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					          Virtual University of Pakistan
                     Evaluation Sheet for Internship Report
                                   Fall 2009
FINI619: Internship Report (Finance)                                       Credit Hours: 3



Name of Student:     Humayoun Ahmad Farooqi
                                                Evaluation Criteria            Result

Student’s ID: MC080203376                       Report writing                 Pass
                                                Presentation & Viva voce

Supervisor:                                     Final Result
SWOT analysis and recommendations are copied from internet
          Mistakes in calculations are highlighted
                 Ratios are not interpreted.




              INTERNSHIP REPORT


               Name of Organization:
           NATIONAL BANK OF PAKISTAN


                     Submitted By:
               Humayoun Ahmad Farooqi
               MC080203376 (Student ID)
                    Session 2008-2010


                     Submitted To:
                    Instructor FIN619


                 Date of Submission:
                        04-02-2010
               VIRTUAL UNIVERSITY OF PAKISTAN

An I n t e r n s h i p R e p o r t




                                     Dedications
                        I dedicate this Internship Report to
                                 My family and friends




                                                               ii
iii
UNDERTAKING




     iii
INTERNSHIP REPORT




        iv
                                   Acknowledgement


          Thanks to almighty Allah, the most merciful, beneficent, and the source of all
knowledge and wisdom. All reverence to the Holy Prophet Mohammad (S.A.W.), who is
forever guidance and knowledge for all human beings on this earth.
          Special thanks to Mr. Muhammad Ali Khan campus manager Virtual University
Campus (Faisal Town), Lahore - 939, Block-C, Moulana Shaukat Ali Road, Lahore
(VLHR01) - for providing information, support and guidance at every level of my
studies. Without his co-operation it would not be possible for me to complete my MBA
degree.
          I am very thankful to my family specially my mothers whose kind prayers and
cooperation helped me at every step of my work.
          I am really very grateful to Anwaar Ali Assistant vice President and Nauman
Dilawar Operations Manager (Internship supervisor), National Bank of Pakistan, Model
Town Branch Lahore for their accommodating attitude during the completion of my
internship. They helped and supported me during gathering and analyzing information.
          And at the end, I am really very thankful to Mr. Mohsin Ali, a friend of mine, for
his help in every step during the completion of my internship report.




                                              v
                                   Executive summary


          In this report, I have discussed about every major aspect of the bank, which I
observed during my internship. Along with it, the processes, policies and procedures of
the bank have also been discussed in detail.
          The main purpose of internship is to learn, by working in practical environment
and to apply the knowledge acquired, during the studies, in a real world scenario in order
to tackle the problems. My intentions were to know how to work in financial institutions,
to know about the office environment and to know how to deal with different kind of
people.
          In this report the analysis of the organization has been done and the financial
aspects have been evaluated to analyze the current position of the organization. Along
with it, the background analysis, the business process analysis, and the internal
environment and external environment of the organization have been discussed and the
recommendations for the improvement have been made.
          During my internship program, I mainly worked with the departments GENERAL
BANKING and ADVANCES. These departments have been discussed in along with the
policies and procedures therein.
          I have concluded my report with my experience at the National Bank of the
Pakistan along with my overall insight of the organization
          The recommendation section contains my perception of the ways of improving
this organization.
          In the end I have listed the references used during the preparation of my
internship report




                                               vi
Table of Contents


Introduction of Organization Business Sector ________________________________ 1
Overview of the organization ______________________________________________ 4
  Brief History of the Organization ______________________________________________ 4
  Nature of the Organization ___________________________________________________ 7
  Business Volume of the organization ___________________________________________ 9
  Product Lines _____________________________________________________________ 10
    National Bank of Pakistan Saiban Scheme _____________________________________________ 10
    NBP Advance Salary Scheme _______________________________________________________ 11
    National Bank Cash Gold Scheme ___________________________________________________ 11
    National Bank Kisan Dost Scheme ___________________________________________________ 11
    National Bank Premium Aamdani Certificate Scheme ____________________________________ 12
    NBP Karobar Scheme _____________________________________________________________ 13
    International Baking ______________________________________________________________ 13
    DEMAND DRAFTS ______________________________________________________________ 13
    MAIL TRANSFERS ______________________________________________________________ 14
    PAY ORDER: ___________________________________________________________________ 14
    TRAVELER'S CHEQUES: _________________________________________________________ 14
    LETTER OF CREDIT: ____________________________________________________________ 14
    COMMERCIAL FINANCE: ________________________________________________________ 15
    FOREIGN REMITTANCES: _______________________________________________________ 15
    SWIFT SYSTEM: ________________________________________________________________ 15
    TRADE FINANCES OTHER BUSINESS LOANS ______________________________________ 16
       AGRICULTURAL FINANCE: ___________________________________________________ 16
       Agricultural Credit: _____________________________________________________________ 16
       Production and development ______________________________________________________ 16
       Farm Credit: __________________________________________________________________ 17
       Production Loans: ______________________________________________________________ 17
    CORPORATE FINANCE: _________________________________________________________ 17
       Working Capital and Short Term Loans: __________________________________________ 17
       Loan Structuring and Syndication: _________________________________________________ 17
       Cash Management Services ______________________________________________________ 18
       SHORT TERM INVESTMENTS: _________________________________________________ 18
       EQUITY INVESTMENTS: ______________________________________________________ 18
  Competitors ______________________________________________________________ 19
Organizational structure ________________________________________________ 20
  Organizational Hierarchy Chart _____________________________________________ 20
  Number of employees ______________________________________________________ 22
  Main Offices ______________________________________________________________ 22
  Introduction of all the departments ___________________________________________ 24
    Deposit Department _______________________________________________________________ 24
    Advances Department _____________________________________________________________ 24
    Government Receipts and Payments Department ________________________________________ 24


                                             vii
   FBR Collection Department ________________________________________________________ 24
   Remittances Department ___________________________________________________________ 24
   Bills Department _________________________________________________________________ 25
   Cash Department _________________________________________________________________ 25
   Compliance Department ___________________________________________________________ 25
   Agriculture Department ____________________________________________________________ 25
   Human Resources Management Depatrment____________________________________________ 26
   Information Technology Department _________________________________________________ 26
   Online Banking Department ________________________________________________________ 26
   Islamic Banking Department ________________________________________________________ 26
 Comments on Organizational Structure _______________________________________ 26
Plan of your internship program __________________________________________ 28
 Introduction of Branch _____________________________________________________ 28
   Name of Branch __________________________________________________________________ 28
   Branch Code ____________________________________________________________________ 28
   Region _________________________________________________________________________ 28
   Address ________________________________________________________________________ 28
   Phone Nos. ______________________________________________________________________ 28
   Fax No. ________________________________________________________________________ 28
   Name of Manager ________________________________________________________________ 28
   Name of My Operation Manager (Supervisor) __________________________________________ 28
   Number of employees _____________________________________________________________ 29
 Starting and ending dates of internship ________________________________________ 29
 Departments of Training ____________________________________________________ 29
   1.   The General Banking Department _______________________________________________ 29
   2.   Advances Department _________________________________________________________ 30
Training program______________________________________________________ 30
 Introduction of the departments I worked in ___________________________________ 30
   1. General Banking _____________________________________________________________ 30
   2. Advances (Credit department) _____________________________________________________ 32
 Detailed description of tasks Assigned to me____________________________________ 32
      a. Qualification of Customer ______________________________________________________ 33
      b. Types of Accounts ____________________________________________________________ 33
      c. Issuing of cheque book: ________________________________________________________ 34
   2. Accepting deposits _____________________________________________________________ 34
   3. Making payment. ____________________________________________________________ 35
      a.    Current account ___________________________________________________________ 35
      b. Saving account ______________________________________________________________ 36
      c. Cheque Payments ____________________________________________________________ 36
      d. Cheque cancellation: __________________________________________________________ 37
   4. Government receipt and Payment __________________________________________________ 37
   Advances Department _____________________________________________________________ 38
      Principles of Advances __________________________________________________________ 39
Structure of Finance Department _________________________________________ 44
 Departmental Hierarchy ____________________________________________________ 44
 Numbers of Employee ______________________________________________________ 44
 Finance and Accounting Operations __________________________________________ 44
   Functions of the Finance Department _________________________________________________ 45

                                           viii
Functions of Finance Department ________________________________________ 45
 Accounting system of the organization ________________________________________ 45
 Finance system of the organization ___________________________________________ 45
 Use of electronic data in decision making ______________________________________ 45
 Sources of funds ___________________________________________________________ 46
 Allocation of funds _________________________________________________________ 46
Critical Analysis _______________________________________________________ 47
 a.        Financial Analysis _____________________________________________________ 47
      i.   Ratio Analysis _______________________________________________________________ 47
        a.   Liquidity Ratios ___________________________________________________________ 47
        b. Leverage Ratios ___________________________________________________________ 49
        c.   Profitability Ratios _________________________________________________________ 51
        d. Activity Ratios ____________________________________________________________ 53
        e.   Market Ratios _____________________________________________________________ 55
        f.   Statement of Cash Flow _____________________________________________________ 56
        g. Other Ratios ______________________________________________________________ 57
      HORIZONTAL ANALYSIS ________________________________________________________ 58
      VERTICAL ANALYSIS ___________________________________________________________ 61
      INDUSTRY ANALYSIS __________________________________________________________ 62
 FUTURE PROSPECTS OF THE ORGANIZATION ____________________________ 64
SWOT Analysis of the organization _______________________________________ 65
 Strength__________________________________________________________________ 65
 Weakness ________________________________________________________________ 65
 Opportunities _____________________________________________________________ 66
 Threats __________________________________________________________________ 66
Conclusion ___________________________________________________________ 68
 Customer Satisfaction ______________________________________________________ 68
 Poor record management and filing system ____________________________________ 68
 Unequal distribution of work ________________________________________________ 68
 Marketing visits ___________________________________________________________ 68
 Formal Organization _______________________________________________________ 68
 Difference between theory and practice________________________________________ 69
 More accounts fewer deposits. _______________________________________________ 69
 Delegation of authority _____________________________________________________ 69
 Lack of specialized training _________________________________________________ 69
 Poor job rotation __________________________________________________________ 70
 Lack of appreciation _______________________________________________________ 70
 Promotions _______________________________________________________________ 70
 Marketing at desk _________________________________________________________ 70

                                              ix
 Lack of business communication _____________________________________________ 71
Recommendations for Improvements ______________________________________ 72
 Professional training _______________________________________________________ 72
 Delegation of authority _____________________________________________________ 72
 Performance Appraisal _____________________________________________________ 72
 To Over Come Problem of Space and Furniture ________________________________ 72
 Job Rotation ______________________________________________________________ 73
 Changes in Policies_________________________________________________________ 73
 Link with the Head Quarter _________________________________________________ 73
 Credit Card ______________________________________________________________ 73
 Installing Validator ________________________________________________________ 73
 Interest on Overdraft: ______________________________________________________ 73
 Cash Financing ____________________________________________________________ 73
 Decreasing Administrative Expenses __________________________________________ 74
 Needs to be Flexible in credit Policy ___________________________________________ 74
 Technological Advancement _________________________________________________ 74
 Staff Relationship __________________________________________________________ 74
 Improper Distribution of Work ______________________________________________ 75
 Favoritism and nepotism ____________________________________________________ 75
 Marketing Policy __________________________________________________________ 75
 Complaints of Customer ____________________________________________________ 76
 Organizational Commitment ________________________________________________ 76
 Credit Monitoring _________________________________________________________ 76
 Avoiding Bad Debts ________________________________________________________ 76
References ___________________________________________________________ 77




                                         x
         Introduction of Organization Business Sector

       National bank of Pakistan is providing banking/financial services in Pakistan. The
Banking/Financial service sector is often described as a nation's economic engine because
they provide financial intermediation functions between savers/investors that are looking
for safety and growth and consumers/businesses who are looking for access to credit and
capital. Banks also play a major role as instruments of the government's monetary policy
aimed at regulating interest rates and money supply in the economy. The current
economic crisis in the United States and Europe is because of the ongoing weakness of
major banks and the resulting credit and capital crunch. It is evident form history that the
banking sector is critically important in national and global economies.


       In Pakistan, the total banking sector serves around 6 million borrowers and 25
million depositors, implying a penetration rate of 3.6 percent and 15 percent respectively.
In terms of access to microfinance, which means the availability of small loans, micro
deposits and micro-insurance services to low income households, the current penetration
rate is only 10 percent. In other words, 85 percent of Pakistan's population does not have
access to any financial services at all, which inherently creates an uneven and an
inequitable economic world, where the majority of people are financially marginalized.


       Between 2002 and 2007, Pakistan's accelerated economic growth was
underpinned by a strong banking sector. Classified as Pakistan‟s and region‟s best
performing sector, the banking industry‟s assets rose to over $60 billion, its profitability
remains high, non-performing loans (NPLs) are low, credit is fairly diversified and bank-
wide system risks are well-contained. Almost 81% of banking assets are in private hands.
Likewise, the present foreign stake comes to 47% of total paid-up capital of all the
financial institutions regulated by Pakistan's central bank, the State Bank of Pakistan.


       At present there are 41 scheduled banks, 6 Development Finance Institutes, and 2
Micro Finance Banks operating in Pakistan whose activities are regulated and supervised

                                                                                           1
by State Bank of Pakistan. The commercial banks comprise of 3 nationalized banks, 3
privatized banks, 15 private sector banks, 14 foreign banks, 2 provincial scheduled banks,
and 4 specialized banks.


       Under the Banking Companies Ordinance, 1962 the State Bank of Pakistan is
fully authorized to regulate and supervise banks and development finance institutions.
State Bank of Pakistan can prohibit the bank from giving loans, advances & credits. It
can prohibit the bank from accepting deposits, Can cancel license of a bank, Can give
directions to the bank as it deem fit ,Can remove chairman, directors, chief executive or
other managerial persons from the office and appoint a person as chairman, director or
chief executive.


       In general, there are primarily two types of banks in Pakistan: Commercial Banks
and Investment Banks. Both types of banks provide financial services essential for
Pakistan's economy to function and grow.


       Commercial Banks are privately-owned institutions that, generally, accept
deposits and make loans. Deposits are money people entrust to an institution with the
understanding that they can get it back at any time or at an agreed-upon future date. A
loan is money let out to a borrower to be generally paid back with interest. This action of
taking deposits and making loans is called financial intermediation. A bank's business,
however, does not end there. Most people and businesses pay their bills with bank
checking accounts, placing banks at the center of our payments system. Banks are the
major source of consumer loans -- loans for cars, houses, education -- as well as main
lenders to businesses, especially small businesses. When banks are strong and the credit
flows, it helps the overall economic growth. When banks are in crisis, the impact on
business and consumers increases the weakness in the economy.


       Investment banks provide four primary types of services: raising capital (private
equity or public offerings of shares), advising in mergers and acquisitions, executing
securities sales and trading, and performing general advisory services. Most of the major

                                                                                         2
Wall Street firms are active in each of these categories. Smaller investment banks may
specialize in two or three of these categories.




       In spite of the international economic crisis, continuing political turmoil and
rising militancy in Pakistan, the financial services sector has held up fairly well in the last
year. Its future, however, remains tied to a measure political stability in the country that
allows economic activity to occur unhindered. Let's hope the nation's political and ruling
elites can find a way to find a peaceful way forward.




                                                                                             3
                        Overview of the organization

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


                                           Mission
          NBP will aspire to the values that make NBP truly the Nation‟s Bank, by:
         Institutionalizing a merit and performance culture
         Creating a distinctive brand identity by providing the highest standards of services
         Adopting the best international management practices
         Maximizing stake-holders value
         Discharging our responsibility as a good corporate citizen of Pakistan and in
          countries where we operate



                         Brief History of the Organization

          National Bank of Pakistan was established vide NBP Ordinance No. XIX of
November 9. 1949. Initially the Bank‟s objective was to extend credit to the agriculture
sector.


          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 Bank in 1950 had one subsidiary „The Bank of Bahawalpur‟ established on
December4, 1947 by the former Bahawalpur State.

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

                                                                                            4
         Deposits held by NBP constituted about 3.1% of total deposits of all Pakistani
Banks in 1949, which rose to 38% in 1952.

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

         In 2002 the Bank signed an agreement with Western Union for expanding the
base for documented remittances. In November 2002 NBP launched its advance salary
scheme


         The Best in the Emerging Markets: World‟s leading financial journal, “Global
Finance” after a worldwide survey declared NBP in its issue of May 2003 as one of the
Best in the Emerging Markets.


         The “Bankers Magazine” in July 2003 recognized NBP as the bank with the
highest return on capital in Asia and No.8 in the world.


         NBP in the only Pakistani bank which has been ranked among the Top 100 banks
of Asia for it performance in the fiscal year 2003 and then among the Top 1000 banks of
the world by the prestigious “Banker magazine” in its issue of July 2005.


         In January 2004 NBP launched its NBP Saibaan scheme. In May 2004, NBP‟s
standard long-term rating was upgraded by M/S JCR-VIS Credit Rating Agency to AA
(double A) from AA- (double A minus) with “stable outlook” while standalone short-
term rating was maintained at A-1+ (A one plus). This is now the best rating for a local
commercial bank in Pakistan.


         WEBCOP-AASHA, an alliance against gender discrimination at workplace,
presented a recognition Award to NBP on December 18, 2004 for having a Gender
Sensitive Management.




                                                                                      5
       World‟s leading financial journal, “Global Finance” in an exclusive survey has
named NBP as the Best Emerging Market Bank from Pakistan for the year 2005.


       On an all Pakistan basis NBP was awarded the “Kisan Times Award” for the year
2005 by the Prime Minister of Pakistan Mr. Shaukat Aziz, for its services in the
Agriculture Sector.


       The “Banker Magazine” in July 2005 recognized NBP as the 10th Best Bank in
terms of “Profit on Capital” in the world.


        “Best Bank-Pakistan” award for the year 2005 by world‟s leading financial
journal “Global Finance”. NBP launched its ATM + Debit Card in 2005


       World‟s leading financial journal, “Global Finance” has named NBP as the Best
Emerging Market Bank from Pakistan for the year 2006. NBP launched the schemes of
NBP helpline, NBP Islamic banking and NBP protection shield.


       Best return on Capital for 2006 amongst all banks in Asia “Banker magazine” in
July 2007. NBP enjoys the highest rating of ‘AAA’ in the industry assigned by M/s
JCR-VIS Credit Rating Company (July 2007) limited on a standalone basis. NBP
launched premium Aamdani and Premium saver schemes in 2007


       National of Pakistan was awarded The Bank of The Year for the year 2001,
2002, 2004, 2005 and 2008 by “The Banker magazine” owned by the Financial Times
Group, London.


       National Bank of Pakistan was awarded “The Best Foreign Exchange Bank in
Pakistan” for the year 2004, 2005, 2006 and 2008 by the world‟s leading financial
journal “Global Finance”




                                                                                   6
        Year 2008 has been a historic year for NBP‟s I.T infrastructure point as the bank
started its implementation program of „Core Banking Application (CBA) Software‟. At
the end of 2008 the Bank has a branch network of 1276 branches with 1254 domestic and
22 overseas branches.



                            Nature of the Organization

        National Bank of Pakistan is naturally a Financial Organization, which deals with
lending, and borrowing and investing activities. The nature of responsibilities of the Bank
is different and unique from other Banks/financial institutions. It is the largest
commercial bank operating in Pakistan. Its balance sheet size surpasses that of any of the
other banks functioning locally. It has redefined its role and has moved from a public
sector organization into a modern commercial bank.


        The Bank's services are available to individuals, corporate entities and
government. While it continues to act as trustee of public funds and as the agent to the
State Bank of Pakistan (in places where SBP does not have a presence) it has diversified
its business portfolio and is today a major lead player in the debt equity market, corporate
investment banking, retail and consumer banking, agricultural financing, treasury
services and is showing growing interest in promoting and developing the country's small
and medium enterprises and at the same time fulfilling its social responsibilities, as a
corporate citizen.


        National Bank of Pakistan is a Governmental Organization. As an agent of State
Bank of Pakistan, it implements the policies of SBP. Its basic objective was to extend
credit to the agriculture sector.


        The Bank has expanded its range of products and services to include Shariah
Compliant Islamic Banking products.




                                                                                          7
       It deals all Government Revenue, collection and payments of salaries, pensions
and Govt. Treasury. It is a complete commercial, retail and corporate bank as well.


       The National Bank of Pakistan as a commercial bank generally makes advances
for a period not exceeding one year, except in case of small and medium industries for
which advance may be made for a maximum period of five years. The bank makes not
only against the security of stocks and goods hypothecated or pledged to the bank, but
also against documents of goods and propriety, shares are various joint stock companies,
Government securities, Insurance policies deposits receipts, etc. The margin and rate of
interest are determined by several factors including the type of security, the size of loan
and the integrity of the party.




                                                                                         8
                    Business Volume of the organization


        The business volume of National Bank of Pakistan is growing day by day. The
key features of financial statements of the National Bank of Pakistan for the last three
years and half year ending June 2009 have been discussed in the table given below




                       Half-year ending Year         ending Year        ending Year        ending
                       June 2009 (Rs. In December 2008 December 2007 December 2006
                       Million)           (Rs. In Million) (Rs. In Million      (Rs. In Million)
Share Capital          10,763.7           8,969.7           8,154.3             7,090.7
Reserves               20,887.12          19,941            15,772              13,879.2
Deposit                692,721.06         624,939           591,907.4           501,872
Investment-Net         208,622.87         170,822.49        211,146             139,946.99
Interest-Earned        37,268.4           60,942.79         50,569.48           43,788.6
Advances Net           452,131.3          412,986.86        340,318.93          316,110.4
Assets- Total          901,089.8          817,758           762,193.59          635,132.7
Pre Tax Profit         9,689.8            23,000.99         28,060.5            26,310.57
After tax Profit       6,281.2            15,458.59         19,033.77           17,022.34
Lending            to 12,234.1            17,128            21,464.6            23,012.7
financial
institutions
Balances        with 28,102.4             38,344.6          37,472.8            40,641.67
other          banks
(Receivables)




                                                                                      9
                                  Product Lines

       National Bank of Pakistan serving following product lines:

                 National Bank of Pakistan Saiban Scheme

Product items under Saiban scheme:
   1. Home Purchase:
        Financing Amount                            Upto 35 Million
        Financing Period                            3 to 20 Years
        Debt to Equity                              85:15 (Maximum)
   2. Home Construction
        Financing Amount                            Upto 35 Million
        Financing Period                            3 to 20 Years
        Debt to Equity                              85:15 (Maximum)
   3. Home Renovation
        Financing Amount                             Upto 35 Million
        Financing Period                             3 to 20 Years
        Debt to Equity                               85:15 (Maximum)
   4. Purchase of Land + Construction
        Financing Amount                             Upto 35 Million
        Financing Period                             3 to 20 Years
        Debt to Equity                               80:20 (Maximum)
   5. Balance Transfer Facility (BTF)
       If you have a Home Finance Facility outstanding with another bank you can have
       it transferred to NBP through a hassle-free process.




                                                                                  10
                           NBP Advance Salary Scheme

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 138 billion.


You can avail up to 20 net take home salaries with easy repayment installments. Hassle
free acquisition without any prior formalities along with easy availability in a short turn is
attributed as the most distinguishing feature of the product. The product is offered
countrywide.



                         National Bank Cash Gold Scheme



With NBP's Cash n Gold, you can meet your need for ready cash against your idle gold
jewelry.
    Rate of mark-up 13% p.a.
    Facility of Rs. 10,000 against each 10 grams of net contents of gold
    No maximum limits of cash
    Repayment after one year
    Roll over facility
    Only gold ornaments acceptable
    Weight and quality of gold to be determined by NBP's appointed schroffs
    No penalty for early repayment



                         National Bank Kisan Dost Scheme

      Competitive mark-up rate around 14.5% per annum
      Quick & easy processing
      Delivery at the farmer‟s doorstep

                                                                                           11
      Technical guidance to farmers
      Wide range of financing schemes for farmers
      Finance facility up to Rs. 500,000/- for landless farmers against personal
       guarantee
      Financing available against pass book, residential/commercial property, gold
       ornaments and paper security
      Loan facility on revolving basis for three years (renewable on yearly basis without
       documentation and approval)



          National Bank Premium Aamdani Certificate Scheme

Monthly Income Scheme introduced for investors as well as for general public.

       Amount of investment required from Rs. 20,000/- to Rs. 5,000,000

       Investment period is 5 years
       Free Demand Draft, Pay Order and NBP Online Aasan Banking
       Free Cheque Book / NBP Cash Card (ATM + Debit)
       Profit paid every month as follows:
           Period                            Profit Rates
           1st year                          7.50%
           2nd year                          8.50%
           3rd year                          9.50%
           4th year                          10.50%
           5th year                          11%
       Financing facility available upto 90% of the deposit value
       Premature encashment will attract penalties
       Zakat and withholding tax will be deducted as per rules




                                                                                       12
                                  NBP Karobar Scheme

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




                                  International Baking

          International strategy of National Bank of Pakistan is focused on capturing trade
business and increasing bi-lateral investment flows. NBP has 22 overseas branches in all
the major financial capitals of the world and is planning to open more branches in near
future.


          NBP offers the lowest rates on exports and other international banking products.
The Bank also provides access to different local commercial banks in international
banking.


          NBP has a Financial Institution Wing to effectively manage NBP‟s exposure to
foreign and domestic correspondence.


                                   DEMAND DRAFTS:




                                                                                        13
          If you are looking for a safe, speedy and reliable way to transfer money, you can
now purchase NBP‟s Demand Drafts at very reasonable rates. Any person whether an
account holder of the bank or not, can purchase a Demand Draft from a bank branch.


                                  MAIL TRANSFERS:


          Move your money safely and quickly using NBP Mail Transfer service. And we
also offer the most competitive rates in the market.

                                      PAY ORDER:

          NBP provides another reason to transfer your money using our facilities. Our pay
orders are a secure and easy way to move your money from one place to another. And, as
usual, our charges for this service are extremely competitive.



                               TRAVELER'S CHEQUES:

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.



                                 LETTER OF CREDIT:

          NBP is committed to offering its business customers the widest range of options
in the area of money transfer. With competitive rates, security, and ease of transaction,
NBP Letters of Credit are the best way to do your business transactions.




                                                                                        14
                               COMMERCIAL FINANCE:

       The Bank‟s dedicated team of professionals truly understands the needs of
professionals, agriculturists, large and small business and other segments of the economy.



                             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 and to meet the SBP directives/instructions for timely and prompt
delivery of remittances to the beneficiaries
       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 22 overseas branches of the Bank.
       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.



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


                                                                                         15
               TRADE FINANCES OTHER BUSINESS LOANS:

                           AGRICULTURAL FINANCE:
        NBP provides Agricultural Finance to solidify faith, commitment and pride of
farmers who produce some of the best agricultural products in the World.
Agricultural Finance Services:
        “I Feed the World” program, a new product, is introduced by NBP with the aim to
help farmers maximize the per acre production with minimum of required input. Select
farms will be made role models for other farms and farmers to follow, thus helping
farmers across Pakistan to increase production.



                                 Agricultural Credit:
The agricultural financing strategy of NBP is aimed at three main objectives:-
   1. Providing reliable infrastructure for agricultural customers
   2. Help farmers utilize funds efficiently to further develop and achieve better
        production Provide farmers an integrated package of credit with supplies of
        essential inputs, technical knowledge, and supervision of farming.
   3. Agricultural Credit (Medium Term):


                           Production and development:
Watercourse improvement
Wells
Farm power
Development loans for tea plantation
Fencing
Solar energy
Equipment for sprinklers




                                                                                    16
                                      Farm Credit:
       NBP also provides the following subsidized with ranges of 3 months to 1 year on
a renewal basis.
      Operating loans
      Land improvement loans
      Equipment loans for purchase of tractors, farm implements or any other
       equipment
      Livestock loans for the purchase, care, and feeding of livestock



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



                              CORPORATE FINANCE:


                    Working Capital and Short Term Loans:
       NBP specializes in providing Project Finance, Export Refinance to exporters, Pre-
shipment and Post-shipment financing to exporters, Running finance, Cash Finance,
Small Finance, Discounting & Bills Purchased, Export Bills Purchased / Pre-shipment /
Post-Shipment, Medium term loans and Capital Expenditure Financing: NBP provides
financing for its clients‟ capital expenditure and other long-term investment needs. By
sharing the risk associated with such long-term investments,


       NBP expedites clients‟ attempt to upgrade and expand their operation thereby
making possible the fulfillment of our clients‟ vision. This type of long term financing
proves the bank‟s belief in its client's capabilities, and its commitment to the country.

                        Loan Structuring and Syndication:
       National Bank‟s leadership in loan syndicating stems from ability to forge strong
relationships not only with borrowers but also with bank investors. Because we

                                                                                            17
understand our syndicate partners‟ asset criteria, we help borrowers meet substantial
financing needs by enabling them to reach the banks most interested in lending to their
particular industry, geographic location and structure through syndicated debt offerings.
Our syndication capabilities are complemented by our own capital strength and by
industry teams, who bring specialized knowledge to the structure of a transaction.


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



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



                             EQUITY INVESTMENTS:
       NBP has accelerated its activities in the stock market to improve its economic
base and restore investor confidence. The bank is now regarded as the most active and
dominant player in the development of the stock market. NBP is involved in the
following:
      Investment into the capital market
      Introduction of capital market accounts (under process)
      NBP‟s involvement in capital markets is expected to increase its earnings, which
       would result in better returns offered to account holders.



                                                                                      18
                                  Competitors

Competitors of National Bank of Pakistan are all scheduled banks, which are
listed/trading under Banking Companies Ordinance 1962.
Competitive Banks are as under:
      Habib Bank Limited
      United Bank Limited
      Muslim Commercial Bank Limited
      Allied Bank Limited
      Askari Commercial Bank Limited
      Soneri Bank Limited
      Bank Al-Habib Limited
      Bank Al-Falah Limited.
      Standard Chartered Bank Limited & The Bank of Punjab




                                                                         19
       Organizational structure


    Organizational Hierarchy Chart

                  PRESIDENT



DIRECTORS / Senior Executive Vice President



Provisional Chiefs / Executive Vice President



 Regional Chiefs / Executive Vice President


     Zonal Chiefs / Senior Vice President



                Voice President


            Assistant Voice President


                Officer Grade I


                  Office Grade II



                Officer Grade III


            Clerical / Non-Clerical Staff

                                                20
Syed Ali Raza is currently the President and Chairman of National Bank of Pakistan


Board of Directors consists of followings
      Muhammad ayub Khan Tarin
      Sikandar Hayat Jamali
      Mian Kausar Hameed
      Ibrar A. Mumtaz
      Tariq Kirmani
      Muhammad Arshad Chaudhry




                                                                                     21
                               Number of employees




          Year             2003      2004    2005    2006    2007    2008


  No. of employees         13272     13745   13824   14019   14079   15204




                                   Main Offices

Registered & Head Office
NBP Building
       I.I. Chundrigar Road,
      Karachi, Pakistan


Registrars & Share Registration Office
THK Associates (Pvt.) Limited
      Shares Department, Ground Floor,
      State Life Building # 3
      Dr. Ziauddin Ahmed Road,
      Karachi, Pakistan


Website
www.nbp.com.pk


                                                                            22
Audit Committee
Chairman                        Ibrar A. Mumtaz
Auditor                         Tariq Kirmani
Auditor                         Mian Kausar Hameed
Auditor Muhammad                Arshad Chaudhry


Auditors
Chartered Accountants           Ford Rhodes Sidat Hyder & Co.
Chartered Accountants           M. Yousaf Adil Saleem & Co.


Legal Advisors
Advocates & Legal Consultants   Mandviwala & Zafar




Branch Network


National Level
           Year          2003    2004      2005      2006       2007   2008


    No. of branches      1199    1226      1242      1250       1261   1276



International Level
22 Branches




                                                                              23
                         Introduction of all the departments

       There are many different departments in National Bank of Pakistan:

                                   Deposit Department
       There are two major types of accounts i.e Saving Account and Current Account.
Customers keep their savings in PLS Saving Accounts and businessmen save their money
in bank Current Accounts. NBP gives profit on saving accounts and special saving
accounts i.e. Premium Saving Accounts and NBP Premium Amadni Certificates for one
to five year‟s period.

                                   Advances Department
       NBP provides loans to different types of borrowers for different purposes. These
loans are given for various sectors for different periods. Small Finance, Cash Finance,
Agriculture Finance, Cash & Gold Loan, Personal Loans, Demand Finance, Running
Finance, Corporate Finance, Export Import Financing, House Building Finance (Saiban)
and NBP Karobar Scheme etc.

              Government Receipts and Payments Department
       National Bank of Pakistan is functioning as an agent of SBP for many types of
government payments and receipts. Payments like Pension, Salaries, Grants, Zakat,
Benevolent Fund, Treasury Refund and Taxes Refund proceed through the National Bank
of Pakistan. Almost all kind of government receipts i.e. Traffic Challans, Revenue
receipts; Taxes, Abyana, Agriculture Tax, Public Service Commission Fees, EOBI Funds
and Utility Bills are deposited.

                             FBR Collection Department
       NBP is playing great role for collection of FBR (CBR) taxes/revenue. A separate
counter is established at branch level to facilitate the taxpayers

                               Remittances Department
       Another important department in the bank is remittances. People send and receive
their money to the other persons and organizations through various way i.e. Bank draft,




                                                                                    24
Telegraphic Transfer, Mail Transfer, Coupons, Govt. Draft and Western Union Money
Transfer etc. The money is transferred to both inland and abroad.

                                      Bills Department
        Customers collect their money/amount through bills. They present their cheques,
drafts and other bills for collection within the city and out of the city through mail. Now a
days Online Banking is becoming more popular for this purpose but the branch where I
got training is still not have this facility.

                                      Cash Department
        National bank deals Government treasury on behalf of State Bank of Pakistan.
There are Chest, Sub-chest and Non-chest branches in the bank. SBP supplies currency
notes to the bank and monitors its cash flow. Cash In charge and other cashiers deal with
cash receipt and payment in the bank.

                                 Compliance Department
        Role of branch compliance department is to reconcile the prescribed frequencies,
investigate long pending reconciliation item, and ensure correct treatment every half-year
and clearing system service branch-in major cities. Internal control is the integration of
the activities, plans, attitudes, policies and efforts of the people of the bank working
together to provide reasonable assurance that the organization will achieve its objectives
and mission.

                                  Agriculture Department
        Agriculture Credit Department is playing a vital role in development the economy
of Pakistan. Commercial banks being the greatest mobilizer of savings in the country
with their large network of branches play important role in financing agriculture. The
National Bank of Pakistan has also been trying to ensure that loans are disbursed to
genuine agriculturists within a reasonable time and that the bank turns down no viable
loan request.




                                                                                          25
                   Human Resources Management Depatrment
        Human Resources Management Department works for the betterment of the
employees. Enhances skills, training management, service benefits, wages, medical
facilities, staff loans are basic functions of this department.

                       Information Technology Department
        Year 2008 has been a historic year for NBP‟s I.T. infrastructure point as the bank
started its implementation program of „Core Banking Application (CBA) Software‟. This
is state of the art software providing a complete banking solution covering all areas. This
will be a transformation which will greatly improve operational efficiency and controls,
customer service and facilitate launching of new banking products. The implementation
process has been started and is planned to be completed within next 18-20 months in 250
branches covering about 80%

                             Online Banking Department
        This department is functioning only in online branches in the bank. This is a fast
track banking system in modern banking. NBP is also trying to enhance this facility for
their customers.
        .

                             Islamic Banking Department
NBP‟s Islamic banking operations have gathered momentum and have registered
impressive growth in Deposits (75%), Advances (237%) and total Assets (84%). In 2008
we further opened two more branches in Faisalabad and Rawalpindi. With the increase in
the popularity of Islamic banking both in Pakistan and overseas, NBP‟s Islamic banking
operations have good potential for growth in future.




                     Comments on Organizational Structure

        The National Bank of Pakistan is one of the oldest banks of Pakistan. The bank
has seen a lot of changed during last 60 years. However the organizational structure is not


                                                                                        26
so professionally developed and implemented. Organizational structure has not been
changed so much since many years. Although the departmentalization exists but in
branches there is no rigid concept of departmentalization present. Sometimes the chain of
command is surpassed and no care is taken on authority and responsibility fixation.
       However, overall situation is not so disappointing. System needs improvements
but currently serving its purposes in a very suitable way.


You were required to comment or give your opinion on the structure of the organization as a
whole that whether the adopted structure and practices fulfill the requirements of the
organization or not like span of control, centralization/decentralization, etc.




                                                                                        27
                 Plan of your internship program

                           Introduction of Branch


Name of Branch
                 National Bank of Pakistan,
                 Model Town Branch Model Town Lahore

Branch Code
                 0372

Region
                 Lahore

Address
                 Bank Square C-Block Model Town
                 Lahore.

Phone Nos.
                 042-99230237
                 042-99230935
                 042-99230895

Fax No.
                 042-99230928

Name of Manager
                 Qadir Hussain

Name of My Operation Manager (Supervisor)
                 Numan Dilawar



                                                       28
Number of employees
                      24


       The branch has been performing on-line business since 2003. It is using EBS
(Electronic Banking System), banking software for its banking function. This bank has
following four departments in it.
             1. Foreign Exchange Department
             2. General Banking Department
             3. Compliance Department
             4. Advanced Department
       First three departments work under the supervision of Operations Manager and
Advances department works under direct supervision of branch Manager.
       There were total 3 staff members working in advance department, 2 in Foreign
Exchange Department, 1 in compliance Department and 16 in the General Banking
Department.



                  Starting and ending dates of internship

       The starting Date of my internship program was 01.12.2009 and my internship
continued for almost 6 weeks and the ending Date of my internship program was
16.01.2010



                            Departments of Training

       During the internship period of 6 weeks that I spent at the National Bank of
Pakistan Model Town Lahore I got practical exposure to the following departments.



   1. The General Banking Department
        Where I worked for 4 Weeks i.e. from 01-12-2009 to 31-12-2009



                                                                                    29
   2. Advances Department
       Where I worked for 2 Weeks i.e from 01-01-2010 to 16-12-2009


                                Training program


               Introduction of the departments I worked in

I worked in Two Departments of National Bank of Pakistan.



                                   1. General Banking

       General Banking is the core of all departments; Deposits from customers are
accepted and cheques are cashed for customers. This department works under direct
supervision of Operation Manager. Two basic kinds of accounts are dealt here i.e.
Current Account and Saving Account.

       Current Accounts are payable to the customer whenever they are demanded.
When a banker accepts a demand deposit, he incurs the obligation of paying all cheques
etc. drawn against him to the extent of the balance in the account. Because of their nature,
these deposits are treated as current liabilities by the banks. Bankers in Pakistan do not
allow any profit on these deposits, and customers are required to maintain a minimum
balance, failing which incidental charges are deducted from such accounts. This is
because the depositors may withdraw Current Account at any time, and as such the bank
is not entirely free to employ such deposits.

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



                                                                                         30
assessment of profit to be paid to the account holder. It discourages unnecessary
withdrawals from the deposits.

       The Account opening is the first step in making a customer with bank. In account
opening the formalities are fulfilled in very easy steps and it takes no time for a person to
have an account at the Bank.


       Another important function here is remittances and Bills for Collection. People
send their money to the other persons and organizations through various way i.e. Bank
draft, Telegraphic Transfer, Mail Transfer, Coupons, Govt. Draft and Western Union
Money Transfer etc. It works both inward and outward.


       Customers collect their money/amount through bills. They present their cheques,
drafts and other bills for collection within the city and out of the city through mail. NIFT
is the organization responsible for collecting and delivering these instruments for
clearance form State Bank of Pakistan.


       National Bank of Pakistan is functioning as an agent of SBP. Many government
Payments like Pension, Salaries, Grants, Zakat, Benevolent Fund, Treasury Refund and
Taxes Refunds are carried out by the bank. Pension payment is only done through
National Bank of Pakistan. Pension payment and salary payments are the most frequent
activities in this department during the first two weeks of the month.


       Similarly most of the government receipts i.e. Taxes, Revenues receipts, Taxes,
Traffic Challans, Abyana, Agriculture Tax, Public service commission Fees and Utility
Bills are deposited. The NBP is doing a great job in revenue collection of both
Government of Pakistan and Government of Punjab. Utility Bills collection is one of the
heaviest workload around the due dates of these bills


       National bank deals Government treasury on behalf of State Bank of Pakistan.
There are Chest, Sub-chest and Non-chest branches in the bank. SBP supplies currency


                                                                                          31
notes to the bank and monitors its cash flow. Cash In charge and other cashiers deal with
cash receipt and payment in the bank.



                             2. Advances (Credit department)

       To give loan to Businessmen and individuals is the medium to convert customer
deposits into own money. As bank receives deposits at lower rates and lend them at
higher rate. Basically, this department deals with the activities of various types of credits,
nature of advance creation of charge, monitoring of classified advances etc. Advances
consists of retail and commercial advances.
       NBP give loans to the borrowers for different purposes. These loans are given for
various sectors for different periods. Small Finance, Cash Finance, Agriculture Finance,
Cash & Gold Loan, Personal Loans, Demand Finance, Running Finance, Corporate
Finance, Export Import Financing, House Building Finance (Saiban) and NBP Karobar
Scheme etc.




              Detailed description of tasks Assigned to me

                                 1. Account Opening:


       Account opening is very vital now a day in banking system due to KYC (Know
your customer), AML (Anti Money Laundering) and ATF (Anti terrorist financing)


       I got training in this department for one week and after understanding the basic
concepts I practically opened account of some walk-in-customers.
       Detail description of how you opened the account was required.
       The opening of an account is the establishment of banker customer relationship.
Before opening a new account, the banker should determine the prospective customer‟s
integrity, credibility, occupation and the nature of business by the introductory references

                                                                                           32
given at the time of account opening. Preliminary investigation is necessary because of
the following reasons.
      To avoid frauds
      To safe guard against unintended over draft
      To avoid Negligence
      To make Inquiries about clients


       There are certain formalities, which are to be observed for opening an account
with a bank. The accounting opening application should be received on the prescribed
account opening form. Copy of CNIC along with the original CNIC is collected and
checked at the time of account opening. The Necessary details in the form should be
filled in and all the detail should be in legible and clear writing. Specimen signatures of
applicant must be carefully tested and collected. The minimum initial deposit is ensured
before handing over the Cheque book to the customer.



                            a. Qualification of Customer
       The relation of the banker and the customer is purely a contractual person;
however, he must have the following basic qualifications.
      He must be of the age of majority.
      He must be of sound mind.
      Law must not disqualify him.
      The agreement should be made for lawful object, which create legal relationship
      Not expressly declared void.



                                b. Types of Accounts
Following are the main types of accounts according to nature of customer
      Individual Account
      Joint Account
      Accounts of Special Types
            Partnership account

                                                                                        33
             Joint stock company account
             Accounts of clubs, societies and associations
             Agents account
             Trust account
             Executors and administrators accounts
             Pak rupee non-resident accounts
             Foreign currency accounts



                              c. Issuing of cheque book:

        After the application processing and the initial minimum deposit were made, I
told customer to approach the account opening officer, who after checking the form and
deposit slip issued cheque book to account holders. I practically issued some cheque
books also under the supervision of my officer.


Requirements for issuing cheque book
a) The account holder must sign the requisition slip
b) Entry should be made in the cheque book issuing book
c) three rupees per cheque should be recovered from a/c holder if not then debit his/her
account.
d) He must have submitted a copy of CNIC and have shown his original CNIC for
verification.



                               2. Accepting deposits
        The money, which comes in the bank, its record should be kept. Cash department
performs this function. The deposits of all customers of the bank are controlled by means
of ledger accounts. Every customer has its own ledger account and has separate ledger
cards. I worked and observed the procedure for accepting deposits. I practically accepted
the deposits of some customers also. The process is as follows



                                                                                      34
       Deposits are accepted along with the deposit slips. Different colored deposit slips
are used for general deposit and clearing. Deposit slips are filled and are handed over to
cashier along with cash. I after checking the particulars of the deposit slip verified that
the amount is in accordance with the written amount. Then I made a credit entry in the
ledger account of customer. I stamped the deposit slip, Keeps one portion with me and
other was given to the customer for future ready reference.

       The deposit slip for clearance is used for the purpose of the cheques that not going
to paid on counter but the amount is to be transferred to the ledger account of the
customer. The cheques pertain to other banks or other branches of NBP. Or it might even
be from another customer of the same bank (this kind of cheque is not sent for clearance
at SBP). All other cheques are sent to State Bank of Pakistan for clearance at their
clearance house. Although the amount is credited to the customer account as soon as the
cheque is presented but this amount contains a control in system that restrict withdrawal
of this amount. When cheque is cleared from SBP and advice of SBP is received in the
branch about payment, the control is uplifted and the amount can be withdrawn now. This
process usually takes place about two to three working days.




                                  3. Making payment.

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




                                                                                        35
                                  b. Saving account
       Savings Deposits account can be opened with very small amount of money, and
the depositor is issued a cheque book for withdrawals. Profit is paid at a flexible rate
calculated on six-month basis under the Interest-Free Banking System. There is no
restriction on the withdrawals from the deposit accounts but the amount of money
withdrawn is deleted from the amount to be taken for calculation of products for
assessment of profit to be paid to the account holder. It discourages unnecessary
withdrawals from the deposits.

                                 c. Cheque Payments

       The customer gives check at the counter and check is carefully examined. I was
told by the junior officer there that the first thing to observe name of the bank and the
branch name of the bank. Only cheques which are of National Bank of Pakistan Model
Town branch are considered for payment at counter. If cheque is drawn on another bank,
it can be deposited along with deposit slip only if customer has an account with NBP
Model Town Branch. This cheque is sent to SBP through NIFT for clearance. After
verifying the bank and branch name Date is observed. The cheque should not be a post
dated cheque neither it should be more than six months old. Then I was told to check the
amount written in words and in figures. Both should be in accordance with each other.
Any cutting or overwriting must be singed in full by the customer. Then through
computer information system the account number is checked and balance is observed.
Then I was told to check the Payee‟s Account Stamp (if stamped) bearer and non-bearer
crossings etc. after that balance of amount is checked if amount is present then check will
be sent to CD in charge who is on the duty of verifying the checks‟ signatures with given
cards‟ signatures and then pass it to the cash section where I was told to watch the
verification sign of in charge and then I was to pay the amount written in the Cheques.
Then I have to write the denomination of currency notes paid along with their respective
quantity at the back of cheque. In this way Cheques clears and payment is made to
customer.




                                                                                        36
                               d. Cheque cancellation:

The cheque can be cancelled for any of the following reasons;
      Post dated cheque
      Stale cheque (validity of cheque is for six months from the date written on
       cheque)
      Warn out cheque
      Wrong signatures etc



                      4. Government receipt and Payment

       Almost all types of Government receipts i.e. Taxes, Traffic Challans, Revenue
receipts, Abyana, Agriculture Tax, public service commission fees, EOBI Funds and
Utility Bills are deposited. The amounts received along with the name of depositor are
written on a scroll. In utility bills the customer number is written. Every scroll is carbon
copied. I worked there for about a week. Different scrolls are maintained for different
categories of receipts. Some of these categories are Central government receipts.
Provincial government receipts, Traffic challans, Property tax, electricity bills, gas bills,
phone bills etc. Every scroll page is totaled at the end and this total is carried forward to
the next page. Then at the end of the day all the scrolls are totaled and tallied with the
cash. The challans and slips along with the original scroll are sent to National Bank of
Pakistan Main Brach Lahore.
       National Bank of Pakistan is earning 0.015% of the amount received as
commission from the government so it is not only helping in revenue earning of
government but also earning a handsome amount of commission on amounts deposited.
       Similarly many kinds of government payments are also made through National
Bank of Pakistan. Most significant payment is pension payment. Other payments includes
salary payments to government servants, zakat payment, grants, Treasury pay orders in
favor of bank‟s account holder, treasury refunds and tax refunds etc.
       Pension payment is made at appearance of original pensioner. In order to get
payment the pensioner has to fill pension payment form. His/her Original pension book

                                                                                          37
and original CNIC should be presented before the officer who will check the pension
record registered. He will verify that the pensioner is original and will tally his/her signs
with record after verification the officer will sign on the filled form that will act as
cheque and cash payment is made to the pensioner. I assisted in verification process of
pensioner for a few days.



                               Advances Department


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

       I worked there as assistant for two weeks. It is a very vast field and a lot is there
to learn. As it is a very sensitive issue so I was mostly assisting others in the work. Most
of the work done was under strict observation of my superiors. I was assigned different
tasks like checking form and documents for their accuracy and completion, verifying the
CNIC of the borrower, maintaining records and corresponding with the borrowers. My
observations at this department are given in the following paragraphs.


       The advances department at NBP Model town branch consists of two main sub-
departments i.e. Retail and Commercial. Any individual or company, who wants loan
from NBP, first of all has to undergo the filling of a prescribed form, which provides the
following information to the banker.
      Name and address of the borrower


                                                                                          38
      Existing financial position of a borrower at a particular branch
      Accounts details of other banks (if any)
      Security against loan
      Exiting financial position of the company (Balance Sheet & Income Statement)
Signing a promissory note is also a requirement of lending, through this note borrower
promise that he will be responsible to pay the certain amount of money with interest.




                               Principles of Advances

There are five principles, which must be duly observed while advancing money to the
borrowers.
   a. Safety
   b. Character
   c. Capacity
   d. Capital
   e. Liquidity
   f. Dispersal
   g. Remuneration
   h. Suitability


   a. Safety

       Banker‟s funds comprise mainly of money borrowed from numerous customers
on various accounts such as Current Account, Savings Bank Account, Call Deposit
Account, Special Notice Account and Fixed Deposit Account. It indicates that whatever
money the banker holds is that of his customers who have entrusted the banker with it
only because they have full confidence in the expert handling of money by their banker.
Therefore, the banker must be very careful and ensure that his depositor‟s money is
advanced to safe hands where the risk of loss does not exist. The elements of character,
capacity and capital can help a banker in arriving at a conclusion regarding the safety of
advances allowed by him.
                                                                                        39
b.    Character

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

          It is obligation on the banker to ensure that his borrower is a person of character
and has capacity enough to repay the money borrowed including the interest thereon.

     c.    Capacity

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

     d.     Capital

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

     e.    Liquidity

          Liquidity means the possibilities of recovering the advances in emergency,
because all the money borrowed by the customer is repayable in lump sum on demand.
Generally the borrowers repay their loans steadily, and the funds thus released can be
                                                                                            40
used to allow fresh loans to other borrowers. Nevertheless, the banker must ensure that
the money he is lending is not blocked for an undue long time, and that the borrowers are
in such a financial position as to pay back the entire amount outstanding against them on
a short notice. In such a situation, it is very important for a banker to study his borrower‟s
assets to liquidity, because he would prefer to lend only for a short period in order to
meet the shortfalls in the wording capital. If the borrower asks for an advance for the
purchase of fixed assets the banker should refuse because it shall not be possible for him
to repay when the banker wants his customer to repay the amount. Hence, the baker must
adhere to the consideration of the principles of liquidity very careful.

    f.    Dispersal

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

         Dispersal of advances is very necessary from the point of security as well,
because it reduces the risk of recovery when something goes wrong in one particular
sector or in one field.

    g.    Remuneration

         A major portion of the banker‟s earning come form the interest charged on the
money borrowed by the customers. The banker needs sufficient earnings to meet the
following:
Interest payable to the money deposited with him.
        Salaries and fringe benefits payable to the staff members
        Overhead expense and depreciation and maintenance of the fixed assets of the
         bank
        An adequate sum to meet possible losses

                                                                                           41
        Provisions for a reserve fund to meet unforeseen contingencies
        Payment of dividends to the shareholders




    h.    Suitability

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

    Forms of Loans

         In addition to purchase and discounting of bills, bankers in Pakistan generally
lend in the form of cash finance, overdrafts and loans. NBP provides advances to
different people in different ways as the case demand.

    a) Cash Finance

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


                                                                                           42
   b) Overdraft/Running Finance

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

c) Demand Financing/Loans

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

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




                                                                                          43
                    Structure of Finance Department

                             Departmental Hierarchy


                                      Branch Manager




                     Retail Officer                    Credit Officer




                               Numbers of Employee

Total No. of Employees is 03 in Finance Department. There is one Retail Officer at
branch and there are two Credit Officers.



                    Finance and Accounting Operations

       Finance and Accounting operations are operated with the help of subordinate
staff. Bank is financing in multiple sectors.




                                                                               44
                     Functions of the Finance Department
Finance Department performs following functions.
      Borrowing from State Bank of Pakistan.
      Lending to Commercial Banks
      Lending to Investors.
      Lending to General Public for multi-business.


                  Functions of Finance Department

                  Accounting system of the organization

       Accounting system of the bank through specialized banking software was well
equipped with Information Technology. The staff was sufficiently trained to perform
functions on their own using the computers. The staff was very happy to have this system
as they told that it has made the things lot easier than the before manual accounting
system. Thus through this integrated software the finance department was able to carry
out their operations in a very smooth way.
       Cash or accrual system of accounting?
       Single entry or double entry?




                    Finance system of the organization

       Financial system of the bank where I done my internship is mixed and
complicated because being government bank, bank deals with all kind of lending and
investing activities and also hold down the cash position of others financial institutions
i.e. banks like MCB, UBL, ABL etc.



                Use of electronic data in decision making



                                                                                       45
       The branch where I have got training was using very good Information
Technology environment. With all data integration the management was in a position to
sit and generate reports of various kinds. The decisions were made based on these reports
and the electronic data was analytically used to see the progress of employees and also
the overall branch.
Which software was used by this organization?
       Use of IT along with proper training can help the management a great deal in their
decision making process. In this branch although the management was not trained enough
to use the computers and the software but they were getting benefits from electronic data
and were using them in decision making process.



                                  Sources of funds

       Fund generation of the branch is depositing, receiving interest on lending money
to various sectors, advances from other financial institutions.
What about internal and external sources?



                                Allocation of funds

       Bank allocates funds according to the instructions of the senior management or
main branch.


In which proportion?




                                                                                      46
                            Critical Analysis


                            a. Financial Analysis
                                 i. Ratio Analysis


                              a. Liquidity Ratios


Current Ratio


                          2006                   2007                  2008
=Current assets /
current liabilities     142279638/           153810681/
                                                                    161976396/
*100                  524181985 *100       609784513 *100         675617003 *100
                         27.14%                25.22%                 23.97 %


Where Current assets= Cash and balance with treasury banks + Balances with
other banks + Lending to financial institutions

                                                                                47
And Current Liabilities = Bills payable + Borrowing + Deposits and other accounts


Acid Test Ratio


                            2006                 2007                 2008
=(current assets –
inventories-           (142279638 –          (153810681 –        (1611976396 –
prepaid expenses)/
                         23012732)/           21464600) /          17128032)/
current liabilities
*100                  524181985 *100       609784513 *100       675617003 *100
                           22.7 %               21.7 %               21.4%


Where inventories in this case means the lending to financial institutions



Sales to Working Capital


                            2006                 2007                 2008
                         (43788628/
                                              (50569481/           (60942798/
=Sales/ Working       38190234700) *
Capital                                   4559783200) * 100    9440939300) *100
                            100
                           0.11%                1.10 %               0.64 %



Where working capital is calculated in the table given below

Working Capital

                            2006                 2007                 2008
=Current Assets –       142279638 -          153810681 -          161976396 -
current liabilities
                         524181985            609784513            675617003
                        38190234700          4559783200            9440939300




                                                                                  48
                                 b. Leverage Ratios




Debt Ratio

                          2006               2007              2008
= (Total Debt/         (553178593/        (645855939/       (715299108/
total assets) *100
                     635132711) * 100   762193593)* 100   817758326) * 100
                         87.09%             84.73%            87.47%




Debt/Equity Ratio


= (Total debt/            2006               2007              2008
Total                  553178593/         (645855939/       (715299108/
shareholder’s
equity) *100            79090712         8154319) * 100    8969751) * 100
                         78.01%             79.20 %           79.74%




Debt to Tangible Net Worth Ratio

                          2006               2007              2008
= (Total debt/
total net assets)      (553178593/        (645855939/       (715299108/
*100                 81954118) * 100    116337654) *100   102459218) * 100
                         674.98%            555.15%           698.13%




Current Worth/ Net Worth Ratio
                                                                             49
                           2006               2007               2008
= (Current assets/     (142279638/         (153810681/        (161976369/
net assets) *100
                      81954118) *100     116337654) * 100   102459218) *100
                         173.6%              132.21%           158.08 %




Total Capitalization Ratio
Working of long term debt?

= Long term debt/          2006               2007               2008
(long term debt +      (492853073/         (608382912/        (655781930/
shareholder
equity) * 100        5458977220) *100    677653543) * 100   737148932) *100
                          9.02%              89.77%             88.96%


Fixed Asset Ratio/ Equity Ratio
qw

                           2006               2007               2008
=(Fixed Asset/         (492853073/         (608382912/        (655781930/
equity) * 100
                      53044649) *100     69270631) * 100    81367002) * 100
                         929.12%             878.26%           805.95%




Long term assets versus Long term Debt

                           2006               2007               2008
= (long term
assets/ long term      (492853073/         (608382912/        (655781930/
debt) * 100          28996608) * 100     36071426) * 100    39682105) * 100
                         16.99%              16.86%             16.52%




                                                                              50
                                   c. Profitability Ratios

Net Profit Margin

                               2006
                        Profit available for
                                                    2007                 2008
= (Net profit after        appropriation
taxation/ interest       should be taken
earned) * 100
                           (170223346 /          (19033773/          (15458590/
                         43788628) *100        50569481) *100      60942798) * 100
                             88.88%                37.63%              25.36%



Return on Assets

                               2006                 2007                 2008
= (Net Profit or
net income/ total          (17022346/            (19033773/          (15458590/
assets) * 100           635132711) * 100       762193593) * 100   817758326) * 100
                              2.68%                 2.49%               1.89%



DuPont Return on Assets

                               2006                 2007                 2008
= (net income/
sale) * (sale / total   (0.3887 * 0.0689) *    (0.3763*.0663) *   (0.2536 * 0.0745) *
assets)                         100                  100                 100
                              2.67%                 2.49%               1.88%




Operating Income Margin
Operating income amount is incorrect




                                                                                        51
                             2006              2007               2008
= (Operating
Income/ interest          (26310577/        (28060501/          (2300098/
earned) * 100           43788628) * 100   50569481) * 100    60942798) * 100
                            60.08%            55.48%             37.74%



Operating Assets Turnover
Operating assets working????

                             2006              2007               2008
= (Interest earned
/ operating assets)       (43788628/        (50569481/         (60942798/
* 100                   36795672) * 100   56917944) * 100    71972574) * 100
                             119%             88.84%             84.67%




Return on Operating Assets


                             2006              2007               2008
= (Interest
earned/ operating         (17022346/        (19033773/         (15458590/
assets) * 100           36795672) * 100   56917944) * 100    71972574) * 100
                            46.26%            33.44%             21.47%




Sales to Fixed Assets

                             2006              2007               2008
=(Sales/ Fixed            (43788628/        (50569481/         (60942798/
Assets) * 100
                        492853073) *100   608382912) * 100   655781930) *100
                            8.88%              8.31%             9.29%




Return on Investment (ROI)


                                                                               52
                            2006                2007               2008
= (Net income/           (17022346/           (19033773/        (15458590/
total assets)*100
                       635132711) * 100    762193593) * 100   817758326) *100
                            2.68%               2.49%             1.89%



Return on Total Equity

                            2006                2007               2008
= (net profit after      (17022346/           (19033773/        (15458590/
tax/ total equity) *
                       53044649) * 100     69270631) * 100    81367002) * 100
100
                           32.09%              27.47%             18.99%




Gross Profit Margin

                            2006                2007               2008
= (Net mark-up/
interest income)         (42316608/           (47174315/        (53473892/
*100                   43788628) * 100     50569481) * 100    60942798) * 100
                           96.63%              93.28%             87.74%




                                    d. Activity Ratios

       Accounts Receivable Turnover

= (Annual credit            2006                2007               2008
sales/average            (43788628/           (50569481/        (60942798/
Account
receivable) * 100      23012732) * 100     21464600) * 100    17128032) * 100
                           190.28%             235.59%             355%




       Average Collection Period

                                                                                53
= 365/ Account            2006              2007               2008
receivable
                        365/ 1.9          365/ 2.35          365/ 3.55
turnover
                        190 days           155 days           102 days



       Accounts Payable Turnover

= (Annual credit          2006              2007               2008
purchases/             (13634912/        (16940011/         (23884768/
average account
payable) * 100      10605663) * 100     7061902) * 100    10219061) * 100
                         156%              239.8%             233.7%




       Average Payment Period


                          2006              2007               2008
= (365/ account
payable) * 100          365/1.56          365/2.398          365/2.337
                        233 days           152 days           156 days




       Total Assets Turnover

                          2006              2007               2008
= (Interest
earned/ total          (43788628/        (50569481/         (60942798/
assets) * 100       635132711) * 100   762193593) * 100   817758326) * 100
                         6.89%              6.63%              7.45%




                                                                             54
                                     e. Market Ratios


Dividend per Share

= Total dividend/            2006                 2007                2008
No. of share
                       1474605/ 590000      2831895/ 708970     6104894/ 814000
outstanding
                              2.5                   4                 7.5




Earning per Share

= Net Income/                2006                 2007                2008
Avg. No. of shares
                       17022349/ 708970     19033733/ 896975    15458590/ 896975
issued
                             24.01                21.22              17.23




Price/ Earning Ratio

= Avg. market                2006                 2007                2008
price per share/
                         249.05/24.01          259.9/23.34        162.54/17.23
earning per share
                         Rs. =10.37/-         Rs. =11.13/-         Rs. =9.43/-




Dividend Payout

= (Dividend per              2006                 2007                2008
share/ earning
                       (2.5/ 24.01) * 100    (4/ 21.22) * 100   (7.5/17.23) * 100
per share) * 100
                            10.41%               18.85%             43.53%




Dividend Yield


                                                                                    55
= (Dividend per            2006               2007                2008
share/ Avg.          (2.5/249.05) *100    (4/259.9) *100    (7.5/162.54) *100
market value per
share) * 100              1.01%               1.54%              4.61%



                           f. Statement of Cash Flow


Operating Case Flow/Current Maturities of Long Term Debt and Current Noted
Payable

= operating Cash           2006               2007                2008
flows/ current
maturities of long      10176913/           78804419/           2532681/
term debt and           28996608            36071426           39682105
current notes
payable                    0.35                2.18               0.06




Operating Cash Flow/ Total Debt

                           2006               2007                2008
=(Operating Cash
Flow/ Total Debt)       (10176913/         (78804419/          (2532681/
* 100                553178593) * 100    645855939) * 100   715299108) * 100
                          1.83%              12.20%              0.35%



Operating Cash Flow per Share


= Operating Cash           2006               2007                2008
Flow/ No. of
                     10176913/708970     78804419/896975    2532681/896975
equity Shares
                          14.35               87.86               2.82




Operating Cash Flow / Cash Dividend

                                                                                56
                           2006                2007              2008
=(Operating Cash
Flow / Cash             (10176913/          (78804419/         (2532681/
Dividend) * 100       2891755) * 100      3263249) * 100    28789320) * 100
                          3.51%               24.14%             0.87%




                                    g. Other Ratios

Net income per employee


                           2006                2007              2008
= Net Income /       635132711/ 14019     19033773/ 14079   15458590/ 15204
No. of employees
                          45305.1             1351.93           1016.74




Asset per employee


                           2006                2007              2008
= Asset/ No. of
employee             635132711/ 14019    762193593/ 14079   817758326/ 15204
                          45305.1             54136.9           53785.7




Growth of Income


=(Change in                2006                2007              2008
Income/ Income          (3575143/            (2011427/         (2532681/
for last year) *
100                  19033773) * 100      17022346) * 100   28789320) * 100
                          33.93%              11.81%            18.78%




                                                                               57
                             HORIZONTAL ANALYSIS
Horizontal analysis is done by subtracting the current year amount from previous year
amount and then. The resulting amount is then divided by previous year amount and
then multiplying the result with 100. This is used to compare whether a particular item
has increased or decreased.



      During 2008 NBP‟s top line (operating revenue) increased by 13% from Rs. 47.2
       billion in 2007 to Rs. 53.5 billion in 2008.




                                                                                    58
   Pre-tax profit has reduced to Rs. 23.0 billion, a decrease of 18.9% over last year
    mainly on account of higher provision charge which increased due to the bank‟s
    policy of prudently providing for against non-performing loans.
   Earnings per share reduced by 18.9% to Rs. 17.23 in 2008
   Pre-tax return on equity stood at 30.5%, whereas pre-tax return on assets stands at
    3.0% while cost to income ratio at 0.35 remained one of the highest amongst the
    Pakistani banks.
   Net interest income increased by 10.2 % to Rs. 37.1 billion from the
    corresponding period last year owing mainly to volume growth
   The increase in lending and assets yield was partially offset by increase in deposit
    rates mainly on account of a 4% mandatory increase in the rate on saving deposits
    and an overall increase in bank‟s funding cost.
   Non-interest income shows growth of 21.2 % mainly due to increase in fee,
    commission, exchange and other income. This growth is impressive since the
    contribution of capital gains on sale of securities declined from Rs. 2.3 billion in
    2007 to Rs. 0.4 billion in 2008.
   Fee income increased by 17%
   Income from dealing in foreign currencies increased mainly on account of
    revaluation gains due to volatility of Pak Rupee.
   During the year the bank succeeded in getting compensation on delayed refunds
    for various years from the taxation authorities to the tune of Rs. 988 million
    which increased other income by Rs. 1.1 billion.
   Administrative expenses increased due to increase in staff cost and other
    administrative expenses by 20.0 %. Staff cost increased on account of inflation
    linked increase in salaries and promotions announced in 2008. Record inflation
    also increased our other administrative expenses.
   Provision charge against advances & other assets increased by Rs. 6.8 billion
    from Rs. 4.9 billion in 2007 to Rs.11.7 billion in 2008 reflecting the greater stress
    on some sectors in our portfolio.
   Record inflation, high interest rates, power shortages coupled with political
    environment were the factors for increase in NPLs which occurred across the

                                                                                      59
    banking system as evident from the increase in NPLs in the system by 47 %. Net
    NPL‟s were at 3.3 % and provision coverage stood at 76%, one of the highest in
    the banking system.
   The bank‟s revaluation surplus on securities including Bank Al- Jazira and mutual
    funds was hit by this abnormal decline in equity prices and showed reduction of
    Rs. 22.7 billion or 86 %. This decline was mainly led by Bank Al-Jazira and NIT
    units; however the market value of these shares still exceeds the bank‟s cost. As
    of the balance sheet date, the impairment loss on listed equity securities and
    mutual fund investments held under 'Available-for-sale' category amounted to Rs.
    2.4 billion. SBP has allowed banks that the impairment loss resulting from the
    valuation of listed equity securities / mutual funds held under „Available-for-sale‟
    category of investments as of December 31, 2008 may be held under „surplus on
    revaluation of asset‟ account as shown on the balance sheet. The impairment loss
    is required to be taken to the profit and loss account in the year 2009 on quarterly
    basis. The bank on a prudent basis decided to recognize Rs. 0.4 billion in P & L in
    the current year representing 25% of impairment loss on the shares portfolio.
   During the year, the bank, on a prudent basis carried out a desktop revaluation of
    major properties to ascertain the current market value and to adjust revaluation
    surplus accordingly. This resulted in reduction of Rs.2.7 billion from previously
    assessed values of 2007.
   Despite the difficult environment, NBP managed to pose an appreciable growth in
    deposits and advances. Advances increased by Rs. 72.7 billion or 21.3% mainly in
    corporate sector on account of financing related to energy and power.
   2008 was a very difficult year in terms of liquidity and deposit mobilization. By
    year end, the deposits increased by 6% or Rs.33 billion. Bank‟s current and saving
    accounts ratio stands at 58% and remains one of the highest in the banking sector.
   Our corporate banking has strong relationships with the country‟s top business
    houses. Corporate loans showed an impressive increase of more then 28% in
    2008.




                                                                                     60
      During 2008 due to higher commodity support prices, financing under
       government operations increased by 118%. These loans are fully backed by GoP
       guarantees.
      NBP‟s Islamic banking operations have gathered momentum and have registered
       impressive growth in Deposits (75%), Advances (237%) and total Assets (84%)
      We expanded our operations in 2008 and 11 more branches across Pakistan were
       opened in 2008 taking the branch network to 1254. In 2008 NBP increased its
       number of overseas branches from 18 to 22.




                             VERTICAL ANALYSIS


Balance Sheet of NBP as at December 31, 2008

                                                                                     61
                         Assets                  Amount (Rs. ‘000’   Percentage
Cash and Balances with treasury                       106503756       13.02%
Balances with other banks                             38344608         4.69%
Lending to financial institutions – net               17128032         2.09%
Investments – net                                     170822491       20.89%
Advances – net                                        412986865       50.50%
Operating Fixed Assets                                24217655         2.96%
Deferred tax assets – net                              3204572         0.39%
Other Assets                                          44550347         5.44%
Total                                                 817758326        100%


Liabilities
Bills payable                                         10219061         1.25%
Borrowings                                            40458926         4.95%
Deposits and other accounts                           624939016       76.42%
Liabilities against assets subject to lease             25274          .003%
Other liabilities                                     39656831         4.85%
Capital
Share Capital                                          8969751         1.7%
Reserves                                              19941047         2.44%
Un-appropriated profit                                52456204         6.04%
Surplus on revaluation of assets – net                21092216         2.5%
Total                                                 817758326        100%




                                  INDUSTRY ANALYSIS




                                                                               62
Comparison between National Bank of Pakistan, Bank al- Alfalah, Allied Bank of
Pakistan and United Bank of Pakistan for the year ended 2008.
Ca;

Ratio              National Bank Bank        Al- Allied Bank of United Bank
                   of Pakistan   Falah           Pakistan       of Pakistan
   Net Profit          25.36%         10%              27%           27%
  Margin Ratio
  Gross Profit        87.74%         57%             72%            65%
  Margin Ratio
Return on total        15%            7%             18%            18%
     Equity
   Return on          1.89%         .372%            1.1%           1.37%
  Assets (After
      tax)
Total Assets to        7.98          20.47           16.40          13.79
  shareholders
      fund
  Earning per          25.64         2.24            9.47            10.8
 share (pre-tax)
  Earning per          17.23         1.63            6.43            8.24
  share (after-
      tax)
  Payout Ratio        49.33         76.69           54.43            56.9
  Book Value          90.71         18.27           32.19             35
  Net Interest        9.75%         5.68%           1.98%           .83%
Income Growth




                                                                            63
           FUTURE PROSPECTS OF THE ORGANIZATION

       NBP remains committed to the interest of all stake holders including its
employees, owners, regulators and Pakistani nation. We have well defined strategy on
where and how we want to proceed in the years to come.
       With the implementation of the new „Core Banking Package‟, NBP will
completely automate its functions which in turn will appreciably enhance work
efficiency. The Bank will continue to diversify its customer segments thereby increasing
our product offering. Its commitment towards the employee‟s empowerment /
development will continue as The Bank believes that a motivated and well trained work
force is necessary to ensure sustenance and growth. On the business side it main focus
would be to reduce non-performing loans and increase deposits.
       The Bank remain committed to our Vision, Mission & core values and our
strategy for the future includes recovery efforts and revival of non-performing loans,
deposit mobilization, consolidation of loans, expense management and tapping into
untapped markets by increasing our network both domestically and internationally.
Customer service will remain its main focus of Operations management.




                                                                                     64
             SWOT Analysis of the organization

                                    Strength
   NBP in one of the oldest bank of Pakistan and first nationalized bank
   Declared World‟s best Foreign Exchange bank in 2008
   Stable AAA/A-1+ (Tipple A/a-One Plus) rated bank
   Best Return on Capital Bank for 2006 amongst all the banks in Asia
   Highest Profit making bank of Pakistan
   Having Highest Assets and Capital compared to any bank in Pakistan
   Functioning as an agent of State Bank of Pakistan
   Dealing Government Treasury where SBP has not its own branch
   Having unshakable trust of the public and its stakeholders
   Giving Loans alone in the market against Gold Ornaments
   Performing social responsibilities and claiming “The Nation‟s Bank”
   Disbursing Salaries and Pensions to the Government employees and earning high
    profit on NBP-Advance Salary Loan Scheme
   Earning commission from SBP on Government transaction
   Facing no problem of cash/currency being its Chest and Sub-chest
   Branches all over the country
   NBP have presence in the countries having sizeable trade volumes with Pakistan
    by its overseas operations
   Holds largest deposit base in the market share in terms of number of accounts
   Leading bank in agriculture financing amongst commercial banks with the market
    share of 15%
   Helping in earning of foreign exchange, remittances and leading agent of
   Western Union Money Transfer




                                    Weakness
   The bank falls far behind as far as the innovative schemes are concerned

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   The strong political hold of some parties and government and their dominance is
    affecting the bank in a negative way
   Lowest Internal Control and Compliance System, SBP rated “Marginal” which is
    alarming for the Bank
   Unsatisfactory corporate culture of the Bank
   Physical environment and atmosphere compare to other banks does not meet the
    standard
   Less number of Online Branches
   Ineffective use of technologies i.e. Information technology
   Shortage of staff (employee per customer is very low as compared to its
    competitors)
   Inefficient training and technical education of staff.

                                 Opportunities

   Being a Government Bank NBP having wide scope in economic market
   Trust and reliability that NBP enjoy, creates chances to enhance deposit and
    profitability
   Its vast network of domestic and overseas branches can help to expand business
    more and more.
   Bank‟s deposit is increasing rapidly so there is a great opportunity to enhance its
    investment and financing.
   Being an agent of State Bank of Pakistan it can play vital role in local economy.
   Earning commission/exchange on Government transactions
   NBP can utilize the electronic banking opportunity to ensure on line banking 24
    hours a day seven days a week



                                     Threats

   SBP penalties due to low internal control and compliance


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   Government, SBP and Prudential Rules and Regulations
   The emergence of new competitors especially in terms of foreign banks
   Its staff switching over to other private banks due to more facilities
   Other bank‟s charming atmosphere and relaxation in documentation
   SBP rated just “Marginal” in respect of System & Control which is alarming for
    the Bank to survive its license.
   NBP staff code of ethics and practices.
   High number of complaints regarding staff behavior
   Government Schemes, Government Revenue Collection, Government
   Payments and FBR Collections create heavy workload.




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                                      Conclusion

        Being a student of MBA Finance it became compulsory for me to do an internship
for which I got an opportunity at National Bank of Pakistan Model Town Branch Lahore.
I worked there for almost 6 weeks. I have concluded my report with my findings as given
below

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

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

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

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

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



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       In NBP, we find a formal organization. Bernard referred to an organization as a
formal when the activities of two or more persons are coordinated towards a given
objective. The formal organization comes into being when people are able to
communicate with one another or willing to act and share a purpose.
       In this formal organization of NBP the activities are carried out in a more formal
way. In theoretical terms it provides basis for communication with one another but in
practice it is not exercised because an employee at high level cannot get straight away to
manager or SVP and ask him about of his problem faced by him, because first he has to
talk to his immediate superior and follow a proper channel of communication.

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

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

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

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

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

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

                                      Promotions
       Promotions in NBP are purely on the basis of seniority, so the new young person
having high qualification remains behind for quite a lot of time. Top management and
staff union put pressure for the promotion of their favorites, which gives a sense of
deprivation to the deserving employee and their efficiency is affected.

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




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                         Lack of business communication
           There is no proper way to give information to their customer. To avoid this minor
dissatisfaction and tension in the mind of customer, and deficiency of the service, it is
recommended that the bank should provide brochures etc containing information in
details.
           Some general information should be placed in information notice board on the
entrance where customer can see it easily or it should be self-attractive




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                Recommendations for Improvements

The recommendations are as follows:

                                  Professional training
       NBP staff lacks professionalism. They lack the necessary training to do the job
efficiently and properly. Although staff colleges in all major cities but they are not
performing well. For this purpose these staff colleges should be reorganized and their
syllabus should be made in such a way to help the employee understand the ever-
changing global economic scenario.
       Banking council of Pakistan should also initiate some programs to equip the staff
with much needed professional training.

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

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

             To Over Come Problem of Space and Furniture
       In the critical analysis this, problem is discussed. To overcome this problem it is
suggested that a special section should be made inside the branch. Which should only
handle the treasury function, salaries and pensions of federal personnel or the bank
should do these functions in the evening time. Also management should purchase more
furniture and arrange them in such a way which provides maximum space and convenient
especially in deposit department and there should also be convenient sitting place for
customers.




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

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

                           Link with the Head Quarter
       Most of the branches of NBP should established a direct link with the, head
quarter In Karachi, through Internet or Intranet. This will make the functions and decision
making of the management easier and convenient.

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

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

                               Interest on Overdraft:
       Overdraft is a short-term credit facility provided by the bank to its trustworthy
customers free of interest. Only bank commission is charge small amount of mark-up on
the overdraft, which will help the bank to improve its revenue position.

                                   Cash Financing
       In this mode of financing the amount of credit not utilized by the borrower is
remained tax-free. It is recommended that a small amount of interest should be charge on


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this amount as well because the bank gas kept-aside the amount for that borrower and can
not advance it anywhere.

                    Decreasing Administrative Expenses
        Bank should their administrative expenses. That can be done by downsizing the
surplus pool of employees. The branches that are not much used could also be closed.
Management should be equipped with new ways to control the bank expenses. That will
give positive results in the future.

                     Needs to be Flexible in credit Policy
        As mentioned earlier, NBP is very conservative in advances and loans policy. It
reduces the investment opportunities. Also loans should be given to the small
businessmen and the agriculture sector at the low markup rate. It should adopt flexible
credit policy while giving credit to the agriculture sector.

                           Technological Advancement
        I would like to suggest that at least all the main branches of NBP should be fully
computerized in order to expedite the dealing process among bankers and their
customers. Every department should be provided a computer with adequate training
(especially Advances, Deposits and Foreign Exchange departments).Daily records should
be entered directly into these computers, (instead entering the overall daily transactions
after the banking hours). It will not only reduce transaction time, will increase accuracy
but will also be efficient as well.
        Not only it will be economical but will also reduce the extra burden of work of the
bank. It will also help in reducing the use of excessive paper work.

                                      Staff Relationship
        Good relationship among staff member leads to the peak performances in any
organization. I observed that the staff relationship was normal other wise but some time I
noticed that there exists a little conformity among the staff members. Another syndrome
from which the staff suffered was that all of them considered themselves more important
than others. Some of the officers used to say that if I am absent for a day the bank would



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stop working. So this sort of attitude is not good because it mars bank image and juniors‟
willingness learn and work hard and in the end will hurt the whole team.

                         Improper Distribution of Work
         Proper distribution work leads to success in every organization. Proper
distribution of work prevents the employee from over and under work situation. So for a
smooth running of an organization proper distribution of work is the hint to be followed.
         During my internship I observed that there was no proper distribution of work in
the bank. I saw that some of the employee worked like ants other sat idle starting here
and there. So this created a lot of over work situation for while relaxation for other.

                             Favoritism and nepotism
         In the branch during my internship I saw that when some of the employees are
transfer to other places, due to their relation with influential people and with top
management they can cancel their transfer in few weeks, when they are unsatisfied at that
place.
         So I suggest that in the organization there should be no favoritism, nepotism and
politics and their transfer and promotion should be made on merit and according to the
rules and regulations of the bank and provided favorable environment to the employee to
show their performances.

                                  Marketing Policy
         The branch should adopt various marketing strategy and promotion strategy to
promote the bank and its product.
         The most important in my opinion is personal marketing; it is the most effective
of all when you think in term of branch level. But on the whole organization level, they
should arrange the seminar with in the bank and outside the bank. They should introduce
various prizing schemes.
         They should do more advertising through newspaper and media and through
channel of personal contacts.




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                            Complaints of Customer
       There should be an information desk to provide the information and to receive the
complaints of the customer in the bank. There is no complaint box available in the branch
and not any person appointed to hear the complaints.
       Every person cannot go to the manager for the complaint because most of the
people are hesitant. So I suggest management to install a compliant box in the branch,
and recruit a special person for that guidance of the customer when they are unable to
manage some difficulties in banking matters.

                         Organizational Commitment
       It is suggested that employees working on daily wages basis should be given
some benefits, which the other employees are getting. Their salaries must increase
according to efficiency, performance and service which would enhance organizational
commitment of the employees working in the organization.

                                Credit Monitoring
       The credit department of the bank should carries out vigilant credit monitoring.
They should ensure the proper payment of installments and the mark-up by the borrower.
The staff members who have done all the paper work of the loan extension should
perform the monitoring, as he/she will be having more information about the borrower.

                               Avoiding Bad Debts
       Policies should be crafted in a way to ensure that no loan is extended on political
pressure. SBP regulation for loan approval should be strictly followed. According to
which the current ration of borrower‟s business must be 1:1 and the debt to equity ratio
should be 60:40, means the liquidity position of business should be healthy.




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                                 References
Website of the National Bank of Pakistan http://www.nbp.com.pk
http://www.nbp.com.pk/publications/AnReport2008.aspx
http://www.nbp.com.pk/publications/AnReport2007.aspx
http://www.nbp.com.pk/publications/AnnualReport2006.pdf
www.abl.com/thebank/pdf/annual_report08/abl-annual-report-2008.pdf
www.ubl.com.pk/aboutus/financial_report/report_2008/annual_doc08/
http://bankalfalah.com/about/download/Annualreport2008.pdf
http://www.kse.com.pk/listing-companies/analysisreport.php?id=38idsid=3.07
Economic Bulletin September-October 2009
Internship Supervisor
Staff members at NBP Model Town Lahore




Annual Report 2006, published by NBP, Head Office Karachi
Annual Report 2007, published by NBP, Head Office Karachi
Annual Report 2008, published by NBP, Head Office Karachi




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