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ACKNOWLEDGEMENT
I have great sense of gratitude for the most Beneficent and Merciful Allah who has always helped me in all matters of life .I tried but He rewarded me more than the tried. I have deep feelings for whole of my family, in general, and for my Father, my Mother and my elder brother, in particular .They have always soothed me, elevated me and their words and dua has floated me in the deep seas of troubles. All of my successes are due to the prayers of my family. I am thankful to all of my teachers and my class fellows and friends whom cheerfulness and guidance is an asset for me .I am especially thankful to the bank staff who has given me opportunity to get precious practical knowledge and also for their guidance during my internship. Without the help of all these I was not able to complete this report.
Preface
This Internship report is the compulsion put in by Hailey College of Banking and Finance for the award of master degree in business administration. In order to accomplish the task of completion of the degree, I choose the renowned and reputed organization that is the Zari Taraqiati Bank Ltd. I went through 6 weeks internship training in the bank in order to perceive the true art and the practical picture of banks working and to go through the process by which the organization is making very good out of its limited resources. The report is based on the introduction of the bank, products offered, financial analysis and assignments I handled during my internship. The report is divided into two main parts; the first part includes the introduction of bank, its products and financial analysis while the second part is based on the assignments I handled during my internship. I am positive that the college will oblige me by giving its recommendation and consent for the approval of the degree and the purpose for which I have gone through training and report writing procedure will be served positively.
Table of Contents
Part One ____________________________________________________________________ 8 Ch. 1: Introduction of Zarai Tarqiati Bank Ltd. _____________________________________ 8 Chapter 1 ___________________________________________________________________ 9 History ___________________________________________________________________ 9 Credit Rating ____________________________________________________________ 11 Corporate Vision_________________________________________________________ 12 Corporate Mission _______________________________________________________ 12 Corporate Objectives _______________________________________________________ 13 Transformation of ZTBL to R.F.I of the country and road to excellence. ______________ 14 Branch Network ___________________________________________________________ 16 Management Hierarchy _____________________________________________________ 17 Board of Directors _________________________________________________________ 19 A Brief Resume of President _______________________________________________ 20 Kissan Support Services Ltd. _________________________________________________ KSS Aim ________________________________________________________________ KSS Operation ___________________________________________________________ Objectives ______________________________________________________________ Services/Activities so far undertaken by KSS ___________________________________ 23 23 23 23 24
Chapter 2 __________________________________________________________________ 25 Products and Services ______________________________________________________ 25 ZTBL Locker Facility ______________________________________________________ 25 Products offered to Meet Finance Need of Farmers ______________________________ 26 Types of Loans Advanced __________________________________________________ 26 Loan Schemes _____________________________________________________________ Supervised agriculture scheme: _____________________________________________ Zarkhaiz (one window operation) ___________________________________________ Sada Bahar Scheme ______________________________________________________ Tea financing scheme _____________________________________________________ Crop maximization project _________________________________________________ PER ACRE CREDIT LIMITS ____________________________________________________ Major Crops ____________________________________________________________ Minor Crops ____________________________________________________________ Growing Agro Forest Trees_________________________________________________ Growing Orchards _______________________________________________________ Mature Orchard/Fruits crops _______________________________________________ 27 27 27 27 28 28 30 30 30 31 31 32
Types of Security __________________________________________________________ Immovable Property _____________________________________________________ Moveable Property and Guarantees _________________________________________ Personal Surety _________________________________________________________
33 33 33 34
Debt Equity Ratio __________________________________________________________ 35 Repayment Periods ________________________________________________________ 36 Recovery Procedure ________________________________________________________ A) Recovery Schedule _____________________________________________________ b) Issuance of Notices ____________________________________________________ c) Legal Action __________________________________________________________ d) Rescheduling of Loan Repayment Facility ___________________________________ d) Down Payment for Rescheduling of Loans __________________________________ 36 36 36 36 37 37
Chapter 3 __________________________________________________________________ 38 Horizontal Analysis of Balance Sheet __________________________________________ 38 Vertical Analysis of Balance Sheet ____________________________________________ 39 Horizontal Analysis of Profit & Loss ___________________________________________ 40 Vertical Analysis of Profit & Loss ______________________________________________ 42 Interpetation of Horizontal and Vertical Analysis ________________________________ 44 Interpetation of Horizontal and Vertical Analysis of Balance Sheet __________________ 49 Cash and Balance with Treasury Banks _________________________________________ 49 Ratios ___________________________________________________________________ 52 Key Financial Trends of 2009 _________________________________________________ 55 Credit Risk _______________________________________________________________ Market Risk_____________________________________________________________ Liquidity _______________________________________________________________ Profitability _____________________________________________________________ Capitalization ___________________________________________________________ SWOT Analysis ____________________________________________________________ Strengths ______________________________________________________________ Weaknesses ____________________________________________________________ Opportunities ___________________________________________________________ Threats ________________________________________________________________ 57 58 59 60 60 65 65 66 67 68
Chapter 4 __________________________________________________________________ 65
Sample of Debit/Credit Voucher ______________________________________________ 84 Sample of Transfer Voucher _________________________________________________ 89 Daily Transaction Scroll _____________________________________________________ 90 Making Entries in the Ledgers ________________________________________________ 92 Disbursement and Recovery Entries ___________________________________________ 92 Revolving SBS Loan ________________________________________________________ 93 Opening and Closing Cash ___________________________________________________ 97 Key Register ____________________________________________________________ 97 Safe Register: ___________________________________________________________ 97 Dispatch and Diary _________________________________________________________ 98 Recommendations _________________________________________________________ 98 Conclusion ______________________________________________________________ 100
Part One
Ch. 1: Ch. 2: Ch. 3: Ch. 4: Introduction of Zarai Tarqiati Bank Ltd. Products Offered Financial Analysis SWOT Analysis
Chapter 1
The Zarai Taraqiati Bank Limited (ZTBL) (formerly known as Agricultural Development Bank of Pakistan) is the largest public sector financial development institution with a wide network of 27 Zonal Offices, 9 Audit Zones and 352 branches in Pakistan. The bank serves around half a million clients annually and has over one million accumulated account holders.
History
Pakistan is an agricultural country and more than 60% of its population is working related to agriculture. A development in the agricultural sector will no doubt result in the development of the whole country. To keep With a view to meet this basic need the Agricultural Development Finance Corporation was set-up in 1951, and was entrusted with the task of providing financial facilities for the development and modernization of agriculture, including: Forestry, Fishery, Animal Husbandry, Poultry, Dairy Farming. Later on the Agricultural Development Bank of Pakistan was also established in September 1957, under the Agricultural Development Bank Act. The Bank is to provide credit in cash or in kind, warehousing and storage facilities to agriculturists, cooperative societies and other bodies, of which the majority of members are agriculturists. As the functions of the Agricultural Development Finance Corporation and Agricultural Development Bank were similar and since both were working with capital provided by the Government, they were merged into one organization known as Agricultural Development Bank of Pakistan on February 18. 1961. The Agricultural Development
Bank of Pakistan was a banking company for the purpose of the Banking Companies Ordinance and the State Bank of Pakistan Act. On 14 December 2002 the Federal Government has converted the Agricultural Development Bank of Pakistan (ADBP) into Zarai Taraqiati Bank Ltd (ZTBL) and the new venture has started its operation with immediate effect. The new corporate structure redefines the banks statue as a public limited company with an independent Board of Directors promulgated under the presidential ordinance which, aims at ensuring good governance, autonomy, delivering high quality, viable and timely financial services to a greater number of clientele in the agricultural and rural segment of the country with adequate returns to the stakeholder. After this incorporation all the assets and liabilities of ADBP became the assets and liabilities of ZTBL. This restructure was carried out with the aim to improve the working and role of bank in the agricultural development. The bank is completely owned by the government and it has head office in Islamabad. Ownership Type of Institution Established President & CEO Equity Headquarters Total Deposits Total Disbursement Homepage Government Specialized Bank 1961 Muhammad Zaka Ashraf 18.7 Billion (2009) Islamabad, Pakistan PKR 8.8 billion (as Dec.31st, 2009) PKR 77.7 billion (as Dec.31st, 2009) www.ztbl.com.pk
ZTBL is providing affordable, rural and agriculture financial services to the rural Pakistan, comprising 68 % of the total population. The Bank through a country-wide network of 352 branches is serving around half a million clients annually and over one million accumulated account holders with the average loan size of around Rs.89,000.
Credit Rating
In August 2010, ZTBL continued to achieve AAA credit rating by JCR-VIS. Year 2010 2009 Entity AAA/ A-1+ AAA/ A-1+ Stand Alone B+/ B B+/ B Outlook Stable Stable
The credit rating of the bank is due to the reason that bank enjoys sovereign guarantee of the federal government that covers its debt obligations to State Bank of Pakistan (SBP) and ensures safety of deposits under the Banks (Nationalization) Act 1974. The banks lending book is largely funded through SBPs credit lines while contribution from deposits remains nominal. ZTBL is actively exploring different options for resource mobilization including bilateral/multilateral arrangements with financial institutions. In case these efforts materialize; it would diversify the existing funding source of the bank, thereby reducing reliance on the SBP.
Corporate Vision
Dedicated to serve the needs of the farming community, by delivering financial products and technical services on a competitive and sustainable basis, in a convenient, efficient and professional manner, leading to success of the Bank and the farmers.
Corporate Mission
To play effective role in the promotion of economic growth, by enhancing the availability of credit to the agriculture sector, through reliable access to sustainable financing, special lending programs, technical assistance, and other products & services, and to promote career development opportunities for increasing professionalism and technical proficiencies of employees.
Corporate Objectives
1. Develop and operate as a financially and operationally sustainable R.F.I of the country. 2. Assist rural community, particularly the small farmers, in raising their productivity and income levels through timely delivery of credit, advisory and ancillary services. 3. Build ZTBL's image as a proactive, client friendly, financially & operationally sustainable with indigenous product deployment. 4. Establish and provide backward and forward linkages to strengthen agri. value added commodity chains. 5. Engage in public - private and wholesale - retail partnership to deepen outreach and reduce operating cost. 6. To function as a rural commercial bank to mobilize rural capital formation and to commercialize the agriculture sector by delivering the true value of credit to the client. 7. Provide a wide range of risk insurance products to its clients. 8. Open up its venues of operation to Domestic & International Banking Industry to avail comparative advantages.
The reforms shall establish ZTBL as a key R.F.I of the country. By expanding its private sector role, the bank aims to establish network of high tech rural and agri. financial services through intermediations under public private participation and whole-sale retail lending mechanism.
Branch Network
Head Office
Islamabad, Pakistan Details of Regional Offices
Punjab
Sindh
Balochistan
Khaber Pakhtunkhaw
Abbottabad 7 Branches Mingora 15 Branches Peshawar 20 Branches
Gilgit Balitistan
Gilgit 7 Branches
Islamabad 13 Branches Multan 8 Branches D.G.Khan 6 Branches Sahiwal 15 Branches Lahore 20 Branches Gujranwala 18 Branches Bahawalpur 13 Branches Faisalabad 20 Branches Sargodha 16 Branches Vehari 11 Branches
Karachi 15 Branches Hyderabad 14 Branches Mirpur Khas 14 Branches Sukkur 15 Branches Larkana 18 Branches S.B. Nazirabad 14 Branches
D.I. Khan 14 Branches Turbat 6 Branches Quetta 18 Branches D.M. Jamali 7 Branches
Total Zones
Total Audit Zones Total Branches
27 9 352
Muzafargarh 11 Branches
Muzafar.Abad 10 Branches
Management Hierarchy
The general direction and superintendence of the affairs of the bank are entrusted to a 12 members Board of Directors consisting of a chairman appointed by the Federal Government, the Federal Government officers from the Ministries of Finance and Food and Agriculture, four officers of the four Provincial Governments and one non official nominated by each province. One member on this board represents the State Bank of Pakistan also. However, at present the bank has 7 directors including chairman. The bank also has a president appointed by the federal government and a company secretary. In ZTBL, the president supervises and directs the Chief Executive Officer who supervises and directs the Head of Department, who then supervise and direct the officers under them. The management hierarchy of bank is as follows;
President
Officers
Officers
Officers
Officers
Earlier the bank was functioning like a pure government institution and permission has to be sought on every step for moving forward. Now the bank management board will be fully empowered to run the affairs of the ZTBL. More than 2,000 employees of the bank have opted for Voluntary Golden Hand Shake Scheme, offered by the bank to its employees. Bank has established a task force for improving the operational performance of the staff and it was monitoring the disbursement, recovery operations and performance of field functionaries. The task force comprised 10-15 officers and each officer will head a desk exclusively to monitor 3-4 regions. This task force will be responsible to evaluate performance of each MCO, Manager and Regional Manager on the achievement of banks policies regarding credit and recovery periodically.
Board of Directors
Syed Qamar-Uz-Zaman Shah Chairman Board Mr. Muhammad Ashraf President/ CEO Zaka
Hussain
Iftikhar
Khan
Posts Held Advisor to Chief Minister Sindh from 1989 to 1990 Member Executive Committee, Lahore Chamber of Commerce & Industry from October 2002 to September 2004 Central Chairman All Pakistan Sugar Mills Association from October 2004 to October 2006 Vice Chairman of The Federation of Pakistan Chambers of Commerce & Industrys Standing Committee on Food & Agriculture from January 2007 to December 2007 Academic Institutions Member Board of Governors of Sadiq Public School, Bahawalpur, from 1st January 1989 to 2008
Mr. Shafqat Hussain Nagmi Director Mr. Shafqat Hussain Naghmi is a civil servant from DMG Group and currently posted as an Additional Secretary I in Federal Ministry of Commerce, Islamabad. Previously he was posted as Chief Operating Officer (COO) in Pakistan Cricket Board.
KSS Aim
To provide support staff to ZTBL & under take its non core activities.
KSS Operation
Kissan support services operates under its Memorandum & Articles of Association.
Objectives
The main objective of KSS are following: To provide to the Bank all kinds of support staff and ancillary services To plan, organize and establish training facilities to impart training to the banks staff Drip Irrigation System to assist the bank clients in marketing of their product and provide storage facilities To assist the bank clients in marketing of their product and provide storage facilities To provide welfare services to the employees of the Bank including education, vocational training, sports and recreation facilities To invest any surplus money of the company not immediately required To carry on any business, which may seem to the company capable of being conveniently carried on To liaison & establish contracts with agricultural research organizations for development of efficient, effective and appropriate technologies To carry on business of providing consultancy, advisory and other agency services and support services to Zarai Taraqiati Bank Limited
To provide to the Banks clients quality products and services for efficient and improved farming Etc.
Chapter 2
Products and Services
ZTBL Locker Facility
Zarai Taraqiati Bank Ltd. apart from its core functional activity marked with country based agri-business, has started to serve its valued customers by offering lockers facility. Initially, this facility is being offered at following 11 branches:S.No 1 2 3 4 5 6 7 8 9 10 11 Name of Branch Islamabad Branch Main Branch Lahore Peshawar Branch Gujranwala Branch Faisalabad Branch Multan Branch Sahiwal Branch Sargodha Branch Khan Pur Branch Shafi Court Branch Main Branch Gulshan-e-Johar
Following are the approved rates for rent of lockers and key deposits against which lockers will be allocated: Type Small Specification 6-1/2"x41/2"x23" Rent Per Annum Rent after grace period Key Deposit Rs.1,200/Rs.1,500/Rs. 5,000/Rs.1,800/Rs.2,500/Rs.2,250/Rs.3,125/Rs. 10,000/Rs. 15,000/-
Life Time Locker Facility On lump-sum payment of locker rent for ten years entitle the lessee to avail the locker facility for life time, without key deposit.
Loan Schemes
ZTBL is offering the following loan schemes to the farmers.
The documentation once completed remains applicable for three years with yearly cleanup/renewal without any further documents. The borrowers can draw the credit in lump sum or in installments according to his requirement. Like-wise he can repay in lump sum or in installments during the year when his cash position allows him. Pass Book containing transactions in his SBS Account is supplied to every borrower free of cost.
Internship Report on Zarai Taraqiati Bank Ltd. 2010 the Bank for the purpose. These funds are to be revolved for meeting input credit needs in the project villages till 30th June, 2014 after which Bank will return the principal amount to MINFAL. Accordingly Credit needs of the project farmers are being met by respective ZTBL branches through Village Organizations formed for the purpose. Duly the currency of the project Bank is authorized to charge 4% per annum mark-up on loans to project growers to meet its operational cost, however in case of default Banks normal rate of return i.e. 9% p will be applicable.
Minor Crops
Overall Credit Limit Per Borrower Sada Bahar Scheme under one window operation or otherwise Rs.1.000 Million Rs.0.500 Million
Potato Tobacco Mustard Mung Tomato Mash Lentil Groundnut Sunflower Soyabean Canola Rape Seed Til(Sesame) Suger beet
36000 29000 11000 19000 3000 11000 14000 15000 12000 13000 11000 12500 12000
Bajra Jawar Gram Guara Caster Oil Barlay Berceme Janter Garloc Turmeric Ginger Lacern & Shaftal
11000 11000 12000 3000 6000 9000 4900 4000 26000 25000 30000 4500
Growing Orchards
S. No. 1 2 3 4 5 6 7 8 9 Trees Mango Citrus Apple Banana Jujuba Guava Coconut Palm Oil Dated 1st Year 24,000 21,000 23,000 29,000 19,000 21,000 29,000 18,000 33,000 2nd Year 13,000 12,000 12,000 20,000 9,000 12,000 6,000 6,000 12,000 3rd Year 13,000 11,000 12,000 23,000 10,000 11,000 6,000 7,000 11,000 4th Year 13,000 13,000 12,,000 30,000 10,000 13,000 7,000 7,000 12,000 5th Year 14,000 13,000 14,000 26,000 10,000 13,000 8,000 7,000 13,000
Types of Security
Immovable Property
Agricultural Land
Under Pass Book System 80% Outside Pass Book System 70% Under Alienability Certificate 66% Commercial/Industrial Land under Pass Book 80%
3. Government securities
85% of face value or market value whichever is less.
6. NIT Units
80% of the face value or market value whichever is less.
Personal Surety
Against a bond with two sureties under General Credit and one surety in Special Schemes up to Rs.25,000/- or Up to 50% of appraised value of properties of sureties.
Except Tubewell/Tractors/Implements/ Attachments/Equipments Production Loan upto Rs.0.100 Million Land holding upto 25 acres/loan amount upto Rs.0.2 Million Land holding beyond 25 acres to 50 acres/loan amount beyond Rs.0.2 Million upto Rs.0.5 Million Land holding beyond 50 acres/loan amount beyond Rs.0.5 Million upto Rs.1 Million. NIL 15% 25% 30%
Repayment Periods
S. No. 1 2 3 Types of Loans Recovery Period
Short Term Loans Medium Term Loans Long Term Loans Crop production working capital loans recoverable in lump sum commencing after the harvest/marketing of respective crops and within maximum period of 12 months. Dairy farming and livestock etc. In yearly/half yearly/monthly installments and within maximum period of 5 years. Tractor, agricultural machinery, poultry farming, godowns and orchard iIn yearly/half yearly installments within maximum period of 8 years and. above.
Recovery Procedure
A) Recovery Schedule
Recovery schedule in each loan case as per terms of sanction of loan is fixed and communicated to the borrowers after disbursement of loan. In case of default or failure in repayment of any installment on due date the mark-up shall continue to be charged and last installment due to this may differ from the amount of installments fixed at the time of disbursement.
b) Issuance of Notices
Demand notice is issued before the due date of every installment. A Legal Notice is issued one month after the due date informing the borrower that if the amount is not repaid within next one month, further legal action will be taken to recover the dues.
c) Legal Action
Legal action can be initiated against the defaulter if loan is not repaid even after expiry of legal Notice period. Where the court in bank's favour has decreed a case, account is to be settled by recovery of amount from the auction of the mortgaged property. The bank may purchase the mortgaged property if considered feasible to dispose it off later on through auction or in any manner deemed fit for getting the best price.
Internship Report on Zarai Taraqiati Bank Ltd. 2010 The bank may dispose off the mortgaged properties of defaulters for satisfaction of its dues with out intervention of courts under Financial Institutions (Recovery of Finances) Ordinance 2001.Rescheduling of Loan Repayment Facility .
Chapter 3
Horizontal Analysis of Balance Sheet
Particulars
ASSETS
Cash & balances with treasury banks Balances with other banks Lendings to financial institutions Investments - net Advances - net Operating fixed assets Other assets - net
2008
%
8.695 973.720 77.413 28.689 16.981 -8.284 21.936
2007
%
31.983 707.497 166.845 12.842 -11.432 1.860 11.267
2006
%
-18.724 426.058 97.724 13.212 -16.375 -10.364 1.813
2005
%
-0.532 428.274 349.899 -2.595 -29.360 -14.614 -0.098
2004
%
100 100 100 100 100 100 100
LIABILITIES
Bills payable Borrowings Deposits and other accounts Sub-ordinated loans Liabilities against assets subject to finance lease Deferred tax liability Other liabilities 210.675 0.000 73.764 0.000 86.149 19.942 32.729 98.915 0.000 38.465 0.000 46.641 10.705 14.307 39.962 0.000 -7.681 0.000 9.006 1.418 3.948 19.402 0.000 -15.296 0.000 3.013 -0.086 -0.162 100 100 100 100 100 100 100
Note: In this Horizontal Analysis the year 2004 is taken as a base year to calculate the
change in other financial years. All the columns are representing change with respect to 2004.
2008
%
2007
%
2006
%
2005
%
2004
%
1.693 2.253 1.516 15.518 12.790 9.106 0.000 0.000 0.000 4.940 8.143 6.594 68.324 65.655 71.987 1.117 0.927 0.956 8.408 10.233 9.841 100.000 100.000 100.000
1.891 1.899 9.319 1.762 0.000 0.000 15.290 3.395 63.121 64.739 0.823 1.164 9.554 11.178 100.000 100.000
LIABILITIES Bills payable Borrowings Deposits and other accounts Sub-ordinated loans Liabilities against assets subject to finance lease Deferred tax liability Other liabilities NET ASSETS REPRESENTED BY Share capital Reserves Unappropriated profit Surplus on revaluation of assets net of tax
0.000 0.000 0.000 0.218 0.152 0.011 28.584 24.396 19.796 100.000 100.000 100.000 100.000 100.000 100.000
0.000 0.000 0.000 0.000 18.989 18.418 100.000 100.000 100.000 100.000
74.223 83.179 89.669 6.438 3.966 2.715 19.339 12.855 7.616 100.000 100.000 100.000 2.847 4.584 2.669 100.000 100.000 100.000
92.606 91.682 1.914 1.664 5.480 6.655 100.000 100.000 1.876 1.048 100.000 100.000
2008 %
4.501 11.279 0.224 -43.546 27.355 0.000 -16.749 14.982
2007 %
-13.362 9.002 -27.473 -9.279 -168.737 4286.557 58.214 -101.980
2006 %
-26.024 -10.618 -35.745 -48.118 913.026 15739.293 65.541 -123.815
2005 %
-15.825 -87.507 29.405 38.920 -158.617 0.000 105.258 -36.551
2004 %
0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
0.000 0.000
Note: In this Horizontal Analysis the year 2004 is taken as a base year to calculate the
change in other financial years. All the columns are representing change with respect to 2004.
2008 %
170.058 70.058 100.000 99.934 0.066 0.000 0.000 100.000 34.539
2007 %
194.831 94.831 100.000 84.502 -0.019 15.517 0.000 100.000 -0.926
2006 %
187.772 87.772 100.000 46.186 0.264 53.549 0.000 100.000 -12.946
2005 %
106.091 6.091 100.000 99.740 -0.012 0.273 0.000 100.000 66.804
2004 %
163.098 63.098 100.000 147.368 0.043 0.000 0.000 100.000 73.574
100.000 92.994 6.934 0.053 0.019 100.000 45.070 100.000 100.052 0.909 -0.961 100.052 58.644
100.000 97.983 1.866 0.000 0.151 100.000 31.938 100.000 84.049 1.103 14.848 84.049 50.603
100.000 65.056 34.937 0.000 0.007 100.000 0.000 100.000 95.833 0.000 4.167 95.833 37.410
100.000 99.855 0.494 0.000 0.145 100.000 -3.619 100.000 101.605 0.000 -1.605 101.605 -17.641
100.000 99.651 0.110 0.000 0.000 100.000 32.306 100.000 99.999 0.000 0.001 99.999 66.776
Note:
The Financial statement for the year of 2009 is not available online. ZTBL is government institute and it is not listed in any stock exchange. I have tried to get copy of financial statement from the offices of bank but I failed to find any copy from the branch where I have completed my internship then I have contacted zonal offices and they also did not have any copy of the financial statement of year 2009. With the reference of branch manager I have requested it from the Head Office but I came to know that publication department has not published the financial statement for the year 2009. The last financial statement which is available in the printed form is of year 2007. The financial statement of year 2008 is also not available in printed form however it is available on internet in the excel format which does not include director and auditor report. This is the reason that the horizontal and vertical analysis is done from 2004 to 2008. However, the Key Financial Trends of year 2009 is included in the report which I have obtained from the credit rating report published by Japan Credit Rating Agency on August 2010. The internship report also includes a glimpse view of banks performance from 1997 till 2009 which I have collected from the banks website, other websites and newspapers.
Internship Report on Zarai Taraqiati Bank Ltd. 2010 much more than the expense which shows that the bank has cushion to confront with other expenses incurred due to secondary functions of the bank which is a positive sign.
ZTBL is a government bank due to which the government can ask it to give relief to loanees of particular regions of category which also increase the cost for the bank. The flood of 2010 is expected to increase this cost in this financial year too because a large number of farmers have been effected with this flood and they are not in the situation to return their borrowed amount to the bank. For the year 2008 there is not any amount which is asked by the government to write off but in the year of 2007 and 2006 there is some amount which banks directly written off on the instructions of the government.
Taxation
Due to increase in the profit the tax has been also increased, it is almost doubled in the last 5 years like the profit of the bank which has been also doubled. So, it not a negative sign. By compare the increse in the profit before tax and the increase in tax, I come to know that the increase in the tax is less than increase in profit which can be due to two
reason that whether the rate of tax is not increased as the income of the bank or the bank is managing its tax efficiently.
Investments-net
There are ups and downs in the amount of investment made by the bank in the previous five years. From the notes to the account it is clear that bank usually invest in less risky investment like Market Treasury Bills and Pakistan Investment Bonds. The less risky investment will result in less gain on investment but here the return on investment is not the main focus of the bank. The money the bank owns is largely consist on the borrowed money from SBP, so the bank cannot use the borrowed money in a more risky adventure.
Advances-net
The bank continues to increase the amount of advances to facilitate more and more farmers every year. The data of 2009 shows a record increase in lending to farmers; the bank has disbursed 77.7 Billion rupees in 2009 as compared to 70.7 Billion in 2008. The percentage increase in the horizontal analysis also shows this continuous increase in the trend of advancing.
Borrowings
It is the amount which bank has borrowed from SBP. There is no change in this loan from 2004 the reason is that neither SBP has given new loan to ZTBL nor ZTBL has returned any principal amount of loan back to SBP due to which the amount of loan borrowed remain unchanged. ZTBL and SBP is now negotiating on terms and conditions of returning principal amount in 15 equal installments.
Deposits
Deposits are the backbone in any bank operations because the primary function of any bank is to take deposit from depositors and then lend it again to other who needs it. But as I have written before ZTBL does not rely on deposits more like any other bank. However, in recent years the bank is trying to shift its dependence from SBP to other resources and due to this it starts increasing its deposits by marketing. But the efforts in this respect is still need improvements as the products offered by ZTBL is not as attractive as offered by other commercial banks.
Share Capital
In 2008 the bank has issued bonus shares to increase its paid up capital. The reason of this increase can be the requirement of SBP to maintain a minimum equity level. Currently the paid up capital of the bank is 12.5 Billion.
Reserves
Reserves are made for the development of the organization or for the contingencies which can affect in the future. There is continuous increase in the reserves of the bank from last five years which is a good sign. These reserves also include the statutory reserve requirement according to banking companies ordinance, 1962.
Conclusion
Although the bank needs improvements in many fields, the overall performance of the bank is satisfactory. The bank has made many efforts in the recent years and it is clearly visible in the result of its financial statements. The reduction in NPLs is also a positive sign and will definitely result in good performance. Besides a government institution the bank has made before tax profit of 4.9 Billion which is great achievement. If the process of improvement continues than it can make more profit in the upcoming years and its success will also result improvement in financing facilities to people of rural area.
Ratios
Ratios Avg. Rate of lending Avg. Rate of borrowing Admin Expenses Cost of funds Spread 2008 % 11.297 6.156 83.322 89.479 -78.182 2007 % 10.190 6.150 87.643 93.793 -83.603 2006 % 8.929 5.177 95.770 100.947 -92.017 2005 % 10.377 0.727 98.778 99.505 -89.128 2004 % 14.174 5.766 78.062 83.828 -69.654
The reason of negative spread is that the bank use to borrow from SBP rather than getting deposits from the general public due to which the ratio of admin expenses depicts a large cost than expected because this ratio is calculated by dividing admin expenses with the deposits. In my opinion the admin expenses is required to be calculated by adding borrowing also with the deposit. For example if we will calculate this ratio by adding borrowing with deposits than the result for 2008 will be 7.975 rather than 83.322 which is acceptable. By calculating all admin expenses with this formula the result of spread will be like this.
Ratios Avg. Rate of lending Avg. Rate of borrowing Admin Expenses Cost of funds Spread
Ratios Net markup to total income Return on assets Return on Equity Breakup Value Infection Ratio Provision to classified advances Advances to deposits
By calculating the admin expenses in this way the result of spread is still in negative but not as much as it was before. However, all this shows that there is still problem the bank
Internship Report on Zarai Taraqiati Bank Ltd. 2010 is not utilizing its human capital as it needs to. The main reason behind this is the working style of the bank, because it a government institute so the wastage of resources is not a surprise thing. However, the bank is continually improving its working style and also moving towards making high profit. Ratio of net markup to total income shows that bank has improved its secondary function as wel. But this improvement is not stable one when I look the ratios of previous years, it shows ups and downs in it.
Return on assets
Return on assets is a ratio uses to gain information that how much assets of the company producing profit, the more the result of this ratio the more efficently the bank is utilizing its assets. More than 2 is considerd a good ratio and the result of ZTBL is also showing good result, the ratio of 2009 is also more than 2 which is found in the report published by Japan Credit Rating Agency.
Infection ratio
It is an important ratio which shows that how much advances of the bank is placed under classified advances. In other words, it shows that how much loans given by the bank is considered to become bad debts. The more this ratio is, the more the bank needs to maintain the provisions against these loans and which will result in lesser profitability. Usually, ideal situation is conisdered where this ratio is less than 5%, in this situation the bank has a biger portion of customers which are trust worthey and have credit worthiness. The infection ratio of ZTBL is very high which can be considered a negative sign. However, keeping in view the previous records it is clear that bank has improved it a lot and all this improvement is giving sense that if bank continue working with the same pace than in the next two to three years this ratio will decrease significantly and can come under satisfactory level. The record of NPLs is given in the Quick View of ZTBLs Performance.
This ratio tells that how much provision the bank is maintaing against its classified advances. The more this provision is, the more it can be assumed that the classified advances of bank is in the category of loss. Maintaing provision is the requirement of Prudential Regulations of State Bank of Pakistan, the more risky the loan is the more provision the bank is required to maintain. The bank has to keep its classified advances in the four categories, (1) Other Assets Especially Mentioned (2) Substandard (3) Doubtful (4) Loss. Each category has its own requirement of provision, the higher the category, the higher the provision required to maintain. The ratio calculated from the financial statement of ZTBL shows a continuous increase, it is a negative sign because the bank is maintaining larger provision which shows that a large part of classified advances are in the category of loss. And it shows that bank is not doing enough to recover these loans.
Advances to Depoists
Advances to deposit shows that how much part of deposit is used by bank to advance. Usually this ratio remains with in range of 70 to 75 % because 25% of all bank deposits is required to be kept in statutory reserve to maintain minimum liqudity requirement. The ratio of ZTBL is presenting a different scenerio, it is more than 1400% for the year 2008 which an abnormal result. I have mentioned the reason of it many times before in this report, the reason is that ZTBL is advancing a large part out of the loan it has obtained from the SBP. The borrowing of the bank is much larger than the deposits it has this is the reson that this ratio is showing such result.
Note: The following is the extract from the report of Japan Credit Rating Agency
issued on August 2010 showing the new credit rating of ZTBL. Balance sheet footing of the bank was higher at year-end 2009 at Rs. 113.6b. Net advances increased to Rs. 83.6b (2008: Rs.69.b) representing a higher proportion of total assets at 74% at year-end 2009. While various new loan products have been launched been launched by the bank in 2009, Sada Bahar Scheme has remained the flagship product of the bank. For all new borrowers of crop production loans, Awami Zarai Scheme (AZS) has been launched by the bank; outstanding balance against this scheme may also show increase over time. To ensure proper utilization of loan, the bank has incorporated a wholly owned subsidiary to make arrangement for in-kind lending to farmers. The IT infrastructure of the bank has improved considerably over time. With the implementation of various applications at branch-level to consolidate loan
disbursement & recovery data, monitoring of lending activities has improved, though there may still be a need to further strengthen the loan recovery mechanism. Gross infection has declined from16.7% in 2008 to 15.8% in 2009; however there is still need for further strengthening the recovery mechanism. Net infection hovered at prior years level at 11.5%. Net NPLs in relation to Tier-1 capital stood at almost 57% at year-end 2009. ZTBL has arranged crop loan insurance for wheat, cotton, sugarcane, rice and maize. As the insurance coverage is enhanced, the risk of loss in case of calamities will be reduced.
Growth in loan portfolio during 2009 absorbed some of the liquidity held by the bank. Liquid assets to total borrowings and deposits declined to 27%. The bank has made efforts to enhance its deposit base, though these continue to represent a small proportion of the total resource base. The bank had outstanding borrowings of Rs. 54.5b from SBP at year-end 2009. The terms of restructuring of SBP debt have yet to be finalized, which would have significant implications for the risk profile of the institution. The bank has so far not made any interest or principal payments against these credit lines. While there is some cushion available to the bank in terms of markup differential receivable from the GoP vis--vis interest payable to SBP, liquidity profile may be significantly compromised if payment is required against the principal portion. One of the proposals under consideration entailed debt to equity swap, which if finalized, would support capitalization levels and facilitate in furthering the governments economic objective pursued through the bank.
Credit Risk
Gross advances of the bank considerably grow over 2009, with year-end outstanding balance of Rs. 89.4b (2008: Rs. 77.8b). Loan disbursements of around Rs. 78b were made by the bank in the outgoing year. Loan disbursement target for fiscal year 2010 was Rs. 80b. ZTBL is used as an arm by the Government, with disbursement target stipulated as part of the annual budget process. For FY10, 22.7% of the loan disbursement target pertained to development loans, while remaining was for production loans. All targets are allocated by SBP. While various new loan products have been launched by the bank, Sada Bahar Scheme has remained the flagship product of the bank. Loan products launched in 2009 include, Green Tractor Scheme, Crop Productivity Scheme and Rural Development Scheme. Green tractor scheme is specifically for the province of Punjab and entails subsidy of RS. 200,000 per unit for 10,000 tractors. Banazir tractor scheme is applicable to all areas of Pakistan. On receiving complaints from borrowers regarding non-cooperative attitude of tractor dealers, a tractor delivery system has been developed through KSSL in the outgoing year. Awami Zarai Scheme (AZS) has been launched by the bank for all new borrows of production loans, pertaining to inputs required at the time of crop cultivation. As per the scheme, agriculture inputs will be supplied by KSSL to farmers in lieu of cash. Quantity of input needed for each crop on a per acre basis has been predetermined by the bank. The farmers will be provided a specific quantity of inputs according to cultivable land. The purpose of AZS is to ensure proper utilization of loan proceeds. Crop productivity scheme is specifically for financing of fertilizer. Rural development scheme has been launched to provide assistance for dairy, poultry, sheep and goat farming in the rural areas of AJ&K; especially earthquake affected areas. The bank has also setup a pilot project for a model village in collaboration with ministry of food & agri./ provincial agri. Departments. Crop loan insurance has been made compulsory by SBP for wheat, cotton, sugarcane, rice and maize financing. To facilitate loan insurance, the bank has to pay the premium for subsistence farmers, which is subsequently reimbursed by GOP on a half yearly basis. ZTBL has arranged crop loan insurance with Adamjee insurance company limited (AICL). Premium is charged @ 1.3% of loan sanctioned.
The implementation of software applications has facilitated monitoring of lending activities at branch level. The need for strengthening the collection mechanism however remains, as may be ascertained form the portfolio quality indicators. NPLs increased to Rs. 14.2b (2008: Rs. 13b) during 2009. During the out-going year, an amount of Rs. 2.6b was charged off against provisions as per the prudential regulations, with cumulative balance of charged off loans standing at Rs.34.98b at the end of December 2009. This amount was lower than the balance of Rs. 36.30b at the end of December 2008, on amount of recoveries of 4.29b made against charge off amount. At year-end 2009, gross infection in the loan portfolio of the bank remained high at 15.8% (2008: 16.7%). The overall agriculture loan portfolio of the banking sector had gross infection of 16.1% (2008:15.3%) at end-December 2009. Around 52 %( 2008: 47%) of NPLs were classified as OAEM at year-end. On account of this,, provisioning coverage against total NPLs Is low. Net infections (NPLs adjusted for specific provisioning only was 11.5% (2008:11.2%). Minimum recovery target set by the bank entails 90.8% of current dues and 75% of past dues. In 2009, recovery of 91% was achieved against current dues, while 72.4% recovery was made against past dues. Recovery targets are monitored on a branch-wise basis; in branches where overall recovery is less than 75% loan approval authority is retracted. The bank held fixed income securities of Rs. 6.7b at December 2009, increasing form Rs. 4.5b at the end of the preceding year. Of these, only Rs. 283.65m was placed in COIs whiles remaining comprised government paper, credit risk associated with which is considered minimal. COIs are also placed with counterparties of sound risk profile. In addition to the above, the bank has Rs. 100m invested in a wholly owned subsidiary.
Market Risk
Net investments of the bank increased to Rs. 7.2b (2008: Rs. 5.1b) at end- December 2009. Around 73% of net investments comprised short-term treasury bills. Price risk on the same is considered low. Fixed-rate long term PIBs represented 14% of net investments. These carry markup rates in the range of 12-13% and have maturities between Aug-Dec11. Recent increase in benchmark rate is expected to have reduced the market value of fixed income instruments held in the portfolio. However, the bank has both the intent & ability to hold these to maturity. Investment in equities at cost was maintained at Rs. 100.6m, comprising exposure in unlisted securities amounting to Rs. 10.5m. Investment in unlisted securities has been
Internship Report on Zarai Taraqiati Bank Ltd. 2010 fully provided for various reasons. Investment in listed equities of Rs 89.3m had a market value of Rs 537m.
Liquidity
Total borrowings and deposits of the bank where higher at Rs. 63.2b (2008:Rs. 59.9b) at year end 2009 with increase in deposit to Rs. 8.75b (2008: Rs 5.43b). Borrowings were maintained at Rs. 54.5b at year-end 2009. Liquidity profile of the bank declined in relation to 2008, with liquid assets to total borrowing and deposits reducing to 27 %( 2008:36%). Depositors of the bank are primarily individuals. Proportion of current and saving accounts in the deposit mix was maintained at 94%. Since deposits still comprise a small proportion of funding mix; improvement in the deposits does not have a material impact on the cost of funding for the bank. The bank had outstanding borrowings to the tune of Rs. 54.5b from SBP at year-end 2009. These borrowings were obtained to provide finance to clients for agriculture. At the time of reorganization of ADBP into ZTBL, these credit lines were restructured and a moratorium was given to ZTBL according to which it had been allowed to repay SPB debt in 15 years (in 30bi-annual installments) with a grace period of 3 years starting from July 2003 and the last payment was supposed to be of Rs. 3.20b, representing the subordinated loan. At the time of restructuring, the bank had proposed to cap the markup on these borrowings at 2.3558 %( 12 month t-bill rate as at July 01, 2003) for five years but the matter had not been acceded to by the SBP. Since then, various restructuring proposals have been discussed by the bank with the ministry of Finance and SBP, though an agreement on this issue has still to be achieved. The bank has not made any principal repayment on the premise that the restructuring terms have not been finalized. These loans are secured by way of federal government guarantee. Presently, the bank is accruing interest expense on these at varying rates. Three credit lines amounting to Rs. 1.577b carry interest rate of 4% p.a. while remaining thirty two lines amounting to Rs. 48.597b are based on PLS subject to maximum share of profit to SBP ranging from 4-10% p.a. markup on subordinated loan is being charged at weighed average yield of t-bills of 12 months maturity. No return however has been actually paid by the bank, with a total payable of Rs. 19.54b having been accrued by December 32, 2009. Any plan requiring immediate payment of the either the interest expense or principal may place significant stress on the bank, as it does not have the required liquidity. However, the bank also has markup differential of Rs. 17.74b receivable from
the government. This amount is not recognized on books. There are also other amounts recoverable from the government in lieu of relief packages, with outstanding balance of Rs. 956.27m at year-end 2009.
Profitability
Return on markup bearing assets declined to 9.8% on account of decline in high-yielding lending to financial institutions. Nevertheless, interest income of the bank increased to Rs. 8.7b (2008: Rs 8.5b) attributable to overall higher average markup bearing assets during 2009. Net interest income of the bank also depicted an increase to Rs. 5.1b (2008: Rs.4.98b). Cost of funding hovered at 6%, thus spreads declined to 4%. Cash outlay has not been made by bank for payment of interest on borrowings, and interest in only being accrued on books. Non interest income of the bank was higher at Rs. 38.2 m attributable to increase in dividend income on investments. Other revenues primarily comprising recoveries on charged off loan amounts was Rs. 4.3b (2008: Rs 4.8), taking total revenues, net of financial charges, to Rs. 11.2b (2008: Rs. 10.4b). Administrative expenses of the bank inclined to Rs. 5.2b (2008:Rs. 4.5b), in line with inflationary trends in the economy. While salary expense experienced growth of 12% staff strength of the bank was rationalized to 5,352(2008: 5,370). In December 2005, the bank had introduced SR-2005, a retirement benefit scheme for its employees. A significant proportion of employees switched to SR 2005 from their existing pension scheme in 2005. The scheme was re-opened in 2009 and 1,097 Executives/officers of the bank opted for SR-2005, resulting in an expense of Rs. 677.8 to bank in 2009. Incremental provisioning against non-performing loans declined to Rs. 563 (2008: Rs. 1.9b). The bank posted profit before tax of Rs. 4.6b (2008: Rs. 3.99b) for 2009. Profit for 2009 was reduced to Rs. 1.8b (2008: Rs. 2.6) after adjustment of tax expense of Rs. 2.8b (2009: Rs. 1.4b) which pertained to current and prior year.
Capitalization
As of December 31, 2009 equity of the bank was higher at Rs. 18.7b (2008: Rs. 16.9b), exceeding the minimum capital requirement of Rs. 6b mandated by SBP. Capital Adequacy Ratio of the bank was slightly lower at 21.7% (2008: 22.9%). Net NPLs to Tier 1 capital stood at 57% at end-December 2009. If the proposal of loan conversion into
Internship Report on Zarai Taraqiati Bank Ltd. 2010 equity materializes, it will provide considerable momentum to capitalization of the institutions.
Disbursement (Billion)
80 70.8 70 60 50 40 30.1 30 20 10 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 15.1 18.7 25.8 32.1 33.5 36.9 38.9 42.1
73.8
Recovery (Billion)
52
63.2
2009
Deposit (Billion)
10 8.4 8 6 4 4 2 0.2 0 1997 -2 -4 -6 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1.8 0.3 0.2 0.8 1.2 0.1 1.8 0.6
-3.8
80.0% 69.6% 61.6% 60.8% 60.0% 52.9% 53.0% 52.5% 50.0% 48.8% 49.7% 49.1%
70.0%
20.0%
10.0%
0.0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Chapter 4
SWOT Analysis
Strengths
ZTBL has brand name in agricultural loaning. It is first and large financial institution established in Pakistan to promote agricultural financing. The bank has more than 350 branches throughout Pakistan and has presence in all the provinces of the country which enables it to capture and facilitate a large number of customers. The bank enjoys sovereign guaranty of Federal Government that covers its debt obligation to State Bank of Pakistan. The Bank has the most experienced and the least experienced staff, which is a good combination of experienced heads and exuberance of youth. The bank has ability to launch successful products for agricultural industry due to know how of the agricultural system of the country. Mobile Credit Officer is the unique concept which is helping in remaining more near to its customers and also helps in recovery. Concept like these helps bank in safeguarding itself in the risky adventure of financing to small farmers.
Weaknesses
ZTBL have not introduced any Islamic product in financing. Islamic banking is becoming popular in these days and to sustain and increase the number of customers every bank is felling need to start offering Islamic Products. This ZTBL requires noticing this changing trend. In spite of the presence of technology many jobs are done manually. Almost all other banks operations have been computerized but ZTBL is still working on manually written ledgers etc. Like other Government institutes the red tap dilemma also exists in ZTBL. The staff is not motivated because the promotion mechanism is based on experience rather than on the performance of the employees. This is the reason that usually employees stop giving their full efforts after knowing the reality that their performance pays a less role in their success. The average loan disbursement amount is 85,000 to single person which is not a big amount. Usually the loan obtained by the loanee can be used to meet working capital requirement only it cannot be used to fulfill the dream of modernizing of agriculture sector. There is a lack between the planning of head office and the reality of environment because the staff at high level have little know how of the real situation on the ground. The infrastructure of the bank is also based on old style; the bank is not refurnishing its branches like the other banks have done in this decade. The situation at branch level is not good, there is lack of even furniture, fans etc.
Opportunities
The bank started computerizing its operation which if completed will result in increase of the bank performance. The impact of computerization can be seen from the result of recovery of 2009 which is 89%. The computerized system helps bank in reducing fraud. Due to increase in the government attention toward the agriculture sector it is expected to see the role of the bank increasing in the near future. As a result of different steps taken by the government regarding the betterment of the agriculture, small borrowers are attracted to get the financing and to start business. So, the ZTBL has an opportunity to attract the customers by giving them more attracted schemes. They have wide area network in all over the Pakistan, so ZTBL can make it possible the fast delivery of funds to rural areas. The flood of 2010 is challenge for the whole country. Because the most effected people are farmers so the bank has a chance to increase its reputation by utilizing its full resources to help them. It is also expected that the relief which the government may provide to them will also be delivered through the bank in the form of relaxation to the loanees.
Threats
The biggest threat in the banking sector is the continuous downfall of the country economy since the last few years. Sudden rise and fall in the trade and industry conditions and stock exchange business of the country also adversely affect the growth of banking sector. The default ratio of customers who are availing the credit facilities from the ZTBL can rise due to the economic recession in the country. Government type of working style is also a threat to the bank which requires to be changed to keep the banking growing. Many commercial banks also started agriculture loaning scheme so it is expected that in the future the farmers will have more choices to have finance from which will definitely affect the customer base of the bank. Political unrest is also a threat for the bank because it is a government owned bank and the change in government can result a change in the strategy of the government which can affect the plan made by the bank. Natural Calamities is also a problem, the bigger part of the bank customers relies on the environmental condition. Almost whole of the agriculture industry have threat from the changing environment conditions. The example of 2010 flood is still in front of us those who are affected are unable to pay their loans back.
Part Two
Ch. 5: Assignments I handled during my Internship.
Chapter 5
Organogram of Mian Channu Branch
Manager
Assistant Officer
Accountant
Cashier
Redemption of loan
On the payment of all the dues by the loanee (principal + interest), he can free his land (or any other security provided) from any charge created by bank for the purpose of loan. For this purpose he will have to present the following documents: 1. 2. 3. 4. Application for redemption Stamp Paper of rupee 20 Last receipt of amount paid Cheque book (if issued)
When the loanee provides these documents to assistant officer (Or any officer appointed for these sort of work), the assistant officer asks the peon to bring the Loan Case File of the borrower. After the file is received by the assistant officer, he checks the documents that whether all the documents are there in the file. Then he makes required entries in the Passbook. These entries usually made on the page 28 and 30. The example of entries is given below. The following entries are made on page 28. See page number 16 and block number 3 for detail. The entire loan including interest has been paid by (Here page number 16 the loanee. shows the number and date of last charge created against the land of loanee in the favor of bank) The following entries are made on page 30. See page number 18 and block number 8 for detail. ZTBL Mian Channu (Page number 18 is usually the page where the detail of land mortgaged has been given, it include the area of land, khatoni number etc)
After these entries the officer then sends the file to Manager for signature. On approval from the Manager for the Redemption Application the assistant officer attaches all afore said documents with in the file and record in the File Movement Register that file has been moved from the record room for the redemption purpose. Than the file is send to AMO (Assistant Manager Operation) for further process. The loanee is given the date of next week to collect his Passbook. During this period AMO checks the record of the loanee to confirm that the entire due amount with respect to that particular loan has been paid and then he signs to give approval to assistant officer to issue Passbook to the loanee. The AMD (Assistant Manager) and Manger both also sign the notice issued in the name of Patwari and Tehsildar that the land can be transferred to the loanee as the loan has been fully paid by him. Then file again comes to the assistant officer, he checks the signature both in the notice and Passbook and then stamped both. Now the Passbook is ready to issue. Before issuing Passbook the officer record that passbook is issued to the loanee in the Dispatched Register. On the issuance of Passbook to the loanee, the officer verifies that the person receiving the documents is the original owner of the land which is mortgaged with the bank. After getting the Passbook, the loanee goes to Patwari and Tehsildar for the change of record back to his name. The one thing which is interesting here is obtaining Stamp Paper from the borrower. This is not a requirement but bank has made it practice so that if in the near future, it finds that some amount is still due by the borrower than it can write on the stamp paper whatever it wants and then can claim the due amount from the borrower. This is precautionary measure adopted by bank because once the Passbook issued to the borrower and the land again transferred to his name, the bank will be in no position to recover any amount which is unexpectedly left due.
Internship Report on Zarai Taraqiati Bank Ltd. 2010 The passbook dispatched to loanee with notice to Tehsildar to transfer land back to his name After the land is transferred to the loanee name, if he wishes he can withdraw the amount from his current account and can close his account. Usually the loanees do not redeem their land because they want to avoid the cost and wastage of time when in the future they again have to gain loan from the bank. So, they usually remain the land in the name of the bank even after they have paid the whole loan amount. During my internship I have seen people who has paid loan more than 10 years ago but they came to bank after such long time to redeem their land and the reason behind their redeem was that they want to transfer it to someone others name otherwise they may not come for redeem. I have also seen one of the clients who has paid loan in 1985 but his land is still in the name of the bank and they have not redeemed it. After the death of the client his sons came to know that the land could not be transfer to their name because it is still mortgaged against the loan which their father had paid in 1985. So, at that time they reach bank for redemption because the bank always maintained record so their file found from the record room after little efforts. All this shows the confidence the people has on the bank and also shows that in practical life anything can happen.
Internship Report on Zarai Taraqiati Bank Ltd. 2010 Father Name CNIC Number Address Occupation Nationality Contact number Date of birth Marital status Mother name Name, CNIC, Contact of MCO who knows the person personally Next of Kin (The person who will have right to operate the account in the event of the account holders death or any other mishap) Starting amount
This side is used to write the name of This side is used to obtain the signatures of account holder both in Urdu and English. the account holder for verification of cheques in the future if required.
Signing Authority: One side is used to obtain the signature of account holder; I usually take 3 signature of him in the right side of card. While the left side of card is used to write the account holder name in both Urdu and English.
Internship Report on Zarai Taraqiati Bank Ltd. 2010 When the account number is issued, it is also written in the Account Opening Form and Know Your Customer Form.
Account Number:
Particulars
Amount
Name: Father: Address: Account no: Cheque book: Date 15-09-2010 15-09-2010 16-09-2010
Signature:
Debit
Signing authority
50000
The above given table is the example of information usually written in the current account of a customer. There are also many other column available in the ledger books but they all are not used in the bank. There are some options which are not printed there but it is a practice to write that information, like there is no column of signature but without a signature no one can check the validity of a cheque. So, I have observed
Internship Report on Zarai Taraqiati Bank Ltd. 2010 that the signature and thumb impression is used to take in the right side of ledger book where a lot of space is available. The other option which I have mentioned here but not included in the ledger book is the cheque book number. It is also practice to write down serial of cheque book in the space available. It makes it possible to confirm that the cheque book which the customer is using to transact with the bank is associated with that particular bank account or not. Here I have also made few entries which show how a transaction is recorded in the ledger book. Absolutely, the date is the first option than the particulars which shows what exactly happen on that day. Like in the first entry the bank account has been opened with an amount of 1000. So, I have written by cash in the particulars which represents that the person has transacted in cash. Then I credited the amount which shows that this money is given by the customer and in the balance column it has increased the balance with the same amount of 1000. The next column is used by the signing authority (AMO in my case) to confirm the transaction. As I have written before that in ZTBL current account is usually opened only when the bank has to disburse any loan to the customer. When I have joined the bank that was the slack time for the bank because all the customers of bank are farmers that is why they come to bank to get or give loan when they have to plant or harvest any crop. That is why a number of bank customers are seasonal. They are usually a great rush from April to June and then from November to December. Awami Zari Scheme was the only scheme available to new borrower at the time I was there. In this scheme a part of sanctioned amount is given to borrower to meet the wage and water expenses and the rest amount is paid by supply order of fertilizer and pesticides. The amount which has to pay in the form of cash is credited to the current account of customer from where he can withdraw it. The 2nd entry in the sketch of ledger above shows the disbursement of any of such loan, which has increased the balance to 51000. When the customer draws a cheque on the bank the entry in the ledger will be like I have shown above with the date of 16-09-2010. The account of the customer will be debited and the balance will be reduced with the same amount. A large number of ZTBL customers are illiterate so they can not fill their cheque by themselves and due to this reason almost all the cheques are filled in the accounts by a clerk. Before filling the cheque of anyone he assures the balance in the account and in the same time he records entries so he will not have to reopen the ledger to make entry after the deposit or withdrawal of amount by the customer. So there are some things which I have learned from the seniors which they have developed to facilitate
themselves when the customer will come again in the future, these guidelines are following: Write the ledger name and its page number on the front of new cheque book Write the account number on every cheque of new cheque book Take the Thumb Impression of every customer on the cheque For the man take left thumb impression and for women take right or both No cheque will be paid to anyone else than account holder if it is a loan account Fill the cheque in Urdu if the customer signs in Urdu or gives Thumb Impression only Also fill the memorandum attached with in cheque book with each cheque to record all the transaction for future reference of client and to the bank also. All the cheques are required to be signed by respected authority before payment of cash, like AMO (Assistant Manager Operation). Before his sign no cheques can be passed, he also cheques the entries made by clerk in the ledgers before passing cheques. In this way the entries originated by any person is double checked which reduce the chances of any mistake. Whenever a cheque of more than 25000 is come to cash it is required to write a voucher of With Holding Tax with it so that the amount of tax can be deducted from the payment. The vouching will be discussed later on.
people during his visit to the villages. And inside the bank, the accounts department makes it sure to fill this deposit slip with every payment. The weekly report of these funds collection is required to send to Regional Office. According to the weekly report of last week of Ramdan, the Mian Channu branch where I did internship was in the first position in the collection of fund in the whole zone of Vehari.
Writing of Vouchers
Vouchers are the important evidence of all the transactions takes place in the bank. In the accounts department of ZTBL it is the back bone, every transaction of bank with reference to cash required a voucher to be drawn against it.
1. Debit Voucher
Debit Voucher is used when bank received any amount from anyone. The example is of deposited amount by the depositors, the payment of loan by the loanee etc.
2. Credit Voucher
It is used for the payment of any amount by the bank to anyone. Like the cheque drawn on bank, the expenses of bank itself etc.
3. Transfer Voucher
As the name shows it is used when the amount is required to transfer from one head to another. The example is the transfer of utilities bills accepted by the bank to the respected utilities provided company (Mepco, PTCL etc.). The transfer of return to the income account of bank, it is also used when the loan is sanctioned so it is required to transfer amount of loan to the loanee account. Another use of transfer account is to correct mistakes in the ledger, for example if an account is mistakenly debited in place of another account. So the transfer voucher can be written to credit the first account and debit the second one to correct the mistake. In the end of day all the vouchers written during the day is required to be write down in the daily Scroll (which will be discussed later on) and then all the vouchers of day is sewed and then sealed so that no new voucher can be placed or removed from the record. These vouchers used to store in record room and they keep piling up there. Every voucher has at least two copies, one for the customer and one for the bank record. For easy recognition the vouchers are made of different colors. Debit Voucher (Have three copies and in white color) Credit Voucher (Have two copies and in blue color) Transfer Voucher (Have two copies and in yellow color)
Total
Internship Report on Zarai Taraqiati Bank Ltd. 2010 The debit voucher for the deduction of With Holding Tax from the cash withdrawal of more than 25,000 will be filled in the following way. First the name or branch, its code and the date is required to write. Than the information from whom this tax is collected, his name, father name, his village and city name will be written. After that in the particulars it will be written A/O of With Holding Tax and in the GL Head (General Ledger Head) the head number of With Holding Tax (which is 3056 in the ZTBL) will be written. The amount will be written after calculating .3% of withdrawal amount. In the total the same amount will be written again and then this amount will be written down in words. In the last the signing authority will sign in. In this voucher of W.H Tax only a few columns of the voucher is used, the other columns can be used for other types of transactions. The explanation of each column is given below:
1: Particular:
In particulars the reason of the transaction is written down. For example, Amount of Recovery etc.
4: T.R Code
This code is rarely used for debit and that is why I dont have complete information about it. In the recovery voucher this column is used, when MCO collects the cash than I used to write 14 and when loanee himself comes to pay loan I used to write 15 in that place. So, it helps when the voucher is recorded in the computer room to understand the type of transaction.
Like, in the credit voucher I was asked to write 01 code for all the expenses of the branch and 02 for the expenses of the Zonal Branch. So, it helps computer to understand the type of transaction. These codes can be different in different banks.
5: R.O Code
Originated/Respond code is used to show that whether a transaction is originated or responded. For example in the W.H Tax example the word O will be written in this column which will show that this debit voucher is originating this transaction. And when this amount will be transferred to the respected head in that voucher the word R will be written which will show that this voucher is responding to any transaction.
6: Effective Date
It is the date on which the amount is received. It can be different from the date on which the voucher has been written down. For example, on 13 September an MCO is on a tour to the villages which are under his circle; during his visit he collects recovery of 100,000 from someone. He will issue receipt to the loanee as evidence that MCO has collected cash from him and on the next day (14 September) when he will come to the bank that MCO will deposit cash as a recovery in the name of that loanee. Because the cash has been collected by him a day before the voucher of recovery is written down so the effective date on voucher will be 13 September while the date of Voucher in right upper side column will be the date of 14 when the voucher is written. Why the effective date required? The answer of this question can be understood from the above example. The loanee has paid the MCO on 13 September, while the amount is deposited by the MCO on 14 September. So, no interest is required to be charged for the day of 14 September because the amount has been already collected a day before. If the effective date will not be written than there will be discrepancy between the amount collected by MCO and the amount calculated in the accounts in the time of writing voucher because the amount calculated in the accounts department will include the interest of one more day than collected by MCO.
7. Amount
This column used to write the amount, it is also divided into many blocks so that when write any amount it will be easily readable later on. Like the first block in Rs. Column from right side is for figure of hundred and the next block is of thousands.
Internship Report on Zarai Taraqiati Bank Ltd. 2010 Amount Rs. 11 000 2 09 000
Ps. -
Total
20
000
12. Signatures
There are three spaces available to sign in the voucher. These spaces are for the person: One who has prepared it One who has checked it And signing authority who passes this transaction But I have not seen anyone signing the first two places, the only signature place is used is of signing authority because it is compulsory. Both Debit and Credit vouchers have same columns and lines to write on. But the transfer voucher is different from these two, it has the same columns and lines but it is divided into two parts. Upper side is for the debiting an account and in the down side is for crediting an account. Because when we use to transfer amount from one account to another account than there should be one account which is required to debit and the other account should be credited to complete the whole entry. The sample of Transfer Voucher has been given in the next page.
No.
Particulars
G.L Head
TR Code
RO Code
Effective Date
Amount
Total
No. Particulars Loan Case no./ A/c no./ Advice no. G.L Head TR Code RO Code Effective Date Amount Contra Voucher/Contra Branch no. Record no./CA Code
Total
The above are the sketch of columns used in the upper side of scroll page. Sheet number is used when there are more vouchers to write and they cannot be written on a single sheet so the next sheet is required to use in such situation the number of sheet should be written so that they can be arranged in a proper way. Sr . 1 2 3 4 Voucher G.L No. Head 154700 701 568900 768200 Total Debit 11 000 500 5 000 4 000 11 500 5 000 4 000 4 000 4 000 Credit Debit Credit
The above view is of the rest of the page where all the vouchers are recorded. The sheet is divided into two sections the left side part is used to write the debit and credit vouchers and their amounts, while the right side is used to write the debit and credit of transfer vouchers. The above is the example of writing of different vouchers. The first two vouchers are debit vouchers that are why I have written the amount (11,000 and 500) in the debit column. The 2nd voucher name is not written completely which is an ease which can be used if the same serial is going on and only the last number is changing. The third
Internship Report on Zarai Taraqiati Bank Ltd. 2010 voucher is a credit voucher and its amount (5,000) is written in the credit side in front of it. The fourth voucher is representing a transfer voucher so its effect will be shown in the right side of the sheet. In both Debit and Credit column of the right side of sheet is filled with the same amount because in transfer voucher one account will be going to be debit and the other will be credit so the net effect will be zero. In the end all the amounts of all the vouchers are totaled in their respective columns. Like in this example the debit vouchers total amount is 11,500 and the total of credit vouchers is 5,000. The debit and credit side of transfer vouchers side will always be the same, which are 4,000 in the example. After getting this total the next step is to calculate and write the closing balance. 1. Opening Balance 2. Debit Balance 3. Total Balance (1 + 2) 4. Credit Balance 5. Closing Balance (3 4) 400,000 11,500 411,500 5,000 406,500
To calculate the closing balance first step is to write the Opening Balance which is absolutely the Closing Balance of last day. Here in the example I have assumed it 400,000. After it the debit balance will be written in the 2 nd row and in the 4th row both 1st and 2nd row will be added to get the total balance. Now the credit balance will be written and to get the closing balance the credit balance is required to deduct from the total balance of 3rd row. To close the cash, this closing balance should match the closing balance in the books of cashier. When comparing with the cash scroll of cashier the Total Balance, Credit Balance and then Closing Balance all should be similar otherwise there will be something which is skipped during writing even by the Officer or by the cashier. When closing cash, in the end of this scroll sheet the number of total debit, credit and transfer vouchers is required to be written so that nothing can be added or erased from the above scroll by any one. Number Vouchers of Debit 2 Credit 1 Transfer 1 Total 4
As you can find that in the above given example of scroll, there are two debits, one credit and one transfer vouchers have been written so the same number is written in the ending column of scroll sheet.
After entering the above information the loan can be disbursed to the loanee when he desires. Because almost all the customers of ZTBL are low earning farmers and they require immediate cash to meet their expenses so they draw a cheque on the bank on
Internship Report on Zarai Taraqiati Bank Ltd. 2010 the same time when their loan is entered in the ledger book. In SBS farmer can withdraw the amount till he has reached maximum limit and the return will only be paid on the amount which he has taken out as a loan. The entries of disbursement can be easily explained by taking an example that the loan has be sanctioned and it is recorded in the ledger now loanee want to withdraw the total sanctioned amount of 50,000. The entry of this transaction will be in the following way at 01-01-2010: Principal Credit Balance Debit 50,000 1,480 18,520 31,480 1,480 Return Total Credit Balance Outstan ding 50,000 1,480 Nil 51,480 31,480
Debit 50,000
After four month a computerized outstanding balance report of all the loans is given to each branch, it is called OBL (Outstanding Balance Ledger). The bank also adds return to the principal amount of each loan case, like it is shown in the date of 31-04-10. (The interest rate on SBS is 9%) Now suppose that loanee has reached bank on 01-05-10 and he wants to pay 20,000. The entry is shown in the date of 01-05-10. It is rule in the bank that when the bank recovers any amount from the loanee than first return amount will be reduced and then the principal will reduced. Here in this example, the loanee wants to pay 20,000, so first interest will be deducted which is 1480. To pay return we will credit it with 1480 and then the principal will be credited with the remaining amount (20,000-1480=18,520) as shown in the above diagram. Due to this payment the principal is also reduced to 31,480 and because the total return has been deducted that is why the total outstanding amount is also 31,480. (It is routine in the bank to check the total outstanding amount in the ledger with OBL before receiving any recovery. This is a precaution because the handwritten and manually calculated ledgers can have mistakes so checking it with OBL make it sure that they are not receiving less amount from the customer.)
Now suppose a situation where loanee wants to pay his entire outstanding loan and then wants to withdraw it again. This usually happens when the MCO want to achieve his recovery target or the time period of one year is completed from the date on which the loanee has withdrawn the amount. It is compulsion for every loanee to return his entire loan at least once in a year, if he will not pay his loan within one year, he will be treated as defaulter and he can withdraw only 90% of sanctioned amount from his running SBS finance. But in SBS the default situation is rarely occurs because when the limit of one year is near to end, the loanee can revolve his loan by paying only interest of the loan. This can be explained by continuing the last example, on 01-05-10 the loanee has paid 20,000 and his remaining outstanding balance is now 31.480. Now suppose he comes again on 01-06-10 and wants to revolve his loan, on that day the following entries will be made in his loan account: Principal Credit Balance Debit 50,000 1,480 18,520 31,840 31,480 31840 Nil 50,000 1,480 241 241 Return Total Credit Balance Outstan ding 50,000 1,480 Nil 241 Nil 51,480 31,480 31,720 Nil (A/C Closed) 50,000
Particulars
Debit
To Cheque 50,000 No. To Return Recovery To Return Recovery To Cheque 50,000 No.
Because the loanee wants to pay the total outstanding amount, the first thing to do is to calculate return on the last outstanding principal balance. Because the loanee has already paid some part of principal on 01-05-10 due to which the principal has been reduced from 50,000 to 31,480. Now the return will be calculated from 01-05-10 to 0106-10 (31 days) at last outstanding principal balance of 31,840. (31,480 * 9/100 * 31/365) = 241 I have debited this return calculated and it has increased the total outstanding to 31,720. Now the next step is to obtain all the outstanding amount of principal and interest so that the account can be closed and again revolved on that day. In the 2 nd entry on the date 01-06-10 I have credited all the principal amount and the balance of
Internship Report on Zarai Taraqiati Bank Ltd. 2010 principal became Nil and the same I did with the return, I have credited the total balance of return and its balance also became Nil. Because both principal and return balance is now Nil that is why the total outstanding amount of loan is also Nil now and the Account is closed on that situation. Now the loanee wants to revolve his account so he will again draw a cheque on the bank of any amount with in his sanctioned limit, in this example I have assumed he again wants to get the total amount out of it. So, I have again debited the amount which has increased the principal balance and then total outstanding balance to 50,000. These are just entries in the ledgers absolutely the loanee will have to follow some procedures to revolve his account. Usually MCO of the loanee asks to revolve the account and then vouchers are written and entries are made in the ledgers and then these vouchers and entries is passed by the AMO otherwise no payment or recovery is made. The vouchers need to written when revolving an SBS loan accounts are following: A debit recovery voucher of full outstanding amount including Principal and Return. Whenever an account is fully paid it is practice in the bank that write the return collected on this account on the upper right corner of the voucher, it helps the other employees in the end to transfer it to the Income Account of bank and also to prepare weekly report on recovery. Another debit voucher of With Holding Tax will also be filled if the amount loanee wants to again withdraw is more than 25,000 A debit voucher of revolving fee (100 rupee for SBS) A credit voucher will be written in the end of the day against the cheque drawn by the loanee A transfer voucher which is used to transfer the Return recovered on the loan to the Income Account of the bank. Actually in revolving an account the loanee pays only the interest amount, revolving fee and W.H Tax if any. The principal is adjusted against the new disbursement of loan. For example:
If 51,000 is total outstanding balance (50,000 principal + 1,000 returns) and loanee wants to revolve the account, he will have to pay the total outstanding amount first and then he can withdraw again the principal of 50,000. Amount the loanee will pay Revolving fee Again disbursement of loan W.H Tax on 50,000 Balance -51,000 -100 50,000 -150 -1,250
1250 is the amount which loanee will pay only and his loan will again be revolved to a new maturity of one year. In this way revolve benefits the two parties, one is loanee who has to pay a nominal amount and he obtains a new maturity date. The second one is MCO who can show that he has recovered the loan which helps him in achieving his recovery target.
Key Register:
It is a register which have information about the keys of the safe. Whenever a person gives the key to someone else, he writes in the key register the name of person who has received the key and that other person signs it. Usually the keys remain with the cashier and another officer of the bank but when one of them is on leave it is required to give responsibility of keys to someone else because during their absence the cash of bank cant remain closed. If there is any mishap the person who has keys according to key register will be held responsible. Thus the key register has significance matter; no one gives the key to someone else without entering it in this register. When a key is given to someone else the time of giving keys is also written in the register, it is precaution to make it clear that on which time of day the key was with which person.
Safe Register:
Whenever the cash is placed inside or remove from the safe it is recorded in the safe register. In the morning when cashier brings out cash from the safe he writes the date, amount and denomination in which cash he has obtained. And same information is required to enter when the cash is again placed in the safe in the evening. The person who gets cash from the safe or puts it also signs it. The cash is also written in denomination in which it is exist. Like if bank has 1 million than this information is not enough the denomination in which this one million exist in bank is also written. Like the bank may have this amount of 1 million in the following denominations. 100 notes of 5,000 500,000 300 notes of 1,000 300,000 300 notes of 500 150,000 400 notes of 100 40,000 200 notes of 50 10,000 Total 1,000,000
Recommendations
Implementation of Information Technology
The following are the problems which I have felt during my internship which is required to be noticed to increase the pace of growth of the bank. Although the bank is computerizing its operations but it is far behind other commercial banks, it needs to speed up implementation of Information Technology so that to perform its operations efficiently and effectively. Information technology will help bank in finding and stopping malpractices and other irregularities and this will result in much better performance. Providing computers and software is not the only solution, the bank needs to train its employees so they can use this new technology for the betterment of the organization. The bank has many experienced employees but they have no or very little know how of IT and many of them is not interested in learning it. So, training the new and young employees is a better option because they have will to learn and also they are people who will have to work for a long time with the bank. Investing in young employee is better than training those who are near to their retirement.
Internship Report on Zarai Taraqiati Bank Ltd. 2010 since last 10 years and the same case is with the contracted workforce they have no idea that when they will be permanent. The promotion criteria like all other government institutions is based on the experience, the more older the employee is the more he has a chance to be promoted irrespective of this that how his previous performances was. But what I have heard from the employee is that they have no idea that when and how they will be promoted, there are no hard and fast rules made as it is available in other government institutions. The banks Human Resource Department needs to focus on developing more trained and motivated employee, the efforts they are putting in this regard is not satisfactory. However, the bank starts training each and every employee which is a good thing but with training the motivation in terms of promotion, bonuses etc. are also required.
Branch Infrastructure
Almost all the banks in Pakistan has refurnished their branches to provide better services to its customers, the branches bank of today is completely different from the branches of 10 years ago. That all is started when City Bank come in Pakistan with a new idea of modernized decorated branches. After it all the banks has adopted this concept and they build and refurnished their entire network of branches. But ZTBL is still working on the old style; the branches have not the furniture, fans, rooms etc. according to their requirements. The concept of air conditioning which has become an essential part in all other banks is a thing about which the bank has not even think, there are even less fans than required. It is true that bank does not have a need to make their branches like all other banks but it is required to provide at least the basic necessities to make the working of the employee comfortable and also to facilitate its customers.
Conclusion
ZTBL is a specialized institute which provides financing facilities to the people of rural areas and in this way it is contributing its part for the development of the country. Due to a government owned organization the politicians and other higher authorities sometime use it to give benefits to their families and friends and this also effects the growth of the bank. However the bank has improved itself a lot, the profit of the year of 2008-9 and decline in Non Performing Loans are clear signs of improvements. The few things on which the bank has to focus is implementation of information technology with faster pace, improving branch infrastructure and working of its human capital to make them motivated.