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       The Imperial Bank of India had been acting as the Agent of Reserve Bank of
India. National Bank of Pakistan was established and incorporated on November 09,
1949 vide National Bank of Pakistan Ordinance XIX of 1949. Initially the Bank was
established to extend credit to the Agricultural Sector only. During the year 1950, as
Bank‟s Ordinance was amended so that it could take up ordinary commercial banking
business as well.

       The bank was performing agency services like to hold Government balances,
manage the public Debts Offices and Clearing Houses. After the independence, it was
very difficult for Pakistan to run its own banking system immediately. Therefore, it was
decided that Reserve Bank of India should continue to functions in Pakistan until 30th
September 1948, so that the problems of time & demand liabilities, coinage, currencies,
and exchanges could be settled. The Hindus residing in Pakistan territories started to
transfer their assets to India. Moreover, the banks including those having their registered
offices in Pakistan, transferred them to India in order to bring a collapse of the new state.
By 30th June 1948, the number of offices of scheduled banks in Pakistan declined from
487 to only 195. The Imperial Bank of India closed down most of its offices in Pakistan,
and was not willing to purchase even token amounts of GOP securities on the plea that
these securities were not marketable. State Bank of Pakistan was established on July I,
1948 as the full fledge Central Bank of Pakistan. The bank addressed the urgent task of
creating a national banking system in the country. In order to attain this goal, Habib Bank
was established. SBP also recommended to Government of Pakistan to establish a new
bank which could serve as the agent of the State Bank. As a result the National Bank of
Pakistan came into being in 1949 and by 1952 it became strong enough to take over the
agency functions form the Imperial Bank of India and became the sole agent of SBP.
These agency function included handling provincial and federal government receipts and
payments, manage public debt offices, clearing services etc. up to 31 December, 1973
before nationalize of the bank Government of Pakistan hold 25% of shares whereas 75%
shares were kept by private shareholders. National Bank of Pakistan was nationalized on

1st January, 1974 under the Bank (Nationalize) Act, 1974. All shares were acquired by
Government of Pakistan from the private shareholders after compensating them. After
nationalize of NBP, 93.4% shares were held by SBP, 5.3% by GoP and 1.3% by other
government controlled corporations. Under the policy of privatization / deregulation of
Government of Pakistan. NBP was got listed on all the domestic Stock Exchanges in
February, 2002 and Government of Pakistan / State Bank of Pakistan owned shareholding
was off-loaded through public offering as under:

              1st offer in Nov ,2001 of 5% (18.652M) shares with a green-shoe option of
               additional 5% shares, at face value (Rs.10/-per share) which was over
               subscribed by 6 times.
              2nd offer in Oct 2002 of 5% (18.652 M) shares with a green shoe option of
               additional 5% shares, at a premium of Rs.11/- per share, which was over
               subscribed by 4 times.
              3rd offer in Oct, 2003 of 3.2% (13.131M) shares at a premium of Rs.36/-
               per share, which was over subscribed by 2 times.
        The following is the summary of current share-holding structure.

S. No                    Shareholder                                  Percentage
1        Government of Pakistan (SBP)                        75.56%
2        Other (Govt owned & Controlled Corporations)        11.33%
3        General Public                                      13.11%

        After listing of Bank of domestic Stock Exchanges, the listing regulations and
code of Corporate Government have also become applicable to NBP, in addition to the
existing statutes.

       National Bank of Pakistan was established under the National Bank of Pakistan
Ordinance, 1949 and is listed on all the stock exchanges in Pakistan. It‟s registered and
head office is situated at I.I. Chundrigar Road, Karachi. As my specialization in Fiancé,
the organization I have selected for my internship in National Bank of Pakistan (NBP). It
is the leading commercial Bank / Financial institution in Pakistan. NBP is providing a
large range of services to its customers. NBP maintains its position as Pakistan‟s premier
bank determined to set higher standards of achievements. NBP is the major business
partner for the government of Pakistan with special emphasis on fostering Pakistan‟s
economic growth through aggressive and balanced lending polices, technologically
oriented products and services offered through its large network of branches locally,
internationally and representative offices. NBP has earned a highest ever profit in
Pakistan‟s financial sector history.

       NBP performances is a reflection of the strategic business and organizational
initiatives taken over the last few years coupled with the consistent effective economic
policies of the government leading to impressive growth in all the sector of the economy.
The main objects of NBP include growth through creation of sustainable relationship
with its customers.

       I did my internship in NBP main branch Civic Centre Islamabad. There are three
departments in main branch which are

      I. General Banking Department
     II. Credit Department and
    III. Foreign Exchange Department

I worked as internee in the Credit Department. There I learned the procedures and
criteria, processing documentation and rates of markups charged and other necessary
conditions which are required before extending loans to the customers, corporations and
general public. This internship report on NBP discusses various aspects in the context of
its history, business volume, product lines and organizational structure. It also discusses
matters related to banking systems and procedures, finance department, financial analyses
and future prospects of NBP. The shortfalls / weaknesses, conclusion and
recommendation for improvement are also given at the end of this report.

       1.3     NATURE OF NBP:
       The performance of NBP for the last few years is tremendous. In recognition of
NBP‟s excellent performance, the bank was awarded the prestigious “Bank of the Year”
award in Pakistan by the “Banker” London in 2004. “Euro money” magazine, a leading
journal in its latest issue of March 2005 has listed NBP, the only Pakistani bank among
the top 100 banks in Asia. NBP has manifested itself in the area of salary deposits of
government employees and payment of utility bills. The bank also renders both of this
service across the county. NBP is committed to serve small savers and the general public
of the country. National Bank is everyone‟s bank as it is “The Nation‟s Bank”.

                Agency services including clearing of cheques, collection of
                  Government takes and receipts.
                Underwriting of loans raised by the Government or public bodies and
                  trading by corporations.
                Helping the Haj pilgrims in submission of their Haj applications
                Source of institutional credit in the economy of Pakistan.


       The overall strength of National Bank of Pakistan as on 31 December 2007 13824
employees. The cadre wise break up of employees is as under:
       Cadre Wise Break Up

       Designation / Cadre                           Number
       President & Chairman                          01
       SEVP                                          06
       EVP                                           25
       SVP                                           78
       VP                                            169
        AVP                                           438
        Total Executives (E)                                         717
        OG-I                                          1133
        OG-II                                         2715
        OG-III                                        3434
        Total Officers (O)                                           7203
        Clerical                                      3963
        Non Clerical                                  1862
        Total Clerical & Non Clerical Staff                          5825
        Total Employees                                              13824

Number of Employees in Main Branch Islamabad

        NBP AIOU, Islamabad has a total strength of seventy employees. The number of
employees in main branch Islamabad cadre vise can be categorized as under

Cadre Wise Break Up

        Designation / Cadre                           Number
        AVP                                           04
        OG-I                                          15
        OG-II                                         02
        OG-III                                        02
        Assistant                                     04
        Messenger                                     01
        Bank Guard                                    01
        Total Employees                               72

        Product lines of NBP can be categorized as:

        1.5.1   Credit / Advances

a) NBP Saibaan Home Finance:
        NBP Saibaan is the most affordable house financing scheme to cover all the
sections of the society of Pakistani residents. The salient features of NBP Saibaan are:
       i. Affordable due to easy installments
      ii. Flexible due to grace period option
      iii. Convenient because it requires minimum approval and
      iv. Mark up choices option. NBP Saibaan can be categorized into three categories
          as Home Purchase, Home Construction and Home Improvement / Renovation
b) Home Purchase:
       The amount of advance in this category is up to 10 Million which is paid in lump
sum. The debt to equity ratio under this category is 85:15, which means that 85% of the
total value of home purchased will be financed by the bank and remaining by the
applicant. The advance is given for the period of 3 to 20 years.
c) Home Construction:
       The amount of this type of advance in this category is also 10 Million but it is
paid in four trenches/ installments. The debt to equity ratio is 70:30. This advance is also
issued for the period of 3 to 20 years.
d) Home Improvement / Renovation:
       The amount for house improvement advance is paid in lump sum up to 10
Million. This loan is issue for the period of 3 to 15 years. The debt to equity ratio is also
70:30 in this category.

       1.5.2    Eligibility Criteria:
       The applicant must be a resident of Pakistan holding computerized NIC. The
applicant must maintain his salary account / current account in NBP.

   a) Salaried persons can be divided into two groups 1. A-1 Clause( Government
       Sector Employees ) and 2.A-II Clause (Private Sector Employees) A-1 Clause
       employees minimum net take home salary of Rs.5,000/- to apply for loan, and
       private sector employees must have salary of Rs. 10,000/-

   b) The professionals and businesspersons can also apply for NBP Saibaan. The
       professionals must have net take home salary Rs.10000/- and business persons
       must have income of Rs.15,000/- to apply for advance.

   c) The loan is given to government employees up to the age of 56 years. The private
       employees, professional and business persons can obtain loan up to the age of 60

d) Those salaried persons can apply only who are regular and have completed 2
   years service. The professional must have 2 years of service. The businesspersons
   must have 3 years experience in the same line of business.
e) Property should be located in positive areas including all urban areas approved by
   CDA, RDA, Municipal Corporations, approved societies and model village.
f) Property should be purely residential and self occupied by the applicant.
          1.5.3   Documentaition of NBP Saibaan:
a. Application form with attested passport size photographs and NIC of applicant
   and attested photocopy of employee card.
b. Attested photocopies of seller‟s NIC and processing documentation includes
      i. Cross cheques of Rs.500/- in favour of NBP.
     ii. Payment order of Rs.1500/- in favour of lawyer.
    iii. Payment order for Rs.3000/- in favour of Valuator in case of purchase of
           house and Rs.2500/- in case of construction of house.
c. Property documents include
      i.     Sale agreement / Registry
     ii.     Approved site plan / Building plan
    iii.     NOC from authority
    iv.      Possession certificate in case of plot
d. Employer undertaking employment certificate, last three months salary slips, and
   last three months bank statement in original and attested photocopies.
e. Last three month‟s paid bills of Electricity, Telephone and Gas in original and
   attested photocopies.
f. Debit authority on bank format and borrowers basic fact sheet on bank format and
   branch confidential report.

          1.5.4   NBP Advance salary Product:
   NBP advance salary product has become very popular and is attracting the public
by and large. Due to the popularity of this scheme NBP has increase its advance
salaries product from 3 to 10 and now up to 20 net take home salaries. The salient
features of NBP advance salary product includes up to fifteen advance salaries fastest
processing and minimum disbursal time, minimum documentation, no hidden &

processing charges, no collaterals & no insurance and repayable in 5 years (60
monthly installments)

       1.5.5      Eligibility of Criteria
     a)         Federal / Provincial government, semi government, autonomous, local
                bodies and government corporation‟s only permanent employees can
                apply for advance salary product.
     b)          The applicants must have their salary account in NBP branch.
     c)         For applying 20 net take home salaries the applicants should have
                minimum net take home salary of Rs.5000/- per month.
     d)         Only NBP approved organization‟s employees can apply for advance
                salary product.
     e)         Only Those branches of NBP are authorized to give advance salary
                product where 10=-AFS software EBS and BBO have been upgraded.

       1.5.5      Procedures for Availing 20 net take home Salaries:
     a)         The application form of advance salary can be obtained from the NBP
                branch by paying Rs.5/-
     b)         The application form consists of main application form, form for
                opening an internal bank account, credit voucher and letter of
     c)         After filling the form the applicant will attach
            i.      Last 3 month‟s salary slips
          ii.       Copy of NIC attested by NBP branch manager
          iii.      Copies of NIC‟s of two work colleagues attested by NBP branch
          iv.       Applicant auto roll over request
           v.       Post dated cheques for each payment or 3 undated cheques covering
                    the whole amount of net advance
          vi.       Finance agreement / undertaking by the employer on stamp paper

     d)           Physical and telephonic verification of undertaking will be made by the
     e)           Branch manager or executive will verify the DDO (Drawing &
                  Disbursement Officer) signatures for confirmation.
     f)           After all the necessary documentation and verification the application
                  goes for approval. The application is signed by Credit Manager, then by
                  the Compliance officer and finally by the Chief / Branch Manager.
     g)           The whole credit approval process may take 5 to 6 day to be completed.

     Calculation of Mark Up for NBP Saibban:
     Mr. Ali‟s monthly salary:                              =Rs.6,000/-
     Amount of 20 Net take home salaries:                   =Rs.6,000*20
     Principal (Loan Amount )                               =Rs.1,20,000/-
     The Loan is re-payable in 60 installments (5 years)
     Installments per month by using Schedule               =Rs.1956/-@11%per Annum
     Amount to be repaid in 5 years (60 months)                    =1956*60
                                Amount of Mark Up           =Rs.117360-9000=27360
                          Amount of Mark up for each year   =27360/5
                                                            =5472 per year
The loan are given against all the certificates issued by any bank, National Saving
Centers and Government of Pakistan. These certificates include fixed deposit, term
deposit, defense saving, national saving and foreign currency certificates. This loan is
issued for the period of one year. For example a person gets loan on May 14, 2007.
The loan will be issued for one year and the duration for loan will be rounded of to 30
June, 2006. Similarly a person has obtained loan on 6th February, 2007. The Loan
agreement will be made up to 31 December, 2005.

The bank keeps the 10% margin and remaining amount is paid as loan. Suppose Mr.
A has Defense Saving Certificate of Rs.100,000/- He wants to get loans against this

   certificate. The bank keeps 10% of the value of certificate which is Rs.10,000/- as
   margin (Karachi Interbank offer Rate). As any body adjusts his loan amount at any
   time he can receive back his certificates.

       Documentation for Loans against Saving Certificates:
            IB-6     Bank Agreement
            IB-12 Promissory note
            IB-26 Letter of pledge
            IB-28 Letter of Lien of bank on securites
            IB-29 Guarantee ( In case of Joint account)
            IB-31 Buy back agreement

           1.5.8   CORPORATE FINANCES:
       National Bank of Pakistan extends corporate advance (above Rs.100 million) to
various corporations. The following are the various categories for corporate advance.

       a. Demand Finance
       b. Running Finance
       c. Cash Finance

   a. Demand Finance
       Demand finance is an advance for a fixed amount, where no debits to the account
   may be made subsequent to the initial advance except for the interest / markup,
   insurance premium sundry charges applied by the bank. A fresh Demand Finance
   account must be opened for every new advance granted and a new demand
   promissory note taken as security. An existing Demand Finance must be liquidated
   when further Finances are granted against the same security. Thus if the advance
   value of a borrower‟s security is Rs.10,000/- and he wishes his existing finances of
   Rs.5,000/- to be increased to Rs.7,000/- a new demand Finance account must be
   opened for Rs.7000 out of which the amount of the old Finance plus any mark-up due

and unpaid thereon will be liquidated and the balance will be advanced to the

b. Running Finance:
   Amount the various modes of bank financing, credit lines afforded to customers
under the Running Finance are the most commonly used. Withdrawals on the current
account allowed in excess of the credit balance, which the customer has maintained,
thereby creating Running Finance (or Overdraft). Under this typed of financing, the
borrower is required to adjust the finance provided by the bank within the stipulated
expiry period. The account may however, be freely operated by way of multi
transactions, and provided that the account is operated strictly in accordance with he
limits, terms and conditions, Incorporated private and public companies, other firms
and individuals who have already made arrangements with the bank for availing of
Demand Finance Running finance and Cash Finance facilities may be allowed
running finance in their account as the case may be, subject to the SBP restrictions
imposed from time to time. For this propose the following clause may be inserted in
the relevant agreement to safeguard the bank‟s interests. The bank may at its sole and
absolute discretion allow the customer to draw an amount which may, at the relevant
time be in excess of the customer‟s drawing power under this agreement, in which
case the customer herby agree and undertakes to repay such excess amounts on

c. Cash Finance:
   It is operated in exactly the same way as a current account does on which a
running finance has been sanctioned. It is a chequing account requiring usual account
opening formalities. The principal advantage of Cash Finance to the borrower is that,
unlike the recipient of a Demand Finance he may draw on the account within the
prescribed limit as he requires and can save mark up on the advance by reducing the
balance, however, temporarily whenever he is in a position to do so. When the
advance is secured by the pledge or hypothecation of goods and produce.

           1.5.9   AGRICULTURAL CREDIT:

       The agricultural credit provided by NBP includes farm credit and production
   loans. The farm credit includes operation loans, land improvement loans, and loans to
   purchase tractors and other equipments whereas production loans comprise of loans
   to purchase seeds, fertilizers, sprays etc. Firstly to provide reliable infrastructure for
   agricultural customers. Secondly to help farmers utilize funds efficiently to further
   develop and achieve better production and thirdly to provide farmers an integrated
   package of credit with supplies of essential inputs, technical knowledge, and
   supervision of farming. The credit is provided for production and development,
   watercourse improvement, wells, farm power development loans for tea plantation,
           1.5.10 NBP STUDENT LOAN SCHEME:

       The objective of the Students Loan Scheme is to provide financial assistance to
the meritorious students of insufficient means who have obtained 70% marks in the last
public examination and are unable to pursue their studies within Pakistan due to financial
difficulties. Students loan scheme for education was launched by the government in
collaboration with major commercial banks of Pakistan. Under the Scheme, financial
assistance is provided by way of interest Free Loans to the meritorious students who have
financial constraints for pursuing their studies in Scientific, Technical and Professional
education within Pakistan.
       Loans facility is available to those students who are nationals of Pakistan
including Northern Areas, Federally Administered Tribal Areas and Azad Jammu and
Kashmir and of age not exceeding 20 years for graduation, 30 years for post-graduation
and 35 years for Ph. D at the time of admission.
     a) NBP Staff Loans:
       The categories of NBP staff advances include
              House Building Advance
             Motor Car Advance
             Motor Cycle Advance and

              Computer Advance
      i. Building Advance:
       This Type of advance is given on long basis for the period of 20 years. The house
building advance has a limit up to the 100 basic salaries of the employees. This type of
advance is issue only to the permanent employees of the bank.

     ii. Motor Car Advance:
       Motor Car Advance is issued for the period of 10 years. The amount of Motor Car
Advance is equal to the 90% of the original value of the car. The Motor Car Advances are
issued according to the various categories of grades.
    iii. Motor Cycle Advance:
       This type of advance is also issued for period of 10 years. This type of advance is
issued to the clerical and non clerical staff of the bank. The amount of this loan is up to
     iv. Computer Advance:
       Computer advances are issued to the employees for the period of 5 years. The
amount of the computer advance is up to Rs.50,000/-
     b) Eligibility Criteria:

     i. House Building Advance are issued only to the permanent employees of the
         bank who have completed their services for five years.
     ii. Motor Car, Motor Cycle and Computer advances are issue both permanent and
         contractual employees of the banks. The service completion condition for these
         types of advances is 3 years.

     c) Rate of Mark-Up on NBP Staff Loans:
               House Building Advance                  3%
               Motor Car Advance                       4%
               Motor Cycle Advance                     No Mark Up
               Computer Advance                        4%

     d) Documentation for NBP Staff Loans:

             IB-6 Bank Agreement, IB-12 (Promissory note)
             IB-24 (Letter of Mortgage), IB-25 (Letter of Pledge)
             Transfer Letter / Registry
             NOC from Authorities and Map

        e) Calculation of Mark Up:
         Mr. Javad is a permanent employee and applies for House Building Advance
                                                     Basic salary: Rs.16,000/-
                                                     Allowances:     Rs.15,000/-
                                                     Total Salary: Rs.31,000/-
The amount of House Building Advance equal
To the 100 basic salaries of Mr. Javad               =Rs.1,600,000/-
Period of Repayment                                  =20 years (240 Months)
Monthly payment by amortization table                =Rs.8874@3%
Total amount repaid in 20 years (240 Months)         =8874*240
Amount of Mark Up                                    =2129760-1600000

1.6      DEPOSITS

1.6.1    PLS Saving Account:
         PLS (Profit & Loss Sharing) saving account is opened on proper introduction and
submission of required documents, alongwith initial deposit prescribed from time to time.
PLS saving account are opened for individuals (single or joint) charitable institutions,
provident and other funds of benevolent nature of local bodies, autonomous corporation,
educational institutions etc. In this type of account there is no restriction on maintaining
the upper limit of deposit, withdrawals of amount, and numbers of cheques drawn. The
bank is authorized to deduct service charges on PLS account levied through its half
yearly schedule of charges. The profit earned on PLS accounts will be credited as
determined by the bank at the sole discretion on the basis of its net working results at the
end of each half year, within a reasonable time from the date of close of books of

accounts of the bank under intimation to the account holders. Zakat where applicable will
be deducted on valuation dates from accounts having balance in excess of the exempted
limit declared for that particular Zakat year. Withholding tax is also recovered by the
bank on the profit amount as per income tax laws in force.

1.6.2   Current Account:
        This type of account is opened on proper introduction and submission of required
documents, alongwith initial deposit prescribed from time to time. Current account is
opened for individuals (single or joint), firms, limited companies, local bodies,
autonomous bodies, associations, educational institutions etc. In this type of account no
profit is paid on the balances of current accounts. The bank is authorized to deduct
service charges (incidental charges ) on Current Account levied through its half yearly
scheduled of charges, in case the average balance falls below the minimum as prescribed
by the bank from time to time. This type of account is normally maintained by those
individual firms and companies who require frequent daily transactions.

1.6.3   National Income Daily Account:
        The NIDA scheme was launched in December 1995 to attract corporate
customers. It is a current account scheme and is a part of the profit and loss system of
account in operation throughout the country. This account is opened with a minimum
opening balance prescribed by the bank form time to time. The account holder is eligible
for sharing profit / loss with the bank at the rate to be determined by the bank at its sole
discretion and the bank‟s decision in this behalf will be final and binding on the
depositor. Deposits in the NIDA accepted on the condition that the depositor shall always
maintain a minimum balance in the depositor‟s account is less than the required amount
the account will be converted to the ordinary PLS SB Account for the purpose of
calculating profit. Payment of profit is made on half yearly basis, with no limits on
withdrawals and no notice period required.

1.6.4   Foreign Currency Account:

        This account is opened on proper introduction and submission of required
documents along with an initial deposit prescribed from time to time. Rates of return on
foreign currency deposits are subject to fluctuation as determined in accordance with SBP
directives. The bank is not responsible to account holder of foreign currency in the event
of restriction imposed by the SBP / GoP on withdrawal of funds or refusal of SBP for the
time being to sell the foreign currency necessary to meet the request of withdrawal or due
to enforcement of any new law or directives of the GOP /SBP. The bank is also not liable
devaluation or fluctuation in the exchange rate or otherwise. The return on this account
will be paid on six monthly basis during June and December, whereas the return on
amount including or excluding return as per instruction by the depositor.


1.7.1. Demand Drafts:
        If clients of NBP want a safe, speedy and reliable way to transfer their money,
they can purchase NBP‟s demand drafts at very reasonable rates. To buy a “DD” the
person whether he is an accountholder of the bank or not is required to fill an application
form. He will mention in the form about the type of instrument needed, name of the
recipient, name of the sender, amount to be transferred, place where the transferred
money is to be paid, mode in which person will pay money to the bank i.e. in Cash or by
debit to his account etc. The application form along with the cheque on his account or
cash is deposited with the counter clerk who gives him a demand draft (which looks like
a cheque) for the amount.

1.7.2   Mail Transfer:
        The costumers of NBP can move their money safely and quickly by using NBP
Mail Transfer service. The bank offers the most competitive rates in the market for this
facility. Mail transfer is used for all mail remittances intended for credit of accounts at the
receiving branch for payment to parties. In this mode of transfer, customer is required to
fill in an application form similar to the one for DD, sign a charge slip or gives a cheque
for the amount to be transferred plus exchange and collect a receipt. The bank will, on its

own, send an order to other branch at center „B‟ to deposit the said amount in the account
number designated by the customer.

1.7.3      Telegraphic Transfer:
           The clients of NBP also can transfer their money by using telegraphic transfer
facility. This mode of transfer is similar to the mail transfer except that the message is
sent to other branch at center „B‟ by way of a telegram and the money is deposited the
next day. The fax is increasingly used as a mode of instruction.

1.7.4      Pay Order:
           NBP also provides facility to its customers to transfer their money by using
NBP‟s pay order service. The bank‟s pay order is a secure and easy way to transfer
money from one place to another. When a person whether he is an accountholder of the
bank or not has to make payment, he can do so by making pay order in favor of the
person / party to whom the payment is to be made.

1.7.5      Letter of Credit
           A letter of Credit is one of the most widely used modes of setting trade debts on
an international or national level. Also it is a convenient and important method of
obtaining short-term financial accommodation from banks customers. A broad
classification of L/Cs is “sight letter of credit (sight L/C) OR the document against
acceptance (DA)L/Cs. In case of sight L/C the draft is drawn at sight and the Bank, as
security holds the relevant document, until the same is retired.

           NBP provides facility to its customer to open L/Cs within the country. This
service of NBP Facilitates the national trade among bank customers within the county.
The following aspects are to be considered by the bank about inland L/Cs.
         i.   When a customer importing goods desire to open a letter of credit in favor of
              the exporter, also referred to as beneficiary, due care should be exercised that
              the customer is trust worthy or in case of a new customer.
        ii.   The L/C to be opened may be within the approved credit line, covering the
              type of L/C facility being applied for.
      iii.      The applicant would be required to fill in an sign the standard application
                form requesting the bank to open the L/C.
      iv.       The branch manager would then examine and apprise the L/C application and
                decide whether or not to accede to the request.
        v.      The means and standing of the applicant‟s assets and liabilities.
      vi.       The purpose for which the finance is required and the probable date of
      vii.      The applicant‟s promise regarding repayment should be viewed in the light of
                all relative circumstances.
   viii.        The customer‟s last audited financial statements as per regulations.
1.7.6        Inward and Outward Remittances:\
             To facilitate its customers in the area of Home Remittances, NBP has taken a
number of measures to increase home remittances through the banking system and meet
the SBP directives / instructions for timely and prompt delivery of remittances to the
beneficiaries. Existing system of home remittances has been improved and well- trained
field functionaries are posted to provide efficient and reliable home remittance services to
nonresident Pakistan is at 15 overseas branches of the Bank besides Pakistan
International Bank (UK) Ltd., and Bank Al-Jazira, Saudi Arabia. The bank provides
home remittance services without any charges and strictly monitors the system to ensure
he highest possible security. Special courier services are hired for expeditious delivery of
home remittances to the beneficiaries.

1.8.1        International Banking:
             International banking can be characterized by the types of services distinguished
form domestic services. For example international banking facilitates the imports and
exports by arranging trade financing within the countries, arranging for foreign exchange
to conduct cross-border transactions and make foreign investments. International banks
also provide consulting services and advices to their clients. For example foreign
exchange hedging strategies, interest rate and currency swap financing, and international
cash management services. International banking offices include correspondent bank,
representative offices foreign branches, off shore banking center etc. A corresponding

bank relationship is established when two banks maintain a correspondent bank account
with one an other to conduct business worldwide. A representative office is one where
business dealing with the bank.

           As NBP is expanding its international operations so it is at the forefront of
international banking in Pakistan which is proven by the fact that NBP has its branches in
major financial capitals of the world. Additionally, NBP has recently set up the Financial
Institution Wing, which is placed under the Risk Management Group. The Financial
Institution Wing performs the following functions;

         i.   To effectively manage NBP‟s exposure to foreign and domestic
        ii.   Manage the monetary aspect of NBP‟s relationship with the correspondents to
              support trade, treasury and other key business areas, thereby contributing to
              the bank‟s profitability.
     iii.     Generation of incremental trade-finance business and revenues.

1.8.2      NBP Cash Card:
           NBP cash card offers a variety of services to the users. This card includes the
facilities like checking account statement on E-mail, mobile banking facility, utility bills
payment facility etc. NBP cash card is ATM plus Debit card which includes many





                      GRADE 22

                     GRADE 21

                    VICE PRESIDENT
                      GRADE 20

                       GRADE 19

                   GRADE I OFFICER
                       GRADE 18

                   GRADE II OFFICER
                       GRADE 17

                   GRADE III OFFICER
                      (GRADE 16)


                                         Chief Manager

                                          Chief Operation
                                          anager (CRA)

      Manager Credit            Manager Credit
      Processing                Operation

Manager                                                                         Manager
FEX*                  Manager JB*                 Manager Admin                 Compliance

             [Sections]                  [Sections]                [Sections]

FEX                   Inquiry                         Reconciliation            Audit /Inspection
Export                Deposits                        Dispatch                  To sign all Br. Returns
Import                Bills                           Dead Stock                Money Laundering
Remittance            Clearing                        Security                  .etc
F/C A/C               Utilities                       Staff Welfare
                      Govt. Collection

    *FEX Foreign Exchange
    *JB Journal Banking

2.4     Business Volume of National Bank of Pakistan:

        Up to 31 December, 2008 the following are the details of NBP Business Volume.

                                      2004      2005      2006      2007      2008
         Total Assets                553231    577719    635133    762194    817758
         Deposits                    465572    463427    501872    591907    624939
         Advances                    220794    268839    316110    340677    412987
         Investments                 149530    156986    139947    210788    170822
         Shares Holders Equity       24900     37636     53045      69271     81367
         Pre tax profit              11978     19056     26311      28061     23001
         After Tax Profit             6195     12709     17022      19034     15459
         Earning per Share              7        14        19        21        17
         Return on Assets            2.40%     3.40%     4.30%       4%        3%
         No. of Branches              1226      1242      1250      1261      1276
         No. of Employees            13745     13824     14019      14079     15204

EXPLANATION (Write the Explanation of Above Chart)


  National Bank of Pakistan is a commercial bank, in modern time it plays a very vital
role and its functions are manifold. The main functions are as under:

  (1)     Accepting various types of deposits.
  (2)     Granting loans and advances.
  (3)     Undertaking of agency services and also general utility functions, few of these
          are as under:-

         a ... ...   Collecting cheques and bills of exchange for the customers.
         b ... ...   Collecting interest due, dividend, pensions, and other sum due to

          c ... ...     Providing safe custody and facilities to keep jewellery, documents,
                        and securities etc.
          d ... ...     Transfer of money from place to place.
          e ... ...     Acting an executor, trustee or attorney for the customers.
          f ... ...     Issuing of travelers‟ cheques and letters of credit to give credit
                        facilities to travel.
          g ... ...     Accepting bills of exchange on behalf of customers.
          h ... ...     Purchasing shares for the customers.
          i ... ...     Undertaking foreign exchange business.
          j ... ...     Furnishing trade information and tendering advice to customers.

       For proper functioning of all these activities, the bank has divided its operations
into different departments that would be discussed next. These departments are as under:

         (1)      Cash Department
         (2)      Deposit Department
         (3)      Clearing Department
         (4)      Advances and Credit Department
         (5)      Foreign Exchange Department

       2.5.1 CASH DEPARTMENT
     The following books are maintained in the cash department:-

     1 ... ...        Receiving Cashier Books
     2 ... ...        Token Book
     3 ... ...        Paying Cashier Book
     4 ... ...        Scroll Books
     5 ... ...        Cash Balance Book

     When cash is received in counter, it is entered in the Scroll Book and Receiving
Cashier Book. At the close of the day, these are balanced with each other. When the
cheque or any negotiable instrument is presented at counter for payment, it is entered in
the Token Book and Token is issued to the customer. The Token and the cashier make
entry in the Payment Book and the payment is made to payee. At the close of the day, the
Token Book and paying Cashier Book is balanced. The consolidated figure of receipt and
payment of cash is entered in the Balance Book and drawn closing balance of cash.

                                 CLOSING BALANCE

        This is very important department because cash is the most liquid asset and
mostly frauds are made in this department, therefore, extra care sis taken in this
department and no body is allowed to enter or leave the area freely. Mostly, cash area is
grilled and its door is under the supervision of head of that department. Officer checks the
books maintained in this department.


        Bank deals in money and they are merely mobilizing funds within the economy.
They borrow from one person and lend to another, the difference between the rates
borrowed and lend from their spread or gross profit. Therefore, we can rightly state that
deposits are the blood of the banks which cause the body of an institution to get to work.
These deposits are liability of the bank so from the viewpoint of bank we can refer to
them as liabilities.


         Deposits can be segregated on two bases, one is the duration in which these funds
are expected to be with the bank, and second is the cost of getting these funds. So we can
divide deposits into two classes according to duration:

           1 ... ...   Time Deposits
           2 ... ...   Demand Deposits
         And on the basis of the cost of acquire these funds, a deposit can be classified as
any one of the following four:

           a ... ...   High Cost
           b ... ...   Medium Cost
           c ... ...   Low Cost
           d ... ...   No Cost

         Bank has different kind of deposit schemes in order to induce deposits. These
schemes are a mixture of the above mentioned two types of deposits with and addition of
different services and requirements, mode of transactions, basis for calculation of profit,
deduction, additional benefits, and eligibility for different groups. In the similar fashion,
national Bank of Pakistan has large variety of deposit schemes and some of these are as

   (1)        CURRENT ACCOUNT
   In this type of accounts, the client is allowed to deposit or withdraw money as and
when he likes, but there is requirement of maintaining the minimum balance of Rs.5000/-
other wise Rs.50/- will be deducted every month. Usually the businessmen open this type
of account and the bank pays no profit on it. These types of deposits are also exempt from
compulsory deduction of Zakat.


   This type of account is for those persons who want to make small savings. This type
of account is opened with a minimum deposit if Rs.200/- If the balance in the account
falls below the minimum requirement then a flat charge of Rs.150/- is made in the
account once in a half year. Zakat and other withholding taxes are deducted as per rules
of the government.

   In this type of account a certain amount is deposited for a certain period such as six
months, one year, two year or longer. A fixed deposit receipt is issued in the name of the
depositor. The receipt is signed by the officer in charge and the bank manager. A notice is
given to the depositor on a prescribed from two weeks before the Fixed Deposit Receipt
(FDR) falls due, requesting the depositor to withdraw his money or to renew his deposits.
The interest is allowed on fixed deposit varies with the period for which the deposit is


   This kind of deposit is for a short period as the name indicates. The depositor may
withdraw his deposit at any time by giving seven days notice to the banker. This type of
deposit facilitates the trader to withdraw his amount with interest of the deposited period.

   (5)     CALL DEPOSIT
   Call Deposits are the sorts of deposits, which are deposited with the banker against
any tender. This is with out interest deposit, this may be with interest provided with the
depositor has agreed to keep this amount with the banker for some fixed period.


   This is just like of fixed deposit. In this kind of deposit, the rate of interest is higher as
compared to other kind of deposits, which are mentioned previously. The rate of interest
rises gradually as the period extends. Its period ranges from three month to twenty years.


   National Bank of Pakistan has also introduced Monthly Income Scheme for the
benefits of its customers. An individual or institution, company, corporation etc. can take
the advantage of this scheme.

                         LEDGERS OF DEPOSIT DEPARTMENT

    The following types of ledgers are concerned with deposit department:

    1 ... ...     Saving Ledgers
    2 ... ...     Current Ledgers
    3 ... ...     Profit and Loss Sharing Ledgers
    4 ... ...     Fixed Deposit Register
    5 ... ...     Cumulative Deposit Certificate Register
    6 ... ...     Cash Book
    7 ... ...     Daily Profit and Loss Summary Book
    8 ... ...     Voucher Register

         Every banker acts both as a paying as well as a collecting banker. It is however an
important function of crossed cheques. A large part of this work is carried out through the

bankers clearing house. A clearing house is a place where representatives of all the banks
of a city get together and settle the receipts and payments of cheques drawn on each other
bank. As the collecting banker runs the certain risks in receipt of their ownership, the law
has provided certain protections to the banks.


         (1)    TRANSFER CHEQUES
         Transfer cheques are those cheques which are collected and paid by two different
branches of the same bank situated in the same city.

         (2)    CLEARING CHEQUES
         Clearing Cheques are those cheques which are drawn on the branches of some
other bank of the same city or of the same area which covers a particular clearing house.

         (3)    COLLECTION CHEQUES
         Collection Cheques are those cheques which are drawn on the branches of either
the same bank or of another bank, but branches are not in the same city or they are not the
members of clearing house.


         The function of Advances and Credit Department is to lend money in the form of
clean advances, against the promissory note, as well as secured advances against tangible
and marketable securities. The bankers prefer such securities, which do not run the risk of
general depreciation due to market fluctuations. Common securities for the banker‟s
advances are as under:


   (1)         BANKERS’ LIEN
        (Moveable property possessed to the lender cannot be sold in case of default)
        Lien is the bankers‟ right to hold the property until the claim on the property
is paid. The bankers look at their lien as a protection against loss on loan or overdraft
or any other credit facility. In ordinary lien, the borrower remains the owner if the
property, but the actual or constructive possession remains with the creditors, though
he has no right to sell it.

        When an application for an advance can offer any tangible security, the
banker may rely on personal guarantees to protect himself against loss on advances or
overdraft to the applicant.

(3)      MORTGAGE
        (Immoveable property possessed to the lender can be sold in case of default)
        A mortgage is the transfer of an interest in specific immoveable property for
the purpose of securing the payment of money advanced or to be advanced by way of
loan, and existing of future debt, or the performance of an engagement, which may
rise to a particular liability. The person in whose interest the property is transfer is
called mortgagee.

         (Immoveable property possessed to the borrower can be sold in case of
        When property in the shape of goods is charged as security for a loan from the
bank, the ownership and possession is with the borrower, the goods are said to be
hypothecated. The essence of hypothecation is that neither the property in goods nor
the possession of them passes to the lender, but the security is granted by means of

   letter of hypothecation which usually provides for a banker‟s charge on the
   hypothecated goods.

   (5)     PLEDGE
           (Moveable property possessed to the lender can be sold in case of default)
           In a pledge, the ownership remains with pledger (borrower), but the pledgee
   has the possession of property until the advance is repaid in full. While in case of
   defaulter, the pledge has the right of sale after giving due notice.

           1 ... ...   Demand Finance(Ordinary Loans)
           2 ... ...   Running Finance(Overdraft)
           3 ... ...   Cash Finance
           4 ... ...   Small Finance
           5 ... ...   Finance against Bills
           6 ... ...   Agriculture Loans

   These are those advances which are allowed in lump sum for a fixed period and are
repayable in lump sum or gradually in installments.

   Running finance are advances, which are gradually given to meet temporary
requirements of the customers. A good customer uses the banks running finance limit, as
a mean of protecting his credit in the market and as a line of second defense to meet his
commitments. There are two types of running finance:

   1)     UN-SECURED
   Under this type of overdraft, the bank relies upon the personal security of the
customer or customer‟s account.

   2)       SECURED
   Under this type of overdraft, the bank allows his customer to withdraw more than his
deposit after giving security against the amount overdrawn. The securities against which
they are given are as under:

           a ... ...   Share Certificates
           b ... ...   Savings Certificates
           c ... ...   Deposits
           d ... ...   Mortgage Property
           e ... ...   Guarantee of a person

   (3)          CASH FINANCE
    These types of loans are given against the following:

    1 ... ...      Against locally manufactured goods
    2 ... ...      Cash finance against rice and paddy
    3 ... ...      Against pledge
    4 ... ...      Against commodities
    5 ... ...      Besides advances against the above commodities bank may be approached
                   by parties for advances against other commodities like tobacco, oil, etc.
    6 ... ...      Against Trust Receipts

   (4)          SMALL LOANS
   Loans are allowed to contractors‟ clearing and forwarding agents. These loans are
repayable within a year.

   The advances are allowed both on local and foreign bills such as:

           a ... ...   Bill of Exchange and Invoices

            b ... ...   Bill of Landing

   Agriculture loans are given to the farmers with holding up to 25 acres for meeting
their short medium and long term production requirements such as:

            a ... ...   Agriculture inputs
            b ... ...   Tractors instruments
            c ... ...   Tube wells
            d ... ...   Live stock farming
            e ... ...   Land Improvements

2.5.1 Branch Net Work of National Bank of Pakistan:

           Total number of branches of NBP as at 31 December 2006 is 1226. The branch
break up is as under;
      i.      Head Office                    01
     ii.      Provincial Headquarters 04
    iii.      Domestic Branches              1183
     iv.      Overseas Branches              24
     v.       Regional Office                29
     vi.      Representative Offices         04


   Foreign exchange is an important department in bank system. In the foreign exchange
   department all the operations of the bank are done in the same way as in all other
   departments of the bank this department also involve in deposits, remittances and
   advances but the difference with other department that the foreign exchange
   department deals in foreign currency rather then in local currency. For opening of

   account in foreign exchange the minimum balance required is $100.This department
   is just like Cash Department in local currency. In this department, the dealing is
   made in foreign currency.

In National Bank of Pakistan, four currency accounts are available:

   US Dollar
   Pound \
   Japanese Yen


The department performs the following functions:
   Account opening
   Account closing
   Inward/outward remittance
   Issuance of traveler cheques


       Financial analysis is an evaluation of both a firm‟s past financial performance and
its prospects for the further performance. Typically, it involves an analysis of the firm‟s
financial statement and its flow of funds. Public companies have a large number of
stakeholders such as shareholders, bondholders, bankers, lenders, suppliers, employees
and management etc. Such stakeholders need to monitor how well their interest is being
served. They rely on the company‟s periodical financial statements to provide the basic
information about the performance and profitability of the firm. These financial
statements are used to analyze a firm‟s overall performance and assess the current
financial standing. The financial analysis includes ratio analysis, horizontal analysis and
vertical analysis. Let‟s take these analyses in some detail.


                                                               (Amount: Rs in Million)

                                                        2004      2005         2006        2007          2008
Cash and Balance                                       94447     71197        78625       94873        106504
Balance with other banks                               49784     31019        40642       37473         38346
Lendings to Financial institutions                     10511     16282        23013       21465         17127
Investments                                           149351    156986       139947       210788       170822
Adnvances                                             220794    268839       316110       340677       412987
Other Assets                                           19142     23941        27114       30995         44550
Operating fixed assets                                  9203      9454         9682       25923         24217
Deferred tax assets                                                                                      3205
Total Assets                                          553232    577718       635133       762194       817758

Bills Payable                                           7215      1741        10606        7062         10219
Borrowings from financial institutions                 11085      8757        11704       10886         40459
Deposits and other accounts                           465572    463427       501872       591907       624939
Sub-ordinated loans                                                      -            -            -
Liabilities against assets subject to finance lease      17         17          13           34           25
other liabilities                                      23068     24974        26596       30869         39657
deferred tax liabilities                                 29       4463         2387        5098 -
Total Liabilities                                     506986    503379       553178       645856       715299

Net Assets                                             46246     74339        81955       116338       102459

Represented By
Share Capital                                           4924      5909         7091        8154          8970
Reserves                                               10814     13534        13879       15772         19941
Unappropriated Profit                                   9162     16716        32075       45344         52456
Surplus on revalutation of Assets                      21346     38180        28909       47067         21092

        Why Ratio Analysis make? This helps finance concerns to check the financial
position of the organization.
This can be defined as the systematic use of ratio to interpret the financial statements so
that the strengths and weaknesses of a firm as well as its historical performance and
current financial conditions can be determined. Ratios make the related information
comparable. A singe figure by itself has no meaning but when expressed in term of a
related figure, it yields significant inference.
A financial analyst uses the ratios to compare with the its past and expected future ratios
to determine whether the company‟s financial conditions is improving or deteriorating
over time.

                                              Ratios Analysis
                                              NBP Bank Ltd.
                                              Balance Sheet
                                                             2004         2005     2006      2007     2008
                                                Liquidity Ratio
Current Ratio = Current Assets /
                 Current Liabilities                        3.949         3.557    2.993    3.346     2.097
Quick Ratio = Cash + Accounts Receivable /
                  Current Liabilities                       3.487         2.882    2.439    2.711     1.603
Absolute Ratio = Cash Equalants/
                  Current Liabilities                       2.283         2.007    1.608    1.943     1.179

                                        Financial Leverage (Debt) Ratio
Debt to Equity Ratio = Total Debts /
                      Share Holder Equity                   10.307        6.352    6.267    5.182     6.495
Debt to Total Assets Ratio = Total Debts /
                             Total Assets                   0.862         0.817    0.809    0.791     0.814

                                                Coverage Ratio
Interest Coverage Ratio = EBIT /
                         Interest Expenses                 1.34298    1.66326     1.92981   1.9499   1.17942

                                                 Activity Ratio
Total Assets Turn over Ratio = Sales or Advances /
                                   Total Assets             39.91%    46.53%      49.77%    44.70%   50.50%
Total Assets Turn over Ratio = Sales or Advances /
                                 Net Fixed Assets           2399%     2844%       3265%     1314%    1705%
                                            Profitability Ratio
Return on Assets = Net Profit After Tax /                 1.120%   2.200%    2.680%    2.497%    1.890%
                            Total Assets
Return on Assets = Net Profit After Tax /               125.83%    215.08%   240.06%   233.43%   172.34%
                    Share Holder Equity

                                             Solvency Ratio
Debt to Equity Ratio = Long term Debts /
                             Equity                      0.345%    0.288%    0.183%    0.417%    0.279%

                                             Banking Ratios
Return on Average Assets = Net Income /                2.193%      3.793%    5.737%    6.711%    7.451%
                             Total Assets
Return on Equity = Net Income /
                   Stock holders' equity                 2.464      3.709     5.138     6.273     6.793

                                             Net Profit Ratio
Net Profit Ratio=    Net Profit /                        2.806%    4.727%    5.385%    5.587%    3.743%
                    Sales Or Advances

                                     Working Capital Turnover Ratio
Working Capital Turnover Ratio = Sales Or Advances /
                         Working Capital Or Net Assets   4.774     3.616      3.857     2.928     4.031

Liquidity Ratio

The value of cash and marketable securities divided by current liabilities. For a bank this
is the cash held by the bank as a proportion of deposits in the bank.
Current Ratios; in definition of this ration of current assets to current liabilities the
current ratio is calculated by dividing current assets by current liabilities. Current assets
at least twice current liabilities i.e. 2:1, that considered a healthy condition for most
businesses. While studying National Bank we have found the dated from 2004 to 2008.
Current Ratio= current assets in 2004 was 3.949 and it decreased in 2005 upto 3.557
again in 2006 upto 2.993 and then in 2007 slight upward trend was seen with the value of
3.346 and then a quick drop to 2.097 in 2008, in the light of above we can say that the
still that decline the bank is in stable condition with the ration of 2:1 and needs to
maintain this position and go higher.
Quick Ration= this is also Asset test ration of liquid ration. It measures the ability of a
company to use its near cash or quick assets to immediately. While calculating National
Bank I have found it as follows i.e. Cash and Accounts Receivables/Current Liabilities.
In year 2004 it was 3.487 that was real strong but have continuous decline till 2008 that is
1.603 as compare to the year 2004 it is not good for bank but still this ratio is higher than
1, it means that the bank still have enough quick assets to meet the liabilities.
Absolute Ratio= is the ratio which is considered .5:1 for an organization‟s business, we
can find this ratio the cash equivalents/current liabilities.
For National Bank this ration has the same trend as in the previous ratios with continuous
decline it was 2.283 in 2004 and had decline in 2005 that is 2.007 and 1.608 in 2006 but
raise in 2007 upto 1.943 and again decline in 2008 i.e. 1.179. but again I can say that at
this point also the bank is very in position to meet its debts only with cash or equivalent

Financial Leverage (Debts) Ratios
In finance gearing is borrowing money to supplement existing funds for investment in
such a way that the potential positive or negative outcome is magnified and or enhanced.
It generally refers to using borrowed funds or debt so as to attempt to increase the returns
to equity Deleveraging is the action of reducing borrowings explanation of Debt to
Equity Ratio & Debt to Total Assets Ratio is as follows.

Debt to Equity Ratio= Total Debts/Total Assets is in the year 2004 was 10.307 and was
decreased till 2007 i.e. upto 5.182 and again increased in year 2008 that is 6.495.
Debt to Total Assets Ratio= Total Debts/Total Assets it was 0.862 in 2004and 0.817 in
2005 and 0.809 in 2006 and 0.791 in 2007 and slight increase in year 2008 i.e. 0.814.

Coverage Ratio

Interest Coverage Ratio= EBIT/Interest Expenses that shows that banks ability to pay the
interest. This ratio was 1.34298 in 2004 that means the bank is in strong position and
have ability to meet the interest expenses. I observe continuous increasing trend in the

ration that is 1.66326 in 2005, 1.92981 in 2006 and 1.9499 in 2007 and a quick drop in
2008 upto 1.17942 but still bank is in stable condition.

Activity Ratio
These ratios shows the turn over of total assets and total fixed assets, we also can say that
the return of total assets and total fixed assets, in the case of National Bank the banks
position is so strong and still having increasing trend throughout the period of 2004 to
Total Assets Turn Over Ratio= was 39.91 % in 2004 and reaches to 50.50 % in 2008 with
increasing trend. Same as Total Fixed Assets Turn Over Ratio.

Profitability Ratios
There are two further categories of these ratios.
       a) Return on assets
       b) Return on equity

Return on Assets= Net profit after taxes / Total Assets, this ration shown that how much
an organization is earn profit on the assets which she is using. This ratio was 1.120 in
year 2004 for National Bank and it goes up till 2007 as it was 2.200 in the year 2005 and
in was 2.680 in the year 2006 and again 2.497 in the year 2007 but I observe the decline
in the 2008 i.e. 1.890, this shows that the bank is utilizing its assets and getting maximum
Return on Equity = Net Profit after Tax/ Share Holders Equity, in 2004 it was 125.83 and
it increased till 2007 i.e. 233.43 with the same trend and again little downward trend has
been seen in 2008 and it was 172.34 in the year 2008.

Banking Ratios
There are further two ratios which I study in National Bank , which are
  I.      Return on Average Assets
 II.      Return on Equity

Return on Average Assets = Net Income/Total Assets, in the year 2004 it was 2.193 and
in year 2005 it increased and become 3.793 and in year 2006 again increased by 5.737
with the same trend in became 6.711 in 2007 and 7.451 in year 2008.
Return on Equity = Net profit after Tax/Share Holders Equity, in 2004 it was 2.464,
3.709 in 2005, 5.138 in 2006, 6.273 in 2007 and become 6.793 in 2008 with increasing

Net Profit Ratio

Net Profit Ratio = Net Profit /Sales or Advances, while observing this ratio I come to
know that the bank is in very strong position in terms of earning profit. Its profitability
ratio was high as 2.806 in 2004 and have increasing trend till 2007 and it become 5.587
in 2007 and decline in 2008 which is 3.743 but still in higher than the starting year 2004.


                                                      2004      2005       2006      2007       2008
Cash and Balance                                      100.00    75.38      83.25     100.45    112.77
Balance with other banks                              100.00    62.31      81.64     75.27      77.02
Lendings to Financial institutions                    100.00    154.90    218.94     204.21    162.94
Investments                                           100.00    105.11     93.70     141.14    114.38
Adnvances                                             100.00    121.76    143.17     154.30    187.05
Other Assets                                          100.00    125.07    141.65     161.92    232.73
Operating fixed assets                                100.00    102.73    105.20     281.68    263.14
Deferred tax assets                                                                            3205.00
Total Assets                                          100.00    104.43    114.80     137.77    147.81

Bills Payable                                         100.00    24.13     147.00     97.88     141.64
Borrowings from financial institutions                100.00    79.00     105.58     98.20     364.99
Deposits and other accounts                           100.00    99.54     107.80     127.14    134.23
Sub-ordinated loans
Liabilities against assets subject to finance lease   100.00    100.00     76.47     200.00    147.06
other liabilities                                     100.00    108.26    115.29     133.82    171.91
deferred tax liabilities                              100.00   15389.66   8231.03   17579.31      -
Total Liabilities                                     100.00    99.29     109.11     127.39    141.09

Net Assets                                            100.00    160.75    177.22     251.56    221.55

Represented By
Share Capital                                         100.00    120.00    144.01     165.60    182.17
Reserves                                              100.00    125.15    128.34     145.85    184.40
Unappropriated Profit                                 100.00    182.45    350.09     494.91    572.54
Surplus on revalutation of Assets                     100.00    178.86    135.43     220.50     98.81

Above is the horizontal analysis of the last five years balance sheets from 2004 to 2008 of
National Bank, I have selected 2004 as base year in which many changes occurs that are
mentioned with detail is Cash and balance that was 100 % in 2004 and become 100.45 %
in 2007 after decline in 2005 and 2006, and again increased in 2008 upto 112.77. in 2008
balance with other banks is declined as compare to the base year which is 77.02. I
observe great boost in other assets and operating fixed assets that are gone more than
twice then the base year, in 2008 that is 232.73 and 263.14 respectively. On asset site all
fields having increasing trend except balance with other banks, this analysis shown that
the bank is in not only in stable condition and it is getting stronger every passing year.
In LIABILITY side Bills Payable was decreased by great amount and become 24.13 in
year 2005 and again boost upto 147.00 in 2006 and decline to 97.88 in 2007 and
increased to 141.64 in year 2008. Borrowings from financial institutions was remain
stable till 2007 with slight changes and it went higher in year 2008 that is 364.99 which
is not good sign. Deposits and other accounts was remain stable till 2006 with slight
changes but increased in 2007 by 127.14 and 134.23 in 2008. Sub-ordinated loans are 0
%. Deferred tax liabilities shown great increase till 2007 and become 17579.31 and it
become 0 % in 2008 as there was no deferred tax liabilities in the year 2008. Other
liabilities and liabilities against assets subject to finance lease was increased as compare
to the base year and become 147.06 and 171.91 respectively.

         In vertical analysis a significant item on a financial statements (Total Assets in

case of balance sheet and Net Income in case of Profit & Loss a/c used as a base value,

and all other items on the financial statement are compared to it. Vertical analysis is used

to disclose the internal structure of an enterprise.

                                                       2004      2005      2006      2007      2008
 Cash and Balance                                      17.07     12.32     12.38     12.45     13.02
 Balance with other banks                               9.00      5.37      6.40     4.92       4.69
 Lendings to Financial institutions                     1.90      2.82      3.62     2.82       2.09
 Investments                                           27.00     27.17     22.03     27.66     20.89
 Adnvances                                             39.91     46.53     49.77     44.70     50.50
 Other Assets                                           3.46      4.14      4.27     4.07       5.45
 Operating fixed assets                                 1.66      1.64      1.52     3.40       2.96
 Deferred tax assets                                                                            0.39
 Total Assets                                          100.00   100.00    100.00    100.00     100.00

 Bills Payable                                          1.30      0.30      1.67     0.93       1.25
 Borrowings from financial institutions                 2.00      1.52      1.84     1.43       4.95
 Deposits and other accounts                           84.15     80.22     79.02     77.66     76.42
 Sub-ordinated loans
 Liabilities against assets subject to finance lease    0.00      0.00      0.00     0.00       0.00
 other liabilities                                      4.17      4.32      4.19     4.05       4.85
 deferred tax liabilities                               0.01      0.77      0.38     0.67        -
 Total Liabilities                                     91.64     87.13     87.10     84.74     87.47

 Net Assets                                             8.36     12.87     12.90     15.26     12.53

 Represented By
 Share Capital                                          0.89      1.02      1.12     1.07       1.10
 Reserves                                               1.95      2.34      2.19     2.07       2.44
 Unappropriated Profit                                  1.66      2.89      5.05     5.95       6.41
 Surplus on revalutation of Assets                      3.86      6.61      4.55     6.18       2.58
This analysis is very important and it is from 2004 to 2008 balance sheets of National
Bank, and I have taken all data from last five years accounts. In Assets side cast and
Balance of National Bank shown negative trend as compare to the preceding years as it
was 17.07 in 2004 and reduced to 12.32, 12.38, 12.45 in years 2005, 2006, 2007
respectively and again raise upto 13.02 in year 2008. Balance with other banks was at
highest in year 2004 that was 9.00 and the following year it decreased and become 4.69
in the year 2008. Lending to financial institutions having mixed trend throughout the
period of 5 years start with 1.90 in 2004 and become 2.09 in 2008. Investments was same
in years 2004, 2005, 2007 but showing decline in years 2006 and 2008 that is from 27.00
to 20.89. Advances shows positive trend throughout the period it was 39.91 in 2004,
46.53 in 2005, 49.77 in 2006, 44.70 in 2007 and in 2008 it become 50.50, similarly other
assets and operating fixed assets starts with 3.46 and 1.66 respectively in 2004, and
become 5.45 and 2.96 in 2008 with having little variation in years 2005, 2006, and 2007.
Deferred tax assets was nil in all the years except 2008 i.e. 0.39 and cannot be compared.
On Liability side bills payable comes first and shown much variation as it was 1.30 in
year 2004 then become 0.30 in 2005 with big decline and again went up with high margin
and become 1.67 in year 2006 and comes to 0.93 in 2007 and then at last in the year 2008
it become 1.25. same is the case with borrowing from financial institutions it was 2.00 in
year 2004 and remain less than 2 in the years 2005, 2006, 2007 but shown sudden jump
and went to 4.95 in year 2008. Deposits and other accounts shows no big movement but
the trend is downward a little with points 84.15, 80.22, 79.02, 77.66, and 76.42 in the
years 2004, 2005, 2006, 2007, and 2008 respectively. Liabilities against assets subject to
finance lease was zero throughout the period from 2004 to 2008. Other liabilities also
have to big variation start with 4.17 in year 2004 and become 4.85 in the year 2008.
Deferred tax liabilities was 0.01 in year 2004 that is very nominal and increased to 0.77
in year 2005 and then decrease 0.38 in year 2006, again raise to 0.67 in year 2007 and
become nil in the year 2008.

4.3    NBP’s Profit & Loss Account for Five Years:

Particular                                       2004    2005    2006    2007    2008

Net Mark-up/ Interest Income                     14388   23312   30154   33629   37058

Net Provision again assets & Bad debts Written   1748    2224    2372    4722    10971
Net Mark-up Income after Provision               12640   21088   27782   28907   26087

Total Non Mark-up / Interest Income              8257    9425    12163   13545   16416

Total Non Mark-up / Interest Expenses            8919    11457   13634   14391   19502

Propfit Before Taxation                          11978   19056   26311   28061   23001

Taxation                                         5782    6347    9288    9027    7542

Propfit after Taxation                           6196    12709   17023   19034   15459

Unappropriate profit b/f                         5892    9162    19373   32075   45344

Transfer from surplus on revaluation of fixed    45      43      41      39      130
Profit available for appropriation               12133   21914   36437   51148   60933


Particular                       2004    2005    2006    2007    2008
Net Mark-up/ Interest Income     100.00% 162.02% 209.58% 233.73% 257.56%
Net Provision again assets & Bad
debts Written off                100.00% 127.23% 135.70% 270.14% 627.63%
Net Mark-up        Income     after
Provision                             100.00% 166.84% 219.79% 228.69% 206.38%
Total Non Mark-up / Interest
Income                           100.00% 114.15%          147.31% 164.04% 198.81%
Total Non Mark-up / Interest
Expenses                         100.00% 128.46%          152.86% 161.35% 218.66%
Propfit Before Taxation          100.00% 159.09%          219.66% 234.27% 192.03%
Taxation                         100.00% 109.77%          160.64% 156.12% 130.44%
Propfit after Taxation           100.00% 205.12%          274.74% 307.20% 249.50%
Unappropriate profit b/f         100.00% 155.50%          328.80% 544.38% 769.59%
Transfer    from      surplus on
revaluation of fixed assets      100.00% 95.56%            91.11%     86.67% 288.89%
Profit      available           for
appropriation                         100.00% 180.61% 300.31% 421.56% 502.21%

For the purpose of Horizontal Analysis of the profit and loss statement of National Bank
of Pakistan for last five years, we take year 2004 as base year and compare the upcoming
4 years performance with respect to the base year. I observe that the Net Mark-up/Interest
Income shows increasing trend throughout the period of 5 years from 2004 to 2008 as
compare to the base year its value is one and half time above. Net Provision again assets
& Bad debts Written off also have the same trend and having huge increase in the year
2008 that is 627.63 %. Because of great increase in provisions in the year 2008 it results
the decline in Net Mark-up Income after Provision that was 228.69 % in 2007 and fall
down to 206.38 % in the year 2008. Non Mark-up Interest Income have also the same
increasing trend it ends on 198.81 % in the year 2008, and Non Mark-up/Interest
Expenses increased upto 218.66 %. Profit Before Taxation increased till 2007, it was as
234.27 % and reduced to 192.03 % in year 2008. So is the case in Taxation in 2005 it was
109.77 % and in 2006 increased to 160.64 % and then decline in year 2007 and became
156.12 % and again decline to 130.44 % in year 2008. Profit after Taxation also have rise
till year 2007 and it was 307.20 % in year 2007 and fall in year 2008 and become 249.50
%. Unappropriate profit with has been brought forwarded in 7.6 times higher than the
base year that is 769.59 %. At the end of the year the profit available for appropriation is
5 times higher than base year that is 502.21 %.


Particular                        2004    2005    2006    2007    2008
Net Mark-up/ Interest Income     174.25% 247.34% 247.92% 248.28% 225.74%
Net Provision again assets & Bad
debts Written off                 21.17% 23.60% 19.50% 34.86% 66.83%
Net    Mark-up        Income      after
Provision                                 153.08% 223.75% 228.41% 213.41% 158.91%
Total Non Mark-up / Interest Income 100.00% 100.00%           100.00% 100.00% 100.00%
Total Non Mark-up / Interest
Expenses                             108.02% 121.56%          112.09% 106.25% 118.80%
Propfit Before Taxation              145.06% 202.19%          216.32% 207.17% 140.11%
Taxation                              70.03% 67.34%            76.36%    66.64%    45.94%
Propfit after Taxation                75.04% 134.84%          139.96% 140.52%      94.17%
Unappropriate profit b/f              71.36% 97.21%           159.28% 236.80% 276.22%
Transfer from surplus on revaluation
of fixed assets                        0.54%   0.46%            0.34%     0.29%     0.79%
Profit available for appropriation        146.94% 232.51% 299.57% 377.62% 371.18%

In vertical Analysis of profit and loss statement for National Bank of Pakistan for last 5
year from 2004 to 2008 by taking Total Non Mark-up/Interest Income as base. This
analysis shows the better picture of the financial position of the National Bank. Net
Mark-up/Interest Income was 174.25 % in year 2004 and remain almost same for 3 years
2005, 2006, 2007 and decline in year 2008 and become 225.74 %. Net provision again
assets & Bad debts Written off have great increase in year 2008 it was 21.17 % in 2004,
23.60 % in 2005, 19.50 % in 2006, 34.86 % in 2007 and become 66.83 % with increase
in year 2008. Net Mark-up Income after Provision is almost same in 2008 as in 2004, but
shown increasing trend in the years, 2005, 2006 and 2007. Total Non Mark-up interest
expenses remain almost same throughout 5 years with slight changes. Profit Before
Taxation was 145.06 % in year 2004, 202.19 % in 2005, 216.32 % in 2006, 207.17 % in
2007 and become 140.11 % 2008. In taxation head it is reduced in 2008 as compare to
year 2004 same is the case in Profit after Taxation. Again increasing trend shown in the
heads of Unappropriate Profit b/f and Profit available for appropriation.


4.6.1.   Enhancement of Commercial & Retail Banking Business:
         NBP has maintained its position as one of the top players in commercial and retail
banking sector of the country. In future NBP will introduce modern banking services in
this sector like debit cards, internet banking, call centre, auto finance and mobile banking
to keep pace with the competition and more important to its customer needs.

4.6.2 Acquiring of Latest Methods of Information Technology:
         NBP is cognizant of the importance of information technology and is constantly
investing to expend and upgrade its technological platform. The IT strategy is fully
aligned to business requirements to offer IT enabled products & services for the highest
level of customer satisfaction. NBP is also on track for acquisition of a new core banking
application to improve operational efficiency and enhance customer service.

4.6.3 Expansion of International Operations:
         NBP has traditionally maintained a strong presence in Pakistan‟s key trading
partner countries and plays a key role in promoting the country economy agenda of
export led growth. In this regard NBP was the first Pakistani bank to open branch in
Kabul during 2003 to support Pakistan‟s efforts towards Afghanistan economic revival.
NBP further expanded its international presence in this year by opening branches in
Jalalabad & Chittagong to increase the international presence to 17 countries.

4.6.4    Strengthening Risk Management Operations:
         The growing portfolio of products and services has reinforced the need for a
proactive and effective risk management operations. NBP has made policies to strengthen
this area as a comprehensive. Risk management manual was developed during the year
inline with the regulatory guidelines. The manual will ensure timely and accurate
identification of bank‟s exposure and server to control and mitigate the various risks.

4.6.5    Up gradation and standardization of NBP Branches:
         The main focus of NBP in future will be one the up gradation and standardization
of important branches. NBP branches are being upgraded with standardized premises and
signage under the new brand. To cater to the needs for Islamic banking, the opening of
the first Islamic banking branch is in the final stages. This initiative is expected to attract
new customers besides increasing revenue.

4.6.6   To Develop a Highly Motivated and Well Trained Workforce:
        The ongoing transformation of the bank will not yields the desired result unless it
is complemented by a comprehensive training program aimed at achieving a customer
focus approach while developing core competencies. In addition to the regular training
programs at the regional staff colleges, several initiative were undertaken to better orient
the bank staff with the recently promulgated State Bank prudential regulations.

4.6.7   Installation of New ATM’s in the Country:
        NBP is about to install new top of the line ATM‟s in the major cities of the
country. while the “One Link” ATM switch sharing arrangement will serve to enhance 24
hour banking facility available to the customers. The bank is expanding its owned ATM
bases as well.

4.6.8   Continuation of Remarkable Growth and Performance:
        NBP will continue to take all initiatives that will aim at remarkable growth and
performance. Such growth and performance is possible due to effective decision making
good teamwork and communication, commitment and dedication of staff and building
strong relationship with the customers.


5.1     Lack of Information Technology:
        The main shortfall of the bank is lack of Information Technology. Due to lack of
I.T many employees of the each branch has to work manually, which takes too much
time. Records are maintained manually which case an extra burden on the employees. To
check any transaction the record is to be found in the files and registers, hence this
process takes time and some of the important documents may be misplaced.

5.2     Extra Work Load on Employees:
        Due to the extra work load, the employees of the bank are frustrated and they are
ready to leave their jobs. The numbers of employees in many departments are short but
the work load is too much. The employees have to work from morning to late night
which causes and extra burden on the employees.

5.3     Lengthy Procedure:
        The credit procedure of the department is lengthy. The branch manager cannot
sanction the heavy amounts. The customers / corporations have to take approval from the
NBP head office Karachi. The documents and other cases are forwarded to head office
Karachi for approval which can take extra time.

5.4     Account Opening Requirements:
        The government employees can open depositing up to Rs.500/-. The persons other
than government employees have to deposit at leas Rs.5,000/- to open his account. The
lower income people including tailors, milkmen, servants etc cannot open account in the


       The global economic environment has changed, creating challenges and
opportunities for the world‟s policy makers. The privatization drive has emerged as a
strong tool of transformation, which is being recognized as an essential ingredient for the
economic well. Being of the countries themselves and for the rest of the world. Now
there is a greater awareness that in an interdependent world all countries gain individually
if these countries become positive contributor to world economic growth as whole. Banks
are playing very important role in the economic growth of the countries. N.B.P. no doubt
a positive contributor in this respect but I think there are certain points by adopting which
can serve more effectively and efficiently. These points are as under:

          i.   NBP should use the modern means of Information technology in every
               branch. By using I.T the manual work can be reduced. It will help in better
               monitoring. Due to introduction of I.T there is immediate completion of
               transactions, immediate retrieval of information and efficient processing
               of data. So it will reduce time and extra burden on employees.

         ii.   Work load on employees can be reduced by recruiting the sufficient
               number of employees. The employees are frustrated due to shortage of
               staff. If sufficient staff is provided the entire routine work of the bank can
               be completed in time. This will reduce an extra burden on the employees.

        iii.   The bank should give a relaxation to those persons that are not the
               government sector employees so that they could easily open their account
               in the bank as it is the Nation‟s bank.

        iv.    The policy regarding delegation of authorities should be relaxed by the top
               management. The certain sanctioning limits should be fixed so that
               whenever a need comes, the Zonal Chief or Regional Business Chief

        should allocate the funds to particular head or approve the credit cases.
        This will save time and cost.

  v.    Model Banks like City Bank, M.C.B. is using media very effectively to
        increase the business of banks. So N.B.P. should use electronic media for
        its business developments.
 vi.    The interference of union in banking business should be minimized as it
        decreases the working efficiency of the employee as well as the bank.
vii.    Refreshes courses for staff are most important in my international
        organization. All the employees should have their courses according to
        their requirement.
viii.   A research cell should continuously try to gather information about the
        present action so its competitors and expected future actions. So in this
        way more effective strategies can be formulated.
 ix.    Govt. should take keen interest to recover its bad debts, which can improve
        its financial position. In case of giving the loans, it is necessary to check the
        repute of customer towards loan repayment. Bank shouldn‟t advance the
        money to those people who are addict of rescheduling of loans due to their
        political influences. Instead providing loans to these persons, loans must be
        advanced to the well-reputed businesses and industries having good record
        of loan repayment.

  x.    Political influences in the bank should be eliminated.


This organization provided loans to the borrowers and industries on easy terms and
conditions as compare to the others financial institutions working in private sectors. This
organization has a unique culture and it is committed to provide customer satisfaction.
They have created a very friendly and cooperative atmosphere so that customers feel
comfortable and deal freely with the bank. It helps the country‟s people to provide them
the credit facility to meet their business needs but also it helps them in safe investments.
Bank has the policies, which motivates the employees; the management of the bank is
It also helps the government of the country‟s different economic projects through
providing financing facility and also provide assistance on going operations in the
To conclude that the banking is an important sector this plays an important role in the
country‟s economy and also helps to flourish the business activities in the country
through the lending facility.


     1. Website of National Bank of Pakistan, http://www.nbp.com.pk

     2. Audited Reports of National Bank as on December 31st, 20XX on above
        mentioned site from Internet.

     3. Annual reports of NBP for from year 2004 to 2008.


     i.   Letter from HRD (internship) of NBP.
   ii.    Balance Sheet of NBP of year 2007-08
   iii.   Profit & Loss A/C of NBP of year 2007-08
   iv.    Organogram of Organization (Hierarchy)
    v.    Organogram of Finance Deptt. (Hierarchy)


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