We are living in a time of extraordinary change.

The ecological and economic threat is looming large on the entire sphere of Pakistanis economy. Pakistani firms must design and make better products and services and should find better ways to market them. What was once regarded enough is no longer competitive. What were once limitless resources are now to be used more efficiently. Today an organization is on the leading edge, or it is on the bleeding edge. I have learned the lessons perhaps the hardest way, that is, though my mistakes. I have tried my best to peep into the generic as well as real cumulative problems faced by the pioneer of banking industry in Pakistan but that degree of objective analysis proved to be of little use since this bank is firmly entrenched in the claws of red tapism and royal bureaucracy.

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Several chapters have been inducted in the report but they seem to be very conventional in nature giving supplementary justification to the fact that NBP is the most conventional of the conventional bank.

Muhammad Umar Ashraf Roll#240

Without the encouragement and help of my fellow students, I perhaps would not have been able to write what I have written, it would be virtually an unending list of persons who helped me in one way or other but then it would be great injustice on my part not to mention the names of those who provided me with the much sought after informationmoral support and cooperation. People belonging to various walks of life contributed in one way or other, but teachers who heads this illustrious which in real terms provided me with foundation on which

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Inshallah, I will build my career much to the pride of my institution and my respected teachers. I am greatly indebted to Prof. Shahid Hussain Nadeem who in reality provided basic guidelines for the production of this report. I am thankful to the staff of City Branch of NBP and specially that of their manager, which provided me with all the information they could provide me with.

In Terms of Return on Capital The Banker, London

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The Banker, Londons Award Winner for Two Consecutive Years

Global Finance, USA

INTRODUCTION
BANKS AND SCOPE OF BANKING
WHAT IS BANK?
A bank is an institution for the custody, loan or exchange of money for sanctioning credit, for transferring funds by domestic foreign

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bills of exchange. It is a pipeline through which currency moves into and out of circulation. As it is clear from the definition of banking, the main activity or function of banking is borrowing and lending of money with a margin of gain. However, as far as the present day banking is concerned, there are a number of different banks, set up under specific different objectives, performing various functions.

BANKING IN DEVELOPING SOCIETIES

In the developed societies, the banks do not have to make many efforts in mobilizing savings, as it has become a second habit with the people. The commercial banks are financing the short and long term capital needs of the business. The loans and discounts of commercial banks include real state mortgages and long term loans, which extend to as long a period as ten years. These banks also administer estates, acts as insurance agents and underwriters, provide brokerage services and implement domestic as well as foreign economic polices of the government.

Commercial banks in developing countries have to make vigorous efforts of resource mobilization at all levels. However, with the passage of time the commercial banking operations are under going remarkable qualitative change. In Pakistan for instance, banking facilities are being extended to the un-banked places. Planned efforts are being made to enhance the supply of bank advances to the new priority sectors in consonance with the present day socio-economic needs.

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A special scheme to induct commercial banks in the field of agricultural credit was introduced in December 1972. The scheme provides for short and medium term loans to farmers under a much simplified procedure. State Banks measures aimed at increasing the flow of credit to the small man in business and industry as well as to housing and non-traditional exports have also yielded positive results. The large risk to the commercial banks in the sphere of agricultural finance and small loans are being covered to a reasonable extent by the Credit Guarantee Scheme. Mandatory targets for small loan credit to the agriculture sector and for housing have been prescribed and are being enforced. Corporate banking is also being reorganized and reactivated on more viable fines.

NEW CHALLENGES OF CONTEMPORARY AGE

Banks play a vital role in the economic development of country. They accumulate the idle savings of the people and make them available for investment. They also create new demand deposits in the process of granting loans and purchasing investment securities. They

facilitate trade both inside and outside the country by accepting and discounting of bills of exchange. Banks also increase the mobility of capital. They provide a variety of facilities for remitting a large amount of money from one place to another by the transfer of a small slip of paper. In a country like Pakistan, which is still in the initial stages of economic development, and well organized banking system is the need of the day. There is acute shortage of capital in Pakistan. The banks

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have to play an important role in promoting capital formation, in controlling speculation in maintaining a balance between requirements and availability and in direction physical resources in to desired channels. In advanced countries of the world like America, Japan, Germany, the rate of capital formation ranges from 12% to 25% of their Gross National Product. Whereas in Pakistan the rate of saving has varied from 5% to 8% only. In order to accelerate the rate of economic development the Government has been acquiring foreign capital. The banks by launching a vigorous campaign both in the villages and cities can mobilize the idle savings and can increase the rate of investment. The country thus becomes independent of foreign capital, which in fact has let us down on almost all the crucial happenings in the country. This deficiency of capital accumulation is due to so many reasons like, lower per capital income, disparity of wealth, unorganized banking system, ineffective fiscal measures etc. One reason of this capital deficiency is the non-adoption of modern marketing tools, such as market research, sales organization, sales training, sales management, advertising etc. for attracting deposits.

HISTORICAL BACKGROUND OF NBP

The story of NBP is part of our struggle for economic

independence. When we won political independence, Nona Pakistanis, mostly Hindus controlled our economy. East Pakistan was spared from massive migration but its economy was also, being dependent on Calcutta, badly hurt. Most bankers and business experts left Pakistan and the economic life was brought to a standstill, these mostly branches

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of Imperial Bank of India were only in partial operation with skeleton staff.

Banking & Finance - History

It was decided that Reserve Bank of India would act as the common monetary authority of both countries up to September 1948. But this arrangement did not prove well. In August 1947, we were given a first installment of Rs.200 million (20 crore) as our share, leaving a balance of Rs.550 million (55 crore) but it was not paid when asked for. In October 1947 there was fighting in Kashmir, when India refused to give us the amount of Rs. 55 crore if we did not give up all interest in Kashmir, which we refused. In response, Reserve Bank of India refused to make even an advance for ways and means. Despite that India had to pay our 50 crore, (the remaining 5 crore still remains unpaid). There was a controversy on establishment of our central bank because we had no experience or expertise but it was resolved and SBP was created, 3 months ahead of schedule, on July 1, 1948, which was the last public appearance of the Quaid-e-Azam. SBP claimed its

share of Assets of Reserve bank of India against the Indian currency retired from Pakistan, but this 50 crore India disputed and virtually refused to settle this dispute up till now. In 1949 (September) U.K. devalued its currency, India followed suit but we did not. India said we had contravened the agreement of keeping both currencies at par. We said we had not done that, India had done it arbitrarily without consulting us. On October 3, 1949, the two central banks were to announce the new par value of both currencies but India denied a day earlier. India also froze our trade - balance

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surplus that is still an unsettled dispute. India also withdraws the Marwari merchants who were employed annually for movement of jute crop by financing it. There being no jute industry, prices fell sharply, foreign banks and foreign merchants stood aside and an agrarian unrest was threatening. Two Ordinances were, therefore, issued. 1. 2. Jute Board Establishment Ordinance & NBP Ordinance dated 08.11.1949

NBP was established on 20.11.1949 to provide finance to suitable parties. NBP stood behind jute trade, SBP stood behind NBP and the government stood behind SPB. Speedy it was such that 6 branches came into being at once and the doubts on our ability to handle this situation were dispelled for ever Now, as the Jute Board and NBP were in the field, the foreign merchants and bankers also rushed in to get their share in the business and consequently NBP had to lay out much less finance than it could. Mr.Ghulam Farooq was chairman Jute Board & Mr. Mumtaz Hassan was chairman NBP. Until June, 1950, NBP remained exclusively in jute operations, thereafter-

other commodities were also taken-up. After that Mr. Zahid Hussain, Governor SBP assumed additional charge also as chairman NBP's Board of Directors, & Mr. Muhajir became its first M.D. In 1952 NBP replaced Imperial Bank of India. This arrangement was negotiated by Mr. Mumtaz Hassan as Acting Governor of SBP. In 1962 when Mr. Mumtaz Hassan became MD (He had already served NBP for 10 years as its Chairman of government Director), the number of branches had increased from 6 to 239 and deposits from Rs.5 crore (50 million) to 106 crore (one billion & 60 million), profit, Page 9 of 77

from 3 million (3 Lac) to 21 million (2.1. crore) and the staff increased from 380 to 7091, as compared to 1949-50. In Dec. 1966 its 600th branch was opened raising the deposits to 2.31 billion. and staff to 14, 963. Up to 1965, the shareholders had received 225% of their original investment. Now its has more than 21549 employees 1537 branches and Rs.208283 million deposit.

MANAGEMENT
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.

CAPITAL
The authorized capital of the Bank is Rs.2500 million divided into 100 million ordinary shares of Rs.10 each. After nationalization, all the shares held by persons other than the Federal Government or Corporations i.e., owned and controlled by the Federal Government was considered as transferred and vested in the Government.

GROWTH AT A GLANCE
(2006-2010)
TOTAL ASSETS
500,000 400,000 300,000 200,000 100,000 0 2006

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2007 2008 2009 2010

DEPOSIT
400,000 300,000 200,000 100,000 0 2006 2007 2008 2009 2010

ADVANCES
200,000 150,000 100,000 50,000 0

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2006 2007 2008 2009 2010

SHAREHOLDERS EQUITY
20,000 15,000 10,000 5,000 0 2006 2007 2008 2009 2010

PRE-TAX PROFIT
10,500 9,000 7,500 6,000 4,500 3,000 1,500 0 2006

Page 12 of 77 2007 2008 2009 2010

AFTER TAX PROFIT

5,000 4,000 3,000 2,000 1,000 0 2006 2007 2008 2009 2010

EARNING PER SHARE

12 10 8 6 4 2 0 2006 2007 Page 13 of 77 2008 2009 2010

RETURN ON ASSETS (PRE TAX PROFIT )

3 2 2 1 1 0 2006 2007 2008 2009 2010

CATEGORIES OF SHARE HOLDERS AS AT DECEMBER 31, 2010 PARTICULARS Govt. of Pakistan SHARE HOLDERS 1 SHARE HOLDING 1203327 %AGE .29%

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President of Pakistan State Bank of Pakistan Directors And Children Associated companies NIT & ICP DFI, NBFI & BANKS Insurance Companies Modarabas General Public (Local) General Public(Foreign) Others Total

2 1 2 2 5 41 12 30 9291 339 159 9885

319554 308536637 2200 9130 2159401 21374555 5575629 11054886 35451030 863835 23792001 410342185

.07% 75% .0005% .0022% .52% 5.2% 1.4% 2.7 % 8.7% .21% 5.8% 100%

BRANCHES
The Bank had a network of 1531branches in the country and 28 branches in foreign countries. These countries are as follows: 1) - United States of America 2) - United Kingdom 3) France 4) - Germany Page 15 of 77

5) - Africa, Middle East Region 6) - Bahrain 7) - Asia Pacific Region 8) - Japan 9) - Republic of Korea 10) - Central Asian States 11) - Bangladesh 12)-Peoples Republic of China 13) - Pakistan.

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ORGANIZATION CHART OF NATIONAL BANK OF PAKISTAN

DESIGNATIONS FOR HIGHER LEVEL OFFICERS PRESIDENT

SENIOR EXECUTIVE VICE PRESIDENT GRADE 22

EXECUTIVE VICE PRESIDENT GRADE 21

VICE PRESIDENT GRADE 20 ASSISTANT VICE PRESIDENT GRADE 19

GRADE I OFFICER GRADE 18

GRADE II OFFICER GRADE 17

GRADE III OFFICER (GRADE 16) Page 17 of 77

MANAGEMENT STRUCTURE
The structure of National Bank of Pakistan is shown in the organizational chart. As the chart shows the top governing body of National Bank of Pakistan is the board of directors. The board of directors elects a president who then heads the executive board of directors which comprises of provincial chiefs and division heads etc. BOARD OF DIRECTORS The board of directors is the supreme governing body of National Bank of Pakistan. it comprises of a government representative, Pakistan Banking Council Nominee, Nominee of corporate sector and three directors from National Bank of Pakistan. EXECUTIVE BOARD OF DIRECTORS The Executive Board of Directors comprises of the four provincial chiefs, the three directors from Board of Directors, and the division heads. These people run the organization. They are answerable to the president and the president is answerable to the Board of Directors. STRUCTURE OF A PROVINCIAL HEAD OFFICE A provincial head office is headed by a provincial chief. As the organizational chart shows that under a provincial head office there are regional offices. In Punjab there are about nine regional offices. Under each regional office there are two or three zonal offices and under each office there are fifteen to twenty branches.

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CORPORATE INFORMATION
BOARD OF DIRECTORS Syed Ali Raza (Chairman & President) Dr. Waqar Masood Khan Iftikhar Ali Malik Muhammad Arshad Chaudhy Syed Shaftat Ali Shah Jamote M. Zubair Motiwala Sikandar Hayat Jamil Muhammad Khalid Malik AUDIT COMMITTEE Muhammad Arshad Chaudhry (Chairman) Syed Shafqat Ali Shah Jamote M. Zubair Motiwala

AUDITORS

M. Yousaf Adil Saleem & Co Chartered Accountants Taseer Hadi Khalid & Co Chartered Accountants Mandiviwala & Zafar Advocates & Legal Consultants NBP Building I.I.Chundrigar Road,Khi

LEGAL ADVISORS

REGISTERED & HEAD OFFICE

REGISTERED & SHARE REGISTRATION OFFICE

Road,

THK Associates (Pvt.) Ltd. Shares Department, Ground Floor Sheikh Sultan Trust Building No. 2 Beaumont Karachi Pakistan.

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MISSION STATEMENT
To make the Bank comparable and competitive with all International standards in performing, quality of operations, quality of staff, quality of financial strength and quality of products and services. Objectives & missions are the means to reach some beneficial end. No one can achieve any target before setting it firstly. So in the same way National Bank has some objectives, which it is trying to achieve. Following are some of them: To maximize profit To provide all sort of banking services. To serve the humanity in all parts of the world through its network of branches throughout the world. To satisfy customers beyond their expectations by providing personalized effective & efficient services in best & possible manner. To serve Pakistan better in order to give socio-economic uplift. To provide the maximum profit to depositors by achieving sound profitable growth. To develop & enhance its system & technology. To train its staff. Providing information & advice to its customers. Providing facilities of foreign currency accounts.

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PRESIDENT MESSAGE

It gives me great pleasure to announce that 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 both of 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 our resources. Nevertheless, we are committed to serving small savers and the general public of the country. By extending and targeting our research to improve bank earnings, through customer focus of our commercial and corporate branches, and by enhanced efforts towards the development of human capital, we shall very soon transform the bank from a bureaucratic organization to a fast paced, modern, and competitive bank. In conclusion, I firmly believe that we have the vision, which will enable us to achieve even better results, safeguard the interest of our customers and to assist us in our march towards progress and prosperity in future. S. Ali Raza
Chairman & President

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FIELD OF ACTIVITIES
FOREIGN EXCHANGE
The branches of the Bank in foreign countries handled the export business and import business. National Bank of Pakistan started a joint venture in collaboration with the Bank of Al-Jazira. Its head office is at Jeddah and also includes twelve other branches. National Bank of Pakistan as a trustee of the National Investment Trust Limited, and also operates a subsidiary for the promotion of agricultural production named the National Agriculture Limited. SERVICES PROVIDED BY NATIONAL BANK OF PAKISTAN National Bank of Pakistan provides following main services to its customers: It acts like a financial intermediary between importers and exporters. It provides services in share of deposits, advances guarantees etc. Full and efficient services of foreign trade. Better computer system through which statement of a client could be made. accounts of

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NBP SAIBAAN
National Bank of Pakistan (NBP) has announced the launch of a housing scheme to cover all sections of the society with monthly income starting from as low as Rs. 5000/- per month*. *(Conditions apply) Branded as 'NBP Saibaan (Housing for all), the scheme offers a maximum loan of Rs 10 million in accordance with the debt burden criterion. Loans are available for Home Construction, Home Purchase and Home Improvement. For Home Improvement Loans the maximum amount is Rs. 2.00 Million. Home Construction and Home Purchase loans can be repaid over a period of 20 years, whereas the repayment period for Home Improvement loan is 15 years.

FUNCTIONS OF NBP
The National Bank of Pakistan performs two types of function. It acts as an ordinary commercial bank, and at places where there are no branches of State Bank of Pakistan it represents Pakistan, that is why it cannot be privatized. As a commercial bank it performs the following functions. 1. 2. 3. 4. Accepting of deposits of money on current account, saving, term deposit and other profit and loss sharing accounts. Borrowing money and arranging finance from other banks. Advancing and lending money to it's clients. Financing of projects including technical assistance, project ` appraisal through long term/short term loans.

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5.

Buying, selling, dealing and discounting of bills of exchange, promissory notes, drafts, bill of lading, other instruments of securities etc.

6. 7. 8. 9.

Foreign exchange business. Financing of seasonal crops like cotton, wheat, rice, Receiving of bonds, scripts, valuable etc. for safe custody. Carrying on agency business of any description other than managing agent on and local authorities. behalf of clients, including government

10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21.

Generating, undertaking, promoting etc. of issue of shares, bonds. Transacting guarantees and indemnity business. Undertaking and executing trusts. Making investments in other banking companies. Joint venturing with foreign dealers, agents and companies for its representation abroad. Participating World Bank's and Asian Development bank's lines of credit. Utility services. Providing Hajj services to intending Hajis. Agent to State Bank of Pakistan for collecting Payment of pension on behalf of provincial and central governments. Treasury business. Gold finances.

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PRODUCT / SERVICE MIX OF NATIONAL BANK

Product of a bank includes all those services, which a customer can use effectively in has general and business live. NBP Main Branch, Lahore offer a wide range of banking services to public and private sector corporations, partnership, individuals and others. However, there are some basic services which NBP at present offered to his customers include: Receipts f customer deposits. Collection of his cheques drawn on other banks. Making payments through cheques drawn on it. Making remittances Foreign trade services.

At present NBP offering the following financial services and investments options to customers. 1- Deposits 2- Advances 3- Foreign Services

DEPOSITS
To receive deposits is a basic function of all commercial banks. Commercial banks do not receive these deposits for save keeping purpose only. But they accept deposits as debts. When a bank receives a deposit from a customer becomes the creditor and the bank a debtor. When the bank receives the amount of deposit as a debtor, it becomes the owner of it. It may, therefore, use it as it deems appropriate. But there is an implicit agreement that the amount owned would be paid back by the bank to depositor n demand or often a specified time. Deposits are the lifeblood of a bank and their classification is based on the duration and purpose for which the deposits are to be kept at the bank before the depositors can withdraw them. At present NBP accepts deposits in bother local & foreign currencies and provides a Page 25 of 77

variety of accounts where these sums are put in at the desire of the customers.

LOCAL CURRENCY DEPOSITS

In local currency (PKR) the following type of accounts are available at the bank 1-Current Account 2-Saving A/c 3-Short term deposits 4-Fixed deposit receipts CURRENT ACCOUNT These are payable to the customer whenever they are demanded. The bank treats these deposits as current liabilities. No profit is given on these accounts and there is no restriction of minimum balance to be kept in these accounts. SAVING ACCOUNT In such types of account, the depositors are normally allowed to withdraw a limited amount of money only twice a week. FIXED DEPOSIT RECEIPTS In these accounts the amounts are deposited for fixed period which may be 1 month, 3 months, 6 months and 1 year.

SHORT TERM DEPOSITS Page 26 of 77

In these accounts the amounts are deposited for fixed period but shorter than that of fixed deposit receipts, which may be 7 days, and 30 days. FOREIGN CURRENCY DEPOSITS At present NBP Main Branch accepts US$, GBR, YEN and DM in shape of foreign currency deposits. For these foreign currency deposits bank has offered the following accounts. 1-Foreign Currency Accounts. 2-Foreign Currency Saving Accounts. FOREIGN CURRENCY CURRENT ACCOUNTS In these accounts depositors can deposit a sum of money in any of the above mentioned currencies. The depositor can also withdraw any amount subject to he availability of the amount. No profit is given on these accounts and no restriction as per the minimum balance required. FOREIGN CURRENCY SAVING ACCOUNTS NBP pays the interest that is earned on the sums available in the accounts by making investments. ADVANCES Advances are the major source of earning income for commercial banks; it is the interest charged on the money lend to customers. Bank advances to customers are made either by way of loan or by overdraft on current account.

FOREIGN SERVICES

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Following is the list of major foreign services provided by NBP to its customers: e .g: a- Documentary Letter of Credit b- Bills of Negotiation c- Foreign Services d- Bills for collection DOCUMENTARY LETTER OF CREDIT A documentary letter of credit may be defined as an authority issued by the opening bank on behalf of the importer in favor of the exporter with the stipulation that the drafts drawn there under will be duly honored provided that the terms and conditions as mentioned there in are duly compiled with. With respect to the documentary credit the following types of documentary letter of credit are offered by NBP; Revocable LC Irrevocable LC Confirmed LC Transferable LC Back to back LC Stand by LC Sight LC Usance LC

BILLS FOR NEGOTIATION

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In some cases the exporter is not willing to wait for the proceeds of collection to be remitted. In such cases exporter requests the Bank to negotiate the bills i.e. he sends the documents to Bank. In this case Bank examines the documents and arranges them with the requirements mentioned in the Letter of Credit. When bank satisfied it pays to the exporter. Now Bank has the right to collect the proceeds on his own behalf from the importers Bank NBP performs the functions of both the exporters and the importers Bank as per its customers status. BILLS FOR COLLECTION The exporters and bank receives the documents from the exporter, examines and dispatches them to the importer, s bank. The importer, s bank confirms these, as per the requirements stated in the letter of credit. If founds correct gets the amount from the customer, advice the exporter ,s bank about the receipt of payment and in the end makes the payment to the exporters bank.

REMITTANCE It includes local and foreign currency fund transfer. NBP also provide the facility to its customers in remitting funds from one place to another place. The remittance (between two countries). At present bank provides the following instrument that facilitates the transfer of funds. TT ( telegraphic Transfer) DD (Demand Draft) PO (Pay Order)

UNMATCHED BANKING FACILITIES

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 Deposit security, Guaranteed by Government of Pakistan Highest rates of return to attract the savings. Lowest rates on exports and other borrowings. Largest contribution towards Government and Semi- Government Requirements. Agent of the State Bank of Pakistan handling Treasury Functions, receipts of Taxes & other Revenues. Handling of salaries and pensions of federal/ provincial employees and defense personnel. Utility Bills collections. Hajj arrangements. Sale and encashment of Prize Bonds through its 266 authorized branches. Sale and encashment of Defense Savings and Special Savings Certificates. Safe Deposit Lockers for customers. Rational Human Resource Management. NBP ATM SERVICES FOR YOUR CONVENIENCE Cash withdrawal according to your cyclic limit. Transfer of funds between PLS Savings Account and Current Account of the same customer through the same ATM Card. Account Balance Inquiry. Instant mini- statement of account listing the last 15 transactions in account. Request for a new Cheque book which might be collected by the customer from the branch.

HOW MUCH CASH CAN BE WITHDRAWN

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There is a 24 hours cyclic cash withdrawal limit imposed on all ATM cards. Withdrawal limits depend on the type of customers. PIN (PERSONAL IDENTIFICATION NUMBER) MAILER A pin mailer issued to the ATM card holders carries the PIN number in a sealed envelope. Card holder is required to keep the PIN number in a safe place as all the operation on the ATM is carried out through the same.

FUNCTIONS OF NBP AS A REPRESENTATIVE OF STATE BANK OF PAKISTAN

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Collection of cheques and bill of exchange for its customers. Paying insurance premium, rent or other obligations of the customers. Collecting interests due, dividend pensions and other sums due to customers. Transferring of money from place to place. Acting an executors, trustees for the customers. Providing safe custody and jewelry documents or securities. Issuing of travelers cheques and letter of credit to give credit facilities for travel. Purchasing shares for the customers. Accepting bills of exchange on behalf of customers. Undertaking foreign exchange business. Furnishing trade information and tendering advice to customers. Formulating operation policy guidelines for the banks.

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13. 14. 15. 16. 17.

Laying down performance criteria for banks and taking steps for ensuring their observance. Evaluating the performance of the banks in the context of operational guidelines issued to the banks. Determining the areas of coordination of the banks. Formulating schemes under section of the act. Making recommendations to the federal government for the appointment of the president and members of the executive board.

18.

Analyzing and appraising financial statement including balance sheets and profit and loss accounts of banks and appointment of auditors of the bank.

19. 20.

Conducting such surveys, inquiries and appraisals as may be necessary for the purpose of this act. Exercising and performing such powers and functions of the federal government under the act and such other functions as

the federal government may assign to it. 21. Establishing a research department or conduct banking research and in particular study 22. 23. overseas banking operation and problems of the agricultural financing. Establishing a central training institution for improving bank services. Coordinating the planning of the operations of nationalized commercial banks, and exercising general overall checks on the cost of their operations.

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DEPARTMENTS
CLEARING DEPARTMENT
Nearly all the banks provide a wide variety of services to their depositors. One valuable service provided is that of clearing. Clearing department also plays an important role in performing the activities of the bank. The basic function of clearing department is to provide services to customers in collection of their cheques of other banks, whether they are in city or outside the city. The customer can get the money in his account at NBP from the cheques drawn on another bank. The bank accepts the cheque in the clearing which it is drawn through the clearing house i.e., State Bank of Pakistan. FIXED DEPOSITS In this type of account a certain amount is deposited for a certain period such as six month, two years or longer. A fix deposit receipts is issued in the name of the depositor. The officer in charge and the bank manager sign the receipt. A notice is given to the depositor on a prescribed form two weeks before the FDR falls due, requesting the depositor to withdrawn his money or to renew his deposits. The interest allowed on fixed deposit varies with the period for which the deposits are made.

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SHORT TERM DEPOSIT Application for short-term deposit is taken on form F-486 and the amount on form F-88. The amount of such deposits will be credited to short term deposit account. Rate of interest allowed by bank on shortterm deposit is advised by the head office from time to time and are laid down in section XII of supplement No.1. CALL DEPOSITS Branch may accept call deposit from local bank or from other on such rates on interest as may be prescribed by the head office from time to time through controlling office. These deposits will be credited to call deposit account in the favor of government and semi government department should also be credited to call deposit account. SAVING ACCOUNTS Saving account is opened by the client through an application on the printed form available from the bank as per instructions mentioned thereon. An existing account holder in the same branch must verify the signatures of the new applicant. Application must be accompanied an amount of Rs.500/- in cash of PLS account, and Rs.1000/ in case of current account. A copy of national identity card must be attached with the application how along with the specimen signature card signed by the applicant.

ARTICLES IN SAFE CUSTODY

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Application for articles in safe deposits taken from the depositor on form of 175 signature of the depositor should be verified by the supervising official the number of the relative safe deposits noted thereon on the application form filed in serial order in a separate file which should be kept in the strong room overnight. Particulars of articles taken into safe deposit will be recorded on the safe deposit register.

CLEARING
We can define clearing as, the transfer of funds from one branch of bank to the other branch of the same bank or the other bank on which the instrument is drawn, without involving cash through State Banks clearing house or we can say in other that cheques which can not be cashed at the ash counter of the bank. CLEARING HOUSE It is of the service provided by central bank i.e., State Bank of Pakistan to the other commercial banks. SBP acts as a clearing house. A representative of each bank represents his bank in the clearing house. A clearing house is an association of commercial banks set up in a given locality for the purpose of interchange & settlement of credit claims. The SBP maintains the accounts of the NBP like other scheduled banks and debits the account of the drawee bank and credits the presented bank which is NBP in that case.

TYPES OF CHEQUE

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Some specific types of cheque are being entertained in the clearing department of NBP Main Branch, Lahore. These types of cheque are: 1) - Local cheque 2) - Out station cheque 3) - In house cheque 1) - LOCAL CHEQUE By local cheque we mean collection of cheque from the banks which are the members of the clearing house and which are located within the city. 2) - OUT STATION CHEQUE By out station cheque we mean collection of cheque from the banks which are situated outside the city. It means that presenting bank and the bank on which the cheque is drawn are not situated in the same city. 3) - IN HOUSE CHEQUE In house cheque are drawn on one branch of NBP and presented to another branch of NBP such cheques are marked with transfer stamp.

TYPES OF CLEARING
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Clearing department deals with the two type of the clearance. These are stated below: 1) - Inward clearance 2) - Outward clearance INWARD CLEARANCE Cheque drawn on NBP and presented to other Banks or handed over to NBP agent in clearing house. That is inward clearance for NBP. So inward clearing results in outflow of funds to collecting bands reducing the balance in the clearing account. OUTWARD CLEARANCE Similarly cheque which are drawn on other bank and presented to NB Main branch, Lahore are known as outward clearance for NBP Main Branch. So outward clearing results in inflow of funds from paying bank into the clearing account maintained with clearing house increasing the balance in the clearing account. Outward clearing thus may be: Local clearing Outstation clearing Excess of outward clearing over inward clearing produces a net increase in the clearing account balance. Excess of inward clearing over outward. Clearing produces a net decrease in the clearing account balance. The first case is referred to as favorable clearing & the second case as unfavorable clearing.

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REMITTANCE DEPARTMENT
Remittance is the monitory transfer from one place to another place or from one country to another country to fulfill the requirements of the customers by the order of the customer. Remittance Department at NBP Main Branch Lahore can be divided into two sections due to its activities. 1) - Local Remittance 2) - Foreign Remittance LOCAL REMITTANCE Local remittance section deals with remittance ( incoming and outgoing but only in local i.e., Pakistan rupee and within Pakistan. Local remittance includes the following eight functions in NBP: a) - Transfer through pay order b) - Transfer through demand draft c) - Telegraphic transfer d)- Issuing of SBP cheques e) - Mail transfer f) - Local / internal transfer g) - Preparation of balance certificates.

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ACCOUNTS DEPARTMENT
The main function of the accounts department of NBP is to maintain general ledger accounts and after the business hours the function of the accounts officer is to close books.

FUNCTIONS
There are many other important functions performed by accounts department of NBP. So I ma going to discuss these functions in three steps: -General Ledger; -Voucher system; -Types of voucher used.

GENERAL LEDGER:
It is the prime record of the branch reflecting its assets and liabilities and serves as the master control of accounting system of the branch. It consists of only those accounts, which are authorized by the head office.

VOUCHER SYSTEM:
Voucher is a written authorization sued in approving a transaction for recording and payment. Voucher is a system, which is generally designed to provide strong internal control over the transaction, which take place during the business hours.

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 Whenever a transaction takes place in any department of the bank. One debit and one credit voucher is prepared. At the end of the day, these vouchers are collected and recorded i.e., Debit vouchers are used in two cases: When ever any expense is incurred. When a depositor withdraws some amount from his account The account of the customer is debited with the amount and debit voucher is prepared. The format of the debit voucher includes: -Name of branch -Date -Branch No. -Account No. -Transaction Code -Amount and other details (Narration)

CREDIT VOUCHERS:
There are two types of transaction in which credit vouchers are used. When a depositor deposits any amount in his account because the liability of bank. Any income received by the bank e.g. bank draft. Different types of credit vouchers are used.

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Now in second set these three important functions of Account department of NBP are described briefly. 1. All expenses vouchers are routed ask through Accounts Department. 2. Preparation of various statements. 3. Preparation daily activity report at the end of each day.

EXPENSE VOUCHER
All the expense vouchers passed by each department are routed through accounts department. These expenses include: a) b) c) d) e) f) g) h) i) Salaries given to all employees of the bank Wages Rent Lease installments Insurance - vehicle Insurance - cash Utility Bills Medical allowances (reimbursed) Cash carrying charges etc.

SALARY STRUCTURE Salary included Bonuses These bonuses are credited after every six months i.e. June and December. These are first and second profit bonuses and are equal to one month's basic salary.

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 Allowances: Allowances included house allowances, transport allowance and utility allowance. Provident Fund: Provident fund is provided to each employee on his retirement. Contribution by employer and employee is 8.3%. Preparation of statements: Second major functions of accounts department are the preparation of various statements. These statements are: 1) - Weekly Statements: These weekly statements are sent at first to NBP head office Karachi. 2) - Monthly Statements: These monthly statements are sent at first to NBP head office Karachi and then these statements are sent to head office affairs in consolidated form. All vouchers and statements signed and approved by manager accounts or who has authority to sign on behalf of the bank and whose signatures appear in one of the banks book of specimen signatures or a person who has authority to sign internal vouchers and records extent of its authority will be made by the country manager.

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Preparation of Daily Activity Reports: It is also duty of accounts department to prepare daily activity report at the end of each day. It includes the details of the following: A) - loans transactions B) - general Ledger transactions C) - Foreign currency related transactions D) - fixed deposits transactions

All vouchers prepared by different relative departments on NBP are described as follows: Approval of daily expenses voucher SBP balance Tax returns Budgeting Forward Cover Fee Debit Balance Calculation Pay order/telegraphic commission transfer Deposit entry Depreciation Result/budget Head office report Trial balance Commitment return Sources and uses Activity report Statistics of activity Page 43 of 77

computer.

In third and last step the following functions of accounts department of

 Monthly assets and liability Liquidity 1, 2, 3, 4, 5 years Excise duty balancing EOM/EOY Print files floppy Customer's/internal A/c statements Computer complete back up Quarterly statements size wise FCY interest reporting FCY interest checking Service Charges A/c to be dormant Letters to customers Classification of deposits List of deposits A/c opening and closing Staff loans A/c blocked and unblocked Monthly resident and non resident Zakat Calculations. ACCOUNTING PROCEDURE IN NBP: 1. Various departments use debit and credit voucher for recording the transactions. 2. Accounting department receives the departmental journal from the departments to gather with all the vouchers. 3. Verify correction of total of all into departmental entries in departmental journals. 4. Sort vouchers into general ledger a/c order debit separately from debit for each account. Page 44 of 77

5. From departmental journals add all debits and all credits for each general ledger account and write total for each account in relative account and extend new balances. 6. Prove debit and credit totals to department journal total. Write total obtained from machines list for each contingent accident in general ledger and up data balances. 7. Date and sign general ledger and obtain signature of an officer. 8. Place general ledger includes leaf binder in chronological order.

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ADVANCES DEPARTMENT
1. 2. 3. 1. Loans Cash Credit Overdraft LOANS Monetary assistance by a financial institution to a business some financial problems such as to finance fiscal assets, working capital, bridge finance, etc. The loans are granted by the bank in lump sum, so this type called fixed or demand loans. Interest is charged on the whole amount of a fixed loan. The borrower withdraws whole the amount of loan. This type of loan is normally granted against security of gold and documents. In case of demand loans against gold or documents, a demand promissory note for the amount of loan is taken from the borrower. Loans are granted under: Loan against Gold Under this type of loan which is granted to the borrower. The Head Cashier estimates the value of Gold or Gold ornaments through an agent (Gold smith) and keeps a margin of 40 to 50 per cent. After the opening the gold loan account a token is given to the borrower which is a bank receipt.

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On repayment of loan, the gold or ornaments held as security for it, together with the demand promissory note duly discharged is returned to the borrower and his receipt for the gold ornament taken in the demand loan ledger. This receipts states that the ornaments returned are complete and in order. Part delivery of ornaments is given against part payment of a loan but care is taken that the ornaments still in the banks possession fully covers the balance of the loan outstanding. The interest on gold loan is to be applied with quarterly rests. Loan against pledged of stock: In case of advancing such types of loans, the following precaution is kept in the mind: a) b) c) 2. Stock pledged must be readily saleable. Products should be readily saleable. Advance should be within the borrows means.

CASH CREDITOR Under such cash credit account is opened in the name of the

customer who borrows from the bank. Customer is granted a loan up to a certain limit which is sanctioned by the head office, which he draw when he requires interest is charged on the amount actually utilized by the customer. In order to avoid the danger of idle fund, the bank charges are certain rate of interest, even if the customer does not withdraw any amount. The credit is usually given against the securities of goods or merchandise as follows:

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Advances against Pledge Stock in Trade or Products: When a cash is granted against the pledge of stock or product, cash credit form is taken, from the certain products or stock, but the actual pledge is created when the stock or finished product are placed under the bank's lock and key or the document of title are duly endorsed to the bank by the borrower. Hypothecation of stock on Finished Products The difference between pledge and hypothecation is that under a pledge the borrower's goods are placed in the bank's possession under own lock, whereas, under a hypothecation, they remain in the possession of the borrower or guarantor and are merely charged to the bank under documents signed by them. Even though the documents empower the bank to take possession of the goods hypothecated, but it is possible that the borrower may actually resist any attempt. Mortgages of property: Title deeds of immovable property is accepted by the bank only as collateral security or alternatively as unauthorized security. 3. OVER DRAFTS: When the bankers permits his customer to overdraw upon his current account up to a certain limit, it is called overdraft facility provided buy the bank. The customer is charged with the interest for the amount he has actually overdrawn from the bank. The customer is free to take the overdraft facility up to the limit whenever he needs

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and he can at any time return back the advance to the bank by deposited the amount with the bank. There are two types of overdrafts: Unsecured Overdraft: Under such type of overdraft the bank rely upon the personal security of the customer or customers mentioned on the customer's account. Secured Overdraft Under this type of overdraft the bank allows his customer to withdraw more than his deposits after giving security against the amount overdrawn. The securities against which the amount is withdrawn may or Government or other first class.

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CASH DEALING DEPARTMENT

The following books are maintained in the Cash Department: 1. 2. 3. 4. 5. Receiving Cashier Bank Paying Cashier Book Token Book Scroll Book Cash Balance Book

When cash is received in counter, it is entered in the Scroll Book and Receiving Cashier Book. At the close of the day, these are balanced with each other. When the cheque or any negotiable instrument is presented at counter for payment, it is entered in the token book and token is issued to the customer. The token and the Cashier makes entry in the paying book and payment is made to payee. At the close of day, the Token Book and Paying Cashier Book is balanced. The consolidated figure of receipt and payment of cash is entered in the cash balance book and drawn closing balance of cash.
Opening balance of Cash + Receipts Payments = Closing Balance.

This is very important department. All the books maintained in this department are checked by an officer.

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WORK DONE BY ME
Major activities performed during my internship program are as follows;

ACCOUNT OPENNING DEPARTMENT

In this department, I gain the practical knowledge about opening account. This department deals with opening current and saving The account for its customers and all matters regarding thereof. following. -Individual -Firm -Company -Trust -Staff -Others

customers opening current and saving accounts can be categorized as

OPENING ACCOUNTS
In order to open an account, first of all the customers have to fill a form prescribed by the bank. The person is required to bring some reference or introduction for opening the account. Introducer may be the person who has any account with NBP. Some important information regarding introducer e.g. the name and account number of the introducer is written on the space provided on the specimen signature card. Then in order to find out whether he is a true introducer or not, a letter is sent to him thanking him for this introduction so that anything wrong may come into notice.

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There are different requirements for different types of accounts and accountholders.

DEPOSITS
The procedure undertaken upon receiving deposits from the customers is as follows: Examining the deposit slip to ensure that the name and the account numbers are clearly indicated. Counting the cash and cheques and agree the total with the amount on the deposit slip. After that the pay in slip is validated for cash transaction and transfer and clearing transfer as appropriate before the counterfoil is handed over to the customer. Cheques signed by directors, partners or employees of a company, drawn in favor of them and credited in their account in the bank are to be scrutinized.

WITHDRAWALS
Cheques can withdraw amount. The withdrawals can be made No third party

only at the branch where the account is maintained. The officer under his full signature authorizes all cash withdrawals. withdrawal is permitted. hours. In current account, the bank does not offer

any interest. We can deposit or withdraw any amount during banking

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ISSUANCE OF CHEQUE BOOK:

The accountholders request for the new cheque book by presenting the requisition slips along with the authority letter to the concerned office. His signatures are verified before giving him a new cheque book. The presence of the accountholders is compulsory to get a new cheque book. But if he sends a third person to get his cheque book then the procedure is as follows; An authority letter is given to the third party by the accountholders. The accountholders verify the signature of the third person on that authority letter. The bank officer gets the signature of that third person to confirm whether he is the same to whom the accountholder has sent. The bank issues the new cheques book and authority letter is kept buy the bank.

CLEARING DEPARTMENT
In this department, I have worked for two weeks. Main branch receives the cheques from all of its branches and makes the lots of these cheques again. Main branch sends these cheques to the state bank of Pakistan where a clearinghouse exits. In this clearinghouse the representatives receive their cheques and go back to their bank's main branch. Then the main branch sends these cheques to their relevant branches where the validity of these cheques is verified and the accounts of the relevant clients are affected. The statement of clearing was submitted before 1.00 P.M. daily. The whole procedure of clearing is completed within two days.

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REMITTANCES DEPARTMENT
I worked in this department for one week. This department deals in transfer of money from one place to another or country by: -Demand drafts -Mail transfer -Telegraphic transfer In this department internees are advised only to observe the working of transfer of money from one place to another place of the country by the above modes of transferring money. During my stay in this department I observed that how demands draft be issued. procedure is as follows. First the bank receives a written request from the customer to issue a bank draft. The written request is either in banks standard form or separate paper signed by the applicant enclosed with cash or cheques covering the amount of the draft and other charges of the bank. While issuing a bank draft it is necessary that the draft should be free from alternations. All the details must be written clearly in ink. After issuance a demand draft it is handed over to the applicant and its advice containing the particulars of the draft is sent to drawer branch with its necessary information and payment of the draft is make on its presentation. The

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FINANCIAL ANALYSIS
NATIONAL BANK OF PAKISTAN INCOME AND EXPENDITURE ACCOUNT HORIZONTAL ANALYSIS ITEMS
Mark up/Interest earned Mark up/Interest expenses Net Mark up Interest Income Provisions Non Mark up Interest Income Non Mark up interest Expenses Staff Welfare Fund Profit Before Tax Profit After Tax Profit Available For Appropriation

2010
19452317 6735579 12716738 2619043 17345934 7863083 474143 9008708 4198103 7650586

2009
27126839 14698507 12428332 2109678 15527746 9164787 318148 6044811 2253385 4469268

INCREASE %AGE (DECREASE)

(7674522) (796928) 288406 509365 1818188 1301704 155995 2963897 1944718 3181318 28.29% 54.17% 2.32% 9.9% 19.84% 14.20% 49.03% 49.03% 86.30% 71.18%

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NATIONAL BANK OF PAKISTAN BALANCE SHEET HORIZONTAL ANALYSIS Assets

Cash balances with other treasury banks Balances With Other Bank Lending to Financial Institutions Investments Advances Other Assets Operating Fixed Assets

2010
59420502

2009
55531453

INCREASE %AGE (DECREASE) CHANGE

3889049 7%

24154070 30213352 166195619 160990265 21946846 8939483

35878101 21716802 143524971 140547374 27489021 8115131

(11724031) 8496550 22670648 20442891 (5542175) 824352

32.67% 39.12% 15.78% 14.55% 20.16% 10.16%

LIABLITIES 2010
Bills payable Borrowing From Financial Institution Deposits Liabilities Against Leasing Other liabilities Deferred Tax liabilities 5496738 16493514

2009
3365744 10032135

INCREASE %AGE (DECREASE) CHANGE

2130994 6461379 63.3% 64.4%

395568490 41117 26080400 595864

362865637 74059 29682837 2846186

32702853 (32934) (3602437) (2250322)

9% 44.48% 12.14% 79.06%

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REPRESENTED 2010 BY
Share capital Reserves Un Appropriated Profit Surplus 4103422 813312 5897163 9450117

2009
3730384 7144326 3404593 9656960

INCREASE %AGE (DECREASE) CHANGE

373038 988986 2492570 (206843) 9.9% 13.84% 73.21% 2.14%

NATIONAL BANK OF PAKISTAN BALANCE SHEET (ASSETS) VERTICAL ANALYSIS ASSETS 2010 %AGE
13.72%

2009
55531453

%AGE
12.83%

Cash Balance 59420502 With Other treasury banks Balance With 24154070 other Banks Lending to 30213352 Financial Institution Investments Advances Other Assets Operating Fix Assets Total Assets 166195619 160990265 21946846 8939483 471866937

5.58%

35878101

8.29%

6.98%

21716802

5.02%

28.39% 37.19% 4.07% 2.06% 100%

143524971 140547374 27489021 8115131 432802853

33.16% 32.47% 6.35% 1.88% 100%

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NATIONAL BANK OF PAKISTAN BALANCE SHEET (LIABILITIES) VERTICAL ANALYSIS LIABLITIES

Bills Payable Borrowings From Financial Institution

2010
5496738 16493514

%AGE
1.19% 3.56%

2009
3365744 10032135

%AGE
0.78% 2.32%

Deposits 395568490 Liabilities 41117 Against Assets Of leasing Other 26080400 liabilities Deferred text 595864 Liabilities Share Capital Un Appropriated Profit Reserves Surplus on Revaluation of Assets Total 4103422 5897163

84.37% 8.87%

362865637 74051

83.84% 0.017%

5.63% 0.13%

29682837 2846186

6.86% 0.66%

0.89% 1.27%

3730384 3405493

0.86% 0.08%

8133312 9450117

1.756% 2.04%

7144326 9656960

1.65% 2.23%

463355031

100%

432802853

100%

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RATIO ANALYSIS

RETURN ON TOTAL ASSETS ITEMS

Profit After tax Total Assets Return On Total Assets

2010
4198103 471860137 0.889%

2009
2253385 432802853 0.52%

1 0.8 % AGE 0.6 0.4 0.2 0 2010 Years 2009

Comments:
This ratio is increased from .52% in year 2009 to 0.889% in year 2010.which is a sign of good performance.

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RETURN ON EQUITY ITEMS

PROFIT After tax Share holder Equity Return on Equity

2010
4198103 18133897 23.15%

2009
2253385 14279303 15.78%

25 20 15 10 5 0 2010 2009

Comments:
This ratio is increased from 15.78% to 23.15% due to increased in mark up and interest which is a sign of better performance.

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NET PROFIT MARGIN ITEMS

Profit after Tax Mark up, Interest Net profit Margin

2010
4198103 6735579 62.32%

2009
2253385 14698507 15.33%

70 60 50 40 %AGE 30 20 10 0 2010 Years 2009

Comments
Net Profit Margin in year 2010 has increased from 62.32 % to 15.33% in year 2009. This shows that there is good performance of the bank.

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EARNING PER SHARE ITEMS

Profit After tax Total No. Of Shares Earning Per Share

2010
4198103 410342185 Rs.10.23

2009
2253385 3730384 Rs.6.04

12 10 8 Rupees 6 4 2 0 2010 Years 2009

Comments
This is very important ratio for shareholder and investor here in this case EPS has increased to Rs.10.23 from Rs.6.041 which is very good for shareholders and investors.

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COST OF LENDING ITEMS

Interest Income Total Advances Cost of Lending

2010
19452317 160990265 12.08%

2009
27126839 140547374 19.3%

20 15 %AGE 10 5 0

2010 Years

2009

Comments:
This ratio show the cost bear by the bank while lending the money. Here cost of lending has decreased from 19.58% to 12.08% in 2010. Which is positive sign for the bank?

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LIQUIDITY OR SOLVENCY RATIOS

LOAN TO ADVANCE RATIO ITEMS
Total Loans Total Advances Loan to Advance Ratio

2010
16493514 160990265 10.24%

2009
10032135 140547374 7.14%

12 10 8 % AGE 6 4 2 0 2010 Years 2009

Comments
Lower the ratio is better for lending institutions. In this case ratio is increased to 10.24 from 7.14%. Which is not better for bank .It shows that bank loans have increased as compared to its advances.

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LOAN TO TOTAL ASSETS ITEMS

Total Loans Total Assets Loan to Total Assets

2010
16493514 471860137 3.49%

2009
10032135 432802853 2.32%

3.5 3 2.5 2 % AGE 1.5 1 0.5 0

2010 Years

2009

Comments
It shows the empirical relation between loan and assets of bank. Here this ratio has increasing trend which shows poor performance of bank.

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CASH TO DEPOSIT: ITEMS

Cash Deposits Cash to Deposits

2010
83574572 395568490 21.13%

2009
91409554 362865637 25.19%

26 25 24 % AGE 23 22 21 20 19 2010 Years 2009

Comments
This ratio shows that how much cash is available to meet the demand liabilities of depositors. Here this ratio has decreased from 25.19% to 21.13%.

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CURRENT RATIO ITEMS

Current Assets Current Liabilities Current Ratios

2010
410352146 5496738 74:1

2009
190159854 3365744 57:1

80 70 60 50 %AGE 40 30 20 10 0 2010 Years 2009

Comments
As the table shows that current ratio of NBP is higher than standard of 2:1.Here in this that is a good sign and it reflect to the liquidity position if NBP.

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PROPRIETRY RATIO ITEMS

Share Holder Fund Total Assets Proprietary Ratio

2010
18133897 471860137 3.84%

2009
14279303 432802853 3.3%

3.9 3.8 3.7 3.6 %AGE 3.5 3.4 3.3 3.2 3.1 3

2010 Years

2009

Comment
It is the ratio of funds belonging to shareholders to the total assets of the company. In this case this ratio has increased from 3.84% to 3.3% which is better for bank.

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FIXED ASSET TO LONG TERM DEBT RATIO ITEMS

Long Term Debt Fix Asset Ratio

2010
16493514 8939483 1.84:1

2009
10032135 8115131 1.24:1

2 1.5 %AGE 1 0.5 0 2010 Years 2009

Comments
The debt equity ratio should be 1:1 and of this ratio is less than 1 it means that company has followed the imprudent the policy of using the short term funds for acquiring fixed assets.

In this case this ratio is above than standard for both two years. This means that company is utilizing its long term debts efficiently.

GENERAL RATIOS
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COST OF BORROWINGS ITEMS

Mark up Paid Deposits Cost of Borrowing

2010
6735579 395568490 17.02%

2009
14698507 362865637 4.06%

30 25 20
%AGE 15

10 5 0 2010

2009
Years

Comments
It is a comparison between mark up paid and deposits, the lower the mark up paid is better for institution. In this case this ratio is increasing from 4.06% to 17.02%. Which in a negative sign for the performance of the bank.

ADMIN. EXPENSE TO DEPOSIT

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ITEMS
Admin. Exp. Deposit Ratio

2010
7806735 395568490 1.97%

2009
9137779 362865637 2.52%

3 2.5 2
%AGE 1.5

1 0.5 0 2010
Years

2009

Comments
It shows the cost incurred to manage and collect the deposits. Here it is decreased from 2.52% to 1.97%. Which shows be

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SUGGESTIONS & RECOMMENDATIONS

Although NBP is included in ten top most banks of the world equity as well as assets wise, but for the further improvement in various sectors may recommendations to the bank would be as follows: PLANNED AND HEALTHY COMPETITIONS NBP should become very specific about its competitors, so that it can understand who its competitor is in the first degree and who is in the second degree. watched closely. FORMATION OF A RESEARCH CELL A research cell should continuously try to gather information about the present action so its competitors and expected future actions. So in this way more effective strategies can be formulated. REWARD SYSTEM The performance reward linkage should be make strong as it is said, "A happy employee delivers more than he receives from the organization." The NBP should also try to make its employees happier. Then the first-degree competitors should be

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 There is immediate need, to reconstruct the personnel

policies. Selection should be through newspaper advertisements. In this way more intelligent, efficient and qualified staff can be formulated. It is strongly recommended that N.B.P. should go for computerization rather than manual work, which is very slow and time, consuming process. In this age N.B.P. even does not have a partially computerized system where as other new competitor banks are now going towards on-line banking services. Govt. should take keen interest to recover its bad debts, which can improve its financial position. In case of giving the loans, it is necessary to check the repute of customer towards loan repayment. Bank shouldnt advance the money to those people who are addict of rescheduling of loans due to their political influences. Instead providing loans to these persons, loans must be advanced to the well-reputed businesses and industries having good record of loan repayment. Along with the officers, the training must also be given to the clerical staff. Because of N.B.P. are running on manual system and the training of its staff directly improving their efficiency of work.

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Present training program for its officers is need to be improved, as this program instead of improving the efficiency of officers is merely a burden for the bank in the form of heavy T.A. , D.A. and cost.

Working

conditions

must

be

improved

for

the

employees. Bank will definitely get more benefits after some expenditure on the working conditions as it improves employees. N.B.P. should flourish certain marketing plans to attract the customers by giving them certain incentives and beneficial schemes to the customers as other competitor banks are doing so. There is also a need of proper recruitment and selection program. New young talent should be introduced to inject the new ideas. Deterioration in efficiency is mostly due to promotion without merit. So promotions must be awarded on merit and also when due. Special attention should be given to the behavior of the employees towards the customers, as customer is the most important person for any bank. There are many employees who are working on adhoc basis creating dissatisfaction. The deserved should be made permanent employees. efficiency and productivity of the

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Political influences in the bank should be eliminated. To motivate the employees of the bank, regular bonuses and incentives should be given to them. There must be a friendly environment among all the employees as it enhances the trust and sincerity. NBP should be focusing its attention towards the share of traveler cheque. Branch manager should be trained in the field of selling to serve better according to the expectation of customers.

The recruitment policy should be fair and transparent. Management should increase the branch limit of expenditure to fulfill the necessary expenditure of personnel relation.

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CONCLUSION
Almost all the ratios show a positive trend which indicates that profitability, solvency and liquidity position of bank is sound. It means that the organization (NBP) is working progressively and the management is performing its role in a very good manner.

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BIBLIOGRAPHY
History of Banking Industry Available at (http://en.wikipedia.org/wiki/Banking_industry) accessed 25th of August] Pakistan Banking Industry Available at (http://ezinearticles.com/?The-Pakistan-Banking -Industry---AnOverview&id=708009) [accessed 25th of August] Vision of National Bank of Pakistan Available at (http://www.nbp.com.pk/vision) Information about yarn Available at (http://www.nbp.com.pk) I specially thanks Mr. Sohail Abbas Mr. M. Aslam Bhutta Mr. Nasir Abbas Mr. M. Zubair Mr. Gazanfer Abbas Mr. Raza Gillani Manager Manager operation Cash officer Credit officer Deposit incharge ATM In charge

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