farmers
       Medium term advance for working capital
       Long term advance for setting industry
       Short term advance to businessman



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The National Bank of Pakistan offer following products (Advances) to its customers

       NBP Saibaan
       NBP Advance Salary
       NBP Cash & Gold
       Students Loan Scheme
       NBP Karobar




   The Advances department deals in following transactions:

   1. Preparation and submission of proposals of Running finance, Cash finance, Demand
       finance, Export finance, Staff finance, Finance against imported merchandise etc for
       sanction of finance limit from the hire authority.
   2. Preparation and posting of vouchering of all type of finance.
   3. Accruals & recovering of Markup on finances on periodical basis.
   4. Approval of transfer of funds through DD-TT, PO, MT, IBCO etc to various branches by
       debiting the limits.
   5. Preparation of weekly, monthly, quarterly, and annually statement to the hire authority.
   6. Transfer of funds from one account to another account of the party taking the authority
       letter.
   7. Preparation of advances record.
   8. Timely submission of returns/reports, daily, weekly, monthly & quarterly.
   9. Checking of computer outputs of the department on daily basis.
   10. Balancing of all financing heads.


   7. COMPUTER DEPARTMENT
This department is playing a very important role in making the banking procedures faster and
helping the bank for providing better services to its customers. The National Bank of Pakistan
has three types of branches in all over Pakistan, these included

   a) ONLINE BRANCHES

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The branches, which are directly, link with central computer AS-400, through wide area
networking through fiber optics. These branches have dumb terminal directly linked with central
computer.

   b) BATCH BRANCHES
The branches where all transactions are carried out with the computer base system but these
branches are not connected to the central computer with wide area net working. Batch branches
are using three type of system, Branch Back Office (BBO) based on FoxPro, Branch Automated
System based (BAS) on UNIX, Branch Integrated System (BIS) based on FoxPro in Karachi
mostly branches are facing this problem. BAS was establish in the beginning while BBO is
currently implemented now efforts are under way to convert all branches into Electronic Banking
System (EBS) which is used by online branches as this system does not require a person to
remain sitting till the branch closed its daily operation but the system automatically close it self
when the branch timing is over. The database in head office is also based on this system.

   c) MANUAL BRANCHES
The branches where all transactions are carried out manually and records are maintained on
registers usually stored in big wardrobes. Manual branches reports Regional head office
regarding their daily transactions. In Regional head office through On Line, terminal data goes to
head office central computer; Except for branches those are On Line as they transfer there daily
data directly through there own terminal. As day-to-day, activities of all branches are recorded in
a central computer.

E VENING DATA RECEIVING CENTER
Data form batch branches reach the main branch in floppy diskettes while form manual branches
it is in form of hard copy. Data comprises of transactions in profit loss account, current account,
advances etc termed as “Daily Transaction Report”. Clerk in charge register all diskettes and
manual in registers called “job booking register” one for each of two type of data. These floppies
and manual are bring in by riders. There are fourteen riders in total who bring information form
all branches located in Karachi region.

D ATA ENTRY D EPARTMENT


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The next task after receiving the data is to enter that data in to a computer. The floppy disk is
directly inserted in the computer. The program in used is based on “COBOL” language. This
program is designed in away that it demand “Hash Value” value before opening the floppy for
further action this value serve the purpose of password or pin code send by the branch on
entering that value the data enter in to the computer. This computer is attached with the terminal
of central computer. The operator of that terminal takes the data from the computer and
converted it in to a text file through that terminal the data finally goes to the central computer.




D EFECTS AND E RROR H ANDLING
Errors of different origin occur when the data goes to central computer. Sometime retrieving data
from the system (BAS, BBO, and BIS), other than used in HO (EBS) also caused errors. Other
errors include Unmatched (This error occurs when document no matched with the previous one
exists), no master (when opening of new account is not mentioned), Date in Valid, duplicate
cheques (this error occur when the last objection is not removed). These and other such errors are
seen by the person in charge. In the end of day print out of the data enter in central computer is
taken. Any Incomplete information for any branch and any information require by that particular
branch is sent to that branch. More over material is used to make a WST which is sent to State
Bank of Pakistan.


   8. PENSION DISBURSEMENT DEPARTMENT
The National Bank of Pakistan was Pakistan’s leading institution which performs the function of
pension payments or disbursements to pensioners. The pension disbursement department is
responsible for making pension payments to Government Pensioners. The person who wants to
receive his/her pension from National Bank of Pakistan can open an account with any branch of
National Bank of Pakistan. The bank performs this function through Demand Draft Purchase or
simply called DD Purchase. This department performs following functions:

       Making Pension Payments
       Opening of Account of Pensioner
       Entry of amount paid to pensioner in Government Pensioners Register



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       Verifications of Signatures of Pensioners
       Making Demand Draft Purchase Register


   9. ACCOUNTS DEPARTMENT
Accounts Department of the bank can be considered the most important department. This
department is basically concerned with processes and activities of recovering, sorting,
summarizing and reporting data resulting from the whole day transactions of all the departments.
Actually the process of this activity starts from the preparation of all the required vouchers by
different related departments. When these vouchers are prepared, these are posted into respective
computer terminals by the relevant departments. Before merging, a batch list is printed out by
Computer Department and duly checked by the respective departments. After this, merging stage
comes, after which a proof list is printed out. This is the stage, where Accounts Department
starts performing its function. Proof list is checked by the Accounts Department. The account
department prepare following vouchers and reports

              Monthly Profit & Loss account- F48
              General Ledger
              General Ledger- Abstract
              Check Book Issue Register
              Western Union payments Register
              Demand Notices
              Miscellaneous Book
              Bank Transfer scroll
              Posting NBP Advance Salary
              Daily Statement- F21
              General Ledger- Head wise
              Hash Value Register
              End of Day register
              Posting National Income Daily Account (NIDA)
              Monthly return register
              Charges A/c register
              P-L-S Profit list


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Weekly Telegram
Mail Transfer Register
Government Scroll
Provident file
Government Scroll Debit & Credit
Transfer Responding Advice Dispatched Register-F15
Cash Remittance IN
Cash Remittance OUT
NBP General Account
Utilities register
Statement of affairs
Closing entries
Daily activity checking
Minor expense recording




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STRUCTURE OF BRANCH’S ACCOUNTS DEPARTMENT
The structure of National Bank of Pakistan’s Accounts department is shown as Annexed VI at
the end of this report. The Accounts department of the branch is controlled by the Chief
Accountant under direct supervision of Branch Manager. The Branch has one cashier & two
clerks for assistance and help of Chief Accountant. The BBO (Branch Back Office system)
Operator has also assist Chief Accountant in various tasks.

The head of branch’s Accounts department is called Chief Accountant, who performs his
functions under direct supervision of Branch Manager. The Chief Accountant is responsible for
the central accounting records and controls over all financial transactions of the Branch. He also
directs a wide variety of accounting activities and meets important deadlines & analyzes and
interprets accounting data of the branch. The other responsibilities of Chief Accountant include:

       Plans and directs the activities of Cashier, BBO Operator and clerical employees of the
       branch engaged in the maintenance of a variety of accounting records.
       Directs and participates in the development and revision of procedures in order to meet
       requirements of law, provide services to Branch Manager, improve efficiency in branch
       activities, and coordinate branch activities with those of other departments.
       Directs and reviews the preparation of periodic and special financial statements, reports,
       projections, and recommendations, on which important administrative decisions are
       based.


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Directs and reviews the study of new and revised laws, rules, and programs affecting the
central accounting system and records and installs or recommends changes as
appropriate.
Designing and operating a system to capture, record, process, and store all relevant
documents and information about the financial activities of the branch.
Ensuring the integrity and reliability of the information system, and preventing fraud
from inside and outside the branch.
Preparing financial statements that are reported to Regional Management of National
Bank of Pakistan.
Preparing financial statements and accounting reports for distribution to the branch
Manager for their planning, control, and decision-making needs.
The Chief Accountant with the help of branch’s clerical staff is preparing following
reports:
   o Monthly Profit & Loss account- F48
   o Daily Statement- F21
   o General Ledger
   o General Ledger Abstract
   o General Ledger head wise
   o Bank transfer Scroll
   o Posting NBP Advance Salary
   o Misc Book
   o Posting National Income Daily Account (NIDA)
   o Monthly return file
   o Charger List
   o PLS Profit list
   o Weekly Telegram
   o Government Scroll
   o Government Scroll Dr & Cr
   o Transfer Responding Advice Dispatched Register- F15
   o Cash Remittance In
   o Cash Remittance Out


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          o NBP General Account
          o Clearing register
          o Debit & Credit supplementary

Debit supplementary is used for debit voucher and credit supplementary is used for credit
voucher books and register maintained by bank are as fallows

General ledger included:

       Statement of daily affairs
       Cash book or cash cum day book
       Transfer book
       Income & expenditure ledger

Income & expenditure includes:

   1. Discount
   2. Service charges
   3. Commission from utility services
   4. Salaries allowances & provident fund
   5. Rent taxes insurance lighting
   6. Profit paid on deposits and borrowings
   7. Auditor’s fee & legal charges




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BANK ACCOUNTING OPERATIONS
The National Bank of Pakistan’s accounting consists in making computerized, written and
permanent records of every transaction. For Computerized recording of transactions the bank
used software called BBO (Branch Back Office). BBO enable Bank to record a variety of
transactions. The most common part of BBO which is operating by the BBO Operator is
Individual Ledgers. Individual Ledgers are the accounts in which accounts with depositors are
kept. They are kept so that the balance of each depositor's account may at any time be readily
seen, and they should be frequently balanced to verify their correctness. The three column form
of individual ledger is used because it has a column for checks paid or other debit entries, one for
deposits or other items credited, and a third for showing the balance after each entry or the day's
entries are made in the account. The BBO enlist Chart of Accounts of the Bank shown in
Annexed VIII. All the accounts shown in Annexed are opened and managed through BBO. All
the Remittances of the bank are recorded managed and control through BBO. The “End of the
Day” report is also generated through BBO.

The most important record keeping and report generated by Bank’s Accounts Department is
Statement of the Bank. The statement of the bank shows the general, or control, accounts of the
bank, and the various books of the bank show the detail of these items. It would not be
impossible, but it would be entirely impractical, to enter every figure directly on the statement of
condition. Instead of total deposits, the balance of each depositor would appear opposite his
name. On the other side, instead of loans and discounts, there would be an itemized list of the
loans with the names of the borrowers. The first principle in bank accounting, as in all other


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bookkeeping, is that for every debit there must be a credit, and vice-versa. In accordance with
this fundamental theory the books are maintained. With respect to the statement, every Rupee of
liabilities is accounted for by another Rupee of resources. Similarly each accounts at the end of
the day for each item of cash is balanced. Each bank employee has had the experience of
remaining at his desk until a late hour at night checking up his day's work searching for a
difference of a few cents. Often they become embittered at what seems to them a tyranny when
the small sum of money involved is considered. The reason they must settle, however, is not on
account of the possible loss of ten cents, but because the most important principle in bank
accounting is involved. "Accuracy first" is a motto that should be framed, figuratively at least,
upon the wall of every banking room.

The books used by National Bank of Pakistan are of various kinds and their purpose is indicated
by name. A ledger is a book used to keep a record of balances. To "post" means to enter in the
proper columns either the debits or credits on the ledger, and the difference between them
represents the balance either due by or to the bank. Another important book which is used by the
National Bank of Pakistan is journal, a book in which daily transactions are listed in regular
order as to accounts, and the total debit or credit is then posted on the ledgers. All other books,
cards and sheets used by bank of whatever nature is a part or subdivisions of these books. Often
they become known among the clerks by some other name descriptive of their general
appearance. For instance, the general ledger scratcher in one bank is known as the "red book,"
while the collection scratcher is the "black book."

The records made by one clerk upon one set of books go to check the records of another clerk
upon a different set of books. For instance, the paying teller and the receiving teller will each
keep a record of checks cashed or deposited payable within the bank. The debit postings of the
individual bookkeeper would agree with the teller's figures. Skillful accounting lies in making
the fullest possible use of original entries, at the same time having a check on all figures to guard
against either error or fraud.

Every transaction ultimately affects the bank's statement of condition by debit or credit. For
example, a deposit of Rs.1000 is made, consisting of Rs.200 cash and checks as follows: Rs.200
on the bank itself and Rs. 600 payable in another city. At the end of the day (assuming this to be
the only deposit), on the liabilities side there is an increase of Rs 800 all of which appears in the


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item "deposits" being the total Rs.1000, less the check for Rs 200 which is charged to the
account of the drawer. On the resource side, then, a corresponding increase of Rs.800 and this is
made up by an increase in the cash of Rs 200 and an increase of Rs.600 in the item "due from
banks." Or a transaction may appear on one side of the statement only. The bank has sold Rs.5,
000.00 of the bonds it owns.




ROLE OF CFO (CHIEF FINANCIAL OFFICER)
The performance of any organization is reflected by the financial statements, any ambiguity if
remains there, makes the reflection of the performance doubtful. Therefore, the role of CFO
becomes very important as he controls the reflection of performance, which is reported to
different authorities and the organization is assessed by them, and they must perform their job
with professional competency and integrity, so that the financial statements give credible
information to its users. The code of corporate governance provides the guidelines and
opportunity to do this.

The Chief Financial Officers of National Bank of Pakistan used to perform several tasks which
were preparing accounts, preparing budgets, operational reporting and interpreting, evaluating
operating results, preparing income tax returns, establishing internal control procedures to safe-
guard the companies assets.

Due to increased governance requirement there arises a need to empower the chief accountant
and to make him responsible by requiring him to sign the accounts. There comes the code of
corporate governance, which makes the chief accountant powerful and more responsible. With
the new role, Chief Accountant becomes Chief Financial Officer (CFO). The appointment,
removal and remuneration terms and conditions of employment of the chief financial officer of a
listed company shell are determined by the Chief Executive Officer with the approval of the
Board of Directors.

Q UALIFICATION R EQUIREMENT


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The qualification requirement is defined under the code of corporate governance that is the
person appointed as the Chief Financial Officer must be

       Member of recognized body of professional accountants or
       A graduate from a recognized university or equivalent, having at least 5 years experience
       in handling financial and corporate affairs of a listed company.




R ESPONSIBILITIES OF CFO
The new responsibilities apply to all Chief Financial Officers of Listed Companies, Insurance
Companies, Banks and DFIs. Mostly the CFO presents the financial position relating to the
period which has been over, and the period which has to come that is the financial position
attained and the financial projection i.e. where the organization will be.

R ESPONSIBILITIES TOWARDS B OARD OF D IRECTORS
The Chief Financial Officer is required to furnish necessary and classified information to the
board of directors along with his analysis and suggestions as the Chief Financial Officer attends
the board meetings, any issue with financial implications is being discussed, the person likely to
be most in command of these implication is on the spot and immediately available for questions.

In order to strengthen and formalize corporate decision-making process, significant issues are
required to be placed for the information, consideration and decision of the boards of directors by
the CFO. These are:

          Annual business planes, cash flow projection, forecasts and long term planes.
          Budgets include capital, manpower and overhead budgets along with variance
          analyses.
          Quarterly operating results of the company as a whole and in terms of its operating
          divisions or business segments.
          Details of joint ventures or collaboration agreements or agreements with distributors,
          agents, etc.




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          Default in payment of principal and/or interest, including penalties on late payments
          and other dues, to a creditor, bank or financial institution, or default in payment of
          public deposit.
          Failure to recover material amounts of loans, advances, and deposits made by the
          company, including trade debts and inter-corporate finances.
          Significant public or product liability claims likely to be made against the company,
          including any adverse judgment or order made on the conduct of the company.




R ESPONSIBILITIES TOWARDS S HAREHOLDERS
The Chief Financial Officer is required to provide all the necessary data to be presented in the
“Director’s Report”. For this purpose Chief Financial Officer must ensure the following.

       The financial statement, prepared by the management of company, present fairly its states
       of affairs, the results of its operation, cash flows and changes in equities.
       Proper books of accounts of the company have been maintained
       Appropriate accounting policies have been consistently applied in preparation in financial
       statements and accounting estimates are based on reasonable and prudent judgment.
       International accounting standards, as applicable in Pakistan, have been followed in
       preparation of financial statements and any departure there from has been adequately
       disclosed.
       The system of internal control is sound in design and has been effectively implemented
       and monitored.
       There are no significant doubts upon the companies’ ability to continue as going concern.
       There has been no material departure from the best practice of corporate governance as
       detailed in the listing regulations.

I NTERNAL AND E XTERNAL R EPORTING
Chief Financial Officer now has extensive responsibilities for internal and external reporting. All
the information required for decision-making by the Board of Directors and Chief Executive is
processed and furnished by the Chief Financial Officer. Apart from this, external reporting



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requirement is fulfilled by Chief Financial Officer, the accounts and financial statements are
signed by the Chief Financial Officer before they are sent to concerned authorities.CCG requires
that the listed companies submit their quarterly accounts to the shareholders within one month of
the close of the first and third quarter of year of account. The CCG does not prescribe the time
for submitting half yearly accounts to the shareholders. Here we can refer to section 245 of
companies’ ordinance 1984 for this purpose, which requires half yearly accounts to be submitted
within two months of the close of first half. The CCG requires a limited review of half yearly
accounts by external auditor. Annual audited accounts are now required to be submitted within
four months of the close of financial year.

The Securities and Exchange Commission of Pakistan is exercising strict vigilance to ensure
compliance of 4th and 5th schedule of the Companies Ordinance, 1984 and timely submission of
accounts by companies. It has recently imposed penalties on Directors of nine listed companies
who failed to prepare and circulate the quarterly accounts. Furthermore, fines have been imposed
on chief executives.




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USE OF ELECTRONIC DATA IN DECISION MAKING
The technological development in the field of information systems make it possible for
management to use electronic data in decision making. An understanding of the effective and
responsible use and management of information systems and technologies is important for
managers, business professionals, and other knowledge workers in today’s internetworked
enterprises. Information systems play a vital role in the e-business and e-commerce operations,
enterprise collaboration and management, and strategic success of businesses that must operate
in an internetworked global environment. Thus, the field of information systems has become a
major functional area of business administration. The management of a business can use
information systems in their decision making process. Before proceeds it’s important to discuss
precisely about decision making.

Decision making can be regarded as an outcome of mental processes leading to the selection of a
course of action among several alternatives. Every decision making process produces a final
choice.30 The output can be an action or an opinion of choice. A significant part of decision
making skills is in knowing and practicing good decision making techniques. One of the most
practical decision making techniques can be summarized in following simple decision making
steps:

   1. Identify the purpose of your decision. What is exactly the problem to be solved? Why it
         should be solved?
   2. Gather information. What factors does the problem involve?


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   3. Identify the principles to judge the alternatives. What standards and judgment criteria
       should the solution meet?
   4. Brainstorm and list different possible choices. Generate ideas for possible solutions.
       See more on extending your options for your decisions on my brainstorming tips page.
   5. Evaluate each choice in terms of its consequences. Use your standards and judgment
       criteria to determine the cons and pros of each alternative.
   6. Determine the best alternative. This is much easier after you go through the above
       preparation steps.
   7. Put the decision into action. Transform your decision into specific plan of action steps.
       Execute your plan.
   8. Evaluate the outcome of your decision and action steps. What lessons can be learnt?
       This is an important step for further development of your decision making skills and
       judgment.

The decision making of Management of National Bank of Pakistan rely on information system
resources which includes people and a variety of hardware, software, data, and communications
network technologies as resources to collect, transform, and disseminate information in Bank.


INFORMATION SYSTEM RESOURCES OF NBP
   a) PEOPLE RESOURCES
People are required for the operation of all information systems. These people resources include
end users and Information system Specialists. The Management and employees of National Bank
of Pakistan are end users and Knowledge workers of information system. These are the
employees of the Bank who spend most of their time communicating and collaborating in teams
and workgroups and creating, using and distributing information.

The Information systems Specialist are people who develop and operate information systems.
They include System analysts, software developers, system operators, and other managerial,
technical, and clerical IS personnel of National Bank of Pakistan. The system analysts of
National Bank of Pakistan design information systems of the Bank based on the information
requirements of the end users. The software developers create computer programs based on the
specification of system analysts of National Bank of Pakistan.

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   b) HARDWARE RESOURCES
The Hardware resources of National Bank of Pakistan include all physical devices and materials
used in information processing. Specifically, it includes not only machines, such as computers
and other equipments, but also all data media, that is, tangible objects on which data are
recorded, from sheets of paper to magnetic or optical disks.




   c) SOFTWARE RESOURCES
The software resources of National Bank of Pakistan include all sets of information processing
instructions. It also includes sets of operating instructions called programs, which direct and
control computer hardware. The followings are the examples of National Bank of Pakistan’s
software resources:

       System Software: The National Bank of Pakistan uses Windows Operating Systems for
       controls and supports the operations of a computer system.
       Application Software: These are the programs that direct processing for a particular use
       of computers by employees of the Bank. Bank uses BBO system, Microsoft Office suit as
       application software.

   d) DATA RESOURCES
The data resources of National Bank of Pakistan are typically organized, stored, and accessed by
a variety of data resource management technologies. The data about Branch transactions is
accumulated, processed, and stored in a BBO system that can be accessed by Manager for an
analysis and decision making.

   e) NETWORK RESOURCES
The network resources of National Bank of Pakistan include:

       Communication Media: The Bank’s communication media include cellular and
       landline.
       Network Support: The Bank uses hardware, software, and data technologies which are
       needed to support the operation and use of a communication network. The Bank uses


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       communication processers such as Modems and internetwork processors, and
       communication control software such as network operating systems and Internet Browser
       packages (Opera).




SOURCES OF FUNDS
 Rupees in Millions
 Year                           2004           2005            2006           2007            2008
 Share Capital           4,924,106   5,908,927   7,090,712   8,154,319   8,969,751
 Reserves               10,813,914 13,536,041 13,879,260 15,772,124 19,941,047
 Borrowings             11,084,790   8,756,847 11,704,079 10,886,063 40,458,926
 Deposits              465,571,717 463,426,602 501,872,243 591,907,435 624,939,016
 Other Liabilities      23,068,314 24,974,450 26,596,300 30,869,154 39,656,831
                                              Horizontal Analysis (%)
 Share Capital                  100             120             144            166             182
 Reserves                       100             125             128            146             184
 Borrowings                     100              79             106             98             365
 Deposits                       100             100             108            127             134
 Other Liabilities              100             108             115            134             172


The National Bank of Pakistan’s sources of funds includes share capital, reserves, borrowings,
deposits and other liabilities etc. To analyze trend, Horizontal analysis of each item is calculated.




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A NALYSIS
The Share capital refers to the portion of a Bank's equity that has been obtained by trading stock
to a shareholder for cash or an equivalent item of capital value. The share capital of National
Bank of Pakistan shows an increasing trend in all years as compare to base year. The increase in
share capital during all years indicates share holder’s concern toward National Bank of Pakistan
and efficient bank’s Management policies.




A NALYSIS
The Banks’ reserves are banks' holdings of deposits in accounts with their central bank plus
currency that is physically held in bank vaults (vault cash). The reserves of National Bank of
Pakistan fluctuate during all years as they show an increasing trend. The reserves are increased
25 %, 28 % & 46 % in the years 2005, 2006 & 2007 respectively. The year 2008 represents
highest increasing percentage of 84% as compare to base and previous years.




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A NALYSIS
The National Bank of Pakistan’s borrowings fluctuates during all years and shows a mixed trend.
The borrowings were decreased 21 % in 2005; however same are increased 6 % in 2006 as
compare to base year. There was a marginal decrease of 2% in bank’s borrowings in the year
2007. The year 2008 represents highest percentage of borrowings as these were increased to 265
% comparing with base year and are increased 267 % as compare to 2007.




A NALYSIS
The deposits and other accounts of National Bank of Pakistan show a mixed trend during all
years. In the year 2005 the deposits were increased very marginally, with the year 2006
represents an increase of 8% as compare to base year. The year 2007 represents second highest
percentage as deposits are increased to 27%. The year 2008 indicates an increase of 34%, highest
among all years.




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    A NALYSIS
    The other liabilities of National Bank of Pakistan are fluctuating during all years and show an
    increasing trend. The year 2005 indicates an increase of 8 % and 2006 indicates an increase of
    15%. The other liabilities in the year 2007 represent an increase of 34%. The other liabilities
    were on their peak percentage in 2008 as the shows an increase of 72%.




    GENERATION OF FUNDS
Rupees in
Millions
Year                                               2004         2005         2006         2007         2008
Markup/return/interest earned                 20,947,333   33,692,665   44,100,934   50,569,481   60,942,798
Net markup/interest income                    14,387,935   23,370,897   30,153,716   33,629,470   37,058,030
Net markup/interest income after provisions   12,639,770   21,146,970   27,782,170   28,906,735   26,087,216
Total non-markup/ Interest income              8,304,716    9,392,351   12,162,892   13,544,845   16,415,862
Total income ( Interest + non-Interest)       20,944,486   30,539,321   39,945,062   42,451,580   42,503,078
PROFIT BEFORE TAXATION                        11,977,601   19,056,028   26,310,577   28,060,501   23,000,998
                                                           Horizontal Analysis (%)
Markup/return/interest earned                        100         161          211          241             291
Net markup/interest income                           100         162          210          234             258
Net markup/interest income after provisions          100         167          220          229             206
Total non-markup/ Interest income                    100         113          146          163             198
Total income ( Interest + non-Interest)              100         146          191          203             203
PROFIT BEFORE TAXATION                               100         159          220          234             192


    The National Bank of Pakistan’s generation of funds include

            Interest earned
            Net interest income
            Net interest income after provisions
            Total non markup interest income
            Total income ( Interest plus non- Interest)
            Profit before Taxation




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A NALYSIS
The interest earned by National Bank of Pakistan fluctuates during all years, as it was increased
during all years as compare to base year. The interest earned is increased 61% in 2005 and 111%
in 2006. The year 2007 represents second highest percentage on account of interest earned as it
was increase 141 %. The year 2008 represents peak percentage of 191 % as compare to all years.




A NALYSIS
The net markup/ Interest income of National Bank of Pakistan fluctuates during all years as it
shows an increasing trend. It was increased 62 % in 2005 and 110% in 2006 as compare to base
year. The year 2007 represents second highest percentage on account of Net markup/ Interest
income as it was increased to 134%, comparing with base year. The percentage is increased 158
% in 2008, highest among all years.




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A NALYSIS
The net markup/ interest income after provisions fluctuates and shows a mixed trend during all
years. It was increased 67% (2005), 120% (2006) and 129% in 2007. The income is increased
106 % as compare to base year but the same was decreased by 23% as compare to 2007.




A NALYSIS
The Total non- markup/ Interest income of National Bank of Pakistan shows an increasing trend
during all years. It was increased 13% in 2005 and 46% in 2006. The income is increased 63 %
in 2007, second highest among all years. There was an increase of 98% in 2008, highest among
all years.




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A NALYSIS
The total income of National Bank of Pakistan shows an increasing trend. It was increased 46%
in 2005 and 91% in 2006. The total income is increased 103% in 2007 and also increase very
marginally in 2008.




A NALYSIS
The profit before taxation of National Bank of Pakistan fluctuates and shows a mixed trend
during all years. It was increased 59% in 2005 and 120% in 2006. The year 2007 represents
highest percentage on account of profit before taxation as it was increased to 134%. The year




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       2008 indicates an increase of 92% as compare with base year but it was decreased in 2008 by
       42% as compare to 2007.




       ALLOCATION OF FUNDS
Rupees in
Millions
Year                                           2004           2005           2006          2007             2008
Lending’s to Financial Institutions     10,511,322 16,282,942 23,012,732 21,464,600 17,128,032
Investments                            149,350,096 156,985,686 139,946,995 210,787,868 170,822,491
Advances                               220,794,075 268,838,779 316,110,406 340,677,100 412,986,865
Operating Fixed Assets                   9,202,969   9,454,365   9,681,974 25,922,979 24,217,655
Other Assets                            19,141,569 23,941,056 37,113,698 30,994,965 44,550,347
                                                      Horizontal Analysis (%)
Lending’s to Financial Institutions             100            155            219            204             163
Investments                                     100            105             94            141             114
Advances                                        100            122            143            154             187
Operating Fixed Assets                          100            103            105            282             263
Other Assets                                    100            125            194            162             233


       After the acquisition of the funds their allocation becomes necessary. The Bank seeks the best
       way for making investment to get more profit with the maximum security. The Bank has an
       investment portfolio in which it allocate its funds for crediting to borrowers, investment in the
       stock market etc. The National Bank of Pakistan allocate its funds in Lending’s to financial


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institutions, investments, advances, operating fixed assets and other assets etc. To analyze trend
in these items, Horizontal analysis of each item is calculated.




A NALYSIS
The lending’s to financial institutions by National Bank of Pakistan fluctuates during all years.
The lending’s increased by 55 % in 2005. The year 2006 represents highest percentage of 119 %
among all years on account of lending’s to financial institutions. The year 2007 also shows an
increase of 104 % as compare to base year. The year 2008 indicates an increase of 63% as
compare to base year but lending’s decreased by 41% in 2008 as compare to the year 2007.




A NALYSIS


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The investments made by National Bank of Pakistan fluctuate during all years. There was an
increase of 5 % in 2005. The year 2006 indicates a decrease of 6% in investments. The year 2007
represents an increase of 41 %, highest among all years. The investments are increased 14 % in
2008 as compare to base year; however investments are decreased 27 % as compare to the year
2007.




A NALYSIS
The advances made by National Bank of Pakistan shows an increasing trend in all years as
compare to base year. This implies that National Bank of Pakistan is keener to advance money to
lenders. The advances were increased 22 % in the year 2005 and 43 % in 2006 as compare to
base year. The year 2007 represents an increase of 54 % and 2008 represents highest percentage
among all years that is 87 % as compare to base year.




A NALYSIS



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The operating fixed assets of National Bank of Pakistan shows a mixed trend during all years.
There was an increase of 3 % in 2005 & 5 % in 2006. There was a very sharp increase in
operating fixed assets in the year 2007 of 182 % as compare to base year. There was an increase
of 163% in 2008 as compare to base year but the same was decreased by 19% as compare to
2007.




A NALYSIS
The other assets of National Bank of Pakistan are fluctuating during all years. The other assets
are increased 25 % in 2005 and 94 % in 2006. The year 2007 indicates an increase of 62% as
compare to base year. The other assets of National Bank of Pakistan are on their peak percentage
of 133 % in 2008 as compare with base year.




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CRITICAL ANALYSIS (THEORY VS PRACTICAL)
During Internship it was my prime objective to furnish my knowledge (Theory) to various
practical situations. The practical work presents an analytical problem while relating theory with
practice. As a result, analysis of practical versus theory requires a distinct approach. This part of
report is the essence of the internship, as this will help to better understand the working
environment of the bank by finding the relationship between what is written in the books and
what is actually going on in fields. The theory written in the books in cases is not implemented
as it is. In some cases theory is implemented with a little modification but in other cases theory
has nothing to do with practice.

In accounting, banks don’t prepare worksheet, but part of worksheet is prepared like trial
balance. The securities for the loans are handled in the same way as theory says like mortgage,
pledge, hypothecation, advances against insurance policies or liquidation procedure is the same.
There is some difference lies in types of loans in bank that is theory talks about four or five types
of loans that is cash finance, overdraft, loans etc., but in practice there are some more types used
by bank like running finance, demand finance etc. All other concepts of remittances, bills,
foreign exchange deposits, letters of credit are in accordance with theory almost. A bank's
balance sheet is different from that of a typical company. You won't find inventory, accounts
receivable, or accounts payable. Instead, under assets, you'll see mostly loans and investments,
and on the liabilities side, you'll see deposits and borrowings.

C ONCLUSION
To me, Theory gives the direction to understand the processes and the terminologies going
across the World using best business practices in a broader view covering each and every aspect
of possible business scenarios. On the contrary practical life is specific, enclosed in a jar.




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                                         Balance Sheet
       Rupees in Millions

ASSETS                                     2004          2005         2006         2007              2008
Cash and balances with treasury
banks                                  94,446,552 71,196,956 78,625,227 94,873,249 106,503,756
Balances with other banks              49,784,884 31,019,330 40,641,679 37,472,832 38,344,608
Lending’s to financial institutions    10,511,322 16,282,942 23,012,732 21,464,600 17,128,032
Investments                           149,350,096 156,985,686 139,946,995 210,787,868 170,822,491
Advances                              220,794,075 268,838,779 316,110,406 340,677,100 412,986,865
Other assets                           19,141,569 23,941,056 27,113,698 30,994,965 44,550,347
Operating fixed assets                  9,202,969   9,454,365   9,681,974 25,922,979 24,217,655
Deferred tax assets                        _           _           _           _        3,204,572

                                      553,231,467 577,719,114 635,132,711 762,193,593 817,758,326

LIABILITIES
Bills payable                            7,214,671   1,741,156 10,605,663    7,061,902 10,219,061
Borrowings from financial institutions 11,084,790    8,756,847 11,704,079 10,886,063 40,458,926
Deposits and other accounts            465,571,717 463,426,602 501,872,243 591,907,435 624,939,016
Sub-ordinated loans                         _           _           _           _           _
Liabilities against assets subject to
finance lease                               17,058      16,629      13,235      33,554      25,274
Other liabilities                       23,068,314 24,974,450 26,596,300 30,869,154 39,656,831
Deferred tax liabilities net                29,185   4,462,718   2,387,073   5,097,831           _

                                      506,985,735 503,378,402 553,178,593 645,855,939 715,299,108
NET ASSETS
                                      46,245,732    74,340,712   81,954,118   116,337,654 102,459,218

REPRESENTED BY
Share capital                           4,924,106    5,908,927    7,090,712     8,154,319     8,969,751
Reserves                               10,813,914   13,536,041   13,879,260    15,772,124    19,941,047
Unappropriated Profit                   9,161,747   16,713,506   32,074,677    45,344,188    52,456,204

                                      24,899,767    36,158,474   53,044,649    69,270,631    81,367,002
Surplus                                21,345,965   38,182,238   28,909,469    47,067,023    21,092,216

                                      46,245,732    74,340,712   81,954,118   116,337,654 102,459,218



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        INCOME STATEMENT
        Rupees in Millions

                                                           2004       2005       2006       2007       2008
Markup/return/interest earned                         20,947,333 33,692,665 44,100,934 50,569,481 60,942,798
Markup/return/interest expensed                        6,559,398 10,321,768 13,947,218 16,940,011 23,884,768
Net markup/interest income                            14,387,935 23,370,897 30,153,716 33,629,470 37,058,030
Provisions against non-performing advances             1,515,354 2,446,739 3,075,723    4,723,084 10,593,565
provision for/(reversal of) diminution in the value
of investments                                           185,707   -245,881   -709,461     -40,248     373,249
provision against off balance sheet obligations           14,297 Nil        Nil        Nil               4,000
bad debts written off directly                            32,807     23,069      5,284      39,899 Nil
                                                       1,748,165 2,223,927 2,371,546    4,722,735 10,970,814
Net markup/interest income after provisions           12,639,770 21,146,970 27,782,170 28,906,735 26,087,216
NON MARKUP/ INTEREST INCOME
Fee, Commission & brokerage income                     5,099,195    4,926,604 6,144,628   6,781,683 7,925,370
Dividend income                                        1,273,863    1,718,478 2,891,755   3,263,246 2,878,932
Income form dealing in foreign currencies              1,008,988    1,205,638 1,333,840   1,042,827 3,969,057
Gain on sale & redemption of securities-net                47,557   1,365,771 1,169,515   2,341,690    395,427
Investments classified as held for trading            Nil              -1,979     -4,464    -31,964      1,707
Other income                                              875,113     177,839    627,618    147,363 1,245,369
Total non-markup/ Interest income                      8,304,716    9,392,351 12,162,892 13,544,845 16,415,862
Total income ( Interest + non-Interest)               20,944,486 30,539,321 39,945,062 42,451,580 42,503,078
NON MARKUP/ INTERSET EXPENSES
Administration expenses                                8,878,801 11,221,789 13,443,441 14,205,911 18,171,198
Other provisions written off                              32,243    198,298    -17,283    168,027    747,521
Other charges                                              8,284     63,206    208,327     17,141    583,361
Total non markup/ Interest expenses                    8,919,328 11,483,293 13,634,485 14,391,079 19,502,080
PROFIT BEFORE TAXATION                                11,977,601 19,056,028 26,310,577 28,060,501 23,000,998
Taxation Current                                       4,950,000 7,154,002 8,695,598    8,311,500 11,762,650
         Prior years                                     847,958 -1,098,709    530,652    391,497 Nil
         Deferred                                        -15,729    291,291     61,981    323,731 -4,220,242
                                                       5,782,229 6,346,584 9,288,231    9,026,728 7,542,408
PROFIT AFTER TAXATION                                  6,195,372 12,709,444 17,022,346 19,033,773 15,458,590
Unappropriated Profit brought forward                  5,892,902 9,161,747 19,372,523 32,074,677 45,344,188
Transfer from surplus on revaluation of fixed
assets on account of incremental depreciation             45,496     43,221     41,060     39,007    130,456
Profit available for appropriation                    12,133,770 21,914,412 36,435,929 51,147,457 60,933,234




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FINANCIAL STATEMENTS ANALYSIS
Financial analysis is a process which involves reclassification and summarization of information
through the establishment of ratios and trends. Financial statement analysis is the process of
examining relationships among financial statement elements and making comparisons with
relevant information. It is a valuable tool used by investors and creditors, financial analysts, and
others in their decision-making processes related to stocks, bonds, and other financial
instruments. The goal in analyzing financial statements is to assess past performance and current
financial position and to make predictions about the future performance of a company. Investors
who buy stock are primarily interested in a company's profitability and their prospects for
earning a return on their investment by receiving dividends and/or increasing the market value of
their stock holdings. Creditors and investors who buy debt securities, such as bonds, are more
interested in liquidity and solvency: the company's short-and long-run ability to pay its debts.
Financial analysts, who frequently specialize in following certain industries, routinely assess the
profitability, liquidity, and solvency of companies in order to make recommendations about the
purchase or sale of securities, such as stocks and bonds.

The analysis of financial statement refers to the examination of the statements for the purpose of
acquiring additional information regarding the activities of the business. The users of the
financial information often find analysis desirable for the interpretation of the firm’s activities.

The overall objective of financial statement analysis is the examination of a firm’s financial
position and returns in relation to risk. This must be done with a view to forecasting the firm’s
future prospective.

Analysts can obtain useful information by comparing a company's most recent financial
statements with its results in previous years and with the results of other companies in the same
industry. Three primary types of financial statement analysis are commonly known as horizontal
analysis, vertical analysis, and ratio analysis.




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RATIO ANALYSIS
Ratio analysis enables the analyst to compare items on a single financial statement or to examine
the relationships between items on two financial statements. After calculating ratios for each
year's financial data, the analyst can then examine trends for the company across years. Since
ratios adjust for size, using this analytical tool facilitates intercompany as well as intercompany
comparisons. Ratios are often classified using the following terms: profitability ratios (also
known as operating ratios), liquidity ratios, and solvency ratios. Profitability ratios are gauges of
the company's operating success for a given period of time. Liquidity ratios are measures of the
short-term ability of the company to pay its debts when they come due and to meet unexpected
needs for cash. Solvency ratios indicate the ability of the company to meet its long-term
obligations on a continuing basis and thus to survive over a long period of time. Financial ratios
allow for comparison:

       Between companies
       Between industries
       Between different time periods for one company
       Between a single company and its industry average

   a) PROFITABILITY RATIOS
The continued viability of any bank depends on its ability to earn an appropriate return on its
assets and capital. Good earning performance enables a bank to fund its operations, remain
competitive in the market and increase or decrease in market funds. Profitability ratios relate
profit to sales and investments. These ratios indicate the firm’s overall effectiveness of
operations and give us idea how well firm utilized its resources in generating profit and
shareholder value.

G ROSS P ROFIT M ARGIN R ATIO
Gross profit margin ratio is used to assess the profitability of a Bank's core activities. Gross profit
margin indicates the relationship between gross profit and interest earned. A high gross profit
margin indicates that a Bank can make a reasonable profit.

Formula = Gross Profit / Interest earned (Revenue)


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                         Year    2004 2005 2006 2007 2008
                         Ratio % 57.17 56.55 59.65 55.48 37.74




A NALYSIS
The Year 2006 has been an outstanding year with the bank recording the highest profit in its
history i.e.., 59.65 %.The National Bank of Pakistan’s wide range of product offering, large
branch network and committed workforce are some of fundamental strengths that enabled NBP
to achieve exceptional in a very competitive market. The gross profit is 37.74% in 2008. The
lowest percentage among all years.

N ET P ROFIT M ARGIN R ATIO
Net profit margin measures the percentage of revenue remaining after all cost and expenses,
including interest and taxes have been deducted.
Formula = Net Profit after Taxes / Interest earned

                         Year    2004 2005 2006 2007 2008
                         Ratio % 29.57 37.72 38.59 37.63 25.36




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A NALYSIS
Net profit margin shows positive trend till 2006 and was the highest in the same year as it was
38.59%, the percentage is decreased in 2007 as it was 37.63%. The net profit margin is on its
lowest level at the end of 2008 as it indicates a percentage of 25.63%. The primary reason of this
decline is current global economic conditions and current political crisis in Pakistan.

A SSETS T URNOVER
This ratio is useful to determine the amount of revenue that is generated from each Rupee of
assets. The Banks with low profit margins tend to have high asset turnover, those with high profit
margins have low asset turnover.

Formula = Revenue/ Total Assets

                             Year 2004 2005 2006 2007 2008
                             Ratio 0.03 0.05 0.06 0.05 0.05




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A NALYSIS
The year 2004 represents a ratio of 0.03, lowest among all years. The years 2005, 2007 and 2008
indicates almost same percentage of 0.05% on account of bank’s assets turnover. The National
Bank of Pakistan’s assets turnover in 2006 is 0.06, peak ratio among all years.

R ETURN ON C APITAL F UND
This ratio relates the net profits to the amount of capital funds that have been employed in
making that profit.

Formula = Net markup received / Capital Funds

                         Year         2004 2005 2006 2007           2008
                         Ratio        2.92 3.95 4.25 4.12           4.13




A NALYSIS
The above given ratios suggest that the profitability of the bank has a mixed trend during five
years. The first three years 2004 (2.92), 2005 (3.95), 2006 (4.95) shows an increasing trend,
indicating more profitable operations of the bank. It was decreased in the year 2007 (4.12) and
has increased in 2008 as the ratio was 4.13.

R ETURN ON I NVESTMENT
This ratio indicates the profit earned by the bank on the resources employed.

Formula = Net income after taxes / Total Assets


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                          Year 2004 2005 2006 2007                 2008
                          Ratio 0.011 0.021 0.026 0.024            0.018




A NALYSIS
There was an increase in the utilization of the resources till 2006 i.e.., 0.011(2004), 0.021 (2005)
and 0.026 (2007). The ratio was decreased to 0.024 (2007) and 0.018 (2008).

R ETURN ON D EPOSITS
This ratio indicates to what extent deposits which represent funds mobilization on the part of the
bank contribute towards income generation.

Formula = Net income before taxes / Total Deposits

                          Year 2004 2005 2006 2007                 2008
                          Ratio 0.025 0.041 0.052 0.047            0.036




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A NALYSIS
During all five years the return on deposits ratio of National Bank of Pakistan shows a mix trend.
The year 2006 (0.052) was the best year for bank in terms of its funds mobilization. Although the
ratio was decreasing in 2008 (0.036), indicating Bank is more keen to kept deposits and a change
in policy of the Bank regarding its funds mobilization.

E FFECTIVE T AX R ATE
This ratio is a measurement of a company's tax rate, which is calculated by comparing its income
tax expense to its pretax income. This amount will often differ from the company's stated
jurisdictional rate due to many accounting factors, including foreign exchange provisions. This
effective tax rate gives a good understanding of the tax rate the company faces.

Formula = Income Tax expense/ Pretax Income

                           Year    2004 2005 2006 2007 2008
                           Ratio % 0.48 0.33 0.35 0.32 0.32




A NALYSIS
The effective tax rate of National Bank of Pakistan was highest in the year 2004 (0.48%).
However bank is able to reduce its tax burden because the Bank is able to adopt Tax
management techniques to lessen the tax burden. A relatively stable effective tax rate percentage,
and resulting net profit margin, would seem to indicate that the Bank's operational managers are
more responsible for a company's profitability than the company's tax accountants.




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    b) LIQUIDITY RATIOS
The liquidity position of a bank is like a reservoir. It may be adequate, although nearly depleted,
just before the start of the rainy season. Or it may be inadequate, although three quarters full just
before the summer drought.

Liquidity can be defined as:

“The bank’s ability not only to meet possible deposit withdrawals but also to provide for the
legitimate needs of the economy as well”

C URRENT R ATIO
Current ratio is a measure of the current adequacy of company's current assets to meet its current
obligations. It must be greater than 1. If it is less than 1, liabilities exceed current assets. For
every Rs.1 of liabilities, the company has a ratio amount of current assets available. The concept
behind this ratio is to ascertain whether a company's short-term assets (cash, cash equivalents,
marketable securities, receivables and inventory) are readily available to pay off its short-term
liabilities (notes payable, current portion of term debt, payables, accrued expenses and taxes). In
theory, the higher the current ratio, the better.

Formula = Current Assets / Current Liabilities

                            Year      2004 2005 2006 2007           2008
                            Ratio     0.83 0.96 1.02 1.00           1.12




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A NALYSIS
The year 2004 (0.83) and 2005 (0.96) were not satisfied for bank as current assets are less than
current liabilities. However, in 2006 (1.02) the management of National Bank of Pakistan is able
to overcome this problem. The year 2007 (1.00) is also good for bank as per standards of this
ratio. Again in the year 2008 (1.12) the management of bank is able to increase its current ratio.

C ASH R ATIO
This ratio shows that the cash is enough for payment of current liabilities or not. This ratio is
obtained by dividing cash by current liabilities. For a bank this is the cash held by the bank as a
proportion of deposits in the bank.

Formula = Cash / Current Liabilities

                            Year       2004 2005 2006 2007 2008
                            Ratio      4.09 2.85 2.96 3.07 2.69




A NALYSIS
The cash ratio of National Bank of Pakistan shows a mixed trend during five years of operations.
During all years, the ratio is satisfactory as per standards of this ratio. The year 2004 (4.09),
representing highest and 2005 (2.85) & 2008 (2.69), representing lowest ratio in all five years.

A DVANCES TO D EPOSIT R ATIO
It demonstrate the degree to which bank has already used up its available resources to
accommodate the credit needs of its customers.

Formula = Advances / Total Deposits


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                       Year          2004 2005 2006 2007             2008
                       Ratio%        47.42 58.01 62.99 57.56         66.08




A NALYSIS
This ratio, a comparison of funds generation and its funds mobilization, indicates the total loans
sanctioned by the bank in relation to total amount of money deposited with the bank, stands
highest in 2008 ( 66.08%) as compared with the previous year figures. This shows that the bank
has greater potential to advance additional loans. During all other years the ratio is quiet
satisfactory representing National Bank of Pakistan’s credit management decisions.

D UE FROM B ANKS TO T OTAL A SSETS
It is an indication of Bank’s funds management policies.

Formula = Due from banks / Total Assets

                       Year          2004 2005 2006 2007             2008
                       Ratio         0.019 0.028 0.036 0.028         0.021




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A NALYSIS
The National Bank of Pakistan’s due from banks to total assets ratio is fluctuating and indicates a
mixed trend during all years. The ratio is 0.019 in 2004 and 0.028 in the year 2005. The year
2006 represents highest ratio of 0.036 among all years. There was a decrease in ratio at the end
of financial year 2007 that is 0.028. The year 2008 represents a decrease in ratio (0.021) on
account of due from banks to total assets.

D UE FROM B ANKS TO D UE TO B ANKS
It shows the relationship between what the bank owes from other banks and what is due to it.

Formula = Due from banks / Due to banks

                       Year   2004   2005   2006   2007               2008
                       Ratio% 94.83 185.95 196.62 197.18              42.33




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A NALYSIS
The ratio indicates an increasing trend till 2007 that is 94.83 (2004), 185.95 (2005), 196.62
(2006) and 197.18 in 2007. The year 2008 represents the lowest percentage of 42.33 on account
of due from banks to due to banks.

D UE TO B ANKS TO T OTAL D EPOSITS
This ratio is an indicative of the proportion of the lending from the financial institutions in
relation to the total funds raised by the bank in the form of deposits.

Formula = Due to banks / Total Deposits

                           Year      2004   2005    2006   2007      2008

                           Ratio 0.024 0.019 0.023 0.018             0.065




A NALYSIS
The due to banks to total deposits ratio of National Bank of Pakistan is fluctuating and indicates
a mixed trend during all years. The ratio is 0.024 in 2004 and decreased to 0.019 in 2005. The
ratio is increased in 2006 as the ratio is 0.023. The year 2007 represents the lowest percentage of
0.018 and the year 2008 represents the peak percentage of 0.065.



   c) DEBT RATIOS
These ratios give users a general idea of the company's overall debt load as well as its mix of
equity and debt. Debt ratios can be used to determine the overall level of financial risk a


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company and its shareholders face. In general, the greater the amount of debt held by a company
the greater the financial risk of bankruptcy.

T HE D EBT TO E QUITY R ATIO
The debt-equity ratio compares a company's total liabilities to its total shareholders' equity. This
is a measurement of how much suppliers, lenders, creditors and obligors have committed to the
company versus what the shareholders have committed.

To a large degree, the debt-equity ratio provides another vantage point on a company's leverage
position, in this case, comparing total liabilities to shareholders' equity, as opposed to total assets
in the debt ratio. Similar to the debt ratio, a lower the percentage means that a company is using
less leverage and has a stronger equity position.

Formula = Total Liabilities/ Total Shareholder’s equity

                            Year   2004 2005 2006 2007 2008
                            Ratio 112.35 97.77 89.57 93.47 91.17




A NALYSIS
The debt to equity ratio of National Bank of Pakistan shows a ratio of 112.35 % in 2004. The
ratio is decreased to 97.77% in the year 2005. The ratio is further decreased in 2006 as it shows a
percentage of 89.57%. There was an increase in the ratio as it shows a percentage of 93.47%.
The year 2008 represents the ratio of 91.17% .




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I NTEREST C OVERAGE R ATIO
It shows whether the bank is earning enough profit before mark up charges to be paid to the
financiers and the taxation obligations due to the government in order to remain solvent. The
interest coverage ratio is used to determine how easily a company can pay interest expenses on
outstanding debt. The ratio is calculated by dividing a company's earnings before interest and
taxes (EBIT) by the company's interest expenses for the same period. The lower the ratio, the
more the company is burdened by debt expense. When a company's interest coverage ratio is
only 1.5 or lower, its ability to meet interest expenses may be questionable.

Formula = Earnings before interest & Taxes / Interest expense

                    Year          2004      2005      2006       2007    2008
                    Ratio          1.83      1.85      1.89       1.66     0.97
                                 times     times     times      times    times




A NALYSIS
The amount of interest a Bank pays in relation to its revenue and earnings is tremendously
important. The National Bank of Pakistan’s interest coverage ratio is 1.83 times in the year 2005.
The ratio was increased in the years 2005 and 2006 as it was 1.85 times & 1.89 times
respectively. There sudden decrease of 1.66 times is observed in 2007. The ratio is further
decrease to 0.97 times in 2008, representing the lowest ratio among all years.




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L OAN L OSS C OVERAGE R ATIO
Banks use the loan-loss coverage ratio to define the quality of its assets and how well it protects
itself from losses caused by problematic loans. The higher this ratio is, the better the bank is
handling itself in regards to loans.

Formula = Provision against non-performance loans & advances/ Profit or loss before taxation


                              Year 2004 2005 2006 2007 2008
                              Ratio 0.13 0.13 0.12 0.17 0.47




A NALYSIS
The loan loss coverage ratio of National Bank of Pakistan is almost same in the years 2004 and
2005 as it was 0.13 in both years. There was a slight decrease in this ratio as it was 0.12 in 2006.
The year 2006 shows an increase in loan loss coverage ratio as it was 0.17. The year 2008
represents highest ratio of 0.47 on account of loan loss coverage, as compare to all years.

   d) CAPITAL ADEQUACY RATIOS

C APITAL F UNDS TO T OTAL A SSETS
This ratio indicates the extent of the funds employed by the bank in the total resources as shown
in the balance sheet.

Formula = Capital Funds / Total Assets

                           Year   2004 2005 2006 2007               2008
                           Ratio% 0.89 1.02 1.10 1.07               1.09


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A NALYSIS
The National Bank of Pakistan’s Capital funds to Total Assets ratio is increased during all years.
The ratio is 0.89 in 2004, representing lowest ratio in all years. The ratio is increased in 2005,
2006 and 2007 as the graph shows ratios of 1.02, 1.10 & 1.07 respectively. The ratio is keeping
its trend and also increases in the year 2008 as it was 1.09.

    e) OPERATING PERFORMANCE RATIOS
Each of these ratios have differing inputs and measure different segments of a company's overall
operational performance, but the ratios do give users insight into the company's performance and
management during the period being measured.

These ratios look at how well a company turns its assets into revenue as well as how efficiently a
company converts its sales into cash. Basically, these ratios look at how efficiently and
effectively a company is using its resources to generate sales and increase shareholder value. In
general, the better these ratios are, the better it is for shareholders.

In this section, we'll look at the fixed-asset turnover ratio and the sales/revenue per employee
ratio, which look at how well the company uses its fixed assets and employees to generate sales.

F IXED A SSETS T URNOVER
This ratio is a rough measure of the productivity of a company's fixed assets (property, plant and
equipment etc) with respect to generating revenue. For most companies, their investment in fixed
assets represents the single largest component of their total assets. This annual turnover ratio is
designed to reflect a company's efficiency in managing these significant assets.


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Formula = Revenue/ Operating Fixed Assets

                          Year    2004 2005 2006 2007 2008
                          Ratio % 2.28 3.23 4.13 1.64 1.76




A NALYSIS
The fixed assets turnover ratio of National Bank of Pakistan has an increasing trend till 2006.
The ratio increases 2.28 (2004) to 3.23 (2005). The year 2006 represents highest fixed assets
turnover ratio for National Bank of Pakistan i.e.., 4.13. The bank’s efficiency to utilize these
assets has been decreased to 1.64 in the year 2007 however it was increased in 2008 as the ratio
is 1.76.

S ALES OR R EVENUE P ER E MPLOYEE
As a gauge of personnel productivity, this indicator simply measures the amount of Rupees sales
or revenue, generated per employee. The higher the Rupee figures the better.

Formula = Revenue/ Number of Employees

                     Year    2004    2005    2006    2007    2008
                     Ratio 1274.85 1858.87 2431.38 2583.94 2587.08




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A NALYSIS
The ratio has been showing an increasing trend till 2007 i.e.., 1274.85 (2004), 1858.87 (2005),
2431.38 (2006) and 2583.94 (2007). There was a marginal increase in the year in the year 2008
i.e.., 2587.08, representing the peak percentage in all years.




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HORIZONTAL ANALYSIS
This technique is also known as comparative analysis. It is conducted by setting consecutive
balance sheet, income statement or statement of cash flow side-by-side and reviewing changes in
individual categories on a year-to-year or multiyear basis. The most important item revealed by
comparative financial statement analysis is trend. A comparison of statements over several years
reveals direction, speed and extent of a trend(s). The horizontal financial statements analysis is
done by restating amount of each item or group of items as a percentage. Such percentages are
calculated by selecting a base year and assign a weight of 100 to the amount of each item in the
base year statement. Thereafter, the amounts of similar items or groups of items in prior or
subsequent financial statements are expressed as a percentage of the base year amount. The
resulting figures are called index numbers or trend ratios.

Formula = Current Year amount / Base Year amount * 100

Horizontal analysis, whilst simple to execute and useful to a certain extent, has its limitations.
These limitations include:

       Being highly dependent on the selection of base year and the period under examination in
       the financial model.
       Horizontal analysis provides little insight into why the trend occurred in a financial
       model.
       Horizontal analysis does not provide insight into whether the trend in the financial model
       results was superior/inferior to some benchmark.
       Horizontal    analysis   does   not   address    the   challenge   of   negative     numbers.




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   HORIZONTAL ANALYSIS OF BALANCE SHEET

                                                Horizontal Analysis
                                                       (%)
ASSETS                           2004   2005       2006         2007            2008
Cash                              100      75         83         100              113
Balances with other banks         100      62         82          75               77
Lending’s to fin. institutions    100     155        219         204              163
Investments                       100     105         94         141              114
Advances                          100     122        143         154              187
Operating fixed assets            100     103        105         282              263
Other assets                      100     125        194         162              233
Total
Assets                            100     104        117         138              148
LIABILITIES                      2004   2005       2006         2007            2008
Share Capital                     100     120        144         166              182
Reserves                          100     125        128         146              184
Unappropriated profit             100     182        350         495              573
Surplus On Reval. of assets       100     179        135         221               99
Bills payable                     100      24        147          98              142
Borrowings                        100      79        106          98              365
Deposits and other accounts       100     100        108         127              134
Liabilities against assets        100      97         78         197              148
subject to finance lease
Deferred tax liabilities net      100   15291       8179       17467               Nil
Other liabilities                 100     108        115         134              172
Total Liabilities                 100     104        117         138              133




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A NALYSIS
The National Bank of Pakistan’s Cash & balance with treasury banks shows a mixed trend
during all years. It was decreased by 25% in 2005 and 17% in 2006. There was a marginal
increase in the year 2007. In 2008 the percentage is increased by 13% as compare to base year.




A NALYSIS
The Balances of National Bank of Pakistan with other banks shows a decreasing trend as
compare to base year. The year 2005 represents lower percentage (38%), while the year 2006
represents highest percentage of 18%.




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A NALYSIS
The lending’s to financial institutions by National Bank of Pakistan fluctuates during all years.
The lending’s increased 55 % in 2005. The year 2006 represents highest percentage of 119 %
among all years on account of lending’s to financial institutions. The year 2007 also shows an
increase of 104 % as compare to base year. The year 2008 indicates an increase of 63% as
compare to base year but lending’s decreased by 41 % in 2008 as compare to the year 2007.




A NALYSIS
The investments made by National Bank of Pakistan fluctuate during all years. There was an
increase of 5 % in 2005. The year 2006 indicates a decrease of 6% in investments. The year 2007
represents an increase of 41 %, highest among all years. The investments are increased 14 % in
2008 as compare to base year; however investments are decreased 27 % as compare to the year
2007.



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A NALYSIS
The advances made by National Bank of Pakistan shows an increasing trend in all years as
compare to base year. This implies that National Bank of Pakistan is keener to advance money to
lenders. The advances were increased 22 % in the year 2005 and 43 % in 2006 as compare to
base year. The year 2007 represents an increase of 54 % and 2008 represents highest percentage
among all years that is 87 % as compare to base year.




A NALYSIS
The operating fixed assets of National Bank of Pakistan shows a mixed trend during all years.
There was an increase of 3 % in 2005 & 5 % in 2006. There was a very sharp increase in
operating fixed assets in the year 2007 of 182 % as compare to base year. There was an increase
of 163% in 2008 as compare to base year but the same was decreased by 19% as compare to
2007.



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A NALYSIS
The other assets of National Bank of Pakistan are fluctuating during all years. The other assets
are increased 25 % in 2005 and 94 % in 2006. The year 2007 indicates an increase of 62% as
compare to base year. The other assets of National Bank of Pakistan are on their peak percentage
of 133 % in 2008 as compare with base year.




A NALYSIS
The Share capital refers to the portion of a Bank's equity that has been obtained by trading stock
to a shareholder for cash or an equivalent item of capital value. The share capital of National
Bank of Pakistan shows an increasing trend in all years as compare to base year. The increase in
share capital during all years indicates share holder’s concern toward National Bank of Pakistan
and efficient bank’s Management policies.



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A NALYSIS
The Banks’ reserves are banks' holdings of deposits in accounts with their central bank plus
currency that is physically held in bank vaults (vault cash). The reserves of National Bank of
Pakistan fluctuate during all years as they show an increasing trend. The reserves are increased
25 %, 28 % & 46 % in the years 2005, 2006 & 2007 respectively. The year 2008 represents
highest increasing percentage of 84% as compare to base and previous years.




A NALYSIS
The Unappropriated profit are Earnings of National Bank of Pakistan not paid out as dividends
but instead reinvested in the core business or used to pay off debt. Unappropriated profit is part
of shareholder equity. The bank’s Unappropriated profit is increasing very sharply during all
years as compare to base year, indicated bank’s strict dividend payout policy and concern
towards reinvestment options.



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A NALYSIS
The National Bank of Pakistan’s surplus on revaluation of assets fluctuates and shows a mixed
trend during all years. It was increased 79% in 2005 and 35% in 2006. The year 2007 represents
highest percentage of 121%. The percentage is decreased by 1% in 2008 as compare to base year
and 122% as compare to 2007.




A NALYSIS
The National Bank of Pakistan’s bills payable is showing a mix trend during all years. The year
2005 is best for bank in terms of reduction in bills payable. The year 2006 represents a higher
percentage of bank’s liability as it increase 47% as compare to base year. The year 2008 also
shows an increase in bank’s bills payable as it increases to 42% as compare to base year.




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A NALYSIS
The National Bank of Pakistan’s borrowings fluctuates during all years and shows a mixed trend.
The borrowings were decreased 21 % in 2005; however same are increased 6 % in 2006 as
compare to base year. There was a marginal decrease of 2% in bank’s borrowings in the year
2007. The year 2008 represents highest percentage of borrowings as these were increased to 265
% comparing with base year and are increased 267 % as compare to 2007.




A NALYSIS
The deposits and other accounts of National Bank of Pakistan show a mixed trend during all
years. In the year 2005, the deposits were increased very marginally, with the year 2006
represents an increase of 8%. The deposits are increased 27% & 34% in the years 2007 and 2008
respectively




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A NALYSIS
The National Bank of Pakistan’s Liabilities against assets subject to finance lease were fluctuate
during all years, with the year 2005 (3% decrease) and 2006 (22% decrease) shows a decreasing
trend and the year 2007 (97% increase) & 2008 (48 % increase) shows an increasing trend as
compare to base year.




A NALYSIS
The other liabilities of National Bank of Pakistan are fluctuating during all years and show an
increasing trend. The year 2005 indicates an increase of 8 % and 2006 indicates an increase of
15%. The other liabilities in the year 2007 represent an increase of 34%. There was a sharp
increase in 2008 as it indicates a percentage of 72%, highest among all years.




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HORIZONTAL ANALYSIS OF INCOME STATEMENT
Rupees in Millions

                                                        2004     2005     2006     2007      2008
Markup/return/interest earned                            100      161      211      241       291
Markup/return/interest expensed                          100      157      213      258       364
Net markup/interest income                               100      162      210      234       258
Provisions against non-performing advances               100      161      203      312       699
provision for/(reversal of) diminution in the value
of investments                                           100     -132     -382     -22     201
provision against off balance sheet obligations          100 Nil      Nil      Nil          28
bad debts written off directly                           100       70       16     122 Nil
                                                         100      127      136     270     628
Net markup/interest income after provisions              100      167      220     229     206
NON MARKUP/ INTEREST INCOME
Fee, Commission & brokerage income                       100        97      121      133     155
Dividend income                                          100       135      227      256     226
Income form dealing in foreign currencies                100       119      132      103     393
Gain on sale & redemption of securities-net              100     2,872    2,459    4,924     831
Investments classified as held for trading            Nil     Nil      Nil      Nil      Nil
Other income                                              100       20       72       17     142
Total non-markup/ Interest income                         100      113      146      163     198
Total income ( Interest + non-Interest)                  100      146      191      203       203
NON MARKUP/ INTERSET EXPENSES
Administration expenses                                  100      126      151      160       205
Other provisions written off                             100      615      -54      521     2,318
Other charges                                            100      763    2,515      207     7,042
Total non markup/ Interest expenses                      100      129      153      161       219
PROFIT BEFORE TAXATION                                   100       159     220      234     192
Taxation Current                                         100       145     176      168     238
         Prior years                                     100      -130      63       46 Nil
         Deferred                                        100    -1,852    -394   -2,058  26,831
                                                         100       110     161      156     130
PROFIT AFTER TAXATION                                    100      205      275      307       250
Unappropriated Profit brought forward                    100      155      329      544       769
Transfer from surplus on revaluation of fixed
assets on account of incremental depreciation            100       95       90       86       287
Profit available for appropriation                       100      181      300      422       502




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A NALYSIS
The interest earned by National Bank of Pakistan fluctuates during all years, as it was increased
during all years as compare to base year. The interest earned is increased 61% in 2005 and 111%
in 2006. The year 2007 represents second highest percentage on account of interest earned as it
was increase 141 %. The year 2008 represents peak percentage of 191 % as compare to all years.




A NALYSIS
The interest expense of National Bank of Pakistan shows an increasing trend in all years, as it
was increased 57 % (2005) and 113 % (2006). The year 2007 represents second highest
percentage on account of interest expensed as it was increases to 158% as compare to base year.
The year 2008 shows an increase of 264 %, highest among all years.




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A NALYSIS
The net markup/ Interest income of National Bank of Pakistan fluctuates during all years as it
shows an increasing trend. It was increased 62 % in 2005 and 110% in 2006 as compare to base
year. The year 2007 represents second highest percentage on account of Net markup/ Interest
income as it was increased to 134%, comparing with base year. The percentage is increased 158
% in 2008, highest among all years.




A NALYSIS
The net markup/ interest income after provisions fluctuates and shows a mixed trend during all
years. It was increased 67% (2005), 120% (2006) and 129% in 2007. The income is increased
106 % as compare to base year but the same was decreased by 23% as compare to 2007.




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A NALYSIS
The Fee, Commission and brokerage income of National Bank of Pakistan fluctuates during all
years. It was decreased 3% in the year 2005 and increases 21 % in the year 2006. The year 2007
represents an increase of 33%. The year 2008 represents peak percentage of 55%.




A NALYSIS
The dividend income of National Bank of Pakistan fluctuates during all years, as it shows a
mixed trend during all years. The dividend income is increasing 35 % in the year 2005 and 127
% in 2006. It was increased 156% in 2007, represents higher percentage among all years. The
year 2008 represents an increase of 126 % as compare to base year and a decrease of 30% as
compare to 2007.




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A NALYSIS
The National Bank of Pakistan’s income from dealing in foreign securities fluctuates during all
years as it shows an increasing trend. It was increased 19 % in 2005 and 32 % in 2006. The
income has its lowest percentage in 2007 as it was increased 3 %. The year 2008 represents
highest percentage on account of bank’s income from dealing in foreign securities as it was
increased 293 % as compare to base year and 290% as compare to the year 2007.




A NALYSIS
The other income of National Bank of Pakistan fluctuates during all years as it shows a mixed
trend. It was decreased 80 % in 2005 and 28% in 2006 as compare to base year. The year 2007
represents the lowest decreasing trend of 83%. There was a sharp increase in National Bank of
Pakistan’s other income as it was increased to 42% as compare to base year and increased 125%
as compare to 2007. to 63%, comparing with base year. The percentage is increased 52 % in
2008 as compare to base year, but it was decreased 11% as compare to 2007.


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A NALYSIS
The Total non- markup/ Interest income of National Bank of Pakistan shows an increasing trend
during all years. It was increased 13% in 2005 and 46% in 2006. The income is increased 63 %
in 2007, second highest among all years. There was an increase of 98% in 2008, highest among
all years.




A NALYSIS
The total income of National Bank of Pakistan shows an increasing trend. It was increased 46%
in 2005 and 91% in 2006. The total income is increased 103% in 2007 and also increase very
marginally in 2008.




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A NALYSIS
The administration expense of National Bank of Pakistan is increased 26 % in 2005 and 51 % in
2006 as compare to base year. The year 2007 represents an increase of 60%. The percentage is
increased 105 % in 2008, highest among all years.




A NALYSIS
The Total non markup/ Interest expenses of National Bank of Pakistan fluctuates and shows an
increasing trend as compare to base year. It was increased 29%, 53% and 61% in the years 2005,
2006 and 2007 respectively. The year 2008 represents peak percentage of 119% in 2008.




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A NALYSIS
The profit before taxation of National Bank of Pakistan fluctuates and shows a mixed trend
during all years. It was increased 59% in 2005 and 120% in 2006. The year 2007 represents
highest percentage on account of profit before taxation as it was increased to 134%. The year
2008 indicates an increase of 92% as compare with base year but it was decreased in 2008 by
42% as compare to 2007.




A NALYSIS
The current taxation of National Bank of Pakistan fluctuates during all years as it was increased
during all years as compare to base year. It was increased 45 % in 2005 and 76 % in 2006. The
year 2007 and 2008 indicates an increase of 68 % & 138 % respectively.




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A NALYSIS
The National Bank of Pakistan’s Profit after taxation fluctuates during all years as it was
increased during all years as compare to base year. The profit after taxation is increased 105% in
2005 and 175 % in 2006 as compare to base year. The Year 2007 has been an outstanding year
with the National Bank of Pakistan recording the highest profit after taxation in its history as the
percentage increases to 207 % comparing with base year. The year 2008 indicates an increase of
150 % as compare to base year and a decrease of 57 % as compare to 2007.




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VERTICAL ANALYSIS
When using vertical analysis, the analyst calculates each item on a single financial statement as a
percentage of a total. The term vertical analysis applies because each year's figures are listed
vertically on a financial statement. The total used by the analyst on the income statement is net
sales revenue, while on the balance sheet it is total assets. This approach to financial statement
analysis, also known as component percentages, produces common-size financial statements.
Common-size balance sheets and income statements can be more easily compared, whether
across the years for a single company or across different companies.

Vertical analysis is a technique for identifying relationship between items in the same financial
statement by expressing all amounts as the percentage of the total amount taken as 100. In a
balance sheet, for example, cash and other assets are shown as a percentage of the total assets
and, in an income statement, each expense is shown as a percentage of the sales revenue.

In Vertical analysis, various components of the financial statements are standardized by
expressing them as a percentage of some bases.

Examples of common-sized statements include:

       Components of the balance sheet expressed as a percentage of total assets
       Components of the income statement expressed as a percentage of sales or revenue




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  VERTICAL ANALYSIS OF BALANCE SHEET

                                                Vertical Analysis (%)
ASSETS                            2004     2005        2006           2007            2008
Cash                              17.07    12.32        12.19        12.45            13.02
Balances with other banks          9.00     5.37         6.30         4.92             4.69
Lending’s to fin. institutions     1.90     2.82         3.57         2.82             2.09
Investments                       27.00    27.17        21.69        27.66            20.88
Advances                          39.91    46.53        49.00        44.70            50.50
Operating fixed assets             1.66     1.64         1.50         3.40             2.96
Other assets                       3.46     4.14         5.75         4.07             5.45
Total                               100      100          100          100              100
LIABILITIES                       2004     2005         2006         2007             2008
Share Capital                      0.89     1.02         1.10         1.07             1.09
Reserves                           1.95     2.34         2.15         2.07             2.43
Unappropriated profit              1.66     2.89         4.97         5.95             6.41
Surplus On Reval. of assets        3.86     6.61         4.48         6.18             2.57
Bills payable                      1.30     0.30         1.64         0.93             1.25
Borrowings                         2.00     1.52         1.81         1.43             4.94
Deposits and other accounts       84.15    80.22        77.79        77.66            76.42
Liabilities against assets       0.0031   0.0029       0.0021       0.0044           0.0030
subject to finance lease
Deferred tax liabilities net       0.01     0.77         0.37         0.67                Nil
Other liabilities                  4.17     4.32         4.12         4.05              4.85
Total                               100      100          100          100               100




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A NALYSIS
The cash balance of National Bank of Pakistan fluctuates during all years. The year 2004
representing highest percentage of cash balance among all years that is 17.07%. The cash
balance percentage is decreasing in 2005 (12.32 %) and 2006 (12.19%). There was a slight
increase in the year 2007 as compare to the years 2005 & 2006, of 12.45%. The year 2008
indicates second highest level of National bank of Pakistan’s cash balance as it was 13.02%.




A NALYSIS
The National Bank of Pakistan’s balances with other banks has its peak percentage of 9% in the
year 2004. The percentage is decreased to 5.37% in 2005 and has increased slightly in 2006,
indicates 6.3%. The percentage is again decreased in 2007 with a percentage of 4.92 % and a
percentage of 4.69% in 2008.




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A NALYSIS
The lending’s to financial institutions by National Bank of Pakistan shows a mixed trend. In the
year 2004 percentage is 1.90%. The year 2005 along with the year 2007 indicates the same
percentage of 2.82%. The year 2006 represents peak percentage of 3.57% for National Bank of
Pakistan regarding its lending’s to financial institutions. The percentage is decreased in 2008
indicating a percentage of 2.09%, second lowest among all years.




A NALYSIS
The investments made by National Bank of Pakistan are fluctuating and showing a mixed trend.
The year 2004 shows a percentage of 27% and the year 2005 show 27.17%. The percentage is
decreased to 21.69% in 2006; however it was increased in 2007 to 27.66 %, representing peak
percentage among all years. The percentage is again decreased to 20.88% in the year 2008.




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A NALYSIS
The advances made by National Bank of Pakistan are fluctuating and indicates mixed trend in all
years. The first three years of analysis shows an increasing trend that is 39.91% (2004), 46.53%
(2005) and 49% in the year 2006. There was a decrease in bank’s advances to 44.7% in 2007;
however in 2008 the percentage is increased to 50.5%, representing peak rate among all previous
years.




A NALYSIS
The operating fixed assets of National Bank of Pakistan shows a percentage of 1.66% in the year
2004. There was a slight decrease of 1.64% in 2005 and 1.50% in 2006. The operating fixed
assets are increased to 3.40% in 2007. The year 2008 indicates a decrease in bank’s operating
fixed assets as it reduces to 2.96%.




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A NALYSIS
The other assets of National Bank of Pakistan fluctuate during all years. The year 2004 has a
percentage of 3.46%, which is increased till 2006 that is 4.14% (2005) and 5.75% (2006). The
percentage of other assets is decreased to 4.07% in the year 2007; however it was increased to
5.45% in the year 2008.




A NALYSIS
The share capital of National Bank of Pakistan shows a mixed trend in all years. It was 0.89% in
2005 and shows an increasing trend of 1.02% in 2005. The percentage of share capital is further
increased in 2006 and shows 1.10%. There was a slight decrease in 2007 as percentage was
1.07%. The year 2008 represents highest percentage of 1.09% among all years.




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A NALYSIS
The reserves of National Bank of Pakistan fluctuate and indicate a mixed trend. The above graph
shows a percentage of 1.95% in 2004 with an increasing trend of 2.34% in the year 2005. The
reserves of the bank are decreasing in 2006 & 2007, shows a percentage of 2.15% and 2.07%
respectively. Despite the decreasing trend in previous two years, the National Bank of Pakistan is
being able opt achieve highest percentage of reserves in 2008 as the percentage increased to
2.43%.




A NALYSIS
The Unappropriated profit of National Bank of Pakistan is increased during all years. It shows a
percentage of 1.66% in 2004, 2.89% in 2005, 4.97% in 2006, 5.95% in 2007 and a peak
percentage of 6.41% in 2008.




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A NALYSIS
The surplus on revaluation of assets is fluctuating and shows a mix trend. It shows a percentage
of 3.86% in 2004. The year 2005 represents highest percentage of 6.61%, but it was decreased in
2006 as percentage is decline to 4.48%. There was a sharp increase in 2007 of 6.18%, however
surplus is again decline in 2008 and shows a percentage of 2.57%, lowest among all years.




A NALYSIS
The bills payable by National Bank of Pakistan indicates a percentage of 1.3% in 2004. The
percentage is decline in 2005 as it shows a decrease of 0.3%, lowest percentage in all years.
There was a sharp increase in 2006 of 1.64% with a decline of 0.93% in 2007. The percentage is
again increased in 2008 as it shows a percentage of 1.25%.




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A NALYSIS
The Borrowings of National Bank of Pakistan shows a mixed trend in all years. The percentage
is 2% in 2004 with a decline in 2005 shows a percentage of 1.52%. The borrowings are increased
in 2006 shows a percentage of 1.81%. The year 2007 represents lowest percentage of 1.43% of
bank’s borrowing among all years. There was a sharp increase in bank’s borrowing in the year
2008 as it shows a percentage of 4.94%.




A NALYSIS
The deposits and other accounts of National Bank of Pakistan decreased during all years. The
year 2004 represents peak percentage of 84.15%. The deposits are decline to 80.22% in 2005,
77.79% in 2006, 77.66% in 2007 and 76.42 % in 2008.




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A NALYSIS
The other liabilities of National Bank of Pakistan fluctuate and show a mix trend in all years. The
percentage of other liabilities in 2004 is 4.17%. The year 2005 represents percentage (4.32%) of
bank’s other liabilities. The other liabilities were decline in 2006 and 2007 shows a percentage of
4.12% and 4.05% respectively. The National Bank of Pakistan is not being able to reduce its
other liabilities in 2008 as the graph shows a percentage of 4.85%, highest percentage among all
years.




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VERTICAL ANALYSIS OF INCOME STATEMENT

                                                            2004      2005         2006         2007      2008
Markup/return/interest earned                                100       110          110          119       143
Markup/return/interest expensed                               31        34           35           40        56
Net markup/interest income                                    69        77           75           79        87
Provisions against non-performing advances                     7         8            8           11        25
provision for/(reversal of) diminution in the value
of investments                                                1         -1           -2            0          1
provision against off balance sheet obligations               0 Nil          Nil          Nil                 0
bad debts written off directly                                0         0            0            0 Nil
                                                              8         7            6           11          26
Net markup/interest income after provisions                  60        69           70           68          61
NON MARKUP/ INTEREST INCOME
Fee, Commission & brokerage income                           24        16           15           16          19
Dividend income                                               6         6            7            8           7
Income form dealing in foreign currencies                     5         4            3            2           9
Gain on sale & redemption of securities-net                   0         4            3            6           1
Investments classified as held for trading            Nil               0            0            0           0
Other income                                                  4         1            2            0           3
Total non-markup/ Interest income                            40        31           30           32          39
Total income ( Interest + non-Interest)                      100       100          100          100       100
NON MARKUP/ INTERSET EXPENSES
Administration expenses                                      42        37           34           33          43
Other provisions written off                                  0         2            0            1           5
Other charges                                                 0         0            1            0           1
Total non markup/ Interest expenses                          43        38           34           34          46
PROFIT BEFORE TAXATION                                       57        62           66           66      54
Taxation Current                                             24        23           22           20      28
         Prior years                                          4        -4            1            1 Nil
         Deferred                                             0         1            0            1     -10
                                                             28        21           23           21      18
PROFIT AFTER TAXATION                                        30        42           43           45         36
Unappropriated Profit brought forward                        28        30           48           76        107
Transfer from surplus on revaluation of fixed
assets on account of incremental depreciation                 0         0            0             0         0
Profit available for appropriation                           58        72           91           120       143




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A NALYSIS
The interest earned by National Bank of Pakistan fluctuates and shows an increasing trend during
all years. The year 2008 is unique in terms of bank’s interest earned. The bank earned 143%
interest in this year. All other years shows an increasing trend that is 100% in 2004, 110% in
2005, 110% in 2006 and 119% in 2007.




A NALYSIS
The interest expense of National Bank of Pakistan shows an increasing trend during all years. In
the year 2004, the interest expensed is 31%. The interest expense is increase in 2005 as it shows
a percentage of 34%. There was a marginal increase in 2006, as interest expanse shows a
percentage of 35%. The year 2007 also shows an increase of 40%. The year 2008 represents a
percentage of 56%, highest among all years.




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A NALYSIS
The net markup/ interest income of National Bank of Pakistan fluctuates and shows a mixed
trend during all years. The percentage is 69% in 2004 and shows an increasing trend in 2005 as
percentage is 77%. There was a slight decrease in net markup/ Interest income as the percentage
is 75%. There was an increase in income in 2007, as the graph indicating a percentage of 79%.
The year 2008 represents peak percentage of 87% of net markup/ Interest income.




A NALYSIS
The net markup/ Interest income after provisions fluctuates and shows a mixed trend. The
percentage is 60% in 2004, lowest among all years. The year 2005 represents an increasing trend
as percentage is 69%. There was a marginal increase in 2006 as the percentage is 70%. The
banks income is decreasing in 2007 & 2008 as the percentage is 68% and 61% respectively.




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A NALYSIS
The Fee, Commission & brokerage income of National Bank of Pakistan fluctuate and show a
mixed trend during all years. The year 2004 represents highest percentage of 24% on account of
fee, commission & brokerage income. The percentage is decreased in 2005 & 2006 as percentage
is 16% & 15% respectively. There was a slight increase in 2007 & 2008 as percentage is 16% &
19% respectively.




A NALYSIS
The dividend income of National Bank of Pakistan is showing a mixed trend during all years.
The year 2004 and 2006 indicates almost same percentage of 6%. The year 2006 & 2008 shows a
percentage of 7% each. The year 2007 represents a peak percentage of 8% on account of
dividend income.




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A NALYSIS
The National Bank of Pakistan’s income from dealing in foreign securities shows a percentage of
5% in 2004. The percentage is decreased in 2005, 2006 and 2007 as the percentage in these years
is 4%, 3% and 2% respectively. The year 2008 represents highest percentage of 9% on account
of income from dealing in foreign securities.




A NALYSIS
The Total non markup/ Interest income of National Bank of Pakistan fluctuates and indicates a
mixed trend during all years. The year 2004 represents highest percentage of 40% among all
years. The percentage is decreased in 2005 as it was 31%. There was a slight decrease in 2006 as
percentage is 30%. The years 2007 and 2008 indicates an increasing trend as percentage is 32%
& 39% respectively.




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A NALYSIS
The administrative and operating expenses of National Bank of Pakistan are 42% in 2004,
representing second highest percentage among all years. The expenses are decreased in 2005 as
percentage is 37%. The year 2006 and 2007 also shows a decreasing trend as percentage is 34%
& 33% respectively. The administrative and operating expenses of bank are increased in the year
2008 as the percentage is 43%, highest among all years.




A NALYSIS
The total non markup/ Interest expenses of National Bank of Pakistan are 43% in 2004,
representing second highest percentage among all years. The expense is decreased in 2005 as
percentage is 38%. The year 2006 and 2007 also shows a decreasing trend as percentage is 34%
in each year. The total interest expense of bank is increased in the year 2008 as the percentage is
46%, highest among all years.



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A NALYSIS
The National Bank of Pakistan’s current taxation fluctuates and shows a mixed trend in all years.
The percentage is 23% in the year 2004. The years 2005, 2006 and 2007 shows a slight decrease
in bank’s current taxation as percentage in these years is 23%, 22% and 20% respectively. The
year 2008 represents peak percentage of 28% on account of current taxation.




A NALYSIS
The National Bank of Pakistan’s Profit before taxation is 57% in the year 2004.The percentage is
increased in 2005 as it shows a percentage of 62%. The year 2006 and 2007 shows almost same
increasing trend as percentage is 66%. There was a decrease in bank’s Profit before taxation as
percentage is reduces to 54%, lowest among all years.




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A NALYSIS
The National Bank of Pakistan’s Profit after taxation is 30% in the year 2004, representing the
lowest percentage among all years. The percentage is increased in 2005 as it shows a percentage
of 42%. The year 2006 and 2007 shows a slight increasing trend as percentage is 43% & 45%
respectively. There was a decrease in bank’s Profit before taxation as percentage is reduces to
36%.




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       BANK ANALYSIS WITH REFERNCE TO COMMERCIAL
       BANKS LISTED ON STOCK EXCHANGE
                           Financial Position of Commercial Banks
                                    Registered in Pakistan
Name
of                                              As of June 2008
Commercial       Paid up Reserves Assets      Deposits Advances Profit         Earnings Branch  Credit
                                  (Rs.                          After          Per
Bank             Capital (Rs. Bn) Bn)         (Rs. Bn) (Rs. Bn) Tax            share    Network Rating
                 (Rs.                                           (Rs.
                 Bn)                                            Bn)            (Rs)            (Nos)
Habib Bank          7.59      23.6   735.71     584.85    411.36         7.5          9.75          1400 AA+
NBP                 8.97     18.54   788.12     621.53    173.42         8.1          9.03          1249 AAA
Allied Bank         6.46      5.48    344.7     293.97    168.45     2.51             3.88           757 AA
MCB                 6.28     35.88   450.34     350.72    228.98     7.68         12.22             1038      AA+
United Bank        10.12     12.82   576.02     465.54    328.55     5.59             5.53          1100      AA+
First Women         0.28      0.22     8.04        6.4      3.09     0.05             1.67             38     BBB+
Bank of Punjab      5.29      7.43   217.85     180.82    142.85    -2.63             -4.97           272     AA-
Soneri Bank         4.11      1.88    81.61      64.73     45.83     0.47             1.13             90 AA-
Askari Bank         4.06      7.59   194.21     153.32    114.04     0.05             1.01            155 AA
Bank Al- Habib      4.79       2.8   167.36     136.75     93.25     1.25             2.61            203 AA
Bank of Khyber        4       1.34    34.43       24.4     11.14     0.11             0.27             34 BBB+
Bank Al- Falah        8       2.95   333.02     287.77    180.02     1.69             2.12            231 AA
                                                                                                           -
Saudi Pak             5       0.22    50.83      42.35     27.62    -0.81             -1.54            55 A
Faysal Bank          5.3      3.57   137.31      99.61     87.61     0.75             1.41            111 AA
KASB Bank           4.02      0.17    53.66      44.33     32.65     0.08             0.39             41 A
Meezan Bank         4.54      0.81    71.74      57.84      38.3     0.44             0.98            111 A+
NIB Bank           28.44      8.46   177.98     112.12     85.43    -0.73             0.23            240 AA-
Mybank              4.24      0.41    45.47      31.96     23.03     0.43             1.02             69 A
Atlas Bank          5.01      0.52     30.7      22.18      17.5     -0.2             -0.39            31     A-
Standard
Chartered          38.72      1.95   276.38     173.81    126.27     1.31             0.34            176     AA+
JS Bank             5.11      0.01    24.16      14.08      9.57     0.16             -0.31            11     A-
Habib
Metropolitan        6.02       6.7   192.45     128.97    101.22     1.57               2.6           100     AA+




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A stock exchange is a corporation or mutual organization which provides "trading" facilities for
stock brokers and traders, to trade stocks and other securities. The securities traded on a stock
exchange include: shares issued by companies, unit trusts and other pooled investment products
and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there.
The initial offering of stocks and bonds to investors is by definition done in the primary market
and subsequent trading is done in the secondary market. In Pakistan securities are traded on three
stock exchanges which are Karachi stock exchange, Lahore stock exchange and Islamabad stock
exchange.

The financial position of commercial banks registered on stock exchanges in Pakistan, are shown
in preceding page in terms of their:

       Paid-up Capital
       Reserves
       Assets
       Deposits
       Advances
       Profit after tax
       Earnings per share
       Credit rating

The best way to analyze these commercial banks is to analyze their credit ratings. The National
Bank of Pakistan enjoys the highest credit rating amongst Pakistani banks; JCR- VIS Credit
rating Co. Limited awarded highest standalone credit rating of AAA to NBP. The JCRVIS Credit
rating Co. comments about NBP say a lot about the bank:31
“The organization has been able to strategically manage and build on its competitive advantages
which has translated into the strong and well managed improvement in profitability trend
observed over the last few years, a substantial balance sheet of sound asset quality, and strong
liquidity and capitalization levels”
NBP’s key strength remains its extensive outreach and a low cost, stable deposit base. Deposits
are also guaranteed by the Government of Pakistan under the Banking Nationalization Act, 1974.
There have also been significant improvements in the management practices of the bank and a
focus on enhancement of systems and controls. In this regard the management has entered into


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an agreement for the acquisition of a core banking software which is likely to be implemented
over the next few years.
JCR-VIS believes that the current economic situation puts certain leading industrial sectors and
the general consumer under financial stress. Therefore, the second half of 2008 and 2009 are
likely to be challenging for the banking sector as a whole, in terms of maintaining growth, asset
quality and profitability.32
The JCR-VIS Rating Process include following steps:33

    1. Signs agreement for an initial rating
    2. Submits preliminary information materials
    3. Conducts a preliminary study
    4. Submits a detailed questionnaire to the issuer/client
    5. Provides detailed information in response to detailed questionnaire
    6. Conducts pre due diligence meeting analysis
    7. Conducts due diligence meetings
    8. Conducts post due diligence analysis
    9. Brief for internal rating committee meetings is prepared
    10. Sub Committee recommends preliminary/initial rating
    11. Rating Committee decides the preliminary/initial rating
    12. Discusses the rating rationales and rating issues with client
    13. Notifies issuer of the preliminary/initial rating, deliberates on appeals by client, if any
    14. Consents to release of preliminary/initial rating to the public in case of non-mandatory
        ratings
    15. Releases the preliminary/initial rating to the press




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FUTURE PROSPECTS OF NATIONAL BANK OF PAKISTAN
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 forward-
looking management of NBP is a firm believer in focusing on niches where there is critical mass
and to create products that meet that demand.

National Bank of Pakistan is gearing up to the challenges faced by the domestic banking industry
due to innovations and advances in the international banking world, which is the consequence of
globalization. The bank wishes to effectively utilize the financial assistance being extended by
the Government of Pakistan for banking sector reforms aimed at reducing operating costs and
improving profitability. National Bank of Pakistan is distinct from other banks in that it has a
nonprofit and service oriented motive, which has manifested itself in the area of salary deposits
of government employees and payment of utility bills. The bank renders these services across the
country reaching as far as the remotest regions; from our northern borders to the Arabian Sea.
These services do not contribute towards the earnings of the bank; rather they put pressure on
bank’s resources. Nevertheless, the bank is committed to serving small savers and the general
public of the country. National Bank of Pakistan is everyone’s bank and does not only serve
corporate customers. To extending and targeting research to improve bank earnings, through
customer focus of bank’s commercial and corporate branches, and by enhanced efforts towards
the development of human capital, the bank shall very soon transform from a bureaucratic
organization to a fast paced, modern, and competitive bank. In conclusion, the National Bank of
Pakistan have the vision, which will enable it to achieve even better results, safeguard the
interest of their customers and to assist them in their march towards progress and prosperity in
future.

The National Bank of Pakistan is confidence that tomorrow we will be…

          Leaders in our industry
          An organization maintaining the trust of stakeholders.


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        An innovative, creative and dynamic institution responding to the changing needs of the
        internal and external environment

NBP’s current management has boarder vision. They have taken steps to improve customer
services, streamline internal procedure and creating a delectating climate for technology
initiative.

Reorganizing efforts going on in the NBP has open many opportunities for NBP to grow. For
instance to achieve objectives NBP have taken following measures.

    Setting of target for of making at least 300 branches country wide on line.
    Closing of all those branches, which are burden on NBP.
    Management to offer specialized services to major corporate including advisory and debt
    syndication introduces the concept of relationship manager.
    Comprehensive training programs has been develop to up grade the core banking skills of the
    existing staff as well as integrate high quality hiring.
    To improve the motivation of staff a merit-based culture is being promoted. Through
    overhauling the manpower recruitment preservation and performance appraisal system.
The actions taken by current management provide a great opportunity for NBP for making it
future prosper and can make NBP not less than any modern commercialize bank in Pakistan.

The Management of NBP assess that the Internal Control environment is showing signs of
improvement as compared to previous years in all areas of the bank. The bank is endeavoring to
further refine its internal control design and assessment process as per guidelines issued by the
State Bank of Pakistan Accordingly, Bank is making all possible effort to improve the
professional skills and competency level of the staff through need based training programs and
our valued customers for their support and continued confidence in NBP.




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SHORT FALLS/ WEAKNESSES OF NATIONAL BANK OF
PAKISTAN
   The National Bank of Pakistan’s Advance salary, which has long been the flag-ship
   product for NBP, is replete with charges of corruption, default and inefficiency.
   The National Bank of Pakistan’s huge number of borrowers is untraceable or correct
   whereabouts are not known.
   The housing finance product of NBP lacks proper infrastructure including database
   support even after five years of post launch history. The similar products launched by
   other commercial banks are much smaller in size are running on well-articulated systems
   and are backed by proper policies and guidelines. The NBP product, despite boasting a
   sizeable portfolio built around some reckless selling, is mostly infected.
   The NBP Karobar scheme is designed around President’s Rozgar scheme. The scheme
   which had all the potential to become a landmark was so badly mishandled by National
   Bank of Pakistan.
   The Quality of infrastructure added by National Bank of Pakistan during the last few
   years is quite substandard as compared to that of peer banks.
   In NBP’s five year strategic plan 2007-2011 approved by board of directors does not
   address any serious thinking on
          Productivity improvement and benchmarking with the competition.
          Development required for serving major sectors of the economy.
          Infrastructure to support planned growth and vision.
          Inducting and leveraging specialized human capital.
          Bringing the institution on international banking landscape in the coming five
          years, not to speak of the seven years which the current management has already
          served.
   As for as public interest is concerned there were no service standards benchmarks and
   guidelines available in NBP. There were only old documents that were crafted at least a
   decade or more back.
   Due to poor planning the bank had book losses of over 1.2 billion rupees in the Karobar
   Scheme.


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The National Bank of Pakistan’s outsourced employees (2350) was obtained from a
single source. Most of these are performing the core function of the bank outside their
assigned duties without any training and supervision.

The National Bank of Pakistan is incurred large expenses in running those branches,
which are not producing any income.
The up gradation of human resource is very slow in NBP. The branches of NBP have less
number of employees as their requirements. The concept of “One Man Show” is adopted
in many branches to save salary expenditure; even most of the branches use their security
guards for various tasks. The one reason for this is that the senior management is able to
decrease salary expenditure of the bank, which result an increase in the net profit. For
their performance they received handsome amounts of bonus. But in long run it has a
negative effect on bank’s productivity.
The pension’s distribution service or payments to EOBI beneficiaries, utility payments;
workers remittances are occupied lowest priority level.
In NBP Karobar scheme the product selected by the NBP is of inferior quality and
develops faults in the first few months of delivery.




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CONCLUSIONS
   The National Bank of Pakistan plays a key role in the strategic national development. The
   bank has historically been the financial arm of the government and has enjoyed the
   blessings of state support in the form of huge public sector funds and deposits.
   In contract to other banks populating the FSI sector, NBP is mandated to uphold public
   interest. It is critical too as all other banks and NBFIs in public sector have been closed
   down or merged with NBP.
   In contract to other banks populating the FSI sector, NBP is mandated to uphold public
   interest. It is critical too as all other banks and NBFIs in public sector have been closed
   down or merged with NBP.
   The current management of National Bank of Pakistan was hired purely for their
   international experience, business orientation to turn around a purely public institution
   into a sustainable and commercially viable bank serving public interest along the lines of
   a large modern commercial bank.
   The National Bank of Pakistan has effective budgeting system in place. Annual budget of
   the bank is approved by the Board and monthly comparisons of actual results with the
   budget are prepared and reviewed by the senior management.
   The National Bank of Pakistan has a comprehensive framework of written policies and
   procedures on all major areas of operations such as Credit, Treasury Operations, Finance,
   Internal audit and Compliance approved by the Board.
   The National Bank of Pakistan provides sustainable financing for growth of industries of
   critical national importance such as energy, education, healthcare, transport, shipping,
   Research & development.




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RECOMMENDATIONS
   The National bank of Pakistan should be fully prepared in its management of financial
   crises and its business continuity planning, within the standing committee framework,
   and should work with others to strengthen national crises management preparations.
   The bank should improve the quality of training of its employees and the integrity,
   controls and efficiency of its systems, processes and financial reporting.
   The bank should improve its recruitment, retention and development and to reform the
   Bank’s pension scheme.
   The bank should renegotiate the Bank’s long term financial framework and to overhaul
   the Bank’s financial system.
   The Bank should improve IT capability in the analytical areas and to develop a medium
   term strategy for banking and market operations.
   The National bank of Pakistan should monitor the impact of its operations on the
   environment, which is mainly through the use of power and the generation of waste.
   NBP, being the only lending arm to the government for public sector development should
   design, develop and deliver product and services for economic growth.
   The bank should provide support to the Micro, Small and Medium enterprises thereby
   reducing unemployment and helping to create a more equitable distribution of wealth.
   The NBP should adopt modern banking tools and techniques. Quality leadership, clear
   vision, investment in IT infrastructure and human resource development.
   The bank should develop software for pension disbursement.
   As for as Islamic Banking environment is concerned the management and employees of
   NBP should work together for basic research for discovering their own laws, developing
   theories or concepts for the better direction of their own business environment according
   to Quran & Sunnah.
   The branches should reduce its large expenses in order to increase the value of the bank.
   The NBP should strengthen incentives and accelerate a results-oriented training and
   communications programs for management and staff.


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The National Bank of Pakistan should implement a financial inclusion program to meet
the needs of underserved economic subsectors, including outreach programs to meet the
requirements of the agriculture, housing, SME and microfinance sectors.
The National Bank of Pakistan should introduce a framework for consolidated
supervision and reorganize the regulatory architecture to allow better regulation and
supervision of financial control division of bank.




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REFERENCES
1
    http://www.nbp.com.pk/EcomomicBulletin/FS-Complete-31-12-2007.pdf
2
    NBP Quarterly Report September 2008
3
    http://www.nbp.com.pk/nbp/About_Us/About_US.jsp
4
    NBP Quarterly Report September 2008
5
    http://www.nbp.com.pk/nbp/About_Us/About_US.jsp
6
    Black's Law Dictionary page 471 (5th ed)
7
    Kotler, P., Armstrong, G., Brown, L., and Adam, S. (2006) Marketing, 7th Ed.
8
    Principles of marketing 8 ED by Kotler & Armstrong G7
9
    Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 87
10
     Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 91
11
     Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 88
12
     Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed
13
     http://www.nbp.com.pk/Aamdani/index.htm
14
     http://www.nbp.com.pk/Premium/index.htm
15
     http://www.nbp.com.pk/Saibaan/index.htm
16
     http://www.nbp.com.pk/advancesalary/index.htm
17
     http://www.nbp.com.pk/CashnGold/index.htm
18
     http://www.nbp.com.pk/StudentLoan/index.htm
19
     Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 221
20
     Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 228
21
     Practice & Law of Banking in Pakistan by Dr. Asrar H. Siddiqui 7th ed page no 228
22
     SBP Prudential Regulations
23
     http://www.nbp.com.pk/nbp/NBP_Treasury.jsp
24
     http://www.nbp.com.pk/nbp/Treasury_Products.jsp
25
     http://www.nbp.com.pk/nbp/About_Us/DReport3.jsp
26
     http://www.nbp.com.pk/nbp/About_Us/DReport3.jsp
27
     NBP Annual Report 2007
28
     Terry and Franklin Principles of Management
29
     Management 7 Ed Robbins & coulter



                       Raja Hamza Javed 03335199328
                                                               P a g e | 175



30
     Human error by James Reason
31
     NBP Annual Report 2007
32
     http://www.jcrvis.com.pk
33
     http://www.jcrvis.com.pk/ratingscale/rating_process.htm




                       Raja Hamza Javed 03335199328

				
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