Contents

EXECUTIVE SUMMARY.................................................................................. 4
Sec:1............................................................................................................. 7
INTRODUCTION............................................................................................ 7
BRIEF HISTORY OF NATIONAL BANK OF PAKISTAN.........................................7
SUMMARY OF ACHIEVEMENTS AND GROWTH OF NBP.....................................9
SUMMARY OF DIFFERENT FUNCTIONS:........................................................11
Sec:2........................................................................................................ 13
OVERVIEW OF ORGANIZATION.................................................................13
Sec:5........................................................................................................... 27
OPERATIONS OF THE ORGANIZATION...........................................................27
DEPARTMENTS............................................................................................ 27
DEPOSITS................................................................................................ 29
PRODUCTS LINE....................................................................................... 29
Fixed Deposit Account (Time Deposits)..........................................................31
Foreign Currency Account..........................................................................32
PRODUCTS.................................................................................................. 33
National Income Daily Account (NIDA)..........................................................34
NBP Saibaan........................................................................................... 35
NBP Advance Salary................................................................................. 35
NBP Cash & Gold.................................................................................... 36
Students Loan Scheme............................................................................... 36
NBP Karobar- Presidents Rozgar Scheme.......................................................37
CORPORATE ADVANCES........................................................................... 38
Cash Finance.......................................................................................... 38
Running Finance/ Overdraft........................................................................38
REMITTANCES......................................................................................... 39
Demand Drafts........................................................................................ 39
Travelers Cheques.................................................................................... 39
Foreign Remittances.................................................................................. 40
Swift System............................................................................................ 41
Mail Transfer.......................................................................................... 41
Telegraphic Transfer................................................................................. 42
Pay Order............................................................................................... 42

Sec:6........................................................................................................... 55
xiv)

Islamic Banking................................................................................. 58

MY EXPERIENCE......................................................................................... 60
How to Open an Account............................................................................ 60
Classification of Deposits........................................................................... 60
Current Account or Demand Deposits............................................................60
Partnership Account.................................................................................. 61
Procedure and Requirements for Opening Partnership Account............................61
Limited Companies Account........................................................................61
Welfare Account....................................................................................... 62
Individual Account.................................................................................... 62
Saving Account........................................................................................ 63
Fixed Deposit Account............................................................................... 63
REMITTANCES...................................................................................... 64
Clearing................................................................................................. 64
Clearing House........................................................................................ 64
Functions of Clearing Department in Branch....................................................64
Difference between Government and Bank Draft..................................................64
Banking Division............................................................................................. 79
HUMAN RESOURCE MANAGEMENT..............................................................79
SVP / Regional HR Chief, Regional Office, Multan.................................83
PSO to Regional HR Chief....................................................................83
Sec7:........................................................................................................ 86
SWOT ANALYSIS OF NATIONAL BANK OF PAKISTAN...................................86
ORGANIZATIONAL STRENGTHS.............................................................86
THREATS.............................................................................................. 90
LIQUIDITY RATIOS.............................................................................. 92
RETURN ON EQUITY RATIO.......................................................................98
RETURN ON ASSETS................................................................................. 98
Comments............................................................................................. 101
Comments............................................................................................. 102
SUMMARY.......................................................................................... 104
PESTEL ANALYSIS..................................................................................... 110
PESTEL ANALYSIS IN NBP..........................................................................110
Economical................................................................................................. 111

Sociological................................................................................................ 112
Technology.................................................................................................. 112
Environment................................................................................................ 113
Legal......................................................................................................... 113
competitor
analysis
..114
sec:8.

..120
THEORY VS
PRACTICAL
121
Sec: 9........................................................................................................ 123
FUTURE PROSPECTS OF NATIONAL BANK OF PAKISTAN.............................124
Sec: 10....................................................................................................... 125
RECOMMENDATIONS................................................................................ 125
CONCLUSIONS.......................................................................................... 127
REFRENCE
128

EXECUTIVE SUMMARY

This report is about my internship program with National Bank of Pakistan. In

this comprehensive report, I have discussed about every major aspect of the
bank, which I observed and perceived during my internship program. In this
report you will be able to find the detail about the bank, right from its
incorporation to the current position. Along with it, the processes, policies and
procedures of the bank are also discussed in detail.
As 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 using the knowledge and skill
learned during the academic process.
National Bank of Pakistan maintains its positions as Pakistans premier bank
determined to set higher standards of achievements. It is the major business
partner for the Government of Pakistan with special emphasis on fostering
Pakistans economic growth through aggressive and balanced lending policies.
I have completed my Internship at National Bank of Pakistan District Court
Branch Multan (0374). I have started my six week internship on and got
training regularly in various departments of the bank up to
I have explained the working process of the departments that I have worked in
as well as the departments functioning there.

I worked in the following

departments; Deposit, Advances, Foreign Exchange, Accounts Opening, Bills

& Remittances, Clearing Section, Government Section.
After my Internship at National Bank of Pakistan, I am of the view that, the
bank has historically been the financial arm of the government and has enjoyed

the blessings of state support in the form of huge public-sector funds and
deposits.
The bank has to ensure that, quality of human resource is needed to register
marked measureable improvement both in terms of skills and productivity.
NBP, being the only lending arm to the government for public sector
development, should design, develop and deliver products and services for
economic growth. NBP should provide sustainable financing for growth of
industries of critical national importance such as energy, education, healthcare,
transport, shipping, Research and Development. NBP should identify new
venues for financing for economic growth- curbing poverty and unemployment
OBJECTIVES OF STUDYING THE ORGANIZATION
The primary purpose of this study is to fulfillment of the requirements for the
degree of MBA. For this connection each student of this particular course is
required to undertake training in a relevant organization selected by them, for a
period of 6-8 weeks.
The secondary purpose of this internship is to understand how the theoretical
knowledge can be applied to the practical situations and examine an
organizations financial issues and identify its opportunities/ problems and also
suggest corrective measures. This internship is also very necessary to gain
confidence and become aware of the mechanism of an organization. As an
internee I want to achieve following objectives during my internship and
organization study:
1.

To familiarize with a business organization.

2.

To familiarize with the different departments in the organization and

their functioning.

3.

To enable myself to understand how the key business process are

carried out in organization.

4.

To understand how information is used in an organization for

decision making at various levels.

5.

To relate theory with practice.

6.

I was also keen to gain professional experience in an actual testing

environment.

7.

I want to develop my skills in the application of theory to practical

work situations.

8.

To develop my attitude conducive to effective interpersonal

relationships.

9.

To acquire good work habits and sense of responsibility.

10.

To enhance my learning experience by application of fundamental

concepts previously learned.

11.

To observe, analyze and interpret the relevant data competently and

in a useful manner.

12.

To develop my interpersonal communication.

13.

I want to enhance my knowledge of the discipline of banking

administration.

Sec:1

INTRODUCTION

BRIEF HISTORY OF NATIONAL BANK OF PAKISTAN

The history of National Bank of Pakistan is part of Pakistans struggle for
economic independence. National Bank of Pakistan was established on
November 9, 1949 under the National Bank of Pakistan Ordinance, 1949 in
order to cope with the crisis conditions which were developed after trade
deadlock with India and devaluation of Indian Rupee in 1949. Initially the
Bank was established with the objective to extend credit to the agriculture
sector. The normal procedure of establishing a banking company under the
Companies Law was set aside and the Bank was established through the
promulgation of an Ordinance, due to the crisis situation that had developed
with regard to financing of jute trade. The Bank commenced its operations
from November 20, 1949 at six important jute centers in the then, East Pakistan
and directed its resources in financing of jute crop. The Banks Karachi and
Lahore offices were subsequently opened in December 1949. The National
Bank of Pakistan came forward to establish its offices in the Cotton growing
areas and extended credit facilities liberally in order to restore stability to the
market. In 1951, the country was once again faced with a crisis in the cotton
trade when prices was crashed and touched the lowest level since independence
following the cessation of hostilities in Korea. The bank in collaboration with
the cotton board provided the necessary Credit facilities to the trade and the
crisis was tided over. The nature of responsibilities of the Bank is different and
unique from other banks/financial institutions. The Bank acts as the agent to the
State Bank of Pakistan for handling Provincial/Federal Government Receipts
and Payments on their behalf. The Bank has also played an important role in
7

financing the countrys growing trade, which has expanded through the years as
diversification took place.
The National Bank of Pakistan has its headquarters in Karachi, Pakistan. The
bank operates 1249(2008) branches in Pakistan and 22(2008) overseas
branches. Under a trust Deed, the bank also provides services as trustee to
National Investment Trust (NIT) including safe custody of securities on behalf
of NIT. The National Bank of Pakistan has assets worth Rupees 737976.44
million on September 30, 2008.
National Bank of Pakistan is today a progressive, efficient, and customer
focused institution. It has developed a wide range of consumer products, to
enhance business and cater to the different segments of society. Some schemes
have been specifically designed for the low to middle income segments of the
population. These include NBP Karobar, NBP Advance Salary, NBP Saibaan,
NBP Kisan Dost, and NBP Cash n Gold.
The National Bank of Pakistan has implemented special credit schemes like
small finance for agriculture, business and industries, administrator to Qarz-eHasna loans to students, self employment scheme for unemployed persons,
public transport scheme. The Bank has expanded its range of products and
services to include Shariah Compliant Islamic Banking products. For the
promotion of literature, NBP recently initiated the Annual Awards for
Excellence in Literature. NBP will confer annual awards to the best books in
Urdu and in all prominent regional languages published during the defined
period. Patronage from NBP would help creative work in the field of literature.
The Bank is also the largest sponsor of sports in Pakistan. It has provided
generously to philanthropic causes whenever the need arose.
It has taken various measures to facilitate overseas Pakistanis to send their
remittances in a convenient and efficient manner. In 2002 the Bank signed an
agreement with Western Union for expanding the base for documented
remittances. More recently it has started Electronic Home Remittances Project.
8

This project introduces technology based system to handle inward remittances

efficiently, by ensuring that the Bank's branches keep a track of the remittance
received from abroad till its final receipt.
A number of initiatives have been taken, in terms of institutional restructuring,
changes in the field structure, in policies and procedures, in internal control
systems with special emphasis on corporate governance, adoption of Capital
Adequacy Standards under Basel II framework, in the up gradation of the IT
infrastructure and developing the human resources.
National Bank has earned recognition and numerous awards internationally. It
has been the recipient of The Bank of the Year 2001, 2002, 2004 and 2005
Award by The Banker Magazine, the Best Foreign Exchange Bank Pakistan
for 2004, 2005, 2006 and 2007, Global Finance, Best Emerging Market Bank
from Pakistan for the year 2005, Global Finance, Kisan Time Awards 2005
for NBP's services in the agriculture field. It is listed amongst the Region's
largest banks and also amongst the largest banks in South Asia 2005, The Asian
Banker. It has also been presented a Recognition Award 2004 for having a
Gender Sensitive Management by WEBCOP AASHA besides other awards. i
SUMMARY OF ACHIEVEMENTS AND GROWTH OF NBP
The precise summary of National Bank of Pakistan regarding its countrywide
and overseas operations is as fallows:
1949 National Bank of Pakistan (NBP) was established under the
National Bank of Pakistan Ordinance 1949 and was 100% govt.-owned.
NBP acted as an agent of the Central Bank wherever the State Bank did
not have its own Branch. It also undertook Government Treasury
operations. Its first branches were in jute growing areas in East Pakistan.
Offices in Karachi and Lahore followed.
1950 NBP established a branch in Jeddah, Saudi Arabia.

The Bank in 1950 had one subsidiary The Bank of Bahawalpur on

December4, 1947 by the former Bahawalpur State
1955 By this time NBP had branches in London and Calcutta.
1957 NBP established a branch in Baghdad, Iraq.
1962 NBP established a branch in Dar-es-Salaam, Tanganyika.
1964 The Iraqi government nationalized NBP's Baghdad branch.
1965 The Indian government seized the Calcutta branch on the outbreak
of hostilities between India and Pakistan.
1967 The Tanzanian government nationalized the Dar-Es-Salaam
branch.
1971 NBP acquired Bank of China's two branches, one in Karachi and
one at Chittagong. At separation of East Pakistan NBP lost its branches
there. NBP merged with Eastern Mercantile Bank and with Eastern
Bank Corporation.
1974 The government of Pakistan nationalized NBP. As part of the
concomitant consolidation of the banking sector, NBP acquired Bank of
Bahawalpur (est. 1947).
1977 NBP opened an offshore brain Cairo.
1994 NBP amalgamated Mehran Bank (est. 1991).
1997 NBP's branch in Ashgabat, Turkmenistan commenced operations.
2000 NBP opened a representative office in Almaty, Kazakhstan.
2001 State Bank of Pakistan and Bank of England agree to allow only 2
Pakistani banks to operate in the UK. NBP and United Bank agreed to

10

merge their operations to form Pakistan International Bank, of which

NBP would own 45% and United Bank 55%.
2003 NBP received permission to open a branch in Afghanistan.
2005 NBP closed its offshore branch in Cairo.
NATURE OF NATIONAL BANK OF PAKISTAN
National Bank of Pakistan was incorporated in Pakistan under the National
Bank of Pakistan Ordinance, 1949 and is listed on all the stock exchanges in
Pakistan. The bank is engaged in providing commercial banking and related
services in Pakistan and overseas. The bank operates 1,249 (2007:1,232)
branches in Pakistan and 22 (2007:18) overseas branches (including the Export
Processing Zone branch, Karachi). Under a Trust Deed, the bank also provides
services as trustee to National investment Trust (NIT) including safe custody of
securities on behalf of NIT.
The nature of responsibilities of the Bank is different and unique from other
banks/financial institutions. The bank also handles treasury transactions for the
Government of Pakistan as an agent to the State Bank of Pakistan for handling
provincial/Federal Government receipts and payments on their behalf. The
National Bank of Pakistan has also played an important role in financing the
countrys growing trade, which has expanded through the years as
diversification took place.
SUMMARY OF DIFFERENT FUNCTIONS:
The bank is providing all banking services of mercantile and commercial
banking permissible in the country, which include:
Accepting of deposits of money on current, fixed, saving, term deposit
and profit and loss sharing accounts.
Borrowing money and arranging finance from other banks.

11

Advancing and lending money to its clients.

Financing of projects, including technical assistance, project appraisal
through long term/ short term loans, term finance and musharika
certificates, etc.
Buying, selling, dealing, including entering into forward contracts of
foreign exchange.
Financing of seasonal crops like cotton, wheat, rice, sugar cane, tobacco,
etc.
Receiving of bonds, valuables, etc. for safe custody.
Carrying on agency business for any description other than managing
agent, on behalf of clients including Government and local authorities.
Generating, undertaking, promoting, etc. of issue of shares and, bonds
etc.
Transacting guarantee and indemnity busines
Joint venturing with foreign dealers, agents and companies for its
representation abroad.
Participating in World Bank and Asian Development Banks lines of
credit.
Providing personalized Hajj services to intending Hajjis

12

Sec:2

OVERVIEW OF 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 Nations 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 stakeholders value.
Discharging our responsibility as a good corporate citizen of Pakistan and
in countries where we operate.
CORE VALUES

13

 Highest standards of Integrity.

Institutionalizing teamwork and performance culture.
Excellence in service.
Advancement of skills for tomorrows challenges.
Awareness of social and community responsibility.
Value creation for all stakeholders.
GOALS
To enhance profitability and maximization of NBP share through
increasing leverage of existing customer base and diversified range of
products.

Excellence in Direction
Excellence in Growth
Excellence in Performance
Excellence in Management

14

Sec:3

MANAGEMENT OF ORGANIZATION

Management is a distinct process consisting of activities of planning,

organizing, actuating and controlling performed to determine and accomplish
stated objectives with the use of human being and other resources.
MANGEMENT SYSTEM
The management has two types.
Centralized
Decentralized
Centralized Management tends to concentrate decision making at the top of
the organization
Decentralized disperses decision making and authority throughout and further
down the organizational hierarchy.
NBP have a centralized type of management because all the decisions are
taken by the top management.
MANAGEMENT STRUCTURE
CENTRAL BOARD
The general superintendent and direction of the affairs and business of the bank
shall be entrusted to the central board which may exercise all powers and
things as may be exercised or done or done by the bank and or not by this

15

ordinance expressly directed or required to be done by the bank in general

meeting.
The Central bank consists of the following directors namely:
Managing director
President
MANAGING DIRECTOR
The Managing director appointed by the central government under section 16,
nine directors is directed in local or special meeting by the share holder in the
following manners. The share holder registered in a branch, register maintained
for an area mentioned in sub section (5) of section 8, shall elect from amongst
themselves, such number of directors for that area as may be decided before
election by the central government having regard to the proportion which that
share capital subscribed by the share holders of that area bears to the whole.
Provided that shareholders registered in branch register maintain at Dacca shall
elect from among themselves at least two directors.
Three directors appointed by the central government, provided that total
number of elected directors representing the area for which the decca register is
maintained shall not be less than three.
PRESIDENT
The president of a Central board shall be appointed by the central government
from among the directors.
LOCAL BOARD
The local board shall be established for the area mentioned in sub section (5) of
section B, one each at Karachi ,Dacca and the Lahore ,and shall without
prejudice to the powers conferred by the sections 12, have power ,within the

16

prescribed limits generally to transact all usual business of the bank. A local
board should consist of following members namely;
The Managing director
One member appointed by the central board from amongst the
directors elected by the share holder register in the branch register of
the area.
Two members appointed by the central government from the area in
which the local board is situated.
Three members elected in local or special board meeting from
among themselves by the shareholder register in the branch register
of the area.
The Managing director shall be appointed by the central government for a
period not exceeding five years and on such salary and terms and condition of
the service as the central government may determined.
NEW MANAGEMENT STRUCTURE
The previous management was removed by the bank nationalization ordinance
1974. The general direction and superintendent of the affairs and business of
the banks vests in the Executive board consisting of President (Chief executive)
and five senior executives of the bank. The federal government in 1980
constituted a board of directors comprising the president and the members of
executive board of the bank and two additional members one representing the
ministry of finance and the other Pakistani banking council.
Thus therefore, all nationalized commercial banks are controlled by the
Pakistani banking council being subject to State bank of Pakistan regulation as
well. The federal ministry is responsible for bank operations in the ministry of

17

finance. Recently by the order of president of Pakistan, banking council of

Pakistan is removed.

BOARD OF DIRECTORS
An executive board composed of six senior executives of the bank and the
president who is also the chief executive supervises the affairs and business of
the bank, called the Board of Directors.
MANAGEMENT COMMITTEE
Also there is a Management Committee consisting of nine senior executives of
the bank, called the members and the president who is also the chairman of the
committee.
TRAINIG AND MANAGEMENT DEVELOPMENT WING
National bank of Pakistan has its national and development centers and 4 staff
collages at: Karachi
Lahore
Peshawar
Islamabad
In these centers and staff colleges, the banking training is provided to the
officers, managers, and to potential managers. It arranges courses and seminars
for middle and higher management in all. Each year almost 1500 persons
receive training over there.
CORPORATE INFORMATION

18

BOARD OF DIRECTORS
Syed Ali Raza

Chairman & President, Chief executive

M. Ayuub Khan Tarin

officer
Director

Ibrar A. Mumtaz

Director and SEVP and Group Chief,

Human

Resources

Tariq Kimrani

Administration Group
Director

M. Arshad Chaudhry

Director

Sikandar Hayat Jamali

Director

Mian Kausar Hameed

Director

Management

&

AUDIT COMMITTEE
M. Ayuub Khan Tarin

Chairman

Ibrar A. Mumtaz

Chairman

Tariq Kimrani

Chairman

M. Arshad Chaudhry

Chairman

Mian Kausar Hameed

Chairman

AUDITORS
Ford Rhodes Siddat Hyder &Co.

Charterd Accountant

M. Yousuf Adil Saleem & Co.

Charterd Accountant

LEGAL ADVISORS
Mandviwala & Zafar

Charterd Accountant

19

SENIOR MANAGEMENT
Qamar Hussain

Chief Operating Officer & Head of Credit & Risk

Masood Karim Shaikh

Management
SEVP & Group Chief, Corporate & Investment

Shahid Anwar Khan

Banking Group
SEVP & Group Chief, Overseas Banking Group

Dr. Asif A. Brohi

SEVP & Group Chief, Operations Group

Amer Siddiqui

SEVP & Group Chief, Commercial & Retail

Muhammed Nusrat Vohra

Banking Group
SEVP & Group Chief, Treasury Management
Group

Dr. Mirza Abrar Baig

SEVP & Group Chief, Human Resources

Management & Administration Group

Imam Bakhsh Baloch

SEVP & Group Chief, Audit & Inspection Group

Ziaullah Khan

Senior Executive Vice President

Nabi Bakhsh Soomro

SEVP & Group Chief, Islamic Banking Group

Ekhlaq Ahmed

EVP & Secretary Board of Directors

Tajammal Hussain

EVP & Group Chief, Special Assets Management

Bokharee

Group

Nadeem Anwar Ilyas

EVP, PSO to the President & Group Chief,

Compliance Group (A)

Naeem Syed

EVP & Divisional Head-Project Management

Aamir Sattar

Office & Core Banking Applications

SVP & Financial Controller/ Divisional Head,
Financial Control Division

20

Atif Hassan Khan

SVP & Group Chief (A) Information Technology

Groups

OVERSEAS MANAGEMENT
R.A. Kaleemi

SEVP & Chief Representative, Canada Office

M. Rafiq Bengali

SEVP & Regional Chief Executive, Americas

Shahid Anwar Khan

Region
SEVP & Group Chief, Overseas Banking Group

Dr. Asif A. Brohi

SEVP & Group Chief, Operations Group

Amer Siddiqui

SEVP & Group Chief, Commercial & Retail

Muhammed Nusrat Vohra

Banking Group
SEVP & Group Chief, Treasury Management
Group

Dr. Mirza Abrar Baig

SEVP & Group Chief, Human Resources

Management & Administration Group

Imam Bakhsh Baloch

SEVP & Group Chief, Audit & Inspection Group

Ziaullah Khan

Senior Executive Vice President

Nabi Bakhsh Soomro

SEVP & Group Chief, Islamic Banking Group

Ekhlaq Ahmed

EVP & Secretary Board of Directors

Tajammal Hussain

EVP & Group Chief, Special

Bokharee
Nadeem Anwar Ilyas

EVP, PSO to the President & Group Chief,

Naeem Syed

Compliance Group (A)

EVP & Divisional Head-Project Management

Aamir Sattar

Office & Core Banking Applications

SVP & Financial Controller/ Divisional Head,
Financial Control Division

21

Sec:4

ORGANIZATIONAL NETWORK

REGISTERED & HEAD OFFICE

Head office of NBP in NBP Building, I.I. Chundrigar Road, Karachi, Pakistan
which is the city of lighting in Urdu Uroos-ul-Bilad which was also the
first capital and ancient place of Pakistan. It carried out its successful journey
to make it an Asian Tiger.
SHARE REGISTERATION OFFICE
THK Associates (Pvt.) Ltd.
Shares Department, Ground Floor,
State Life Building #3,
Dr. Ziauddin Ahmed Road,
Karachi, Pakistan.
SHARE CAPITAL
Issued Capital
The bank was setup with an issued capital of Rs.1.5 million.
Authorized Capital
Authorized capital of National Bank of Pakistan in 2000 was Rs.25
Billion.
Issued, Subscribed, and Paid-up Capital
Issued, subscribed and paid-up capital in year 2008 was 10763702260

22

BRANCH NETWORK
Presently the Bank is divided into 10 Groups headed by SEVPs/EVPs. 9
Regions reporting to as many Regional Chiefs and 15 Single Branch Zones
headed by Zonal Chiefs; 12 corporate branches and 1,254 domestic branches
headed by Branch Managers control its field operations.
With the geographical development of its branches, the Bank has been able to
extend its services to a much larger number of Pakistanis all over the country.
Today it has more than 8.5 million accounts.
Bank maintains its presence in all the major financial centers of the world
through its 21overseas branches and 4 representative offices. Of these, three
representative offices have recently been set up at Tashkent (Uzbekistan), Baku
(Azerbaijan) and Almaty (Kazakhstan) to take advantage of the emerging
opportunities in CIS countries.
Apart from having a vast branch network, Bank is at the forefront in the
acquisition and application of new technologies in every aspect of its banking
facilities. It has acquired leased telephone lines for on-line banking. The Bank
has 12 Regional Computer Centers to cover various on-line and batch system
requirements of branches and controlling offices. Bank has also a presence on
the Internet. It has modernized its services by installing Automated Teller
Machines (ATMs) called "CASH LINK" at selected branches and presently 17
ATMs are operational in major cities.
GLOBAL NETWORK
18 Overseas Branches
5 Representative Offices
1 overseas Subsidiaries
23

 Joint Venture.
Overseas Branch Network:
Paris
Baku
Seoul
Kabul
Tokyo
Osaka
Dhaka
Bahrain
Bishkek
Kowloon
Ashgabat
Jalalabad
Frankfurt
Chittagong
New York
Hong Kong
Washington D.C.
KEPZ Offshore Banking Unit, Cairo
Oversea Representative Offices
Baku
Beijing
Toronto
Chicago
Tashkent

24

 Oversea Subsidiary

CJSC Almaty, Kazakhstan

DOMESTIC NETWORK
1254 Domestic Branches
6 domestic Subsidiaries
29 domestic regional offices
Domestic Subsidiaries

NBP Capital Ltd.

Taurus Securities Ltd.
NBP Exchange Company Ltd
National Bank Modaraba Management Co.
National Agricultural and Storage company Ltd.
Cast N- Link Products Ltd
Joint Venture

United National Bank Ltd., UK

(Economic Indicators Pakistan, Published by Economic
research Wing NBP, Head Office Karachi)

25

President
Senior Executive Vice-President
Executive Vice-President
Senior Vice-President

Vice-President
Assistant Vice-President

Branch Hierarchy

Officer Grade 1
Officer Grade 2
Officer Grade 3
Senior Assistant
Assistant
Driver
Peon

ORGANIZATION CHART

26

27

Sec:5

OPERATIONS OF THE ORGANIZATION

In NBP,different departments are dealing with several important functions.The

list of departments are as follows:
DEPARTMENTS AT NBP
There are several departments in NBP, following is the detail according to the
department functions and their product lines.
DEPARTMENTS
Banking procedures are divided between various departments. Different
departments do their jobs in occurrence with the bank policies. In National
Bank of Pakistan each branch is divided into various departments depending on
their size and volume of business. Head of department manages each
department & officials of the branch follow procedures. The departments
working within National Bank of Pakistan main branch are as under:
ACCOUNT OPENING
A customer willing to open the account in the bank must fill firstly the account
opening forms (prescribed format issued by the bank).
The nature of account can be single, joint, sole proprietor, partnership, etc. The
condition of account varies in each case.
For Individual / Sole Proprietorship
A part from account opening form it requires NIC and passport size
photograph.

28

For Partnership
Bank further requires partnership deal and certified copy of partnership
mandate.
For Limited company
The following documents must be available like, copy of certificate in
corporation, memorandum, articles of association, and list of director,
copy of board resolution, copy of NIC to the directors and latest copy of
forms.
The open account it is also mandatory to have an introducer, who introducer you
(customer) on his behalf and should already holds is accounts in the same branch.
PAYMENT OF CHEQUES
Due to efficient staff personal computer, it saves great time of customer and as
mention earlier the signatures are matched to minimize the fraudulent activities.
CHEQUE BOOKS
The Cheque requisition receipt is delivered to the Cheque issuance section, from
where authorized persons will issue checkbooks. There are various checkbooks
such as 10, 25, 50 and 100 pages/leaf. The customer is also liable to pay fixed
charges on the receipt of checkbooks in the form of excise duty.
CLEARING DEPARTMENT
In clearing department, clearinghouse is a devise, which enable banker to settle
cheques and other instruments, drawn on each other.
National Bank of Pakistan is the member of SBP Clearing House and receives
cheques, Demand Draft and other negotiable instruments for the presentation of
its payment and also provides excellent services for clearing cheques and other
inter bank obligations between the banks.
29

In this way different banks get cheques drawn by the customers on one another.
So, to off set the inter-bank claims 14 branches of SBP are providing clearing
facility for scheduled banks. The State Bank of Pakistan merely debit or credit the
balances of banks whose accounts and services are maintained with it. It easier
for member banks to adjust their claims against each other in the books of the
state bank.
DEPOSITS
The National Bank of Pakistan offers to their clients a variety of Deposit
Schemes with personalized services at competitive rates of interest. Any
Pakistani citizen can open his/her account for any deposit scheme at any of its
Branches strategically located throughout Pakistan. The Bank with its huge
network of 1243 branches garners savings from both the rich and the poor in
urban as well as rural areas. Even a poor farmer in a remote village, with his
meager annual income, feels secure to safe keep his minuscule savings in
National Bank of Pakistan, Because National Bank of Pakistan has a long
heritage of trust and professional commitment.
PRODUCTS LINE
Current Deposits
These are payable to the customer when ever they are demanded. When a
banker accepts a demand deposit, he incurs the obligation of paying all cheques
etc, drawn against him to the extent of the balance in the account. Because of
their nature, these deposits are treated as current liabilities by the banks.
Bankers in Pakistan do not allow 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 Current Deposits may be
withdrawn by the depositors at any time, and as such the bank is not entirely
free to employ such deposits. Current Accounts/ Basic Banking accounts are
opened, on proper introduction and submission of required documents along

30

with initial deposit prescribed from time to time. Basic banking accounts are
opened for an individuals (single or joint) only whereas current accounts are
opened for individuals (single or joint) Charitable institution, provident and
other funds of benevolent nature of local bodies, autonomous corporations,
companies, associations, educational institutions, firms etc. and in all other
cases where the accounts are to opened under the order of a competent court of
law. No profit is paid on the balances of current/basic banking accounts. The
bank is authorized to deduct service charges (incidental charges) on current
accounts levied through its half yearly schedule of charges, in case the average
balance falls below the minimum balance as prescribed by the bank. No
balance maintenance condition is applied on basic banking account.
PLS Saving Deposits
In Pakistan a Savings Deposits Account can be opened with a very small
amount of money, and the depositor is issued a cheque book for withdrawals.
Profit is paid at a flexible rate calculated on six monthly basis under the Interest
Free Banking System. There is no restriction on the withdrawals from the
deposit accounts but the amount of money withdraw is deleted from the amount
to be taken for calculation of products for assessment of profit to be paid to the
account holder. It discourages unnecessary withdrawals from the deposits. In
order to popularize the scheme the SBP has allowed the Savings Scheme for
school and college students and industrial labour also. The purpose of these
accounts is to inculcate the habit of savings in the constituents. As such, the
initial deposits required for opening these accounts are very nominal. iiNBP
charge Rs.500 for opening of PLS Savings deposits.
The salient features of profit and loss sharing and saving accounts of NBP are
as fallows:
1. These accounts can be opened by individuals in their own single or joint
name. The PLS savings account can also be opened for provident fund

31

or other benevolent funds of companies, firms, organizations, NGOs

and educational institutions.
2. PLS saving account can be opened with a minimum amount of Rs.500/only
3. To share in the profit a minimum balance of Rs.500/- must be
maintained in the account. The minimum balance on sixth and last of
month will qualify for the profits. The profits will be calculated on the
basis of monthly minimum balance for the periods of six months i.e.
from January to June and July to December
4. The head office of NBP determines the profit or loss on PLS saving
deposits and advice its branches the rate and time of distribution of these
profits.
5. There shall be no restrictions on maintaining the maximum balance in
PLS saving account.
6. On the first day of Ramzan each year the Zakat at the rate of 2.5% will
be deducted from these deposits on the balance of that day. But if
depositors affix an affidavit of Zakat deduction along with account
opening form or he is a non-Muslim, no Zakat will be deducted from his
account.
Fixed Deposit Account (Time Deposits)
The deposits that can be withdrawn after a specified period of time are referred
to as Fixed or Term Deposits. The period for which these deposits are kept by
the bank ordinarily varies from three months to five years in accordance with
the agreement made between the customer and the banker. Profit/Return is paid
to the depositors on all fixed or Time deposits, and the rate of profit/Return
varies with the duration for which the amount is kept with the banker. By
lending out or investing these funds, the bank earns more than the Profit/Return

32

that it has to pay on them to the depositors. iii By giving an advance notice to
the bank the deposit can be withdraw from the bank before the expiry of the
period. Fixed deposit accounts have higher rate of interest as compare to other
accounts. The rate of interest rises with the length of period and the amount of
deposit. The bank grants to the depositor a fix deposit (FDR) which is not
transferable to any other person. The silent features of fixed deposit account of
NBP are as fallows
1. The PLS term deposit are opened for individuals in their own single or
joint names, companies firms and other organizations.
2. The PLS term deposit receipt are issued for any amount. There is
minimum or maximum limit or deposits in a single term deposit
account.
3. PLS term depositors may be allowed some facilities against the security
of these receipt credits, after making Lien on the relevant receipt and
subject to recovery of service charges.
4. Under term deposit scheme the depositors not cease to earn the profit
immediately, after the respective maturity date.
Foreign Currency Account
Government of Pakistan has introduced many important reforms in Foreign
Exchange Control in the country since February, 1990, for the purpose of
strengthening the Foreign Exchange Reserves. One of these reforms relates to
foreign currency accounts, which can be opened in United States Dollars,
Pound Sterling, Euro and Japanese Yen in any of the authorized branches of
commercial banks throughout the country.iv Foreign currency accounts are
opened, on proper introduction and submission of required documents along
with an initial deposit prescribed from time to time. Rates of return on foreign
currency deposits are subject to fluctuation as determined in accordance with
State Bank of Pakistan directives and will be paid on six monthly basis whereas
33

the return on term deposit/SNTD will be paid on maturity or as prescribed by

SBP. The bank shall have no responsibility for or liability to the account
holders for any diminution due to taxes imposed or depreciation in the value of
funds credited to the account whether due to devaluation or fluctuation in the
exchange rate or other wise.
PRODUCTS
NBP Premium Aamdani
NBP Premium aamdani is a retail product of the bank. The amount of
investment required for this account is Rs. 20,000/-to Rs. 5,000,000.The
investment period is 5 years. Zakat and withholding tax will be deducted as per
rules. In NBP premium aamdani, the account holders have benefit of free
demand draft, pay order; free cheque book and NBP cash card (ATM+Debit).
The Financing facility is available up to 90% of the deposit value. v Profit paid
every period as follows:
Period

Profit
Rates

1st year

7.50%

2nd years

8.50%

3rd years

9.50%

4th years

10.50%

5th years

11%

34

NBP Premium Saver

NBP Premium saver is a retail product of the bank. The minimum saving
balance of Rs. 20,001 and a maximum balance of Rs. 300,000 are required for
opening a premium saver account. Two debit withdrawals allowed in a month
and no limit on number of deposit transactions. The profit is calculated monthly
and Paid on half yearly basis. Free NBP Cash Card (ATM + Debit) facility is
available to account holder.vi
National Income Daily Account (NIDA)
The scheme of National income daily account was launched in December 1995
to attract corporate customers. It is a current account scheme and is part of the
profit and loss system of accounts in operation throughout the country.
Deposits in the NIDA accepted on the condition that the depositor shall always
maintain a minimum balance as prescribed by the bank in his account. In the
event however, that any depositor wishes to withdraw the amount and the
balance in his account is less than the required amount, the account will be
converted to the ordinary PLS SB account for the purpose of calculating profit.
Advances
National Bank of Pakistan plays a pivotal role in translating the government's
development plans in terms of growth in industrial, commercial and
agricultural sectors in Pakistan. Accordingly the Bank has formulated its Credit
Policy under the guidelines of SBP-the Central Bank of Pakistan. In normal
circumstances the bank has consider following factors in view before framing
financing policies.
Capital position
Risk and profitability of various types of financing
Stability of deposits
35

 Economic conditions
Influence of monetary and fiscal policies
Ability and experience of bank personnel
Credit needs of the area served.
PRODUCT LINE
NBP Saibaan
The NBP Saibaan is retail product of the bank. It has different product items
which are home purchase, home construction, home renovation and purchase of
land plus construction. If anyone has a Home Finance Facility outstanding with
another bank he can have it transferred to NBP through a hassle-free process. vii
A brief description of these products is as fallows.
TYPE OF
ADVANCE
Home Purchase (House or
Apartment)
Home
Construction
Home
Renovation
Purchase of land Plus
Construction

Financing

Financing

Amount
Rs. 35 Million

Period
3 to 20 years

Ratio
85:15

3 to 20 years

(maximum)
85:15

3 to 15 years

(maximum)
80:20

3 to 20 years

(maximum)
80:20

Rs. 35 Million
Rs. 15 Million
Rs.35 Million

Debt to equity

(maximum)

NBP Advance Salary

The NBP Advance salary has been the flag-ship product for NBP. NBP
Advance Salary, the leading personal loan product of the country, is
maintaining its inimitability ever since it was launched. This was only possible
due to its swift growth and remarkable loan disbursement of over 118 billion. viii
You can avail up to 20 net take home salaries with easy repayment installments.
Its hassle free acquisition with no prior formalities and easy availability in a
short turn around time is attributed as the most distinguishing features of the
36

product. The product is offered countrywide. The terms and conditions of NBP
Advance salary is shown on next page:
NBP Cash & Gold
With NBPs Cash & Gold, the customers meet their need for ready cash
against their idle gold jewelry. The rate of mark up is 13% p.a. This product has
following featuresix
Facility of Rs. 7,000 against each 10 grams of net contents of gold
No maximum limits of cash
Repayment after one year
Only gold ornaments acceptable
Weight and quality of gold to be determined by NBP's appointed
schroffs
No penalty for early repayment
Students Loan Scheme
Pursuant to the announcement made by the Federal Finance Minister in his
2001-2002 budget speech, a Student Loan Scheme (SLS) for Education was
launched by the Government of Pakistan in collaboration with major
commercial banks of Pakistan (NBP, HBL, UBL, MCB and ABL). Under the
Scheme, financial assistance is provided by way of Interest Free Loans to the
meritorious students who have financial constraints for pursuing their studies in
Scientific, Technical and Professional education within Pakistan. The Scheme
is being administered by a high powered committee comprising Deputy
Governor, State Bank of Pakistan, Presidents of the commercial banks and
representative of Ministry of Finance, Government of Pakistan. x

37

NBP Karobar- Presidents Rozgar Scheme

The solution of Pakistans major socio-economic problems primarily lies in the
development and growth of small & micro businesses. These will not only
provide employment opportunities to ever-growing population demand but will
also become the catalyst for breaking the vicious circle of poverty. In this
regard, NBP has developed a full range of Products under the Presidents
Rozgar Scheme with a brand name of NBP KAROBAR. The scheme will be
offered to eligible young and literate citizens of Pakistan, falling within an age
group of 18-40 years having a minimum qualification of Matriculation (except
for females in the PCO/Tele-center product). The eligible borrowers will be
required to make a down payment of 15%. Asset and Life & Disability
insurances will be mandatory under this scheme. The 15% down payment will
include 1st years asset insurance premium. However, the cost of life and
disability insurance will be borne by GOP. The mark-up rate for the 1st year
will be 12% and for the subsequent years it will be 1 year KIBOR + 2%. Fifty
percent (50%) of this rate will be paid by the customer i.e. 6% and the balance
of 6% will be borne by GOP. Additionally, first 10% of the losses under the
scheme will be taken-up by GOP. Initially, under the Presidents Rozgar
scheme, NBP will offer following products:
a) NBP Karobar Utility Store (under a Franchise with Utility Stores
Corporation)
b) NBP Karobar Mobile General Store (without USC Franchise)
c) NBP Karobar Transport
d) NBP Karobar PCO
e) NBP Karobar Tele-center

38

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

39

Demand Finance
When a customer borrows from a banker a fixed amount repayable either in
periodic installments or in lump sum at a fixed future time, it is called a loan.
When bankers allow loans to their 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 borrowers 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.
REMITTANCES
Demand Drafts
The National Bank of Pakistan provides demand drafts at very reasonable rates
with safety, speedy and reliable way to transfer money. Any person whether an
account holder of the bank or not, can purchase a Demand Draft form a bank.
Travelers Cheques
They are generally issued for the convenience of person travelling abroad, but
some Pakistani banks issue them in Pakistan currency also for use within the
country as well. Before issuing, the bankers receive an amount equal to the face
value of the cheques, and also charge a small commission. The travelers
cheques are for fixed amount and are treated as Order cheques payable only to
the purchaser whose specimen signature appears on each travelers cheque
itself. Foreign currency travelers cheques are issued and encashed in
accordance with the provisions of the Exchange Control Regulation Act, 1947.
While making payment, the paying banker must insist that the holder signs in
his presence.xi

40

Letter Of Credit
Letters of credit are very useful instruments in facilitating commercial relations
between businessmen at various places. Letter of credit state the limit of the
credit and the time during which it is held at the disposal of the grantee, but
they are neither negotiable nor transferable. Letter of credit may be revocable.
There are many kinds of letter of credit such as Revolving credit, Back to Back
credit, Claused credit etc. NBP is committed to offering its business customers
the widest range of options in the area of money transfer. If you are a
commercial enterprise then our Letter of Credit service is just what you are
looking for. With competitive rates, security, and ease of transaction, NBP
Letters of Credit are the best way to do your business transactions.
Foreign Remittances
To facilitate its customers in the area of Home Remittances, National Bank of
Pakistan has taken a number of measures to:
Increase home remittances through the banking system.
Meet the SBP directives/instructions for timely and prompt delivery of
remittances to the beneficiaries.
The new features of NBP foreign remittances include:
The existing system of home remittances has been revised/significantly
improved and well-trained field functionaries are posted to provide
efficient and reliable home remittance services to nonresident Pakistanis
at 15 overseas branches of the Bank besides United National Bank (the
joint venture between NBP and UBL in UK)., and Bank Al-Jazira, Saudi
Arabia.
Zero Tariffs: NBP is providing home remittance services without any
charges.

41

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, we can
safely and speedily transfer money for our business and personal needs.
Mail Transfer
A Mail Transfer is a form of remittance in which the amount remitted by a
customer or a non-customer is directly credited to the account of the
beneficiary with another branch. Move your money safely and quickly using
NBP Mail Transfer service. And NBP also offer the most competitive rates in
the market. They charges Rs 50/- exchange rate and RS 75/- postage charges on
issuing mail transfer. When the money is not required immediately, the
remittances can also be made by mail transfer (MT). Here the selling office of
the bank sends instructions in writing by mail to the paying bank for the
payment of a specified amount of money. Debiting to the buyers account at the
selling office and crediting to the recipients account at the paying bank make
the payment under this transfer. NBP taxes mail charges from the applicant
where no excise duty is charged. Postage charges on mail transfer are actual

42

minimum Rs. 40/- if sent by registered post locally Rs.40/- if sent by registered
post inland on partys request.
Telegraphic Transfer
Telegraphic Transfer is a form of remittance, which is advised by telegram,
telex or fax machines. The fundamental principles of such transfer are
otherwise identical with the Mail Transfer. It is the message, which is sent from
one branch to another on the order of payer to payee through wire. It is one of
the quickest means to transfer fund through the use of telex/fax/internet or
cable. Payment to the beneficiary is affected directly by the drawee office upon
identification or through credit into beneficiarys bank account.

As such

remitting office is not required to issue any instrument payment to the remitter
for delivery to the beneficiary.
Pay Order
NBP provides another reason to transfer your money using our facilities. NBP
pay orders are a secure and easy way to move your money from one place to
another. And, as usual, NBP charges for this service are extremely competitive.
The charges of NBP are very low all over the Pakistan. It charges Rs 50/- for
NBP account holders on issuing one payment order, and charges Rs 100/- for
NBP non-account holders on issuing one payment order. It charges Rs 25/- for
students on payment of fees of educational institutions. If some one want a
duplicate of payment order they charges Rs 100/- for NBP account holders and
Rs 150/- for non account holders.
FORIEN EXCHANGE DEPARTMENT
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
43

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 Sterling
Japanese Yen
Euro
FUNCTION
The department performs the following functions:
Account opening
Account closing
Inward/outward remittance
Issuance of traveler cheques
IMPORT AND EXPORT SECTION
Export Section
A term used for goods and articles commodities sent from the country to
another. Exports in Pakistan are done by the following four modes. These
modes are:

44

 Advance Payment
Document Against Acceptance
Collection
Under L.C
Advance Payment
In this type of export the importer is making the payment in advance. This
shows the height of confidence between importers after the shipment is
completed then the bank sends and E-form to SBP stating the export being
made.
Document against Acceptance (D/A)
Consignment is given to the auction house with out any order. A trust receipt is
being made issued. Amount is given to the exporter when the goods are being
sold or if the auction houses are not able to give the exporter the required
money then gave to return the goods in full to the exporter. This payment is
made after a specific period of time on which both the parties had agreed i.e.
30, 60, 90, 120, 180, days. If neither the payment is made nor the goods are
returned the importer (auction house) are treated as criminal under section 420
of criminal act in Pakistan.
Collection
Under this type of exports, bank has no liability, buyer and seller sets the rules
for this type of export. Only documents are rooted through the bank and also
payment is received through the bank. It is done with the prior arrangement
between the buyer and seller firm order. Payment is made by the draft, when
the bank received the documents through other bank the payment is made.
The exporter produces the following documents with the bank at the time of
export.

45

 Export license
Airway bill or bill of lading
Invoice
Packing list
Certificate of chamber of commerce
Insurance of goods
In this type of export payment can be made in parts.
Under Letter Of Credit
Bank receives an L.C from the importer for exporter of goods. In this class of
LC the exporter with that listed in the LC makes the payment after a specific
period of time bank checks all the documents provided. If no error then
payment is being made else vice verse. The payment in this type of export is
made in full else specified, partly payment may be made when both the parties
agrees. After receiving the LC and checking all the documents the officer is
issuing an approval sheet. The bank provides the bill of exchange.
Exporters provide the following documents to the bank.
Bill of lading or air way bill
Invoice
Packing list
Certificate of chamber of commerce
Insurance
Document of Export
Following documents are required for export
Financial documents
Shipping documents
Miscellaneous documents
46

 Commercial document
Original Invoices of the transaction for sale.
Bills of Exchange drawn on the importer by the exporter
Bills of Lading from the shipping company along with the details
Insurance documents
Exporter is known to the Bank and is a bonafide businessman and customer in
Pakistan. He has made arrangements with realization of the export proceeds,
which must be made within 120 days from the date of the shipment of the
goods.
IMPORT SECTION
Letter of Credit
A letter of credit is defined as under Undertaking by the importers bank to
exporter that the draw in accordance with terms and conditions of the credit,
will be honored if presented with in the validity of the credit.
It is a conditional undertaking by the Bank to make payment to the exporter if
he fulfills the terms of credit by presenting the required documents to the bank
in his country. In fact LC is a legal document on behalf on which the payment
made by the importers bank to the exporters bank.
National Bank of Pakistan is providing this service to its customers who have
an account with the branch and other businessmen too. This facility has been
recognized as a modern banking activity of all commercial banks that are
included in the list of 6000 Banks internationally.
Information in LC Document
The name of the local company, which is importing the goods
The name of foreign company, which is exporting the goods

47

 The details of the goods to be transacted including the amount, quality,

mode of packing etc.
The total amount of the LC
The number of days for which the LC is valid
The name of the banks, who are regulating all these dealings
The name of the carrier which will be used for the shipment of the goods to
the importer
The bill of shipment number
Parties involved in a letter of credit
There are normally six parties involved in a letter of credit:
Buyer (known as the importer or consignee)
Buyers Bank (known as opening, or paying bank)
Seller (known as the exporter, or beneficiary)
Sellers bank (known as advising, confirming, negotiating bank)
Carrier (known as the shipping company)
Insurance Company
Opening of LC
For opening of LC the following documents are required by the bank.
Application or bond
Order or invoice or indent
Insurance (must according to Pakistan rules)
Liability endorsement of customer
An L.C is issued after opening of the letter of credit it is sent to the negotiating
bank.

48

AUDIT DEPARTMENT
Every organization has certain rules and regulation and it functions keeping in
mind those rules. NBP follows the prudential regulations given by the State Bank
of Pakistan. So, in order to check whether the organization is going on right track,
there is an Internal Audit and Inspection Department.

FUNCTION OF AUDIT
The main function of audit is to monitor the implementation of policies, rules,
regulations, and prescribed procedures with a view to ensure improved
operations. It maintains check and balance on behalf of management. This in
turns calls for a high standard of professional skills and judgments on part of
Auditors.
There are different types of audit that are done like internal audit, external audit,
financial audit, pre-penalty audit, special assignments audit (staff problems,
disputes, expenditure exceeds etc). It is basically the audit department who
performs all these functions.
Core Objectives of Audit

Existence of audit ensures moral pressure on staff of the organization. If

audit is conducted regularly and effort is well timed, the working staff is
always on alert and keeps doing the job properly.

Detection and prevention of errors and mistakes such as omission

commission compensatory, incorrect valuation of assets.

See that the financial control on paper is practically applied.

Detect and prevent fraud.

Audit Techniques Adopted By NBP

49

Audit techniques may differ from organization to organization depending upon

the size, complexity and volume of transactions. Following broad - based audit
NBP Auditors while conducting inspection of branch observe techniques and
procedures.

Audit should be surprise

Physical verification

Confirmations

Advances

Deposits

Income and expenditures

Audit of day to day affairs

Reconciliation of head office and clearing audit

External Audit
It is the requirement of State Bank of Pakistan that every pubic or private limited
company should have an audit once in a year by professional auditors. This is
done to verify the accounts, so that the true picture of the company is revealed to
government, loan lending institutions, shareholders and general pubic.
Internal Audit
Internal audit is an independent appraisal activity within an organization for the
review operations as a tool to management. NBP internal audit department fulfils
its responsibilities by doing audit two stage:

Pre-audit

Post audit

Pre-Audit
Pre-audit is done on daily basis. It is a sort of clearance or approval. Every thing
is checked by the internal auditor such as: dues amounts, cheques, legal cases,
50

vouchers, salaries and allowances, repairs and maintenance expenses, inventory

checking, repayment schedules. Apart from it, auditor also goes for a weekend or
surprise visit to any department and can ask for any document.
Audit a Voucher
The record in banks is maintained through vouchers. Every voucher is first preaudit. Things like date, issuing person, amount, and sign, supporting bills or
documents are checked. If the voucher is cleared then Cheque is made. In case,
the auditor has arrangements he will ask for clarification from the concern
department.
Audit a Cheque
There are certain things that are checked while auditing a Cheque such as:
branch name, amount in figures and words should be same, no over
writing, signing authority. No Cheque is withdrawn without audit.
Auditor also checks that whether the amount is entered correctly in
the books of accounts or not. Auditor signs daily opening and
closing balance of accounts.
Post Audit
Post audit is a final confirmation test, which checks the occurrence of
transactions. It is done twice in a year by the audit team. One period commencing
from January 1st. Post audit is done of the branches and the head office.
Branch Audit
In NBP branches there are three facilities available deposit, lockers and advances.
There are altogether 1250 branches of which audit is done. There are different
things, which are checked during inspection. Some mistakes are on the spot
rectified, others are noted so that the top management knows about the affairs of
the branch. The things, which are checked, are:

51

Deposits & profit targets

Cash department

Key movement register

Account reconciliation statement

Banker's account

Customer services

Expenditure control

Very serious irregularities

Routine lapses

There are different registers maintained in branch for the purpose of recording
transactions, which are checked:

Cash receipt & payment register

Cash transfer register

Key movement register

Deposit & advances register

Rent payment register

Sundry creditors register

Income & expenditure register

Lockers attendance register

Daily statement of affairs

Every type of vouchers

In registers, assets are shown with red color and liabilities with blue color.
The audit team notes the objections and prepares a report which is given to
branch manager so that he will reply about the objections. This compliance is to
be submitted by the branch manager within 15 days.

52

Confidential report having important observations is send to Managing Director.

A letter related to the inspection report is send by Banking Department to Branch
Manager asking to take prompt actions against some serious irregularities.
Then branch sends its compliance to the head office. In the end, if all the
compliance are done and the management is satisfied then letter of assurance
from manager comes to the Head Office ensuring that mentioned objections will
not be practiced in future.
Check of Lockers
Following things or information regarding lockers may check by the auditors:

Agreement numbers of locker should be in serial number. Information

regarding locker holder such as their names, rent dues, date of issue of
lockers is properly maintain or not.

Register in which the locker holder sign before and after the use of the is
properly maintain or not.

To check the register whether and customer issue locker without key
deposit.

To check practically how many lockers are vacant?

Checking of sealed envelope in which the keys of vacant lockers enclosed

and verify by open few vacant lockers and assure that lockers are vacant.

After the inspection, the auditors generate a report in which the findings /
objection of the auditors and manager's justification is mention. It includes
information regarding the above mention queries and their performance. After
that the summary of this report is forward to the head office. After studying the
report by the internal audit department, they concise the summary and the report
to the M.D of the NBP. The irregularities found in the report must be rectifying by
the branch and letter is issue to the branch with objections written in the letter. If
53

the branch cannot remove the irregularities quickly then the letter of assurance is
sign from the branch in order to affirm that the efforts will continue until they
rectify irregularities.
PERSONNEL DEPARTMENT
Human Resources play an imperative role in the success of any organization. An
organization, can never reach at its benefit without efficient individuals even if it
has disproportionate financial resource most of organizations. Today are focusing
on training of their existing employees and herd hunting for intelligent people by
offering high wages and strong compensation package. NBP also provides
training to its employees. It has its own Training College. The newly recruited
employees are provided training in the Main Branch at Staff College.
NBP also should to its employee's abroad for special training. These training's
includes seminar conferences and workshops on different issues relating to the
banking sector and financial institutions. NBP selects its employees for abroad
training according to their expulsive and performance in their respective fields.
CREDIT MANAGEMENT DEPARTMENT
Credit department's means function is to provide short-term finance to the
industries, chiefly to the sugar mills and cotton mills for running finance against
the effective pledge. The terms and conditions of the pledge are as follow:

For individual 20% margin is kept, meaning the client has to keep 80% of
the borrowed amount as pledge.

For companies 75% of borrowed amount is kept as security, meaning

companies has to keep 75% of the borrowed amount as pledge.

To check the credit worthiness of the clients through CIB I and CIB II
reports are received from State Bank of Pakistan, which defines the credit
worthiness of the client and its concerns.

54

Credit worthiness reports are also received from the other banks and a
physiological survey is due, because a companys position may be very good
but its future viewpoint is not satisfactory, as loan received now would be
returned in future so it is necessary to conduct the future performance survey
before going to finance any client.
ADMINISTRATION DEPARTMENT
This department performs the function of over all maintenance of the
organization and has the maximum employees as compared to other departments.

On average the functions of this department includes, given that parking and
transportation facilities to the employees. The transportation facilities are only for
the female employees and the top management. This department is also
responsible for arranging the lunch and tea for all the employees of NBP. For
lunch, NBP's Administration Department maintains a canteen within the premises
of the organization and the administration department is handling all the matters.
This department is also accountable for the purchase, erection and upholding /
patch up of organizational location. This department settles so all the matters
about rent. The department is responsible for the purchase and maintenance of
furniture and other luxuries such as ACs etc. for all the departments of NBP all
the computers, for the computers department and for all other department are
purchased and maintained by this department.
Administration department purchases the all the stationary and other supplies that
are available in the stockroom and are issued to each department on their
application. This department also arranges for the printing of security stationary
material such as checkbooks of vouchers, files, schemes certificates etc.
This department is also responsible for the security matters of the organization.
Entirely, their security team that includes May security guards etc is handled by

55

this department. This department also handles the other lower staff such as peon's
etc.
Administration department is the most important department of NBP, which
performs all the little but important functions of the organization and performs the
activities to coordinate the activities of the entire department.

56

Sec:6

INTERNSHIP PROGRAM

A BRIEF INTRODUCTION OF THE BRANCH WHERE I DID MY

INTERNSHIP
Name of Branch

National Bank of Pakistan, Main Branch Multan

Branch Code

0374

Branch Category

Branch Rating

Region

Multan

Region Code

08

TRAINING PROGRAM
Introduction of all the Departments
There are many different departments in National Bank of Pakistan:
i)

Deposit
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 years period.

ii)

Advances (Credit department)

57

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.
iii)

Government Payments
National Bank of Pakistan is functioning as an agent of SBP. All
types of Government Payment i.e. Pension, Salaries, Grants, Zakat,
Benevolent Fund, Treasury Refund and Taxes Refund proceed
through the bank.

iv)

Government Receipts
In this department all types of Government receipts i.e. Revenues,
Taxes, Abyana, Agriculture Tax, Government Fees, EOBI Funds and
Utility Bills are deposited. This way NBP is serving great job of
revenue collection.

v)

Remittances
Another important department in the bank is remittances. 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.

vi)

Bills
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.

58

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.
vii)

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.

viii)

Compliance
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 branchin 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.

ix)

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.

59

ix)

Human Resources Management

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.

x)

Information Technology Department

Banks data collection and information system run by Regional Data
Collection Center. This department manages staff training programs
regarding computer.

xi)

Online Banking
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.

Retail & Commercial

This is the department that boosts the profitability of the bank.
National Bank becomes the largest profit-earning bank of the country
by introducing personal loans i.e. NBP Advance Salary Scheme and
Saiban Scheme.
xii)

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.

xiv)

Islamic Banking
The year 2007 marked the first year of Islamic banking
operations. During the year under review, in addition to active
60

participation in various Sukuk transactions, two more Islamic

banking branches at Lahore and Peshawar started operations. NBPs
plans for the year 2008 include opening of Faisalabad and Rawalpindi
branches with the focus on growing organically by opening more
standalone Islamic banking branches, utilizing NBPs existing
branch network of 1,200 plus conventional branches and looking
into strategic acquisitions for expansion in this field.

61

MY EXPERIENCE
ACCOUNT OPENING
I have spent my 1st week in account opening section and I learnt about what are
the prerequisites of opening an account of individuals, minors, shaky hand
signature persons, and different companys account opening procedure and
essentials. Brief discussion is given below.
How to Open an Account
The applicant is provided with a copy of rules and an application form to open
an account. This form is filled by the applicant in a manner prescribed
and duly singed by the applicant. An existing account holder of the
bank must introduce the application. A copy of ID card is attached with
the specimen signature card. The application is presented at the branch
with the initial amount of deposit for credit of his account. The amount
is entered in the passbook and is singed by the responsible officer of the
bank; finally a Checkbook is issued to the account holder, for
withdrawal purpose. Classification of Deposits
The deposits can be classified under three main heads.

Current Account

Saving Account

Fixed Deposit

Current Account or Demand Deposits

Current account or demand deposit can be withdrawn by Cheque or transferred
to someone else by the depositor at any time without prior notice to the bank.
This account can be opened with a minimum of Rs.500/. In such case the bank
62

does not allow any interest on it, because such deposits are meant for short
period and can be withdrawn without any prior notice. Current account can be
opened by or through.

Partnership

Limited Companies Account

welfare Account

Individual Account

Partnership Account
The assets of partnership are held partners of the firm, or by one of its member
acting on behalf of all members as trustees for all of them. A partner has an
implied prior by law to open an account on behalf of his partnership firm, but
not on his individual name. The bank only honors that Cheque which confirms
to the mandate given to it by all the partners.
Procedure and Requirements for Opening Partnership Account

Names of all partners are taken with their specimen signature.

Instructions for operation are obtained from each partner.

Signature of authorized partner is obtained.

A letter of partnership, signed by all partners is obtained.

In case a partner who was not authorized to operate the account is now
authorized by all partners. Thus the authority letter is obtained.

Limited Companies Account

Before opening an account for a limited company the following documents are
obtained.
63

The true copy of the certificate of incorporation.

True copy of the certificate of commencement of business (only in case

of public limited company).

Three copies of the memorandum and article of Association.

True copy of the resolution of the Board of Director regarding conduct

of the account.

Procedures and Requirements for Opening a Limited Company Account

The certificate of incorporation and commencement certificate of

business should be called in original which are returned after inspection.

The specimen signature of the director named in the resolution

authorized should be obtained on specimen card.

In case the company is taken-over by the Government fresh instruction

are obtained from the managing director appointed by the government.

Welfare Account
The Associations and welfare unions open such accounts.
Requirements for Opening Welfare Account
No registration certificate is needed but only a paper containing registration of
the Association is sufficient.
Individual Account
Any individual can open individual account. Following are some requirements
to be fulfilled by the individual in order to be able to open an account with a
bank.
Requirements for Opening an Individual Account
64

National ID Card

Introducers reference

Rs.500/- as initial amount to be credited to his account.

Procedure is the same as explained earlier in this chapter.

Saving Account
In saving account the basic purpose is to mobilize the saving trend in the lives
of people and to enable people to draw money within certain limits.
In saving account at NBP the customers are not allowed to draw a big amount
at once without any notice. Moreover Zakat will be deducted only from the
amount which remains in the bank from first day of the month till last day of
the month the customer is bound to follow the rules and regulations of the
bank. Saving accounts can be opened in following shapes.

Individual account

Joint account

Fixed Deposit Account

Fixed deposit account is also called Term Deposit Receipt (TDR). In case of
fixed deposit account, the time of the account is in accordance of the different
fixed deposit schemes offered by the bank and according to wishes of the
customers. The customers cannot withdraw money from his/her account in
accordance and compliance of terms decided by the bank and the customer. In
this depositor have specific amount for specific period. Depositor will with
draw all amount at once. Another terminology in fixed deposit account is the
Special Notice Time Deposit (SNTD) that means that money will be deposited
for 7 or 30 days. Withdrawal will be on notice and profit will be according to
rules. No profit will be given if the withdrawal will be before date of maturity.
65

REMITTANCES
Clearing
Every bank performs the function of paying and collecting. The Cheque drawn
on other bank by the customers of the bank is collected by the bank for or
without charging fee is called clearing. Most important thing is that all
transactions in clearing department are on Cheques not on cash. The bank
through the clearinghouse (State Bank of Pakistan) performs the function of
clearing.
Clearing House
A clearinghouse is a place where the representative of all banks get together to
settle the payment and receipts of Cheques drawn on each other.
Functions of Clearing Department in Branch

To accept transfer, transfer delivery and clearing Cheques from the

customers of the branch and to arrange for their collection

To arrange the payment of Cheque drawn on the branch and give

Cheque for collection to any other branch of NBP. or any other member
or sub-member of local clearing house.

To collect amounts of Cheque drawn on members of local clearinghouse

sent for collection by NBP branches, not represented at the local
clearinghouse.

Difference between Government and Bank Draft

The bank drafts are issued to any customer on request.

While

government drafts are issued to any department of government.

66

Bank drafts are issued by any branch of the bank, whereas the
government drafts are issued only by authorized branches, who deal in
treasurer business of the country government.

Through bank draft one can get the amount from any bank but in case of
government draft only the authorized section can deal and is able to
issue cash.

Mail Transfer
It is an order to pay a specified sum of money to the person named in the
instrument. It sent by surface mail or airmail. The issuing bank charges a
commission of issuance, which is, called MT rate.
Demand Draft
Money could be sent from one place to another place by means of demand
draft. A demand draft is an order instrument by the issuing bank requiring the
other branch of the bank to pay a specified amount of money to the person on
presentation of the draft in the specified branch. A draft can be obtained by a
person who wants to send money by paying the amount of the draft and
commission to the housing bank, and can be sent by post to the person needed
to be paid.
ADVANCES DEPARTMENTS
In advances I have cleared my concepts about the basic terms used in financing
and the brief introduction about the products offered by the bank to its
customers. Basic terms are as follows:

67

TERMINOLOGIES USED
Mark Up
Under the Non-Interest Banking system the rate return on Banks Finance is
generally expressed in terms of so many paisa per 1000 per day instead of so
much percent per annum.
Bank continues to charge the rate of mark-up mutually agreed upon between
the bank and the fiance but charging of mark-up on mark-up is strictly
prohibited.
Purchase Price
Financing is made on the basis of purchase and sale of goods for which a buyback agreement is executed. The amount of finance made or to be made is
supposed to be the Purchase Price for the bank, which generally the amount of
the limit.
Sale Price/Marked-Up Price
Under the buy-back agreement, the fiance agrees to re-purchase the asset from
the bank, after a specified period, against payment of the total amount which
consists of the following:
1.

Banks total finance

2.

Mark-up for the finance period

3.

Mark-up for the grace period, if any

4.

Mark-up for the cushion period

Documents are executed for the Sale Price/Marked-up Price.

68

Finance Period / Transaction Period

The period from the date of finance to the date of full and final adjustment of
the finance is the finance period/transaction period which may be expressed in
number of days, number of months or number of years.
Cushion Period
This is a period of 210 days, the calculation which starts from the date
succeeding the date of adjustment. This is a period in addition to the finance
period allowed to the customer to compensate the bank in case the finance is
not adjusted in time. The bank cannot charge any mark-up beyond this period
and has to take legal recourse, if necessary.
Margin
Finance is generally allowed against asset to cover only a certain percentage of
the value of the assets. This simply means that the fiance may enjoy the
benefit of finance up to 75% of the value of the asset if there is a condition of
margin of 25% irrespective e of the fact that there is room in the limit.
Grace Period
Grace period is related to the installment-based finances. To facilitate the
fiance for utilizing the asset for which the finance is to be made, a specific
period is allowed after expiry of which the installment period begins.
The length of the grace peri8od depends upon the nature of the asset and the
circumstances.
Grace period is generally expressed in number of months.
Collateral
A collateral Security is give in addition to the Principal /Primary security.

69

Lien
Lien is the right to retain property belonging to another until a debt due from
the borrower is liquidated. This is a possessor lien.
A possessor lien is of two kinds: Particular & General.
A particular lien is the right to retain goods in respect of which the debt was
incurred. For example, a carrier has a lien on goods entrusted for
transportation; a watchmaker has a lien on watches left for repair in respect of
the cost thereof.
A general lien is a right to retain not only for a debt incurred for particular
goods but also for the general balance due.
Thus bankers solicitors, stock brokers, in certain circumstances may have a
lien on clients securities etc., for all moneys due.
Mortgage
A mortgage is defined in section 58(a) of the Transfer of Property Act as the
transfer of an interest in specific immovable property for the purpose of
securing the immovable property for the purpose of securing the payment of
money financed, an existing or future debt or the performance of an
engagement which may give to pecuniary liability. A mortgage which remains
valid only for 12 years is a charge which a borrower gives to a lender upon a
part or the whole of his property.
1.

Legal Mortgage

2.

Equitable Mortgage

Against a legal mortgage a banker has a right to dispose of the property without
reference to the court of law if the borrower fails to repay the dues payable by
him whereas in case of equitable mortgage the banker has to obtain the

70

sanction from the court of law for realizing the debts from the disposal of
property.
MARKETING DEPARTMENT
I have learnt about credit memorandum structure which prepared on the basis
of information provided by the companies for the avail of facility.
This is completely about the business related activities and big changes in past
and present.
In the credit Memorandum general over view is taken in the following key
point to assess the business and their past relations to the bank branch:
It is clearly stated that what is being requested, purpose and nature of
facility.
Analysis of securities against the facility which the customer wants to
avail.
It is also evaluated the source of repayment.
Buyers and suppliers dynamics are also discussed
About the risks and how the customer try to mitigate them.
Management assessment is also done, in these assessment weaknesses
and strengths of management are listed in terms of their, integrity of
length and type of experience.
Financials of company is also discussed in this section. In these net
sales, cost of goods sold, as a % (percentage) of year to year basis.
Trends in operating profit. Evaluated non cash and non production
expenses. Comments on working capital required and quality of assets.
Also summarizing the major reasons affecting the cash generating
during the period.
71

 Also mention critical success factors, risks and mitigations. What are the
policies of company to meet them?
At the end of memorandum brief conclusion is given about the
organization which wants to avail the facility.
On the basis of this basic information credit proposal is made which is sent to
HOK for approval of loan or specific facility. This credit proposal contains
90% information of credit memorandum.
After approval of credit proposal, this is handed over to the credit
administration department. In this department I have learnt about basic
concepts about what is credit memorandum and credit proposals and their brief
prerequisites.
CREDIT ADMINISTRATION DEPARTMENT
I learnt about credit maintenance on the Basis of approved credit proposal. This
is totally deal with the securities, collaterals Drawing Power etc. Key Points are
as follows about which I spend my time to understand and discuss them with
my supervisor of CAD department.
Objective of the department is to check the balances with are maintained
with regards correct utilization of credit facility.
Its responsibility is to keep custody of credit files, ensuring that all
credit files are kept under departments custody.
Its main functional responsibility is to keep all collateral i.e. shares,
Govt securities, mortgage documents etc.)As per bank standard
operating procedure.
I have learnt about monthly credit administrate up dates which includes
list of overdue, list of expired documents and insurance policies.

72

 I have learnt in department about basic loan documents such as letter of

pledge, letter of hypothecation, agreement for sale, and personal
guarantee of mortgages.
I have also seen the process of scrutinizing the documents which are
received from customers.
Also discussed with my supervision of handing over the facility if some
documents are kept uncollected on the permission of RGM.
In the monitoring process, pledged goods stored in the Banks godown
that guards are posted accordingly. The sign boards of Bank are
permanently fixed and displayed at ware houses..
Also periodic reports of value, quantity, quality weight are obtained
from customer and duly verified by Banks staff.
I have also learnt about the credit files that each borrower must have a
credit files. All credit files must be kept in locked in the CAD.
IMPORT (FOREIGN TRADE)
I have spent two weeks in this department. One is in Import. During the 4 th
week I have learnt Pre requisites. Sectors of import procedure of L/C about the
different types of L/Cs, procedure of import etc. all these are briefly discussed
with the in charge foreign exchange, listed and briefly mentioned below:
Category of Import
Imports are classified into the following categories:
Commercial Sector Importers
A firm organization, person, or institution registered as an importer under the
registration order 1993, is called commercial importer.

73

Industrial Sector Importer

An industrial unit is registered as an importer in order to meet its own import
requirements under the registration order 1993
Public Sector Importers
Organizations owned by the government also require to imports certain
commodities as per their requirement. Their letter of credit is routed through State
Bank.
Procedure for Establishment of L/C
Only authorized branches can open L/C, however application can be received at
any branch of NBP. Authorized branches require that approval and margin of such
application be obtained.
The importer requests the bank for establish meant of L/C on specific formal IB-8
along with following documents.
L/C Form Ib-8
This form contains an undertaking that the importer would purchase the import
documents from the bank as Ill as to retire the document with in 20 days. It bears
adhesive court stamp of the amount as prescribe by provincial government from
time to time. It contains the following information:
Name and addresses of importer and exporter.
Amount in foreign currency.
Terms of credit: DA or DP and shipment.
Description and origin of goods.
Port of loading and discharge.
Shipment last date

74

 Insurance cover note/number

Import registration number
Documents required or any other condition etc.
Performa Invoice/Indent/Purchase Order
It is a quotation of the seller containing the description and specification of
goods, price and terms of sale. Sometime the seller has their agent in the
country of import. The agent is called indenter. He is registered with export
promotion bureau. Purchase order is acceptable to the bank provided the seller
duly confirms the same.
Insurance Cover Note
All the goods imported under L/C must always be insured and a Pakistani
insurance company must issue insurance. Insurance cover is based on the
following points:
It is issued in the name of the issuing Bank A C importer.
The rider should provide for cover against war and SR & CC.
Port of shipment and destination.
Amount of insurance policy i.e. LC amount plus 10% which should be
with in per party risk limit of insurance company as approved by bank.
Description of goods should be the same as mentioned in L/C.
Some time an open insurance policy is obtained wherein various types of
goods are specified. In such case, the endorsement is made at the time of
each import on the insurance policy of the amount involved. The
endorsements are made until the full an ailment of the amount.

75

ACCOUNTS DEPARTMENT
The function of account department is to keep the main accounts of the
transaction from the day to day as for as they affect the liabilities and assets of
the bank and is earning and expenditure. The double entry system of
accounting is employed by which accounts are maintained in such a way that
every transaction is recorded in two accounts, viz. The debtor and creditor
accounts
The main function of the accounts departments of a branch are as follows
Balancing and maintenance of books.
Preparation of statement.
Balancing and Maintenance of Books
For the purpose of maintaining the record unto date usually account officer
maintain the following two books.
1.

Cash Book cum General Ledger.

2.

Income & Expenditure Ledger.

By balancing the cash book, the means that all transactions, (Cash, Clearing
and Transfer) have properly been recorded and there is no mistake in any of the
vouchers.
The following are the steps to balance the cash book.
1.

Arrangement of vouchers.

2.

Preparation of supplementary.

3.

Preparation of summary.

4.

Arrangement of totals of the summary with the totals of transfer book.

76

Voucher System
There are three categories of transaction viz, cash transaction, transfer
transactions, and clearing transaction. For arranging vouchers, the following
steps should be taken:

The vouchers should be stored out main-head of account-wise and where a

main-head has got its sub-head-wise.
Again the credit vouchers should be separated from the debit vouchers.
The credit vouchers should be placed over the debit vouchers.
The credit and debit vouchers should be arranged in the serial order of the
account numbers given in the respective ledger. This is done only in respect of
C.D and S.B account.
Preparation of Supplementary
1.

Supplementary should be prepared for C.D and S.B separately ledger

wise.

2.

For Pak A/C separate supplementary should be prepared.

3.

For the remaining vouchers, which are called the general vouchers of the
branch, separate supplementary should be prepared. However, while
preparing supplementary from the general vouchers, it should be
remembered that since these vouchers pertain to various main heads
given in the cash book-cum-general ledger, therefore, for cash mainhead, separate supplementary is to be prepared.

4.

Now the accounts of vouchers pertaining to different main-heads and

sub-heads should be jotted down on separate sheets.

77

5.

The amount of debit and credit vouchers should be jotted won on the
right and left hand sides of sheet, respectively.

6.

The totals of debit and credit then should be struck on each sheet.

7.

The total number of credit and debit vouchers should be mentioned on

the sheet.

Preparation of Summary
After having written the supplementary, a summary is prepared or a separate
sheet. On the left hand side of it, the total of debit side of cash supplementary
will be jotted down and on the right hand side of each supplementary will be
written. Arrangement of total summary with the total transfer book
1.

At the close of the business hour, the total of both sides of transfer book
are struck. Both sides agree with each other.

2.

A grand total should be struck which should agree with the totals of the
summary.

3.

The total of clearing and transfer delivery are also to add in the transfer
book.

Preparation of Statement
In fact, the statement submitted to the head office, serve the purpose of
financial barometer of the branches. Though these statement people sitting in
the head office watch the progress of the branch and suitably guide it wherever
and whenever necessary. Figures contained in these statements from the basis
of top management decision.
STATEMENT OF AFFAIRS
This statement is prepared on the printed performs with the help of the figures
contained in the cash book cum general ledger. This is the most important
78

statement because it reflects the detailed as well as the consolidated position of

a branch at a particular data. It is also called as a balance sheet of the branch
prepared on daily basis.
How to Prepare a Statement of Affairs
The preparation of this statement is the jotting of figures from the cash book
cum general ledger to statement to affairs. This statement should be prepared in
triplicate. The first copy should be forwarded to the Head Office, second copy
to the respective Zonal Area Office and third copy be kept for branchs records.
Liabilities Side of the Statement of Affairs
1.

C.D Accounts Ledger

Science in the cash book cum general ledger, figures are shown ledger
number wise separately but in the statement of affairs, a consolidated
figure is to be shown, therefore, strike a total of figures of all the C.D
ledgers shown in the cash book cum general ledger.

2.

S. B. Deposits
In the statement of affairs, saving deposits are to be shown separately for
checking and non-checking accounts.

3.

S. N. T. D
To jot down the figures form cash book cum general ledger in the
respective columns of statement of affairs.

4.

Sundry Deposits
The figures given under various sub-heads of sundry deposits should be
added together and then placed in the statement of affairs in the
respective column.

79

5.

Call Deposits
The amount in cash book cum general ledger should be written in the
statement of affairs against the respective column.

6.

Bills Payable
Add the figures of all the sub-heads under bills payable in the cash book
cum general ledger and then put it against the column of bills payable
given in the statement of affairs.

7.

Bills for Collection

The amount of documentary bills (supported by RR/TR etc.) and clean
bills (cheques etc.) sent by bank on behalf of the customers only for
collection and not for the purpose of giving any sort of advance against
them.

8.

Pak Account/M.O Account

On the both sides are (liabilities and assets) Pak A/C and M.O A/C in the
statement of affairs. In some big cities in Pakistan where the bank has a
considerable number of branches, for passing different entries of cash,
transfer delivery or clearing, the M.O A/C is used whereas for all other
entries Pak A/C is used.

9.

Income Account
This is the last item given in the statement of affairs under liabilities side
and the balance shown against this item in a consolidated form in the
cash book cum general ledger represents the grand total of all the subheads of income as appearing in the income & expenditure ledger.

80

ASSETS SIDE OF THE STATEMENT OF AFFAIRS

Cash On Hand
The balance shown in the cash book cum general ledger should be copied out
in the statement.
Balance with NBP
Main branches of different cities have to maintain their accounts with SBP and
where there is no branch of SBP, then with NBP for the settlement of Inter
Bank Transaction.
Agreement of Liabilities and Assets Sides
The assets are always equal to liabilities i.e. all the amount of debit balance
should be equal to the amount of credit balance, therefore, the total of
liabilities and assets arrived in the respective columns of the statement of
affairs agree with each other.
Banking Division
Banking division is the major division for any bank either commercial or
industrial. The banking division of NBP performs various banking
operations, hence is the sources of quick income for it. This division
comprises of various departments and their activities such as, selling
different investment schemes, life insurance policies, dealing in the capital
market and money market, providing short term finance, and working
capital finance to industries.
This division includes following departments:
1. Banking operations department
2. Investment and Banking department
3. Credit management department
81

HUMAN RESOURCE MANAGEMENT

As in future I have decided to select HRM as my major subject, so thats why I
have spent 2 weeks at HR department and observed all the functions in detail
which are as follows:
Major Functions of HR department
Following are the functions of HR Management and Administration
department,
National Bank of Pakistan, Regional office Multan.
1. Human Resource Planning:
Human Resource Planning is conducted by the HR department. They
assess the existing number and nature of staff and then post them at
needy branches according to the requirement of that branch.
2. Recruitment of Staff:
At NBP, recruitment of permanent staff is centralized and all
recruitments are made by their Head Office Karachi. This type of
recruitment is being made in following areas:
a.

Security Guards

b.

Janitorial Services

c.

Sale & Marketing staff for retail products.

3. Transfer of Employees:
All transfer and posting of employees among the branches is made
by HR department keeping in view the staff requirements at different
branches.
4. Job Rotation:

82

Function of job rotation is also performed by the Regional office

Multan.
Normally, when an employee completes three years at a particular
seat, he rotates to another seat.
5. Human Resource Development & Training:
HR department analyze the day to day requirement of SBP regulation
for different Banking activities, and plans for training development
of staff.
This training may also be based upon introduction of new Banking
produces and competition with rival Banks.
6. Performance Appraisal:
HR department also performs the function of performance appraisal
of employees on yearly basis.
At the close of every year confidential reports (ACR) of each and
every employee is written by HR department.
7. Promotion of Employees:
HR department performs the function of promotion. Normally NBP
promotes its employees after every three years on the basis of their
past performance, availability of vacancies in each grad quota
approved by Ministry of Finance, for each grad,
8. Lay Offs:
Lay off function is also performed by HR department. NBP is a
govt. owned organization and its employees retire at attainment of
age of 60 years.

83

However, in 1998 and 2002 the NBP announced the Golden Hand
Shake schemes and almost 5000 and 3500 employees separated from
Bank services in these respective years.

84

9. Health & Safety:

HR department arranges for medical facilities to its employees.
There are several hospitals on banks panel and employees can avail
medical facilities from these hospitals. Hospitals bills are paid by HR
deptt. after proper verification.
10. Disciplinary Cases:
HR department deals with all disciplinary cases of employees. These
disciplinary cases include:
a.

Fraud Forgery

b.

Unauthorized leaves

c.

Insubordination

d.

Misconduct of finances

e.

Violation of procedure & policy

11. Equal Employment Opportunity:

NBP provides equal employment opportunity to men & women. HR
department is responsible to implement this policy, too.
12. Personnel Information System:
HR department is responsible to keep and maintain complete data of
each and every employee. This data includes his personal data as
well as professional data and being used to place right person for the
right job.

85

ORGANIZATIONAL STRUCTURE OF THE HUMAN RESOURCE

MANAGEMENT (HRM) DEPARTMENT
REGIONAL OFFICE OF NBP MULTAN
SEVP / Group Chief,
HRM & AG, NBP Head
Office Karachi

SVP / Regional HR
Chief, Regional
Office, Multan

PSO to Regional
HR Chief

No.2 in HRM
Department
Incharge

Incharge Staff
Benefit

Incharge Staff
Loan

Disciplina

Incharge
Accounts of
R.O.

iry Cases

Incharge
Litigation &
Ind.
Relations

Incharge
Inward /
Outward
Mail

MY EXPERIENCE
During my internship, I practically observed almost all the functions of
Human Resource Management, which were already theoretically studied by
me. For instance, I inquired about Human Resource Planning and
Recruitment process of NBP; which is centralized.
86

The Head Office Karachi analyzes the staff requirement on the basis of
input / feed back received from its twenty nine regions. Then it advertises
the Job Opening in all leading news paper and after test / interviews, the
recruitment is made by NBP.
The newly appointed employers are undergone by an intensive training of
six months at NBP Staff Colleges as well as practical training in the
branches. Thereafter, they are posted at Branches / Regions / Head Office,
as per requirement. All policies of Human Resource Management are made
by Head Office Karachi and the Regional HR Department are supposed to
implement the HR polices, in true letter and spirit. For example,
(i)

All human resource development and training schedules are formulated

by Head Office, the Staff Colleges are arranged for training and Regional
Offices nominate employees to attend the training sessions.

(ii)

The strategy for promotion of employees is also formulated by Head

Office. Regions provide evaluation sheets of each and every employee to
Head Office. After detail study of number of employees in each
grade/cadre, the Head Office announces the promotions of employees,
which may be 10%, 20% or 30% in each grade/cadre.

Requirement Analysis (Purpose of internship / study)

Purpose of my internship was to study practically the Human Resource
Department of National Bank of Pakistan, Regional Office Multan in order
to examine that how different functions of HR are being performed by
them.

Data Gathering
87

I used following techniques for data gathering during my internship at

NBP: 1. Personal Interviewing
2. Documents (such as duty list of employee etc.)
3. Observations
4. Books / Internet
System Design
The design of my study is Descriptive. Whatsoever, I have observed
during my internship, I have described in detail in the report.
Implementation
The final stage of any study is implementation. Implementation means the
application of study results. My internship is a Descriptive study and only
facts are described in my report. Some weaknesses have also been
discussed along with recommendations to overcome them.
SHORTFALLS / WEAKNESSES OF HRM DEPARTMENT
1.

Delays due to centralized system. i.e. Head office conveys guidelines and
HR Department proceeds accordingly.
2.

No flexibility in the rules and regulations.

3.

High level of confidentiality.

88

Sec7:

ANALYSIS

SWOT ANALYSIS OF NATIONAL BANK OF PAKISTAN

SWOT an acronym that stands for strengths, weaknesses, opportunities and
threats. SWOT analysis a careful evaluation of an organizations internal strengths,
weaknesses as well as its environmental opportunities and threats. In SWOT
analysis the best strategies accomplish in organizations mission by:
1.

Exploiting opportunities and strengths.

Neutralizing its threats and avoiding its weaknesses.

ORGANIZATIONAL STRENGTHS
A skill or capability that enables an organization to conceive and implement its
strategies
More equity.
Being the pioneer of banking in Pakistan, NBP is one of the oldest banks
and is the richest in experience.
NBP focuses on consumer banking by lucrative schemes, products and
services suiting best to the wants and demands of the customers.
The band is always on the look to improve its services both to the domestic
as well as overseas customers.
89

 Human resources development and introduction of new technology towards

modern banking.
24 hours cash access and safe payment products for high value transaction.
NBP instant financing products for customers wanting instant loan facilities
NBP branches.
Having potential to encounter the competitive environment in the market.
Customer enjoys the services at the residential localities.
NBP one of the largest financial institutions of Pakistan with eight million
of customer base NBP holds 24.6% share of time and demand deposits in
the country. Local currency deposits comprise 67% of bank's total deposits
while foreign currency deposits account for the rest.
NBP has an extensive domestic branch network of 1265 (according to the
latest data) branches located all over Pakistan. The Bank also has a
presence in 22 international locations including the USA, United Kingdom,
Europe and the Far East.
NBP is working as right arm government of Pakistan as it is responsible for
all claims of government for recovery as well as payment. All depositor of
NBP are in relief that their money security is guaranteed by government of
Pakistan.
It acts as an agent of the Central Bank wherever the State Bank does not
have its own Branch.
WEAKNESSES

90

A skill in capability that does not enable an organization to choose and implement
strategies that supports its mission
NBP staff especially at lower considers their work as burden. They usually
waste time in other task a part in performing their duty. Using government
property for there own need. They are reluctant to accept change brought by
latest restructuring efforts.
The general out look and interior layout of branches are not as required
according to modern banking
NBP bearing up large burden in running those branches, which are not
producing any income but keep on adding expenditure.
NBP is far behind in offering modern banking facility like automated teller
machines then other commercial bank in Pakistan as very few branches in all
over country have this facility.
NBP has very few on line branches. While from remaining branches data
gathering is time consuming, and not fool proof. Quantum of settlement within
different branches is pending because of this updating daily record is becoming
very difficult.
Customers have to fallow long lengthy procedure for opening of account as
well applying for debt. Which discourage most of the people to invest in NBP.
Slow down in advances growth in the short term as NBP focuses on quality
customers in the markets.
Extremely burden on employees due to work pressure.
No coordination among the employees.
91

 Discrimination in services to customers with large and small accounts.

Inconsistency in efficiency and working atmosphere due to the largest of
branches.
Sense of insecurity in the employees serving at low profitable branches due
to the right sizing.
Victim of political, legal and socio-cultural pressures.
OPPORTUNITIES
In area that, if exploited, may generate high performance.
In opportunity exist, in form of opening of ladies banking section within the
branch, which is entirely a new idea and it, will attract customer.
Growing policies of government on business and commerce sector provide
NBP opportunities to take advantages of these policies to meet efficiently
with the business people to solve their problems with the instant cash and
financing facilities.
Customer feedback on different products and accounts has really improved
the bank performance and encourage the atmosphere for other future
policies.
NBP also has an opportunity to expand its new technological advancement
like, online bank and internet banking facilities in order to serve the
customers more efficiently.
E-banking facility is also a new opportunity which is a flourishing business
in foreign countries and can also be here, if NBP takes the initiatives.

92

 Due to efficient and veteran management group, NBP can also improve
well and expand its foreign operation successfully.
NBP provide opportunity to utilize its skills and efficiencies in leasing
business.
Setting of target for of making at least 500 branches country wide on line.
Closing of all those branches, which are burden on NBP.
Comprehensive training programs has been develop to up grade the core
banking skills of the existing staff as well as integrate high quality hiring.
To improve the motivation of staff a merit-based culture is being promoted.
Through overhauling the manpower recruitment preservation and
performance appraisal system.
THREATS
An area in the environment that increases the difficulties the organizations
achieving high performance.
Facing more competition by foreign banks in the market.
Also the increasing operation of private banks.
Highly attractive and advance services by foreign banks to their customers.
The threat of inconsistency and government policy regarding to business
and economics sectors, specially political and regional situation which
makes the environment uncertain.
Growing global technological advancement.

93

 Strict regulation by government over credit facilities to the customers as

well as to meet the prudential.
Loss of confidence of overseas customers due to freezing of accounts.
Major threats NBP facing is from its competitor especially from
denationalized commercial bank. In which MCB is on the top of the list,
The Bank provides 24 hour banking convenience with the largest ATM
network in Pakistan covering 15 cities with over 100 ATM locations.
Retail banking and consumer banking resulting in the products such as
credit cards, housing finance and automobile finance lending to small
individual consumers, and purchases of automobiles, housing, and
consumer goods are generally made on a cash basis. These are causing
another threat, if not counter will result in significance loss of customers
Now banks are using technology which covers the distance no matter how
far away any one, through a satellite based, on-line real-time banking
system and by offering telephone banking, electronic funds transfer, EBanking and other modern facilities.
CONCLUSION
From SWOT analysis we can conclude that the management of the bank should
adopt systematic planning for the bank growth, introduced new schemes NBP has
more customers as compare to other banks, if they given proper attention to every
customer then if in few years it will be the leading bank of the country.

RATIOS ANALYSIS
94

Some of the different types of ratios that can be calculated from data in the
financial statements and used to evaluate a business include:
Liquidity ratios
Activity ratios
Profitability ratios
LIQUIDITY RATIOS
Liquidity ratios measure a businesss ability to cover its obligations, without
having to borrow or invest more money in the business. The idea is that there
should be sufficient cash and assets that can be readily converted into cash to
cover liabilities as they come due. One of the most common liquidity ratios is:
Current Ratio = Current Assets / Current Liabilities
Ratio

2006

2007

2008

2009

2010

Current Ratio

1.07 Times

1.15 Times

1.14 Times

1.19 Times

1.16Times

Current Ratio in 2006 was 1.07 and continuously increase to 2009 at 1.19 as
compared to Current ratio of 1.16 Times in 2010. Current assets basically includes
cash with treasury bank, cash with other banks, lending to financial institutions,
investments - (short term), short term advances-net, deferred taxes, other assetsnet. Current liabilities include bills payables, Borrowings, Short Term Deposits,
Liabilities against Subject to Finance Lease (Short Term) and other Liabilities
that are due within one year. This ratio could also be seen as a measure of working
capital the difference between current assets and current liabilities. A company
with a lot of working capital will be in a better position to expand and improve its
95

operations. On the contrary, a company with negative working capital does not
have sufficient resources to meet its current obligations, and therefore is not in a
position to take advantage of opportunities for growth.
SOLVENCY RATIOS
Solvency ratios are measures to assess a companys ability to meet its long-term
obligations and thereby remain solvent and avoid bankruptcy. Two general, overall
solvency ratios include:
Solvency Ratio = Total Assets / Total Liabilities
Ratio

2006

2007

2008

2009

2010

Solvency Ratio

1.0847

1.1481times

1.1510

1.1440

1.1417 Times

times

times

times

In the above ratio total assets are divided with the total liabilities of the series of
the years. In 2006 the ratio is 1.0847 times and it increases to 1.1481 in 2007. In
2010 it becomes 1.1417 times. This increase shows that Total Assets are
increasing.
Solvency Ratio = Net Worth (Total Capital or Equity) / Total Liabilities
Ratio

2006

2007

2008

2009

2010

Net worth to Total

0.0912times

0.1467times

0.1481times

0.1440

0.1417

times

times

Liabilities

In the above ratio Net worth is divided with the total liabilities of the series of the
years. In 2006 the ratio is 0.0912 times and it increases to 0.1467 in 2007. In 2010
96

it becomes 0.1417 times. This decrease is due to the increase in Current

Liabilities mainly Deposits which is a good sign for bank.

DEBT RATIO
Another ratio that can tell how much a company relies on debt to finance its assets
is:
Debt Ratio = Total Debt / Total Asset
Ratio

2006

2007

2008

2009

2010

Total Debt / Total Assets

84.41%

84.58%

87.26%

87.41%

87.58%

Debt Ratio in 2006 is 84.41which increases to 87.58 in 2010. This constant

increase in debt ratio is due to increase in liabilities as compared to assets of NBP
which shows that there is need to broaden the base of advances.
Traditionally, both short-term and long-term debts and assets are used in
determining this ratio. In general; the lower a companys reliance on debt to
finance its assets, the less risky the company.
The debt to equity ratio is a measure of a companys leverage how much
financing it has in the form of debt as compared with how much it has invested in
the business.
DEBT-EQUITY RATIO
Debt-equity Ratio = Total Liabilities / Total Owners Equity:

97

Ratio

2006

2007

2008

2009

2010

Debt to equity Ratio

5.418

5.484

6.851

6.944

7.055

Debt to equity Ratio also increasing from year to year. In 2006 it was 5.418 and
goes to 7.055 in 2010
SHORT-TERM DEBT RATIO
Short-term Debt Ratio or Quality of Debt = Short-term Debt / Total Debt
Ratio

2006

2007

2008

2009

2010

Short-term Debt / Total Debt

80.17%

79.25%

79.53%

78.23%

80.41%

Short-term Debt Ratio is parallel to 2006 to 2010.

A lower value for this ratio would indicate less concern for installments coming
due within a year.
There are other ratios intended to assess a companys capacity to cover its debt
repayments and financing costs. One of these ratios measures how interest expense
is being covered by the net income the company is generating:
INTEREST EXPENSE COVERAGE RATIO
Interest expense coverage = profit before interest & taxation/ Interest expense
Ratio
Profit before taxation/
Interest expense

2006

2007

2008

2009

1.833times

1.846times

1.886times

1.906times

2010
1.922
Times
98

Interest expense coverage ratio increases from 2006 to 2010. This shows that
financial position of NBP is strong.
This ratio is also called Number of Times Interest Earned, and represents how
many times the net income generated by the company, without considering interest
and taxes, covers the total interest charge. The higher the ratio the more solvent is
the company.
Another similar ratio often used to measure a companys capacity to cover its fixed
charges is:
Capitalized interest is the amount of interest on a loan to finance a project or
acquisition of fixed assets that has been capitalized and included as part of the cost
of the project or asset on the balance sheet. You will probably need to see the notes
to the financial statements to find this figure.
ACTIVITY RATIOS
Many useful gauges of operations can be calculated from data reported in the
financial statements. For example, you can determine the average number of days
it takes to collect on customer accounts, the average number of days to pay
vendors, and how much of the operation is effectively being financed with
payment terms extended by vendors.
Accounts Receivable Turnover = Total Sales / Average Accounts Receivable
Ratio

2006

2007

2008

2009

2010

Accounts Receivable Turnover

1.50

1.95

1.913

1.937

1.983

In this ratio account receivable turn over in 2006 is 1.50, in 2007 1.95 and in 2010
is 1.983 which shows you the average duration of accounts receivable for credit
99

sales to customers is increasing. This in turn can be expressed in terms of the

collection period, as follows:
Average Collection Period = Days in Year / Accounts Receivable Turnover
Ratio

2006

2007

2008

2009

2010

Average Collection Period

243 Days

187 Days

190 Days

178 Days

184 Days

Collection period shows that it decreases from 2006 to 2007 but increase in 2008
decrease in 2009 and slight increase in 2010.
PROFITABILITY RATIOS
One of the most common profitability ratios is the profit margin. This can be
expressed as the gross profit margin or net profit margin, and it can be expressed
by company, by sector, by product, or by individual unit. The information reported
on the income statement will enable you to determine the overall profit margin. If
additional breakdowns are provided, more detailed margins can be calculated.
NET PROFIT MARGIN
Net Profit Margin = Net Income / Total Revenue
Ratio

2006

2007

2008

2009

2010

34.58%

38.18%

25.65%

19.85%

22.53%

Net
income/Total
income

Net Profit Margin has increased in 2006 to 2007 but it decreased in 2008 and 2009
19.85. Last year it has also improved at 22.53 %.

100

Other commonly used ratios are returns, expressed as return on investment or

equity, return on assets, and return on capital employed. These ratios measure a
companys ability to use its capital, or its assets, to generate additional value.
RETURN ON EQUITY RATIO
Return on Investment (ROI) or Return on Owners Equity = Net Income / Average
Owners Equity
Ratio

2006

2007

2008

2009

2010

Net income/Capital

16.521%

16.446%

15.016%

14.769%

13.668%

Return on Owners Equity is decreasing by year to year and reached to 13.668 in

2010 from 16.521 in 2006
RETURN ON ASSETS
Return on Assets (ROA) = Net Income / Average Total Assets
Ratio

2006

2007

2008

2009

2010

Net income/Total Assets

2.569%

2.551%

1.913%

1.859%

1.697%

Return on Assets is also decreased from year 2006 to 2010.

RETURN ON CAPITAL EMPLOYED
Return on Capital Employed (ROCE) = Net Income Before Interest and Tax /
Capital Employed (Total Assets minus Current Liabilities)
Ratio

2006

Net income before income 35.318%

2007

2008

2009

2010

36.496%

41.116%

37.689%

39.600%
101

& taxation/Net Assets

EARNINGS PER SHARE
Earnings per Share = Net Profit After Tax and Dividends / Weighted Average
number of Ordinary Share
Ratio
Profit After Tax /
Ordinary Shares

2006

2007

2008

2009

2010

15.43

21.62

17.48

13.05

13.05

Earning per Share in 2006 is 15.43 and increase in 2007 at 21.62. This ratio
decreases in 2008, 2009 and remains same in 2010.

102

HORIZONTAL ANALYSIS (BALANCE SHEET)

PARTICULARS
2006
Cash and Balance with treasury 158.94
banks
Balances with other banks
Lending to financial institutions
Investments
Advances
Other Asset
Operating Fixed Asset
Defer tax Asset
Total Asset
Liabilities
Bills payable
Borrowings from Financial
Deposits and other accounts
Subordinates loan
Liabilities against leased Asset
Other Liabilities
Defer Tax Liabilities
Total Liabilities
Net Asset
Represented By
Share Capital
Reserves
Unappropriated profit
Total
Surplus revaluation of asset
Total Representation

2007
90.55

2008
132.32

2009
159.66

2010
162.14

206.11
35.11
87.08
137.31
96.22
102.94
117.22

128.42
54.38
94.45
166.72
125.61
105.57
123.18

168.26
76.86
84.20
196.01
142.26
108.30
135.43

155.14
71.04
126.83
211.61
141.22
29.01
161.52

97.97
141.4
191.94
177.6
223.4
284.4
179.15

131.25
66.89
117.71
41.48
98.80
114.82
154.14

31.67
52.84
117.17
40.44
101.12
748.94
113.70
274.86

192.94
70.63
126.89
32.18
114.67
400.60
125.32
294.22

128.47
66.01
149.63
81.60
118.36
8.55
145.37
421.75

459.8
229.5
179.5
641.6
184.8
180.08
172.84

60.54
136.71
156.23
139.28
187.07
154.14

143.99
151.89
328.50
207.54
404.03
274.86

83.33
170.64
543.90
292.51
305.91
294.22

198.71
86.97
768.91
381.99
498.05
421.75

227.7
180.6
394.03
286.9
64.77
172.8

HORIZONTAL ANALYSIS

103

International accounting standards call for the presentation of comparative

financial statements that gives the current years and past years financial
information. A common starting point for studying such statements is horizontal
analysis, which begins with the calculation of monetary amount changes and
percentage changes from the previous to the current year. The percentage change
must be calculated to show how the size of the change relates to the size of the
amount involved.
Horizontal analysis is an easier way of comparing the performance of two
different financial statements either within the same bank or accounts of the other
entities within the same bank. Horizontal analysis involves line by line comparison
of the financial figures from two different sets of accounts.
The exhibit below shows how horizontal analysis can be conducted:
BALANCE SHEET ANALYSIS OF NATIONAL BANK AT 31 DECEMBER
2005 TO 2010
The main categories of assets are usually listed first and are followed by the
liabilities. The difference between the assets and the liabilities is known as equity
or the net assets or the net worth of the bank and according to the accounting
equation, net worth must equal assets minus liabilities.
Another way to look at the same equation is that assets equal liabilities plus
owner's equity. Looking at the equation in this way shows how assets were
financed: either by borrowing money (liability) or by using the owner's money
(owner's equity). Balance sheets are usually presented with assets in one section
and liabilities and net worth in the other section with the two sections "balancing".
Records of the values of each account or line in the balance sheet are usually
maintained using a system of accounting known as the double-entry bookkeeping
system.
104

A business operating entirely in cash can measure its profits by withdrawing the
entire bank balance at the end of the period, plus any cash in hand. However, many
businesses are not paid immediately; they build up inventories of goods and they
acquire buildings and equipment. In other words: businesses have assets and so
they can not, even if they want to, immediately turn these into cash at the end of
each period. Often, these businesses owe money to suppliers and to tax authorities,
and the proprietors do not withdraw all their original capital and profits at the end
of each period. In other words businesses also have liabilities
In financial accounting, a balance sheet or statement of financial position is a
summary of a person's or organization's balances. Assets, liabilities and ownership
equity are listed as of a specific date, such as the end of its financial year. A
balance sheet is often described as a snapshot of a bank financial condition of the
four basic financial statements, the balance sheet is the only statement which
applies to a single point in time.
HORIZONTAL ANALYSIS (INCOME STATEMENT)
YEARS
Interest Earned
Interest Expense
Interest Income
Provision
against

2006

2007

2008

2009

2010

92.86
102.68
107.11
Non- 101.02

223.37
318.56
198.01
285.81

362.77
634.85
291.17
422.05

452.60
888.72
337.94
376.31

263.04
438.3
185.4
286.5

-97.50

109.44

72.65

-6.05

-12.06

29.78
62.72
110.77

295.72
2299.88
#VALUE!

2088.46
3358.93
282.39

7251.02
1127.88
271.30

448.2
157.6

113.20
53.57
152.92
31.12

16.88
8.37
152.57
11428.23

253.82
33.68
152.81
8472.77

353.10
17.68
189.61
25534.90

Performing Advances
Provision for Diminution
Bad debts Written Off
Interest Income after Provision
Non-mark-up /Interest Income
Commission
Dividend Income
Income from FOREIGN
Gain on securities

195.5
63.98
183.3

105

Other Income
Total Interest Income
Interest Expenses
Administrative Expense
Write-Off
Other Charges
Total Interest Expenses
Profit before Taxes
Taxation-Current
-Prior Year
-Differed
Profit after Taxes
Share minority interest
Profit to shareholders
Un appropriated profit/loss
EPS

135.99
104.36

170.23
45.73

181.76
62.17

217.00
123.82

13.7
187.09

109.26
-8.04
190.07
100.32
110.78
144.12
122.65
48.62
69.57
135.58
203.43
135.01
224.24
260.21
13.66

126.78
60.86
128.44
121.73
205.85
252.91
34.79
231.80
207.15
218.82
419.87
217.26
0
297.41
172.61

175.28
41.01
472.27
165.21
320.65
1713.90
19.71
107.01
282.77
171.50
-637.47
3404.31
19.03
466.11
270.53

214.74
42.81
316.85
201.63
305.09
2579.03
192.98
81.15
266.76
327.79
1213.53
320.85
0
445.38
203.86

234.05
74.64
188.09
231.04
128.12
137.4
-85.48
-701.6
107.9
138.19

363.1
60.6

HORIZONTAL ANALYSIS OF INCOME STATEMENT

Horizontal analysis of income statement Net mark up/Interest income was
continuous increasing in 2005, 2006, 2007, 2008 and 2009 which was 100%,
104.36%, and 45.73%. 62.17% and 123.82%.
In case with items of net mark up/ Interest income. Fee, Commission and
brokerage income, Dividend Income, Income from dealing in foreign currencies,
other income was increasing and decreasing every year.
The total income before interest expenses and taxes increased, in 2005 which was
100% which was increased in 2006 and go to 100.32%. In 2007 it was 121.73%
and in 2008 it was 165.21% which was 35.26% increased from the previous year.
It was also increased in 2009 and go to 201%. Thats shows that perform in well
manners.
106

Where total income increased total expenses were also increased Items of Total
non mark up interest expenses such as Administrative expenses, other charges
show the constant growth every year. This shows that organization is not paying
proper attention.
Profit & loss before taxation is 100% in 2005 which was increased in 2006, 2007,
2008 as 110.78%, 205.85%., 320.65% But in 2009 profit of the bank decreased
and reached at 305.09%.
Profit after taxation was 100% in 2005

which is constantly increasing as

135.58%, 218.82%, 170.50%and 327.799 in 2006, 2007, 2008 and 2009.

If we see the income statement of national Bank we will find firm is growing and
improving every year. But horizontal analysis of income statement shows the
decreasing ratio few years and show increasing ratio few years. Overall the bank
performing well to the satisfaction of client and in stable position.

VERTICAL ANALYSIS (INCOME STATEMENT)

Ratio

Mark-up/return/Interest Earned
Mark-up/return/Interest Expense
Net mark-up/Interest Income
Provision against Non-Performing
loans & Advances

2006

2007

2008

2009

2010

Amount is in Amount is in Amount is Amount is Amount is

%
100.01
31.32
68.70

%
110.33
34.35
76.53

in %
109.62
34.13
75.49

in %
119.12
39.90
79.22

in %
173.8
88.9
84.9

7.24

8.01

7.70

11.13

13.7

107

Provision for Diminution in value of

Investment
Provision against off balance sheet
obligations
Bad debts Written Off
Net mark-up/Interest Income after
Provision
Non-mark-up /Interest Income
Fee, Commission and brokerage
income
Dividend Income
Income from dealing foreign
currencies
Share of profit from a joint venture
Gain on sale of securities
Unrealized loss on revaluation of
investments classified as held for
trading
Other Income
Total non mark-up/Interest Income
Non Mark-up/Interest Expenses
Administrative Expense
Other Provisions Write-Off
Other Charges
Total Mark-up/Interest Expenses
Profit before Taxes
Taxation-Current
-Prior Year
-Differed
Profit after Taxes
Unappropriated profit b/f
Transfer from surplus on revaluation

0.89

-0.81

-1.78

8.35

7.28

5.94

11.12

19.5

60.35

69.25

69.55

68.09

45.69

24.35

16.13

15.38

15.98

18.9

6.08

5.63

7.24

7.69

2.16

4.82

3.95

3.34

2.46

4.3

4.47

2.93

5.52

4.9

4.18
39.65
100.00

0.58
30.75
100.00

1.57
30.45
100.00

31.91
100.00

4.2
34.6
100.00

42.39
42.59
57.41
22.20
4.05
0.00
29.81
28.16
0.22

36.75
0.65
37.60
62.40
23.43
-3.60
0.95
20.78
41.62
35.64
0.14

34.07
0.52
34.13
65.87
21.77
1.33
-

33.46
33.90
66.10
19.58
0.92
0.76
21.26
44.84
75.56
0.09

51.4
0.29
0.23
52.01
47.98
19.32
-15.9
4.0
13.4
34.51
119.2
0.23

42.61
48.50
0.10

108

of fixed assets
Profit Available For Appropriation
Statutory reserve
Capital Reserve
Revenue Reserve
Reserve for issue of bonus of shares
Proposed cash dividend
Un appropriated profit c/f

28.37
58.18
-5.96
-4.70
-3.53
43.99

35.64
77.26
-

48.50
91.11
-

75.65
120.48
-

77.26

91.11

1,204.68

154.02
-

Comments
NBP has earned less revenue in terms of interest as compared to 2008 and 2007. It
means that the profitability of NBP is not satisfactory as compared to previous
years. Expense has incurred in 2009 in term of interest expense as compared to
other years.
There is decrease of almost 3% in 2009 in terms of interest after provision that is
the gross profit. Bad debts are recovered and less writ off in 2009, which means
that NBP has recovered its accounts and that is a good sign. Earning per share of
NBP is decreased in 2009 because of the industry downfall that came into being
from the assanation of Benazir Bhutto.
VERTICAL ANALYSIS (BALANCE SHEET)
Ratio

Cash and Balance with

treasury banks
Balances with other banks
Lending to financial
institutions

2006
2007
2008
2009
2010
Amount is in Amount is in Amount is in Amount is in Amount is in
%

17.07

12.32

12.38

12.45

11.15

9.00

5.37

6.40

4.92

2.93

1.90

2.82

3.62

2.82

2.2

109

Current Asset
Investments
Advances
Other Asset
Operating Fixed Asset
Defer tax Asset
Total Asset
Liabilities
Bills payable
Borrowings from Financial
institution
Deposits and other accounts
Subordinates loan
Liabilities against assets
subject to Asset lease
Other Liabilities
Defer Tax Liabilities
Total Liabilities
Net Asset
Represented By
Minority Interest
Share Capital
Reserves
Unappropriated profit
Surplus revaluation of asset
Total Representation

0.00
27.00
39.91
3.46
1.66

0.00
27.12
46.53
4.14
1.64

0.00
22.03
49.77
4.27
1.52

0.00
27.66
44.70
4.07
3.40

0.00
29.11
46.13
5.16
2.5

100.00
0.00
1.30

100.00
0.00
0.30

100.00
0.00
1.67

100.00
0.00
0.93

100.00
0.00
0.77

2.00

1.52

1.84

1.43

1.94

84.15
-

80.22
-

79.02
-

77.66
-

80.39
-

0.00

0.00

0.00

0.00

0.00

4.17
0.01
91.64
8.36
0.00
0.00
0.89
1.95
1.66
4.50
3.86
8.36

4.32
0.77
87.13
12.87
0.00
0.00
1.02
2.34
2.89
6.26
6.61
12.87

4.19
0.38
87.10
12.90
0.00
0.00
1.12
2.19
5.05
8.35
4.55
12.90

4.05
0.67
84.74
15.26
0.00
0.00
1.07
2.07
5.95
9.09
6.17
15.26

4.45
87.58
12.41
0.00
0.00
1.29
2.3
6.3
10.05
2.3
12.4

Comments
Cash and balances with other banks has increasing and decreasing value. As
networking capital is increased, NBP has also increases its cash. Total assets of
NBP have increased from 2006 to 2009 and its the highest value in 4 years.
Liabilities of NBP have decreased which is satisfactory and increases the worth of
110

the NBP. share capital has increased and is at satisfactory level. NBP has gained
good surplus on revaluation of assets which is a good sign of the good will of the
NBP bank.
PESTEL ANALYSIS
Like any other organization pest analysis is important for banks as well.in this
analysis we consider banks from various environmental factors which are as
follows:
Political
Environmental
Sociological
Technological
PESTEL ANALYSIS IN NBP
Political
AS NBP is a government bank so it has got some extra edges as compared to other
commercial banks. NBP is working as right arm government of Pakistan as it is
responsible for all claims of government for recovery as well as payment. All
depositor of NBP are in relief that their money security is guaranteed by
government of Pakistan.
It acts as an agent of the Central Bank wherever the State Bank does not have its
own Branch.
It is also having the advantages of being a government bank but it has to face the
following issues:

111

 Employment practices, Unions, Associations.

Political Interference and harassment.
Incidents of high taxation on banking industry
Economical
In recent years banks have higher interest rates because of the high default rates
over the last few years. Liquidity of banks is a worry but nothing is happening in
the interbank market. At the same time, banks are trying to build their balance
sheets back up.if we talk about NBP being a GOVT bank it is being affected by the
economic conditions of the country.the bank is facing some issues regarding
economic conditions which are as follows:
Constraints in mobilization of public savings because of inflation.
Staff cost.
Operating costs
Bad debts
Sociological
People are less trusting of banks and the public now see banks as power and
money hungry institutions who messed up society - doubt it's all true. Publicity is
not all that good either; bank bonuses are taxed at 50% in order to deter paying
them, but banks are still paying them in order to try to keep their star players
within their organisation.but if we talk about national bank than being a govt bank
it is trusted by people specially those who are traditional ones.beside this factor
NBP is facing some issues which are as follows:
Inadequate human resources.
112

 Cultural strain to savings.

Defaulters lobby.
Declining education and work ethics.
Inadequate accountability.
Adequate empowerment.
Technology
If we talk about technology then it then there have been things like the PIN entry
device, online banking, etc. nothing all that new. There have been credit cards
issued before the boom. at the moment, R&D is looking up new forms of
investments (we call that financial innovation) to get more business, when
confidence in the financial industry is restored. Things are rather slow in this area
as well, except for the fact banks are now opening on Saturdays as well as on
weekdays. if we talk about NBP then it is not that much technically settled yet they
are more trusting on keeping records in registers but NEW SAP system is in a
process of implementation. other issues are:
Inadequate communication infrastructure.
Inadequate computer facilities.
Inadequate IT training.
Environment
Banks don't have much effect on the environment; in fact I think I have heard a
few banks are actually helping various trusts and various welfare centres. Under a
trust Deed, the bank also provides services as trustee to National Investment Trust
(NIT) including safe custody of securities on behalf of NIT. Some schemes have
been specifically designed for the low to middle income segments of the

113

population. These include NBP Karobar, NBP Advance Salary, NBP Saibaan, NBP
Kisan Dost, and NBP Cash n Gold.
The National Bank of Pakistan has implemented special credit schemes like small
finance for agriculture, business and industries, administrator to Qarz-e-Hasna
loans to students, self employment scheme for unemployed persons, public
transport scheme. The Bank has expanded its range of products and services to
include Shariah Compliant Islamic Banking products. For the promotion of
literature, NBP recently initiated the Annual Awards for Excellence in Literature.
NBP will confer annual awards to the best books in Urdu and in all prominent
regional languages published during the defined period. Patronage from NBP
would help creative work in the field of literature. The Bank is also the largest
sponsor of sports in Pakistan. It has provided generously to philanthropic causes
whenever the need arose.
Legal
Legal issues include stricter regulations and there have been quite a few court
cases with a few banks because shareholders lost money (not that all of these cases
actually get much of a fight).if we talk about NBP they follow rules and have got
many cases in court due to the several defaults by the parties and individuals.

Competitor analysis

National Bank of Pakistan is the largest commercial bank of Pakistan. The bank
handles treasury transactions on behalf of the government of Pakistan as an agent
to the State Bank of Pakistan. The bank has a network of 1,232 branches
in Pakistan and 18 overseas branches including the Export Processing Zone
Branch.
National Bank of Pakistan provides commercial banking and related services to
individuals, corporate entities, and government in Pakistan and internationally. It
114

provides saving accounts, home financing, personal loans, ATM and debit cards,
financing facility for stock investors, cash against gold, agriculture farming
program, Internet based home remittance service, and personal accident insurance.
The company also offers Islamic banking services, which include deposit schemes,
such as current deposit scheme, and profit and loss sharing deposit scheme. In
order to know further about the performance of Nbp,we compare it with its
competitors.
Some
of
Competitors of nbp are:

MCB Bank Ltd.

United Bank Limited
Habib Bank Limited

MCB Bank Ltd.

MCB Bank Ltd.

MCB is one of the leading banks of Pakistan with a deposit base of Rs. 431 Billion
and total assets over Rs. 550 Billion. Incorporated in 1947, MCB soon earned the
reputation of a solid and conservative financial institution managed by expatriate
executives. In 1974, MCB was nationalized along with all other private sector
banks.
MCB Bank Limited, with more than 60 years of experience as one of
the leading banks in Pakistan, was incorporated on July 9 in 1947.
The bank has journeyed remarkable tenure of more than half a
century of competitively edged and well positioned heights of
success by deploying quality banking, heads on technological
developments, professionally leading management and prudent and
ethical work methodologies. MCB was nationalized along with other
private banks in 1974 as part of Government of Pakistan's economic
reform movement and was later privatized to Nishat Group lead
consortium in 1991.
Since privatization, MCB's growth has been phenomenal. Today,
MCB in one of the largest foreign banks in Sri Lanka, the first bank
in Pakistan to launch Global Depository Receipts (GDR) in 2006,
has strategic foreign partnership with May bank of Malaysia which
holds 20% shares in MCB through its wholly owned subsidiary
Mayban International Trust (Labuan) Berhad since 2008, has
international indirect regional presence in Dubai (UAE), Bahrain,
Azerbaijan, Hong Kong and Sri Lanka and serving through a
115

domestic network of over 1,130 branches and 600 ATMs across

Pakistan with a customer base of 4.5 million (apprx.)
MCB is reputed as one of the most sound financial institution and as
one of the leading banks in Pakistan with a deposit base of PKR. 462
bln (apprx.) and total assets of PKR 605 bln (apprx.). The bank is
versed as one of the oldest and most responsible banks in Pakistan
and has played pivotal role in representing the country on global
platforms while being one of the few institutions that are recognised
and traded in the international market.
The bank has also been acknowledged though prestigious
recognition and awards by Euromoney, MMT, Asia Money, SAFA
(SAARC), The Asset and The Asian Banker.

The bank along with its subsidiaries is engaged in providing commercial

banking and related services to retail clients, and small and medium enterprises
in Pakistan, Asia Pacific and the Middle East. It offers various deposit
products, including fixed deposits, savings deposits, term deposits, current
accounts, margin accounts and foreign currency accounts. As of December 31,
2007, it operated 1,020 branches, including eight Islamic banking branches in
Pakistan and six branches outside Pakistan. Global Markets Directs MCB
Bank Ltd. - Financial and Strategic Analysis Review is an in-depth business,
strategic and financial analysis of MCB Bank Ltd.. The report provides a
comprehensive insight into the company, including business structure and
operations, executive biographies and key competitors. The hallmark of the
report is the detailed strategic analysis of the company. This highlights its
strengths and weaknesses and the opportunities and threats it faces going
forward.

United Bank Limited

United Bank Limited (UBL) is one of the largest banks in Pakistan. The company
is principally engaged in providing retail banking, investment banking, treasury
banking and corporate banking services to the individuals and corporate
customers. UBL operates through four business segments namely, Corporate
Finance, Trading and Sales, Retail Banking and Commercial Banking. The
company operates through a wide network of 1,112 domestic and 17 overseas
branches. It principally operates in Pakistan and has operations in Bahrain, China,
116

Iran, Kazakhstan, Oman, Pakistan, Qatar, Switzerland, United Arab Emirates, the
UK, the US and Yemen. Global Markets Directs United Bank Limited - Strategic
Analysis Review is an in-depth business and strategic analysis of United Bank
Limited. The report provides a comprehensive insight into the company, including
business structure and operations, executive biographies and key competitors. The
hallmark of the report is the detailed strategic analysis of the company. This
highlights its strengths and weaknesses and the opportunities and threats it faces
going forward. UBL achieved a profit after tax of Rs 11.2 billion which is 21%
higher than the corresponding period last year and translates into earnings
per share of Rs 9.12 (2009: Rs 7.51). On a consolidated basis, UBL achieved a
profit after tax of Rs 11 billion, an increase of 16% over2009. UBL's strong
internal capital generation resulted in a Rs 6.1 billion(14%) increase in Tier 1
Capital, despite keeping Risk Assets flat.Consequently, the unconsolidated Capital
Adequacy Ratio (CAR) ofthe Bank improved from 13.2% in December 2009 to
14.5% inDecember 2010. The Tier-1 CAR of the Bank has also improvedfrom
9.0% in December 2009 to 10.3% in December 2010. On a consolidated basis, the
CAR improved to 15.0% in December 2010(December 2009: 14.0%) while Tier-1
CAR improved from 9.5% in December 2009 to 10.4% in December 2010. The
commitment to continuously create value for its customers, employees and local
communities is a major priority of UBL. In 2010,the Bank provided support of
over Rs 80 million for CSR initiatives principally in the areas of education, health
care and community development. UBL's efforts in the field of CSR were also
acknowledged by the Pakistan Center for Philanthropy (PCP), an independent
organization, as one of the largest donors to charitable causes in
Pakistan.UBL, as a Contributing Sponsor of the Karachi Education
Initiative(KEI), contributed Rs 40 million to this cause. This initiative aims to set
up a world class School of Business and Leadership in Karachi. Additionally, Rs
3.9 million were also donated to other organizationsoperating in the field of
education, including The Citizens' Foundation and the Lahore University of
Management Sciences.In the areas of health and community development, UBL
contributedover Rs 10 million to the Edhi Foundation, SOS Villages of Pakistan,
Marie Adelaide Leprosy Centers, Special Olympics Pakistan, The Police Hospital
Fund and Friends of Burns Center.

Habib Bank Limited

Habib Bank Limited commonly referred to as "HBL" and head-quartered in Habib
Bank Plaza, Karachi, Pakistan, is the largest bank in Pakistan. The bank has a
network of over 1450 branches in Pakistan and 55 branches worldwide.Habib
Bank stands to gain from a possible deal as it would get some of the best
customers who have very good credit history, the official said. He added that the
117

Citibank had already cleared its portfolio of risky loans. After Pakistan was born in
1947, Habib Bank, at the urging of Governor-General Jinnah, moved its
headquarters to Karachi, Pakistan's first capital. This gave Karachi its first
commercial bank of the newly formed Pakistan. The Habib family owned and
managed the bank until the Pakistan.
The HBL Board met on April 15, 2011 at Karachi and announced its results for the
first quarter of 2011. HBL's consolidated Pre-tax profit for the first quarter of 2011 is
Rs.7.7 billion and the profit after tax is Rs. 5 billion showing an increase of 23% and
31% respectively over the corresponding quarter last year. This translates into an
earning per share of Rs. 4.95 for the quarter.
For the year 2010,Deposit growth for the year has been 14.3% and the net asset
growth of the bank has been 27.2% over 2008. HBLs consolidated Pre-tax
profit for 2009 is Rs. 21.4 billion and the profit after tax is Rs. 13.4 billion,
which translates into an earning per share of Rs. 14.70.
The Bank announced a final cash dividend of Rs. 6.00 per share (60%) and
bonus shares of 10%.

Financial highlights of nbp and competitors.

Name of the

Assets

Advances

Deposits

Equity

bank
National Bank

1035024680 477506564 832151888 103762310

of Pakistan

MCB
567533
Bank Ltd.

254522

431372

76150760

United
Bank
Limited

368692

550646

60181

698785

118

Habib
Bank
Limited

34478466

1272066

186966167 10018800

conclusion
Top
Some businesses think it is best to get on with their own plans and ignore the
competition. Others become obsessed with tracking the actions of competitors
(often using underhand or illegal methods). Many businesses are happy simply to
track the competition, copying their moves and reacting to changes.
Competitor analysis has several important roles in strategic planning:
To help management understand their competitive advantages/disadvantages
relative to competitors
To generate understanding of competitors past, present (and most importantly)
future strategies
To provide an informed basis to develop strategies to achieve competitive
advantage in the future
To help forecast the returns that may be made from future investments (e.g. how
will competitors respond to a new product or pricing strategy?
By keeping in view above data a we come to the conclusion of competitor analysis
that national banks deposits, assets, advances and equity is increasing year by year
gradually.it depicts its strong position.it also shows the trust of people on this
bank,this trust is crucial for the stability of any business. Further if we consider its
branches it has th highest branches compared with the other banks that are 619
branches in Pakistan.it has very wide network and provide best services.

119

120

Sec: 8

THEORY VS PRACTICAL

During Internship it was my prime objective to furnish my knowledge (Theory) to

various practical situations. The practical work presents an analytical problem
while relating theory with practice. As a result, analysis of practical versus theory
requires a distinct approach. This part of report is the essence of the internship, as
this will help to better understand the working environment of the bank by finding
the relationship between what is written in the books and what is actually going on
in fields. The theory written in the books in cases is not implemented as it is. In
some cases theory is implemented with a little modification but in other cases
theory has nothing to do with practice.
In accounting, banks dont prepare worksheet, but part of worksheet is prepared
like trial balance. The securities for the loans are handled in the same way as
theory says like mortgage, pledge, hypothecation, advances against insurance
policies or liquidation procedure is the same. There is some difference lies in types
of loans in bank that is theory talks about four or five types of loans that is cash
finance, overdraft, loans etc., but in practice there are some more types used by
bank like running finance, demand finance etc. All other concepts of remittances,
bills, foreign exchange deposits, letters of credit are in accordance with theory
almost. A bank's balance sheet is different from that of a typical company. You
won't find inventory, accounts receivable, or accounts payable. Instead, under
assets, you'll see mostly loans and investments, and on the liabilities side, you'll
see deposits and borrowings.

121

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

122

Sec: 9

FUTURE PROSPECTS OF
NATIONAL BANK OF PAKISTAN

National Bank of Pakistan maintains its position as Pakistan's premier bank

determined to set higher standards of achievements. It is the major business
partner for the Government of Pakistan with special emphasis on fostering
Pakistan's economic growth through aggressive and balanced lending policies,
technologically oriented products and services offered through its large network of
branches locally, internationally and representative offices. The forward-looking
management of NBP is a firm believer in focusing on niches where there is critical
mass and to create products that meet that demand.
National Bank of Pakistan is gearing up to the challenges faced by the domestic
banking industry due to innovations and advances in the international banking
world, which is the consequence of globalization. The bank wishes to effectively
utilize the financial assistance being extended by the Government of Pakistan for
banking sector reforms aimed at reducing operating costs and improving
profitability. National Bank of Pakistan is distinct from other banks in that it has a
nonprofit and service oriented motive, which has manifested itself in the area of
salary deposits of government employees and payment of utility bills. The bank
renders these services across the country reaching as far as the remotest regions;
from our northern borders to the Arabian Sea. These services do not contribute
towards the earnings of the bank; rather they put pressure on banks resources.
123

Nevertheless, the bank is committed to serving small savers and the general public
of the country. National Bank of Pakistan is everyones bank and does not only
serve corporate customers. To extending and targeting research to improve bank
earnings, through customer focus of banks commercial and corporate branches,
and by enhanced efforts towards the development of human capital, the bank shall
very soon transform from a bureaucratic organization to a fast paced, modern, and
competitive bank. In conclusion, the National Bank of Pakistan have the vision,
which will enable it to achieve even better results, safeguard the interest of their
customers and to assist them in their march towards progress and prosperity in
future.
The National Bank of Pakistan is confidence that tomorrow we will be
Leaders in our industry
An organization maintaining the trust of stakeholders.
An innovative, creative and dynamic institution responding to the changing
needs of the internal and external environment
NBPs current management has boarder vision. They have taken steps to improve
customer services, streamline internal procedure and creating a delectating climate
for technology initiative.
Reorganizing efforts going on in the NBP has open many opportunities for NBP to
grow. For instance to achieve objectives NBP have taken following measures.
Setting of target for of making at least 300 branches country wide on line.
Closing of all those branches, which are burden on NBP.
Management to offer specialized services to major corporate including
advisory and debt syndication introduces the concept of relationship manager.
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Comprehensive training programs has been develop to up grade the core

banking skills of the existing staff as well as integrate high quality hiring.
To improve the motivation of staff a merit-based culture is being promoted.
Through overhauling the manpower recruitment preservation and performance
appraisal system.
The actions taken by current management provide a great opportunity for NBP for
making it future prosper and can make NBP not less than any modern
commercialize bank in Pakistan.
The Management of NBP assess that the Internal Control environment is showing
signs of improvement as compared to previous years in all areas of the bank. The
bank is endeavoring to further refine its internal control design and assessment
process as per guidelines issued by the State Bank of Pakistan Accordingly, Bank
is making all possible effort to improve the professional skills and competency
level of the staff through need based training programs and our valued customers
for their support and continued confidence in NBP.

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Sec: 10

RECOMMENDATIONS

The National bank of Pakistan should be fully prepared in its management

of financial crises and its business continuity planning, within the standing
committee framework, and should work with others to strengthen national
crises management preparations.
The bank should improve the quality of training of its employees and the
integrity, controls and efficiency of its systems, processes and financial
reporting.
The bank should improve its recruitment, retention and development and to
reform the Banks pension scheme.
The bank should renegotiate the Banks long term financial framework and
to overhaul the Banks financial system.
The Bank should improve IT capability in the analytical areas and to
develop a medium term strategy for banking and market operations.
The National bank of Pakistan should monitor the impact of its operations
on the environment, which is mainly through the use of power and the
generation of waste.

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NBP, being the only lending arm to the government for public sector
development should design, develop and deliver product and services for
economic growth.
The bank should provide support to the Micro, Small and Medium
enterprises thereby reducing unemployment and helping to create a more
equitable distribution of wealth.
The NBP should adopt modern banking tools and techniques. Quality
leadership, clear vision, investment in IT infrastructure and human resource
development.
The bank should develop software for pension disbursement.
As for as Islamic Banking environment is concerned the management and
employees of NBP should work together for basic research for discovering
their own laws, developing theories or concepts for the better direction of
their own business environment according to Quran & Sunnah.
The branches should reduce its large expenses in order to increase the value
of the bank.
The NBP should strengthen incentives and accelerate a results-oriented
training and communications programs for management and staff.
The National Bank of Pakistan should implement a financial inclusion
program to meet the needs of underserved economic subsectors, including
outreach programs to meet the requirements of the agriculture, housing,
SME and microfinance sectors.

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The National Bank of Pakistan should introduce a framework for

consolidated supervision and reorganize the regulatory architecture to allow
better regulation and supervision of financial control division of bank.

CONCLUSIONS
The National Bank of Pakistan plays a key role in the strategic national
development. The bank has historically been the financial arm of the
government and has enjoyed the blessings of state support in the form of
huge public sector funds and deposits.
In contract to other banks populating the FSI sector, NBP is mandated to
uphold public interest. It is critical too as all other banks and NBFIs in
public sector have been closed down or merged with NBP.
In contract to other banks populating the FSI sector, NBP is mandated to
uphold public interest. It is critical too as all other banks and NBFIs in
public sector have been closed down or merged with NBP.
The current management of National Bank of Pakistan was hired purely for
their international experience, business orientation to turn around a purely
public institution into a sustainable and commercially viable bank serving
public interest along the lines of a large modern commercial bank.
The National Bank of Pakistan has effective budgeting system in place.
Annual budget of the bank is approved by the Board and monthly
comparisons of actual results with the budget are prepared and reviewed by
the senior management.
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The National Bank of Pakistan has a comprehensive framework of written

policies and procedures on all major areas of operations such as Credit,
Treasury Operations, Finance, Internal audit and Compliance approved by
the Board.
The National Bank of Pakistan provides sustainable financing for growth of
industries of critical national importance such as energy, education,
healthcare, transport, shipping, Research & development.

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Refrences

ii

Annual reports of the National Bank

Previous reports on National Bank.
Existing documents of National Bank.
Annual report of the State Bank of Pakistan
James C. Van Horne, John M. Wachowicz, Jr. Chapter # 6 Financial
Statement Analysis, Financial management 10th Edition, 121-157
Richards, Verlyn D, and Eugene J. Laughlin. A Cash Conversion Cycle
Approach to Liquidity Analysis Financial management 9, 32-38.
The Professionals Academy of Commerce (PAC), Introduction to
Financial Accounting 3-10.
Lawrence

J.

Gitman

Chapter

Financial

Statements,

Taxes,

Depreciation and Cash Flow Principles of Managerial Finance 9 th Edition,

78-84.
Employ handbook of National Bank prepared by Human Resource Division
of National Bank
Officials of Accounting, Finance and MIS department of National Bank of
Pakistan.
Officials of Internal Audit department of National Bank of Pakistan.

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