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INTERNSHIP REPORT ON
NATIONAL BANK OF PAKISTAN MANDIAN BRANCH
(1348)
ABBOTTABAD
Submitted by:
MUHAMMAD RASOOL
Roll # S32-MBA-011
Supervised by:
DR.AMJAD RAFIQ
GOVERNMENT COLLEGE OF MANAGEMENT SCIENCES
ABBOTTABAD
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(Session 2011to 2013)
INTERNSHIP REPORT ON
NATIONAL BANK OF PAKISTAN MANDIAN BRANCH
(1348)
ABBOTTABAD
Submitted by:
MUHAMMAD RASOOL
Roll # S32-MBA-011
Supervised by:
DR.AMJAD RAFIQ
This internship report is submitted in partial fulfillment of the
requirements for the degree ofMaster of Business Administration
awarded by Hazara University, Mansehra
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GOVERNMENT COLLEGE OF MANAGEMENT SCIENCES
ABBOTTABAD
(Session 2011 to 2013)
GOVERNMENT COLLEGE OF MANAGEMENT SCIENCES
ABBOTTABAD
Approval Committee
1. External Examiner
Mr. /Miss. ________________________________ Signature_______________
2. Supervisor
DR.AMJAD RAFIQ_______________________ _Signature_______________
Designation: ( Professor)
3. Head of Department
Professor M ushtaq Ahmed_____________________ Signature_____________
Designation: (Principal)
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DEDICATION
This report is dedicated to my parents for giving me this opportunity to attend this degreeand supporting me throughout my student life who acted as a backbone and a major
reason behind my accomplishment, my grand parents who have always supported me
with their prays and also to my honorable teachers and friends who have always guided
me.
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ABSTRACT
To every country and the people living there, a need of such an institution is always
needed that can circulate and deal in money. Such institutions are also required to fulfill
other financial needs such as provision of place to deposit money, serving for the utilities
and also advancing money in order to facilitate the needs of people and the businesses.
These organizations in any form can collectively be called as Banks.
Banking services are extremely important for both economies developed and developing
economy such as Pakistan. Banking services serve two primary purposes.
First, by supplying customers with the basic mediums-of-exchange (cash, current
accounts, and credit cards), banks play a key role in the way goods and services are
purchased. Without these familiar methods of payment, goods could only be exchanged
by barter (trading one good for another), which is extremely time-consuming and
inefficient.
Second, by accepting money deposits from savers and then lending the money to
borrowers, banks encourage the flow of money to productive use and investments. This
in turn allows the economy to grow. Without this flow, savings would sit idle insomeones safe or pocket, money would not be available to borrow, people would not be
able to purchase cars or houses, and businesses would not be able to build the new
factories the economy needs to produce more goods and grow. Enabling the flow of
money from savers to investors is called financial intermediation, and it is extremely
important for the growth of economy
This report covers all the areas of the NBP bank that clearly show that how the bank is
being excelling in many areas. The report also covers the analysis portion with the help of
which we come to know that where it is strong and where it needs to be strong.
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TABLE OF CONTENTS
_______________________________________________________________________iv
DEDICATION___________________________________________________________vABSTRACT_____________________________________________________________vi
LIST OF TABLE________________________________________________________xii
Table 2.1: Board of directors_________________________________________ 14___xii
Table 2.2: Senior managers of NBP ___________________________________ 15___xii
Table 2.3: NBP Overseas Branches____________________________________ 16__xii
Table 4.1: NBP Performance in 2008-2010______________________________ 34__xii
Table 4.2: Vertical Analysis of Balance Sheet___________________________ 37___xii
Table 4.3: Vertical Analysis of Income Statement_______________________ 38____xii
Table 4.4: Horizontal Analysis of Balance Sheet_________________________ 41___xii
Table 4.5: Horizontal Analysis of Income Statement_____________________ 42____xii
Table 4.6: Ratio Analysis ___________________________________________ 46___xii
Table 4.7: Ratio Analysis ___________________________________________ 46___xii
Table 4.8: Return on Earning Assets__________________________________ 47___xii
Table 4.9: Operating Cost to Income Ratio_____________________________ 48____xii
Table 4.10: Equity to Total Assets_____________________________________ 49___xii
Table 4.11: Credit Ratio_____________________________________________ 50___xii
Table 4.12: Long loss coverage ratio___________________________________ 50___xii
Table 4.13: Interest Income per employee______________________________ 51___xii
Table4.16 Business per branch______________________________________ 53____xii
Table 4.17: Employee per branch____________________________________ 53____xii
Table 4.18: Return on equity________________________________________ 54____xii
Table 4.19: Return on Assets________________________________________ 55____xii
Table 4.20: Deposit Ratio___________________________________________ 56____xiiTable 4.21: Assets Ratio____________________________________________ 56____xii
LIST OF FIGURE/DIAGRAMS___________________________________________xiii
Figure 2.1: NBP Organization Chart________________________ 11____________xiii
Figure 2.2: NBP Main Branch Organization Chart_________ 17_______________xiii
Figure 4.1: Equity and liability_____________________________ 41____________xiii
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Figure 4.2: Ratio Analysis_________________________________ 46___________xiii
Figure 4.3: Return on earning assets________________________ 47____________xiii
Figure 4.4: Operating Cost to income ratio___________________ 48____________xiii
Figure 4.5: Operating Cost________________________________ 48____________xiii
Figure 4.6: Equity to total assets____________________________ 49____________xiii
Figure 4.7: Credit ratio____________________________________ 50___________xiii
Figure 4.8: Interest Income per employee____________________ 51____________xiii
Figure 4.9: Profit per employee_____________________________ 51____________xiii
Figure 4.10: Business per employee__________________________ 52___________xiii
Figure 4.11 Business per branch____________________________ 53___________xiii
Figure 4.12 Employee per branch___________________________ 54___________xiii
Figure 4.13 Return on equity_______________________________ 54___________xiii
Figure 4.14 Return on Assets_______________________________ 55___________xiii
Figure 4.15 Deposit ratio___________________________________ 56__________xiii
ACKNOWLEDGEMENT_________________________________________________xiv
__________________________xiv
EXECUTIVE SUMMARY_______________________________________________xvii
CHAPTER 1____________________________________________________________1
INTRODUCTION TO THE REPORT________________________________________1
1.1 Objective of the study___________________________________________________11.2 Limitations of the study_________________________________________________1
1.3 Merits of the study_____________________________________________________2
1.4 Methodology of the Study_______________________________________________2
1.4.1 The primary data was collected through__________________________________3
1.4.2 Secondary data______________________________________________________3
1.5 Scheme of the report ___________________________________________________3
1.6 Organizational structure of Mandian Branch Abbottabad_____________________3
CHAPTER 2____________________________________________________________4
HISTORY AND INTRODUCTION TO NBP__________________________________4
2.1 Evolution of Banking__________________________________________________4
2.1.1 Meaning of Bank:____________________________________________________4
2.1.3 Banking in South Asia:_______________________________________________5
2.1.4 History of Banking in Pakistan:________________________________________6
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2. 2 Historical background of National Bank of Pakistan________________________7
2.2. 1 Present Status of the Bank____________________________________________8
2.2.2 Existing NBP Branches in Pakistan_____________________________________9
2.2.3 Credit Rating________________________________________________________9
2.2.4 Auditors __________________________________________________________10
2.3 Organizational structure_______________________________________________10
2.4 The Vision statement of NBP___________________________________________12
2.5 The Mission statement of NBP__________________________________________12
2.6 Objective of NBP_____________________________________________________12
2.6.1 Maximum profit____________________________________________________12
2.6.2 Maximize deposits___________________________________________________12
2.6.3 Economic Growth___________________________________________________13
2.6.4 Customer service____________________________________________________13
2.6.5 Expenditure discipline_______________________________________________13
2.6.6 Facilities to staff & utilization of staff___________________________________13
2.7 Goals______________________________________________________________13
2.8 Core values of NBP___________________________________________________13
2.9 Corporate profile_____________________________________________________14
2.10 Executive Committee _____14
2.10.1. Board of Directors:________________________________________________142.10.2 Regional Manager_________________________________________________14
2.10.3 Number of Directors________________________________________________15
2.11 Introduction to NBP Mandian Branch__________________________________17
2.11.1 Location_________________________________________________________17
2.11.3 Credit Committee__________________________________________________19
CHAPTER 3___________________________________________________________20
PRODUCTS AND SERVICES PROVIDED AT NBP__________________________20
3.1 Functions of NBP____________________________________________________20
3.1.1 Receiving deposits___________________________________________________20
Current / demand deposits_________________________________________________20
3.1.2 Advances on open account or overdraft_________________________________20
3.1.3 Discounting on open account or overdraft_______________________________21
3.1.4 Cash credit system or ordinary loans____________________________________21
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3.1.5 Remitting funds ____________________________________________________21
3.1.6 Safe custody_______________________________________________________21
3.1.7 Agency functions___________________________________________________21
3.1.8 Reference_________________________________________________________21
3.2 Departments of NBP Mandian Branch ___________________________________22
3.2.1 Deposit Department_________________________________________________22
3.2.2 Functions of Deposit Department______________________________________22
3.2.3 Classification of Deposits_____________________________________________23
3.3 Products____________________________________________________________25
3.3.1 NBP Premium Aamdani (Monthly Income Scheme) _______________________25
3.3.2 NBP Premium Saver (PLS Saving Account)_____________________________25
3.3.3 NBP Karobar (Mera Apna Karobar under President's Rozgar Scheme)_______26
KIBOR + 2.00%p.a.______________________________________________________26
3.3.4 NBP Saiban (House Finance)_________________________________________26
3.3.5 Advance Salary (Personal Loan)_______________________________________26
3.3.6 NBP Cash Card (ATM + Debit Card)___________________________________27
3.3.7 Investor Advantage (Margin Finance Facility)___________________________27
Financing Facility for Stock Investors_______________________________________27
3.3.8 NBP Cash and Gold (Ready cash against Gold)___________________________27
3.3.10 NBP Pak Remit____________________________________________________28
3.3.11 Termination of Coverage___________________________________________29
3.4 Services____________________________________________________________29
3.4.1 International Banking_______________________________________________29
3.4.2 Demand Drafts_____________________________________________________30
3.4.3 Mail Transfers_____________________________________________________30
3.4.4 Pay Order_________________________________________________________30
3.4.5 Travellers Cheques_________________________________________________303.4.6 Letter of Credit_____________________________________________________30
3.4.10 Short Term Investments_____________________________________________32
3.4.11 National income daily account (NIDA)_________________________________32
3.4.12 Equity Investments_________________________________________________32
3.5 Trade finance and other business loans (other services)______________________32
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Agricultural Credit______________________________________________________32
3.5.2 Corporate Finance__________________________________________________33
3.5.3 Islamic Banking____________________________________________________34
CHAPTER 4___________________________________________________________36
FINANCIAL ANALYSIS_________________________________________________36
4.2 Financial Analysis____________________________________________________36
4.3 Parties interested in financial analysis____________________________________37
4.3.1 Trade creditors_____________________________________________________37
4.3.2 Suppliers of long-term debt___________________________________________37
4.3.3 Investors__________________________________________________________37
4.3.4 Management_______________________________________________________37
4.4 Vertical Analysis of Balance Sheet_______________________________________38
Horizontal Analysis of Balance Sheet....................................................................................43
Table 4.4................................................................................................................................ ..43
Profit after tax reduces in all year in vertical analysis. In 2008 it is 37% then in 2009 it
reduces to 25% and it is just 20% of total revenue of year 2011___________________46
4.6 Ratio Analysis_______________________________________________________46
4.6.1 Profitability Ratios__________________________________________________46
Net Interest Margin______________________________________________________46
4.6.2 Efficiency ratio_____________________________________________________52
4.7.1 Return on Equity..........................................................................................................................55
4.7.2 Return on Assets____________________________________________________56
Table 4.19: Return on Assets______________________________________________56
Figure No 4.15: Return on Assets__________________________________________574.7.3 Investment deposit Ratio..............................................................................................................57
4.7.4 Debt to Assets Ratio_________________________________________________58
CHAPTER 5___________________________________________________________59
References_____________________________________________________________62
ANNEXURE ___________________________________________________________63
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LIST OF TABLE
Table 2.1: Board of directors_________________________________________ 14
Table 2.2: Senior managers of NBP ___________________________________ 15
Table 2.3: NBP Overseas Branches____________________________________16
Table 4.1: NBP Performance in 2008-2010______________________________34
Table 4.2: Vertical Analysis of Balance Sheet___________________________ 37
Table 4.3: Vertical Analysis of Income Statement_______________________ 38
Table 4.4: Horizontal Analysis of Balance Sheet_________________________ 41
Table 4.5: Horizontal Analysis of Income Statement_____________________ 42
Table 4.6: Ratio Analysis ___________________________________________ 46
Table 4.7: Ratio Analysis ___________________________________________ 46
Table 4.8: Return on Earning Assets__________________________________ 47
Table 4.9: Operating Cost to Income Ratio_____________________________ 48
Table 4.10: Equity to Total Assets_____________________________________49
Table 4.11: Credit Ratio_____________________________________________50
Table 4.12: Long loss coverage ratio___________________________________ 50
Table 4.13: Interest Income per employee______________________________ 51
Table 4.14: Profit per employee:______________________________________ 51
Table 4.15: Business per employee____________________________________ 52
Table4.16 Business per branch______________________________________ 53
Table 4.17: Employee per branch____________________________________ 53
Table 4.18: Return on equity________________________________________ 54
Table 4.19: Return on Assets________________________________________ 55
Table 4.20: Deposit Ratio___________________________________________ 56
Table 4.21: Assets Ratio____________________________________________ 56
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LIST OF FIGURE/DIAGRAMS
Figure 2.1: NBP Organization Chart________________________ 11
Figure 2.2: NBP Main Branch Organization Chart_________ 17
Figure 4.1: Equity and liability_____________________________ 41
Figure 4.2: Ratio Analysis_________________________________ 46
Figure 4.3: Return on earning assets________________________ 47
Figure 4.4: Operating Cost to income ratio___________________ 48
Figure 4.5: Operating Cost________________________________ 48
Figure 4.6: Equity to total assets____________________________ 49
Figure 4.7: Credit ratio____________________________________ 50Figure 4.8: Interest Income per employee____________________ 51
Figure 4.9: Profit per employee_____________________________ 51
Figure 4.10: Business per employee__________________________ 52
Figure 4.11 Business per branch____________________________ 53
Figure 4.12 Employee per branch___________________________ 54
Figure 4.13 Return on equity_______________________________ 54
Figure 4.14 Return on Assets_______________________________ 55
Figure 4.15 Deposit ratio___________________________________ 56
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ACKNOWLEDGEMENT
I offer my humblest thanks to ALMIGHTY ALLAH, The most Beneficent and the Most
Considerate and the entire source of all knowledge and wisdom. I thank ALMIGHTY,
ALLAH, who gave me the capacity to complete this internship report. I offer my
humblest respects to the HOLY PROPHET HAZRAT MUHAMMAD (Peace Be upon
Him) who is, forever a torch of guidance and knowledge for humankind as a whole.
Firstly this report is aimed to studying and analyzing National Bank of Pakistan in
general and NBP Mandian Branch, Abbottabad in particular. A report encompasses the
experience of the internee, his/her learning, and analysis in light of which
recommendations are made. The report is then properly analyzed and evaluated on its
description and analytical capabilities of its writer by Department of management
sciences. This internship report has been written on National Bank (NBP) Mandian
Branch Abbottabad.
Secondly, the most respectable to me are all of my teachers who guided me, who taught
all the way from the stage when I was just a kid and up till today where I am at the
doorstep of my practical life. I cannot repay those favors back to them all in my life.In addition I am really thankful to Mr. DAWOOD (Manager NBP, Mandian Branch
Abbottabad) and Mam.TAHIRA (Operations Manager NBP Mandian Branch) who
granted me internship in this branch and provided me an excellent opportunity to go
through the practical experience in banking. I have no words for all of these people.
MUHAMMAD RASOOL
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ABBREVIATIONS
ATMs: Automatic Teller Machine
AVP: Assistant Vice Presidents
ABL: Allied Bank Limited
B.A: Bachelors of Arts
B.C: Before Christ
BOD: Board of Directors
EBIT: Earning before Income Tax
EPS: Earning per Share
EVP: Executive Vice President
GDP: Gross Domestic Product
HR: Human Resource
IT: Information Technology
J/V: Joint Venture
Ltd: Limited
MBA: Master of Business Administration
MTO: Management Trainee Officer
MCB: Muslim Commercial BankNBP: National Bank of Pakistan
NIT: National Investment Trust
NIDA: National income daily account
NPA: Net Performing Asset.
PLS: Profit and Loss sharing Accounts
Rs: Rupees
ROCE: Return on Capital Employed
ROI: Return on Investment
SBP: State Bank of Pakistan
SEVP: Senior Executive Vice President
SVP: Senior Vice President
SWOT: Strength Weakness Opportunity Threats
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SS: Specimen Signature
UK: United Kingdom
USA: United State of America
VP: Vice Presidents
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EXECUTIVE SUMMARY
This report is about National Bank of Pakistan Mandian Branch. NBP is one of the
largest bank in the country. NBP is a gainful organization, having a large network within
and out of the Pakistan. To know about the National Bank of Pakistan and its functions it
was important to work there. Being a student of MBA FINANCE the purpose of this
report is to critically define and describe different functions and services offered by the
bank to its valued customers and other visitors. To analyze the performance of the bank
employee and measure that how much effectively they are working and make a financial
analysis of it and suggest recommendations I was there and I gather all of these
information regarding banking.
The concentrated competition among banks, the privatization of the financial institution
and financial liberalization in general are gradually and continuously making the banking
sectors efficient and effective.
Because of the reasons mentioned above banking has always been the main field of
interest for most of the students of business administration especially in Finance
Management. It is also an academic requirement to undergo internship therefore the main
purpose behind this report is partial fulfillment of requirements, for the degree of MBA
in Finance. The report is categorized into the following chapters.
In the first chapter introduction to the report, background of study, scope of the study,
merits, limitations and scheme of the study are given. The second chapter is about history
of banks in Pakistan, introduction to the organization, its historical background, role and
functions of organization, its core values, and miscellanies topics related to banking.
The third chapter is the major portion of the report. It covers the organizational structure
of NBP, the different departments working at NBP and the different financial products of
NBP. The fourth chapter of the report covers the analysis of report and the findings,
which have been observed. It includes the financial analysis. The end of the report is
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about recommendations based on the analysis in chapter four. It mainly focuses on the
recommendations pertaining to management/administration, to let NBP capitalize on the
opportunities and overcome the weaknesses by using its strengths.
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CHAPTER 1
INTRODUCTION TO THE REPORT
This research report is about the internship in National Bank of Pakistan MandianBranch Abbottabad. Every student is required to do internship and spend, a specific time
period in an organization in order to get first hand knowledge of real life situations and
gain practical experience.
National Bank of Pakistan, which is one of the leading, banks in the country. 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. NBP is a highly profitable
organization, having a huge network within and out of the country.
1.1 Objective of the study
The objective of undertaking this internship is basically to aid the student in their MBA
(Master in business administration) program and to furnish them with some experience of
practical work. The main objective of the Internship is to gain work experience and then
able to get opportunities of work. The internship helps the students to polish theiracademic achievements with practice and day-to-day problems, which they have been
faced in their professional lives. It is the internship, which serves as a railway track that
takes the train of academic knowledge of a student to its destination. The duration of
these Internships is 8/eight weeks. During this period the students are supposed to collect
information about their respective fields/course of an organization and prepare a
comprehensive report on it.
1.2 Limitations of the study
The time period of internship was very limited for a complete understanding of
operations and was the major factor which hinders the dynamics of bank
processings.
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Lack of documented material proved to be another constraint in this regard as
most of the material is confidential; therefore, internees are not allowed to get
handouts.
No one is permitted to recover the official data of the branch for any purpose
except authorized bank personnel for official purpose.
Research students face a great difficulty as most of the time employees are busy
to answer he queries and hence incomplete information is provided.
There was no proper document or latest annual report available for analysis.
Research students are not allowed to retrieve and use any confidential material for
any purpose, as it is against the bank policy.
1.3 Merits of the study
While doing internship and participating in the banking operations of National Bank,
I came to know about the financial practices and their implications practically.
Learned how to gather and analyze financial data to interpret the financial
position of any company.
I gain experience in the banking sector.
This research is very beneficial for the finance students and is the best way to
learn about banking practices.
The recommendations in this report would help the bank to get improved.
1.4 Methodology of the Study
The whole internship is base on 8/eight weeks and the facilitation organization was NBP
Mandian Branch. Firstly it was try to gather the primarily data and then I concentrate
toward the secondary data. The main source of information was personal observation
while working with other staff member and having discussion with them also helps me a
lot. During this period of time formally arranged interviews and discussions in all aspect
helped me in this regards I was trying to collect the valuable data and information.
Primary data
Secondary data
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1.4.1 The primary data was collected through
Personal observation.
Sitting with staff member.
1.4.2 Secondary data
Annual Reports.
Manuals.
Brochures.
Newspapers.
Websites.
Reference Books.
Internship Reports.
Financial journals.
1.5 Scheme of the report
The detail of five chapter of this report is as follow.
Chapter 1 includes background, purpose, Scope, limitations, merits and scheme of
report.
Chapter 2 includes background and history of banking in Pakistan as well as
Introduction to National bank of Pakistan, Mandian Branch ABBOTTABAD
Chapter 3 includes the financial statement, Products and services offered by NBP.
Chapter 4 includes the analysis of financial statements and their interpretation.
Chapter 5 includes the conclusion and recommendations are given.
1.6 Organizational structure of Mandian Branch Abbottabad
Organizational Structure is the framework that defines the boundaries of the formalorganization and within which the organization operates. The Organizational Structure of
NBP Mandian Branch is also aimed at achieving specific corporate objectives of the
branch.
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CHAPTER 2
HISTORY AND INTRODUCTION TO NBP
The history and introduction of NBP is explained below:
2.1 Evolution of Banking
2.1.1 Meaning of Bank:
It is generally said that the word "BANK" has been originated in Italy. In the middle of
12th century there was a great financial crisis in Italy due to war. To meet the war
expenses, the government of that period imposed a forced subscribed loan on citizens of
the country at the interest of 5% per annum. Such loans were known as "Compara",
"Mintuo" etc. The most common name was "Monte", In Germany the word "Monte" wasnamed as "Bank" or "Banke". According to some writers, the word "Bank" has been
derived from the word Banke.
It is also said that the word "Bank" has been derived from the word "Banco" which
means a bench. The Jews money lenders in Italy used to transact their business sitting on
benches at different market places. When any of them used to fail to meet his obligations,
his "banco" or bench would be broken by the angry creditors. The word "Bankrupt"
seems to be originated from broken banco. Since, the banking system has been originated
from money lending business; it is rightly argued that the word "Bank" has been
originated from the word "banco".
Today the word "Bank" is used as a comprehensive term for a number of institutions
carrying on certain kinds of financial business. In practice, the word "Bank" means an
organization which borrows money from one class of people and again lends money to
another class of people for earning interest or profit.
2.1.2 Historical Background of Bank:
It is very difficult to state the complete historical background of banks or banking .it is
not possible to learn when and how the banking system came into existence. Of course, it
is sure that the banking system did not come all of a sudden by means of any revolution.
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Rather, it came into existence naturally and gradually. In its crude form, the banking
business was confined in the hands of moneylenders in the pre-historic days.
It may be said that banking in its most simple form had been as old as authentic history.
As early as 2000 B.C. Babylonians had developed a system of banks. In ancient Greece
and Rome the practice of granting credit was widely prevalent. In Rome some of the
banks carried business on their own account and others were appointed by the
government to collect the taxes. With the gradual development, different types of
documents, hand notes, slips etc., used by the early money lenders in transacting their
business have been developed into different documents and instruments of modern
banking.
During the early periods, although banking business was mostly done by private
individuals, many countries established public banks either for the purpose of facilitating
commerce or to serve their governments. The bank of Venice, established in 1157, is
supposed to be the most ancient bank. in some other countries of Europe Deposit and
Exchange Banks were established in 14th century.1st Bank of Sweden was established in
1556.
The beginning of English banking may correctly be attributed to the London GoldSmiths. They used to receive their customer's funds and valuables for safe custody and
issue receipts acknowledging the same. These receipts, in course of time, became payable
to then bearers on demand and hence enjoyed wide circulation like bank notes. The Bank
of England was established on 15th April, 1694.it was a turning point in the history of
English banking which led to the growth of modern banking.
Ref: Professor Khurshid.H.Siddiqui (2003); Banking
2.1.3 Banking in South Asia:
In the Sub-continent, it is rightly assumed that banking system came into existence from
the activities of the indigenous money lenders like, Goldsmiths, Mahajans, Sahukars etc.
even in Vedic period between 2000 and 1400 B.C., these banks were in action in this
region. In Muslim period, particularly in the period of Mughals indigenous private
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banking was common and popular. Banks were enjoying many facilities and concessions
from Government. They ere also authorized to mint coins of gold and silver which were
used in financial and business transactions throughout the sub continent.
Like Jewish merchants in England these big merchants of sub-continent used to finance
the Government and many sections of people. Even in British Regime, these indigenous
banks financed the ruling East India Company. In the year 1700 The "Hindustan Bank",
the first Joint Stock Bank in India was established in Calcutta. In 1785, the Central Bank
of India and the Bank of Bengal (1809) were established. After these banks the Bank of
Calcutta, The Bank of Bombay and the Bank of Madras were established in the years
1806, 1840 & 1843 respectively. In the year 1920-1921, these three banks were
amalgamated with the name of The Imperial Bank of India. This bank acted as theCentral Bank of India since its inception to 1935.in 1935, the Reserve Bank of India was
established as the Central Bank of the country. In the meantime many commercial banks
were established in this region.
2.1.4 History of Banking in Pakistan:
In Pakistan, banking sector was created with the setting up of the Habib Bank in 1947,
which was shifted to Karachi from Bombay, & Muslim Commercial Bank in 1948 from
Calcutta. After partition of the sub-continent Reserve Bank of India assumed the
responsibility of performing central banking functions in Pakistan, Subsequently the
functions were taken over by the State Bank of Pakistan which was organized in July,
1948.its one of the main feats was the rescue of the Bank of Bhawalpur which had gone
on the brink of bankruptcy. The salvage by the State Bank wrote a glittering history of
banking stability in Pakistan.
In July 1948 all commercial banks were nationalized, and in August 1991 their
privatization started. In the late 80's private sector banking was allowed.
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2.1.5 Definition of Banking:
According to Banking Companies Ordinance 1962 (Pakistan)"Accepting for the purpose
of lending or investment of deposits of money from public, repayable on demand or
otherwise and withdrawal by cheques, draft, order or otherwise.
2. 2 Historical background of National Bank of Pakistan
Historical background of NBP is as follows:
The National bank of Pakistan was established on 9 November 1949 under the National
bank of Pakistan (NBP) Ordinance, 1949 in order to cope with the crises, 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 agriculture sector.
The normal procedure of establishing a bank company under the Companies Law was setaside and the bank was established through the promulgation of an Ordinance due to
situation that had developed with regard to financing of jute trade.
The bank commenced its operations from 20th November 1949 at six important jute
centers in the East Pakistan (now Bangladesh) and directed its resources in financing of
jute crop. The banks, Karachi and Lahore offices were subsequently opened in December
1949.
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 its behalf.
The Bank has also played an important role in financing the countrys growing trade,
which has expanded through the years as diversification took place. Today the Bank
finances import/export business has reached to the tune of Rs. 62.17 billion, whereas in
1960 financing under this head was only Rs. 1.54 billion.
The management is being decentralized to improve customer services and enable faster
decision-making. As a result of this de-layering, zones have been eliminated and the
number of regions has been increased. Organizational hierarchy at the regional level has
been restructured and operational and business activities have been completely separated.
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This separation will improve communication, decision-making and promote teamwork.
For the second consecutive year, the bank was recognized as the best bank in Pakistan for
the year 2004 by the prestigious periodical, The Banker UK (a subsidiary of the
Financial Times Group).
2.2. 1 Present Status of the Bank
NBP continued its journey of success based on their strategy of serving clients better A
Company agile enough to take advantage of its unique domestic and international
footprint, capitalizing on the largest balance sheet and customer base in Pakistan with
high cross sell potential. Their standalone AAA rating (the highest in the industry), Their
ROE, which is amongst the highest in the Asian Banking industry, and their comfortable
capital adequacy ratios, position the bank well in front of its competitors for futuregrowth. Year 2007 has been yet an outstanding year with the bank recording the highest
profit in its history. NBP's wide range of product offering, large branch network and
committed workforce are some of their fundamental strengths that enabled them to
achieve exceptional results in a very competitive market. The pre-tax profit increased to
Rs. 28.06 billion, an increase of 6.6% over last year. Earning per share jumped by over
11.6% from Rs. 20.88 in 2006 to Rs. 23.34 in 2007. Pre- tax return on equity stood at
45.9%, whereas pre-tax return on assets stands at 4.1% and cost to income ratio of 0.30
remained one of the highest in the sector. These results were possible despite the fact that
NBP had to make additional provision of over Rs.3 billion as a result of withdrawal of
Forced Sales Value (FSV).This year NBP also availed the offer by Government of
Pakistan to redeem up to 10% of its holding in NIT units held by the bank under Letter of
Comfort (LoC) arrangement, this sell off resulted in a Capital gain of Rs. 1.8 billion (1)
Increase in pre-tax profit was achieved through strong growth in core banking income.
Net Interest income increased by Rs. 3.5 billion (11.5%) due to better yields and volume
driven growth spurred by increase in consumer loan portfolio. Dividend income and
Capital Gains also made a healthy contribution as it increased by Rs. 371 million and Rs.
1,145 million over 2006 respectively mainly owing to higher dividends from NIT Units
as well as Capital gains recorded on sell of 10% NIT Units. Advances increased by Rs.
25 billion due to impressive contribution by all business units. Deposits increased by a
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healthy Rs. 90 billion or 18% over last year. The bank's NPL provision coverage ratio
also stands as impressive 80%.
2.2.2 Existing NBP Branches in Pakistan
SINDH
Dadu, Sanghar, Hyderabad, Jacobabad, Shikarpur, Karachi, Larkana, Mirpurkhas, Badin,
Nawabshah, Sukkur, Khairpur, Tharparkar
Punjab
Bahawalpur, D.G. Khan, RYKhan, Faisalabad, Gujranwala, Sialkot, Narowal, Jhang,
Jhelum, Gujrat, Chakwal, Darya Khan , Bhakkar, Lahore, Multan, Murree, Attock, Gilgit,
Rawalpindi, Sahiwal, Sargodha, Sheikhupura.
KPK
Abbottabad, Mansehra, Bannu, D.I. Khan, Kohat, Mingora, Mardan, Peshawar and
Haripur,
Balochistan
Quetta
Azad Kashmir
Muzaffarabad, Mirpur
International
NBP working at 24 different locations in the world
2.2.3 Credit Rating
NBP is the highest of credit ratings of AAA in the industry assigned by JCR-VIS
Credit Rating Company Limited on a standalone basis which are used in the national
bank of Pakistan are given as following.
Credit rating for entity value
Credit rating for stands alone
9
http://en.wikipedia.org/wiki/Punjab_(Pakistan)http://en.wikipedia.org/wiki/Balochistan_(Pakistan)http://en.wikipedia.org/wiki/Quettahttp://en.wikipedia.org/wiki/Azad_Kashmirhttp://en.wikipedia.org/wiki/Balochistan_(Pakistan)http://en.wikipedia.org/wiki/Quettahttp://en.wikipedia.org/wiki/Azad_Kashmirhttp://en.wikipedia.org/wiki/Punjab_(Pakistan)7/30/2019 NBP m.rasool
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2.2.4 Auditors
Auditors are the persons who check the accountings standards in an organizations
financial statements and check either these are true or there is fraud in the financial
statements. The auditors of the national bank of Pakistan are, ford Rhodes Sidat Hyder &
co and M. yaqoob Adel Saleem & CO these both companies are chartered accounts.
2.3 Organizational structure
Organizational Structure is the framework that defines the boundaries of the formal
organization and within which the organization operates. The Organizational Structure of
NBP is also aimed at achieving specific corporate objectives. The board of directors
controls all the activities and the function of NBP.
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Figure 2.1 NBP Organization Chart
President
Senior Executive Vice
Executive Vice President (EVP)
Senior Vice President (SVP)
Additional / Assistant Vice
President
Additional / Assistant Vice
President (AVP)
Grade-I
Grade- II
Grade- III
Clerk, Cashier etc
Non-Clerical staff
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2.4 The Vision statement of NBP
To be recognized as a leader and a brand synonymous with, highest standards of service
quality, international best practices and social responsibility.
2.5 The Mission statement of NBP
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.
2.6 Objective of NBP
National bank of Pakistan is also a commercial organization and its main objective is
profit maximization.
This is achieved in two ways
1. By increasing deposits.
2. By charging heavy interest on loans provided to the private sector and business
community.
2.6.1 Maximum profit
The name of the Bank indicates that it is established to finance the nation. As a business
organization its main objective is to earn more and more profit by least expenditure.
2.6.2 Maximize deposits
Banks income is difference between the interests it receives on loans and the interest it
pays on the deposits. Greater the deposits, greater the ability of the bank to grant loans
and greater will be the revenue.
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2.6.3 Economic Growth
An important objective of National bank of Pakistan is to promote industrial and
economic growth in Pakistan by providing financial assistance for the establishment of
the new projects.
2.6.4 Customer service
The ultimate objective of the National bank of Pakistan is to serve its customers. It
collects money from individuals, firms and limited companies and gives loans to people.
2.6.5 Expenditure discipline
Banks always try to minimize its expenditure. So it keeps strict control over wastage of
money at every stage. The branch expenditure must not increase more than 15%of last
years budget for correspondence.
2.6.6 Facilities to staff & utilization of staff
The Bank gives best possible facilities to the working staff and at the same time the bank
utilizes the staff most efficiently.
2.7 Goals
To enhance profitability and maximization of NBP share through increasing leverage of
existing customer base and diversified range of products.
2.8 Core values of NBP
Highest standards of Integrity.
Institutionalizing team work and performance culture
Excellence in service
Advancement of skills for tomorrows challenges
Awareness of social and community responsibility
Value creation for all stakeholders
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2.9 Corporate profile
The NBP's principal activities are to provide commercial banking and related services in
Pakistan and overseas. The Bank, together with its subsidiaries, is engaged in commercial
banking, mudarabah management, brokerage, leasing and discounting services. The bank
handles treasury transactions for the government of Pakistan as the sister organization to
the State Bank of Pakistan. The Bank was also operating eight Islamic banking branches
as at June 30, 2009.
2.10 Executive Committee
It is also called the management committee. The general direction and supervision of the
affairs of the bank lies in their respective executive boards. The federal government
appoints the president, secretary and 6 other members of the board. The president beingthe chief executive controls the affairs of the bank.
2.10.1. Board of Directors:
In the management of the bank the board of directors is at the top of the controlling
bodies. The board consists of a nominated president, a secretary and 6 other members.
BOARD OF DIRECTORS
Table # 2.1NAME DISIGNATION
Syed Ali Raza Chairman BoG, NBP
Qamar Hussain President , NBP
Mr. Tariq Kirmani Director
Ms. Nazrat Bashir Director
Asif A. Brohi Director
Mrs. Haniya Shahid Naseem Director
Syed Muhammad Ali Zamin SEVP & Secretary to BD
2.10.2 Regional Manager
In order to improve the performance of the banking system, the bank has appointed
regional managers also. The regional chief has the powers of sanctioning finance and
other credit facilities.
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2.10.3 Number of Directors
In Pursuant to the section 11 of the bank (Nationalization) act 1974 number of directors
of bank shall not be less than 5 and will not be more than 7, excluding the president. The
Federal Government may, if it deems necessary, appoint the chairman of the board in
respect of the bank... Voting Right upon the show of hand every member present in
person or by proxy shall have one vote for every 10 shares held by him subjects to the
maximum of the 10 votes. The Federal Government being a shareholder may also appoint
a person to vote on his behalf.
Senior Management of NBP
Table # 2.2
Dr. Asif A. BrohiSEVP & Group Chief, Commercial &
Retail Banking Group
Shahid Anwar KhanSEVP & Group Chief, Credit
Management Group
Ziaullah Khan
SEVP & Group Chief Assets Recovery
Group and Divisional Head, Islamic
Banking Division
Dr. Mirza Abrar Baig
SEVP & Group Chief, Human
Resources Management &
Administration Group
Nausherwan AdilSEVP & Group Chief, Operations
Group
Nadeem Anwer IlyassSEVP & Group Chief Assets Recovery
Group & PSO to President
Tariq JamaliSEVP & Group Chief, Compliance
Group
Syed Iqbal Ashraf SEVP Group Chief, Overseas Banking
Group
Asif Hassan SEVP & Group Chief, Small and
Medium Assets Recovery Group
Sheharyar Qaisrani EVP/Divisional Head Agriculture
Business Division, C&RB Group
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Muhammad Hassan Khaskheli EVP & Divisional Head, Personnel &
Industrial Relations Division, HRM&A
Group
Tahira RazaEVP & Group Chief, Risk Management
GroupMoizuddin Khan EVP & Divisional Head, Training &
Organizational Development Division,
HRM&A Group
Aamir Sattar EVP & Financial Controller, Financial
Control Division
Raza Mohsin Qizilbash EVP & Head, Legal Division
Syed Muhammad Ali Zamin SEVP & Secretary Board of Directors
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NBP Overseas Branches
Table 2.3
Countries Branches Countries Branches
U S A 02 Branches Afghanistan 02 Branches
France 01 Branch Bangladesh 02 BranchesEgypt 01 Branch Korea 01 Branch
Germany 01 Branch Kyrgyzstan 01 Branch
Bahrain 01 Branch Japan 02 Branches
Turkmenistan 01 Branch Hong Kong 02 Branches
Source: Internship Report on NBP
2.11 Introduction to NBP Mandian Branch
National Bank of Pakistan Mandian branch is situated in Mandian Abbottabad that covers
different remote villages as well as the posh colonies of Abbottabad. Its also facilitatingthe government departments which include colleges and universities.
2.11.1 Location
National Bank Mandian Branch is situated in Mandian mansehra road, Abbottabad.
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Figure 2.2 NBP Mandian branch Organization Chart
Credit &
Administration
Department
Manager
Operations Manager
Account Opening
Remittances
Department
Cash Department
Government Section
Clearing & Collection
Department
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2.11.2 Assets and Liabilities Management Committee (ALCO)
Asset and Liabilities Committee (ALCO) manage the banks liquidity position through
Treasury management Group. The ALCO/Management Group monitors the maintenance
of Balance Sheet Liquidity Ratios, depositors concentration both in terms of overall
funding mix and avoidance of undue reliance on large individual deposits and liquidity
contingencies plan.
2.11.3 Credit Committee
The Credit Committee determines the Credit Policy of the Bank. The Credit Committee
identifies possible risks assumed by the Bank for different types of transactions, which
are not within the competence of the Assets and Liabilities Directorate. It is alsoresponsible for making final decisions on raising and use of funds within its authority
as determined by the Executive Board of the Bank. The Credit Committee has the
authority to make a final decision on approval or rejection of proposed transactions
as well as to establish personal limits and client limits in accordance with its powers.
Only the Executive Board of the Bank may overrule resolutions of the Credit Committee.
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CHAPTER 3
PRODUCTS AND SERVICES PROVIDED AT NBP
3.1 Functions of NBP
NBP act as an intermediary between those who have surplus money and those, who need
it. To receive deposits and extend loans are two main functions of NBP. The functions of
this Bank can be summed up in one sentence. NBP borrows to lend further. It borrows
in form of deposit and lends it in form of loans or advances. Besides these, many other
functions are also performed by NBP. The detail of these functions is as follows:
3.1.1 Receiving deposits
NBP attract the idle savings and surplus money of the people in form of deposits throughvarious deposits schemes. This function is important, because banks mainly depend on
the funds deposited by the public; deposits are usually of three kinds:
Current / demand deposits
These deposits are repayable on demand without any notice. As the banks utilize long-
term deposits but demand deposits are short-term, therefore, no interest is paid on such
deposits. The commission is charge for the services rendered by the bank.
Fixed / time deposits
These deposits are left with the bank for a certain fixed period before the expiry of which
no one can withdraw except prior notice. On such deposits the bank pays higher interest.
Saving deposits
The main objective of the saving deposits is to encourage the people for saving. This
account can be opened with initial amount of Rs 100/-.
3.1.2 Advances on open account or overdraft
Customers are given the right to over draw their accounts. In other wards, they can
withdraw more than the actual deposits, with a nominal charge of interest payable within
a short period. The amount of permissible overdraft varies with the financial position of
the borrower.
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3.1.3 Discounting on open account or overdraft
Discounting of bills is another way of lending money. If any bill of exchange is presented
before a bank, the bank makes cash payment after deducting its commission according to
the date of maturity of that bill of exchange.
3.1.4 Cash credit system or ordinary loans
The bank not only advances loans in the form of discounting bills of exchange or
overdraft but also establish credit line. In this case, if person wants financial assistance
from bank, is required to submit a request in writing. After making thread base scrutiny
about the reputation and financial position of the applicant, the request is honored. The
applicant simply open an account and the loan will be transferred into it instead of cash
payments He will also allotted a cheques book for bank transition, which is an officialauthorization to draw the money as and when required.
3.1.5 Remitting funds
NBP remit funds for its customers through bank to any place where it has branches or
agencies. This is quite safe and cheapest way of sending money from one place to
another. Funds can also be remitted to foreign countries.
3.1.6 Safe custodyNBP also provide locker services for keeping ornaments and other valuable things and
documents safely. Bank charges a small amount per year for providing this service.
3.1.7 Agency functions
Among all other vital functions, NBP also act as an agent of its customers, receive
payments on their behalf, collect rents, dividends on shares etc. bank pays insurance
premium and makes all other payments as instructed by its accounts holders.
3.1.8 Reference
NBP like other commercial banks give references about the dealings and financial
position of its customer when required. NBP supply this information confidently. This is
done when customers want to establish business connections with some new firms,
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banks, development finance institutions etc within or outside the country. Bank also gives
guarantees letter to its customers.
3.2 Departments of NBP Mandian Branch
NBP Mandian Branch Abbottabad has the following departments
Deposits department
Government Section
Cash department
Remittances department
Clearing and collection department
Foreign Exchange
Western Union Money Transfer System.
NBP Advance Salary
3.2.1 Deposit Department
In this department NBP accepts money deposits from customers, which provide basic
core of all resources available to a bank. NBP accepts surplus money deposits from
individuals, firms and corporations. In order to attract these funds it has introduced a
number of savings accounts and investment schemes. These schemes may suit to theneeds and taste of large number of depositors.
3.2.2 Functions of Deposit Department
Provide guidance to the persons wishing to open an account by assistance of account
opening form and specimen signature (SS) card. Major functions of deposit department in
NBP include:
To maintain existing accounts.
To dispatch letters to customers if needed e.g. letter of thanks to introducer and
new account holder.
Posting of vouchers and cheques in computer and maintain records in form of
printouts.
Cancellation of cheques.
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Issuance of cheques book.
Sorting is also done of accounts to check dormant and inoperative accounts and
also for recovery of incidental charges.
It also deals in deduction and refund cases of Zakat.
Maintenance and handling of various deposit schemes e.g. PLS, saving and
current accounts.
Making stop payments of cheques and noting cautions regarding death,
insolvency, and insanity of account holder.
Transfer and closing of accounts.
Keeping the records of death/credit balance confirmations and statement of
account.
Provide confidential inquiries to other banks, government departments and other
agencies.
3.2.3 Classification of Deposits
Deposits are the lifeblood of a bank. They constitute the main source of banks funds.
Generally bank deposits are classified as follows:
PLS saving account
PLS means Profit and Loss sharing Account. Here the bank shares with the customer the
profit or loss resulting from investment of customers funds along with the banks pool of
funds. These accounts can be opened with Rs100/-. For profit the minimum balance is
Rs.5, 000.profit is calculated @ 4.10% p.a. Zakat @2.5% is deducted from the balance
outstanding on the first day of every valuation date i.e. 1st Ramadan. Generally
withdrawals from PLS saving accounts are allowed on demand, i.e. without any prior
notice of withdrawal.
PLS term deposit
The PLS Term Deposit is non-interest bearing techniques. The bank also calls it time
liability because it is kept for a certain period of time. Initially this type of deposit was
called as fixed deposits but after the islamization of banking system in 1985, its name has
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been changed from fixed to PLS Terms Deposit. The bank with the sum of Rs.1000/-
accepts the minimum deposits the maximum deposit have got no limit. The PLS term
depositors would be eligible for sharing profit/loses with the bank at true rate determined
by the bank. The deposits are accepted for the period from three months maximum to
above.
Current accounts
A current account is that account which is payable on demand. A holder can withdraw the
money on any date during working hours without giving any prior notice to the bank.
That is why the bank has to keep sufficient funds to meet uncertain funds of the current
account holder. The account holder is expected to maintain a minimum balance of
Rs.500/- in his account or whatever the minimum amount is prescribed for the purpose.No profit or return is paid on current accounts.
Fixed deposit account
Fixed deposit accounts are also called time liabilities of a bank, because money is
payable on expiry of a fixed period of time only. The minimum period for fixed deposit is
six months and withdrawal is not permissible before the maturity of fixed period. The
account holder earns greater amount of profit by depositing in fixed deposit account for
longer period. The fixed deposit account is opened with minimum of Rs.5000/- Bank
gives a receipt for withdrawal of the money at the date of maturity. The fixed period can
be extended.
Call deposit account
It means the deposit from which the money deposited can be withdrawn at any time by
presenting receipt of call deposit issued from the bank. The purpose of these deposits is to
serve as a guarantee provided by bank to any department either public or private in taking
or giving tenders. This type of account is for the purpose of to participate in tender bid;
contractors are required to deposit a certain amount or percentage of the tender amount
along with the tender documents for which Call Deposit Receipt are issued by Banks.
Call deposit are return free.
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Minor account
According to Pakistan, a person is regarded as a minor until he has attained the age of
eighteen years. There are two different ways in which the minor can open account inNBP.
The account is opened in the name of minor along with the name of guardian. The
total of account is given as the name of Accountholder along with guardian who
operates the account.
Accounts are opened directly under the name of minor and they are allowed to
operate their accounts with their own signature. In this type of account he/she
must be about ten years of age. No overdraft is allowed and no advances are
extended.
3.3 Products
Product detail is given below:
3.3.1 NBP Premium Aamdani (Monthly Income Scheme)
Earn up to 11% p.a.
Amount of investment required from Rs.20,000/- to Rs.5,000,000
Investment period is 5 years
Free Demand Draft, Pay Order and NBP Online Aasan Banking
Free Cheques Book / NBP Cash Card (ATM + Debit)
Financing facility available up to 90% of the deposit value
Premature encashment will attract penalties
Zakat and withholding tax will be deducted as per rules
3.3.2 NBP Premium Saver (PLS Saving Account)
Minimum saving balance of Rs. 20,001 and a maximum balance of Rs. 300,000
Free NBP Cash Card (ATM + Debit)
Two debit withdrawals allowed in a month and no limit on number of deposit
transactions.
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Profit is calculated monthly and paid on half yearly basis.
Earn up to 7.25 p.a. +
3.3.3 NBP Karobar (Mera Apna Karobar under President's Rozgar Scheme)
People who are between 18 and 45 could be eligible for easy financing for self-
employment in the categories below.
NBP Karobar Utility Store
NBP Karobar Mobile Utility store
NBP Karobar Mobile General Store
NBP Karobar Transport
NBP Karobar PCO
NBP Karobar Tele-CentreIn this facility NBP give loan of Rs.200, 000 only for one to five years and only 2 years
for PCO Minimum down payment, 10 % of asset price. Mark-up (variable) 1 year
KIBOR + 2.00%p.a.
3.3.4 NBP Saiban (House Finance)
Home Purchase
Home Construction
Home Renovation
Purchase of Land + Construction
Balance Transfer Facility (BTF)
For home purchase, and home construction criteria is that the finance amount is
35million, financing period is 3 to 20 years while debt to equity ratio must be 85:15
maximum. While for home renovation finance amount is to 15 million, financing period
3 to 15 years and debt to equity ratio 80:20 maximum. For purchase of land +
construction finance amount is up to 35 million, financing period is 3 to 20 years and
debt to equity ratio is 80:20 maximum
3.3.5 Advance Salary (Personal Loan)
Easy installments of 1 to 60 months at customer's choice.
No minimum income collateral & insurance charges required
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Quick processing and fastest disbursement
The product is for permanent employees of Government, Semi Government
and Autonomous bodies receiving salaries through NBP accounts
3.3.6 NBP Cash Card (ATM + Debit Card)
NBP Cash Card is a 24-hour direct access ATM/Debit card to your bank account, which
lets you pay directly from your account as an alternative payment method to cash. The
transaction is authorized and processed by entering PIN. The NBP Cash Card holders are
able to transact at any of the 4000 + Merchants where Orix logo is displayed and can
withdraw cash from NBP, 1-Link & M-NET ATMs across the country.
3.3.7 Investor Advantage (Margin Finance Facility)
The detail about investor advantage is as follows: (1)
Financing Facility for Stock Investors
Comfortable environment for trading
No security requirement, except for the customers equity
Customers equity freely available for investment
Equity acceptable in cash or approved shares
Financing Facility for Retail Investors
Features of the financing facility for retail investors are as follows.
Comfortable and secure environment for trading.
NBP financing at very easy terms requiring minimum documentation.
Minimum turn around time.
No security requirement from the customer except for the customer's equity.
Customer's equity freely available for investment.
Equity acceptable in cash or approved share.
3.3.8 NBP Cash and Gold (Ready cash against Gold)
In this is a roll over ability of lending is offered by NBP against gold. NBP give Rs.
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10, 000/= facility against 10 gm of net weight of gold ornaments on 11% mark up per
annum. The maximum period is one year & there is no limit of credit
3.3.9 NBP Kissan Dost (Agriculture Farming Program)
In this facility, Loans are available to the farmers for production, development purposes,
for purchase of tractors, for installation of tube wells, for purchase agricultural
implement, macro loans, for go down construction, for construction of fish pond, for
livestock farming, for milk processing, for cold storage & for bio-gas plants etc. This
loan is offered by NBP at the farmers doorstep on competitive mark up rate. NBP Kissan
Dost is available against agricultural passbook, gold ornament & 0paper security. They
also provide technical guidance to farmers and also provide financing facility up to Rs.
500,000/- for landless farmers against personal guarantee
3.3.10 NBP Pak Remit
Pak Remit is an Internet based Home Remittance Service. This service is available to
U.S. residents for sending money to their family and friends in Pakistan. One must have a
valid US Dollar account with a U.S. bank or a US Dollar credit or debit card in order to
remit funds through this channel
Remitters in USA can log on to our user friendly website, www.pakremit.com and easily
remit funds to Pakistan from the comfort of their homes, in a matter of minutes.
The service is fully secure with advance encryption application and is available for use 24
hours a day, 7 days a week. Fees and exchange rate have been set at competitive levels
and the remitters have the ability to track delivery of funds as well (1)
USPs
Unique Selling Propositions is convenient and fast, reliable and secure and available at
twenty four hours.
NBP Protection Shield (Personal Accident Insurance)
No documentation
No medical required
Premium Auto Debit facility & choice of deactivation
Coverage includes death due to:
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Natural Calamities e.g. Earthquake, Flood, Cyclone etc.
Accident
Riots
Civil Commotion Strikes
Acts of Terrorism
Eligibility
NBP PLS account holders
18 years and above
3.3.11 Termination of Coverage
The date the policy executed by NBP with ALICO is terminated.
The date the Insured Person is no longer eligible within the Classification of
Insured Person(s).
If the required premium is not paid/deducted for the particular month.
The date the benefits are paid to the extent of the Principal Sum in respect of any
Insured Person.
The date the Insured Person cancels coverage under this policy.
3.4 Services
The services provided by NBP are:
3.4.1 International Banking
National Bank of Pakistan is at the forefront of international banking in Pakistan, which
is proven by the fact that NBP has its branches in all of the major financial capitals of the
world. The role of the Financial Institution Wing is:-
To effectively manage NBP's exposure to foreign and domestic correspondence
Manage the monetary aspect of NBP's relationship with the correspondents to
support trade, treasury and other key business areas, thereby contributing to the
bank's profitability and generate trade finance business and revenues.
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3.4.2 Demand Drafts
The safe, speedy and reliable way to transfer money is provided by NBP by purchasing
Demand Drafts at very reasonable rates. Any person whether an account holder of the
bank or not, can purchase a Demand Draft from a bank branch.
3.4.3 Mail Transfers
Money can be moved safely and quickly using NBP Mail Transfer service .NBP also
offer the most competitive rates in the market.
3.4.4 Pay Order
NBP provides another way to transfer money using their facilities. NBP's pay orders are a
secure and easy way to move money from one place to another. And, as usual, charges
for this service are extremely competitive.
3.4.5 Travellers Cheques
To safe cash for traveling and travel related purposes. This product has been extremely
popular and is preferred over cash by customers while traveling and in all walks of life.
Characteristics of Pak rupees travelers cheques
Negotiability Pak Rupees Traveler's Cheques are a negotiable instrument
Validity There is no restriction on the period of validity
Availability At 700 branches of NBP all over the country
Encashment At all 400 branches of NBP
Limitation No limit on purchase
Safety NBP Traveler's Cheques are the safest way to carry our money
Table 3.1 Characteristics of Pak rupees travelers cheques
3.4.6 Letter of Credit
NBP is committed to offering its business customers the widest range of options in the
area of money transfer. With competitive rates, security, and ease of transaction, NBP
Letters of Credit are the best way to do business transactions by the commercial
enterprise.
Commercial Finance
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The dedicated team of professionals of NBP truly understands the needs of professionals,
agriculturists, large and small business and other segments of the economy. They are the
customer's best resource in making NBP's products and services work for them. (1
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
New Features
The existing system of home remittances has been revised/significantly improved and
well-trained field functionaries are posted to provide efficient and reliable home
remittance services to nonresident Pakistanis at 15 overseas branches of the Bank besides
United National Bank (the joint venture between NBP and UBL in UK)., and Bank Al-
Jazira, Saudi Arabia.
Zero Tariffs: NBP is providing home remittance services without any charges.
Strict monitoring of the system is done to ensure the highest possible security.
Special courier services are hired for expeditious delivery of home remittances to
the beneficiaries.
SWIFT (Society for Worldwide Inter bank Financial Telecommunication)
The SWIFT system 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 aredrawing remittances through SWIFT.
Using the NBP network of branches, one can safely and speedily transfer money for
business and personal needs.
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3.4.10 Short Term Investments
NBP offers excellent rates of profit on all its short-term investment accounts. People
looking to invest for 3 months or 1 year, NBP's rates of profit are extremely attractive,
along with the security and service only NBP can provide.
3.4.11 National income daily account (NIDA)
The scheme 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. Mode of Calculation: Average balance during a calendar month.
3.4.12 Equity Investments
NBP has accelerated its activities in the stock market to improve its economic base and
restore investor confidence. The bank is now regarded as the most active and dominant
player in the development of the stock market. NBP is involved in the following:
Investment into the capital market
Introduction of capital market accounts
NBP's involvement in capital markets is expected to increase its earnings, which would
result in better returns offered to account holders
3.5 Trade finance and other business loans (other services)
They are explained below:
3.5.1 Agricultural finance
NBP provides Agricultural Finance to solidify faith, commitment and pride of farmers
who produce some of the best agricultural products in the World.
Agricultural Finance Services
I Feed the World program, a new product, is introduced by NBP with the aim to help
farmers maximize the per acre production with minimum of required input. Selected
farms will be made role models for other farms and farmers to follow, thus helping
farmers across Pakistan to increase production.
Agricultural Credit
The agricultural financing strategy of NBP is aimed at three main objectives:-
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Providing reliable infrastructure for agricultural customers
Help farmers utilize funds efficiently to further develop and achieve better
production
Provide farmers an integrated package of credit with supplies of essential inputs,
technical knowledge, and supervision of farming.
Agricultural Credit (Medium Term)
Production and development
Watercourse improvement
Wells
Farm power
Development loans for tea plantation
Fencing
Solar energy
Equipment for sprinklers
Farm Credit
NBP also provides the following subsidized with ranges of 3 months to 1 year on a
renewal basis.
Operating loans
Land improvement loans
Equipment loans for purchase of tractors, farm implements or any other
equipment.
Livestock loans for the purchase, care, and feeding of livestock
Production Loans
Production loans are meant for basic inputs of the farm and are short term in nature.
Seeds, fertilizers, sprayers, etc are all covered under this scheme.
3.5.2 Corporate Finance
The offerings of NBP in category of Corporate Finance are:
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Working Capital and Short Term Loans
NBP specializes in providing Project Finance, Export Refinance to exporters, Pre-
shipment and Post-shipment financing to exporters, Running finance, Cash Finance,
Small Finance, Discounting & Bills Purchased, and Export Bills Purchased / Pre-
shipment / Post Shipment Agricultural Production Loans
Medium term loans and Capital Expenditure Financing
NBP provides financing for its clients' capital expenditure and other long-term
investment needs. By sharing the risk associated with such long-term investments, NBP
expedites clients' attempt to upgrade and expand their operation thereby making possible
the fulfillment of their clients' vision. This type of long term financing proves the bank's
belief in its client's capabilities, and its commitment to the country.
Loan Structuring and Syndication
National Bank's leadership in loan syndicating stems from ability to force strong
relationships not only with borrowers but also with bank investors. Because NBP
understand their syndicate partners' asset criteria, they help borrowers meet substantial
financing needs by enabling them to reach the banks most interested in lending to their
particular industry, geographic location and structure through syndicated debt
offerings. NBP's syndication capabilities are complemented by their own capital strength
and by industry teams, who bring specialized knowledge to the structure of a transaction.
Cash management services:
With National Banks Cash Management Services (in process of being set up), the
customers sales collection will be channeled through vast network of NBP branches
spread across the country. This will enable the customer to manage their companys total
financial position. They will also be able to take advantage of NBP's outstanding range
of payment, ejection, liquidity and investment services.
3.5.3 Islamic Banking
NBP is proud to expand its range of products and services to include Shariah Compliant
Islamic Banking products, now available at our dedicated Islamic Banking Branches at
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Karachi, Lahore and Peshawar. Commercial and Corporate customers requiring financing
will have the following financing facilities available to them by NBP to meet their
requirements:
Murabahah
Murabahah may be defined as a contract between a Buyer and Seller under which the
Seller discloses to the Buyer the cost of goods being sold and adds an agreed profit. Price
is payable on spot or at a certain future date, in lump sum or in installments (deferred
payments).
Murabahah Facility
Under the Murabahah facility, the Bank will first purchase the required goods directly or
through an Agent. All costs incurred on such purchases will be borne by the Bank.
Subsequently the Bank will sell the goods to the customer on deferred payment basis (30
days to one year) at an agreed price comprising cost of goods purchased and Banks
profit. On due date the customer will pay to the Bank the agreed price, in lump sum or as
per the agreed installment schedule.
Ijarah (Leasing)
Ijarah means to give something on rent. The term Ijarah is analogous to the Englishterm leasing .Firstly the Bank will purchase the Assets as required by the Customer and
subsequently the assets will be leased to the Customer on the terms and conditions as
agreed with him.
Ijarah Facility will be offered for the following assets:
Vehicles (both Commercial and Private), Office Equipment, Plant and Machinery
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CHAPTER 4
FINANCIAL ANALYSIS
4.2 Financial Analysis
Financial analysis is the process of identifying the financial strengths and weakness of the
organization by properly establishing relation ship between the items of balance sheet and
profit and loss accounts, in order to make rational decision in keeping with the objectives
of the organization, for that purpose the management use analytical tools. To evaluate the
financial condition and performance of the business entity, the financial analyst needs to
perform "checkups" on various aspects of the business financial health.
A tools frequently used during these checkups is a financial ratio analysis, which relates
two piece of financial data by dividing one quantity by the other we calculate ratios
because in this way we get a comparison that may prove more useful than the raw
number by themselves. The business itself and outside providers of capital (creditors and
investors) all undertake financial statement analysis. The type of analysis varies
according to the specific interest party involved... Financial analysis, though varying
according to the particular interests of the analyst, always involves the use of variousfinancial statements. NBP performance shows in the table below.
Table 4.1
Years 2009 in Rupees 2010 in rupees 2011 in rupees
Total assets 817,758,326 944,232,762 1,035,024,680
Deposits 624,939,016 727,464,825 832,151,888
Advances 412,986,865 475,243,431 477,506,564
Investment 170,822,491 217,642,822 301,323,804
Share holder equity 8,969,751 10,763,702 13,454,628After tax profit 15,458,590 18,211,845 17,863,214
Earning per share 14.36 16.92 13.42
Return on assets 3% 5.2 % 6.7%
No of Branches 1,248 1,250 1,256
No of Employees 1,5015 16,072 16,457
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From the above table it is very much clear that the NBP performance is going higher and
higher. Total assets are at the crest in 2011. If we draw a graph this will shows that the
graph is upward trend. Profit is increasing from year to year. NBP decrease the number of
its branches and employees because of automation and large networks of other banks
4.3 Parties interested in financial analysis
Following are the parties that are interested in the financial analysis of a bank:
4.3.1 Trade creditors
Trade creditors are interested in firm's ability to meet their claims over a very short
period of time. Their analysis will, there fore confine to the evaluation of the Firms
liquidity positions.
4.3.2 Suppliers of long-term debt
Suppliers of long-term debt on the other hand are concerned with firm's long-term
solvency and survival. They analysis the firms profitability over time, its ability to
generate cash to be able to pay interest and repay interest and repay principal and the
relationship between various source of funds. (Capital structure relationship). Long-term
creditors do analyses the historical financial statements but they place more emphasis on
the firm's projected financial statement to make analysis about its future solvency andprofitability.
4.3.3 Investors
Investors who have invested their money in the firms share are most concerned about the
firm steady growth in earning. As such, they concentrate on the analysis of the firm's
present and future profitability. They are also interested in the firms financial structure of
the extent it influence the firms earning ability and risk.
4.3.4 Management
An organization would be interested in every aspect of the financial analysis. It is their
overall responsibility to see that the resources of the firm are used most effectively and
efficiently and that the firm's financial condition is sound. So thus management employee
financial analysis for the purpose of internal control and to better provide what capital
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supplier seeks in financial condition and performance from the business and from an
internal control standpoint, management needs to take financial analysis in order to plan
and control effectively.
There are three broad categories of the statement analysis.
Vertical analysis
Horizontal analysis
Ratio analysis
4.4 Vertical Analysis of Balance Sheet
In balance sheet we compare each amount by taking Total Assets as 100%.
Asset
Vertical Analysis of Balance Sheet
Table 4.2
ASSETS and LIABILITIES 2009 2010 2011
Cash and balances with treasury banks 13.02
%
12.26% 11.15
%
Balances with other banks 4.68% 3.08% 2.93%
Lending to financial institutions- net 2.09% 2.07% 2.51%
Investments- net 20.88
%
23.04% 29.11
%
Advances- net 50.5% 50.31% 46.13
%
Operating fixed assets 2.96% 2.66% 2.59%
Deferred tax assets 0.39% 0.32% 0.67%
Other Assets 5.44% 6.31% 5.16%
Total Assets 100% 100% 100%
Bills payable 1.24% 1.12% 0.77%
Borrowing 4.95% 4.79% 1.94%
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Deposits and others accounts 76.42