INTERNSHIP REPORT ZARAI TARAQIATI BANK LTD.

Submitted to: Chairman Department Of business Administration

Submitted By:

Name: SHABNAM NAZ Roll # : Q575753

Registration #: 05-FID-0097 Mailing Address:Block No 10,Flat No 14, Cat-5,I-9/4 Islamabad Contact #:0336-5013509 Date of Submission:

DEPARTMENT OF BUSINESS ADMINISTRATION ALLAMA IQBAL OPEN UNIVERSITY

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.

Shabnam naz

Format of the Internship Report for MBA Finance

1. Title Page 2. Acknowledgements 3. List of Contents 4. List of tables & illustrations, if any 5. Introduction 6. Objectives of studying the organization 7. Overview of the organization 7.1 Brief history 7.2 Nature of the organization 7.3 Business volume 7.4 Number of employees 7.5 Product lines 8. Organizational structure 8.1 Main offices 8.2 Comments on the organizational structure 9. Structure of the Finance Department 9.1 Number of employees working in the Finance Department 9.2 Finance & Accounting operations 10. Functions of the Finance Department 10.1 Accounting system of the organization 10.2 Finance system of the organization 10.3 Use of electronic data in decision-making 10.4 Mobilization of funds 10.5 Generation of funds 10.6 Sources of funds 10.7 Allocation of funds 11. Critical analysis of the theoretical concepts relating to practical experiences

i.e. relate the theoretical concepts with your practical experience during your Internship with the Finance Department 11.1 Financial analysis (ratio analysis, horizontal & vertical analysis of the organization for the last five years) 11.2 Organization analysis with reference to the industries listed on the stock exchange 11.3 Behavior of the studied organization in allocation of various funds to different assets 11.4 Future prospects of the organization 12. Short-falls/weaknesses of the Finance Department 12.1 Critical analysis of the management patterns of the organization with reference to financial operations, weak areas that need to be improved. 13. Conclusions & recommendations for improvement 14. References & Sources used 15. Annexes

Instructions
The report should be: 1. Double space typed on A4 size, 2. 75 gram paper, 3. With bold headings & sub-headings, 4. With margins set as top, 5. Bottom & right 1 inch whereas left 1.5 inch. 6. These typed pages should be hard board binding in black color consisting of 25 to 30 pages. Latest Mailing Address, Roll Number, Registration Number & Telephone Number should be clearly mentioned in the report.

HISTORY OF ZTBL

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.

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.

Nature of organization

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. Business Volume 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. Develop and operate as a financially and operationally sustainable R.F.I of the country. Assist rural community, particularly the small farmers, in raising their productivity and income levels through timely delivery of credit, advisory and ancillary services. Build ZTBL's image as a proactive, client friendly, financially & operationally sustainable with indigenous product deployment. Establish and provide backward and forward linkages to strengthen agri. value added commodity chains. Engage in public - private and wholesale - retail partnership to deepen outreach and reduce operating cost. 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. Provide a wide range of risk insurance products to its clients. Open up its venues of operation to Domestic & International Banking Industry to avail comparative advantages

NO. Of Employees:

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;

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 Mr.Ihsan-Ul-Haq Khan President/ CEO

Sultan Ali chaudhry Chairman Board

Mr.Muhammad Zaka Ashraf Director

Mr.Abdul Wajid Arain Director

Mr.Zafar Iqbal Director

Mr M Iftikhar mohmand Director

Khan

Mr.M Yaqoob Vardag Director

Dr.Khalid Ahmed khokar Director

Dr Amir Muhammad

Brief Resume On Mr Ihsan ul Haq Khan President/CEO

All Pakistan ZTBL Officers Association (patriots) has welcomed the appointment of a prominent banker Ehsan-ul-Haq Khan as President of the Bank. Ehsan-ul-haq Khan is a seasoned banker having more than 30 years experience in banking sector. He served Allied Bank of Pakistan, NDFC and National Bank of Pakistan. He was currently holding the post of Acting President/CEO of Small & Medium Enterprises Bank (SME). The Association held an emergency meeting on Saturday to discuss the appointment of new President after the intervention of apex court. Addressing the officers, Ghazanfar Ali, Secretary General of Patriots group lauded the timely intervention of the Prime Minister Raja Pervez Ashraf who in compliance with the Islamabad High Court Orders has appointed Ehsan-ul-Haq Khan as permanent President/CEO of ZTBL

A Brief Resume of director

Mr. Muhammad Zaka Ashraf Present Portfolios President/Chief Executive Officer, Zarai Taraqiati Bank Ltd. Chairman & Chief Executive, Ashraf Group of Industries Chairman, Pakistan Sugar Mills Association (Punjab Zone) from October, 2006 (Second Tenure) Chairman, Sugarcane Research & Development Company, Agriculture Department, Government of Punjab President, Petarian Association, Lahore Patron-in-Chief Sindh Abadgar Welfare Association (Sindh)

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

Transformation of ZTBL to R.F.I of the country and road to excellence.

The conversion of ADBP into ZTBL had a conditionality of the Asian Development Bank (ADB) loan framework as per which a restructuring exercise was initiated. The restructuring process entailed ADBs Rural Finance Sector Development Program (RFSDP) with the objective to transform ZTBL into a sustainable Rural Finance Institution. It also included the up-gradation of Information technology (IT) infrastructure for which funds from ADBs loan were to be utilized. Healthy and well-functioning rural finance markets are directly related to achieving the two key national policy objectives of accelerating rural/agriculture growth and reducing poverty. The realization of these objectives depends on the simultaneity of developments in rural finance and non-financial markets to foster the creation of diverse sources of rural finance to build sustainable financial institutions, and stimulate products and capital flows in the rural sector. For this, rural finance must be seen as an integral part of equitable development within a framework of macroeconomic stability. For the majority, access to affordable rural finance services is also important to enable them to compete in the post-World Trade Organization scenario. Inability to compete because of high financial costs could reduce income of the majority of farmers and rural clients, particularly the small and subsistence clients. Lack of access to affordable rural finance services will also prevent the clients from switching to non-farm activities.

The ZTBL restructuring plan covering the following; Governance: establish an environment that facilitates good governance and accountability; Systems: modernize operations through use of technology, networking, and communication tools; Business processes: streamline products and delivery systems so as to reduce transaction costs, simplify operations, and increase outreach; Products and services: introduce products and services that are financially economically viable; Human resource development: improve standards and skills of management and staff and strengthen training capacity; and Information Technology: establish new hardware and software platform to support MIS, accounting system including forensic accounting, and risk management functions.

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 Structure: Head Office Islamabad, Pakistan

Punjab

Sindh

Balochistan

Khaber Pakhtunkhaw

Gilgit Balitistan

Islamabad 13 Branches Multan 8 Branches D.G.Khan 6 Branches

Karachi 15 Branches Hyderabad 14 Branches Mirpur Khas 14 Branches

D.I. Khan 14 Branches Turbat 6 Branches Quetta 18 Branches

Abbottabad 7 Branches Mingora 15 Branches Peshawar 20 Branches

Gilgit 7 Branches

Sahiwal 15 Branches Lahore 20 Branches Gujranwala 18 Branches Bahawalpur 13 Branches Faisalabad 20 Branches Sargodha 16 Branches

Sukkur 15 Branches Larkana 18 Branches S.B. Nazirabad 14 Branches

D.M. Jamali 7 Branches

Vehari 11 Branches

Muzafargarh 11 Branches 27

R.Y. Khan 7 Branches

Muzafar.Abad 10 Branches

Total Audit Zones Total Branches Total Zones

9 352

Kissan Support Services Ltd. Subsidiary of ZTBL

Kissan Support Services Ltd. Is a subsidiary of ZTBL which is established with a capital investment of 100 Million to help ZTBL in the achievement of its objective and also to make availability of trained human capital to the bank. 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.

Services/Activities so far undertaken by KSS

Security Services to ZTBL Recruitment/provision of staff janitorial Services provided to: ZTBL Head office buildings Ztbl Farms Staff college Printing stationery office AV Unit Old record office

Sports club Warehouse

Management of Sports Activities Management of Sports Activities Photocopy Services Day to day minor repair and maintenance of ZTBL HQ Buildings

ZTBL Locker Facility

Zarai Taraqiati Bank Ltd. apart from its core functional activity marked with country based agribusiness, 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 Specification Rent Per Annum Rent after grace period Key Deposit

Small

6-1/2"x4-1/2"x23"

Rs.1,200/-

Rs.1,500/-

Rs. 5,000/-

Medium

13-1/2"x4-1/2"x23" Rs.1,800/-

Rs.2,250/-

Rs. 10,000/-

Large

13-1/2"x8-1/2"x23" Rs.2,500/-

Rs.3,125/-

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. Products offered to Meet Finance Need of Farmers:

Zarai Taraqiati Bank Limited (ZTBL) is a specialized bank providing agricultural credit in rural areas of the country. Pakistan is an agricultural country and near about 60% of its population is working directly or indirectly related to agriculture industry. But instead of being an agricultural country Pakistan is still not gaining benefits from this sector which it can gain. Some time we even does not able to fulfill our food requirement and sometime we have bumper crop but does not have facilities to store them properly, in this way we are wasting our resources. To gain benefit from agriculture sector it is required to be modernized to increase the per acre production and also to build warehouses to store. The main hindrance in the modernization of agriculture is the unavailability of finance. The other financial institutions feel reluctant in giving finance to farmers due to high level of risk in the production of this field. To facilitate farmers and to help in modernization of agriculture sector the government has established this bank which is contributing its part in achieving government objective from many decades. ZTBL is offering a blend of products to fulfill the need of different types of customers.

Types of Loans Advanced Short Term Loans

Short term loans are loans for shorter period of less than a year. It includes, crop production working capital loans recoverable in lump sum commencing after the harvest/marketing of respective crops and within maximum period of 12 months. Medium Term Loans Medium term loans are for a period of more than a year but less than 5 years. In includes, dairy farming and livestock etc. The installments of these loans are usually paid able in quarterly or half yearly basis. Long Term Loans Long term loans are for a period of more than 5 years. These are development loans which require large amount and also need some time to show its result in the shape of better production. It includes loans for tractor, agricultural machinery, poultry farming, godowns and orchard in yearly/half yearly installments within maximum period of 8 years. Loan Schemes: ZTBL is offering the following loan schemes to the farmers. Supervised agriculture scheme: Under this scheme agriculture loans are given for short, medium and long term loans up to Rs. 1.00 million per borrower/per case. The loans are sanctioned for In Fats, livestock, orchard, tractor, agricultural machinery, tube well and irrigation facilities etc. under the scheme besides provision of credit, information are provided to the farmers for planning the farm, production, guidance for implementation of the scheme, marketing and repayment of loans. Zarkhaiz (one window operation) For timely and conveniently provision of credit to purchase inputs, loans are provided to the borrowers under One Window Operation being conducted twice a week during Rabi and Kharif seasons. Applications processed on the same day whereas sanction payments are made within three days at Branch. For Rabi Crops one window operation from October to January and for Kharif Crops from April to September each year which is extendable as per requirement of particular area.

Sada Bahar Scheme For providing timely input loans for crops and working capital for poultry and fishery etc, the Bank has launched a Sada Bahar Scheme. Assessment for inputs requirements for the whole year is made at the time of first application. The amount so assessed is treated as Revolving Limit provided it is within the security limit. The Managers are authorized to sanction such loan limits up to Rs.O.500 million. Schemes main features are as under: Revolving Credit Limit is fixed to cater production credit and ancillary requirements of the farmers during one year period. 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. Tea financing scheme In order to increase the tea cultivation in District Mansehra, Swat, Mutta, Shangla par and Dir in Malakand Division, tea financing scheme has been introduced which would not only save the hard earned foreign exchange but would also help improve the socio-economic condition of the inhabitants of the area. The salient futures of the scheme are given as under: Maximum Credit Ceiling of Rs.60, 000/- per acre has been fixed. Farmers owing land up to five acres are eligible to avail loans. Credit will be given in 3 installments: first year Rs.30, 000/-, 2nd year Rs.15,000/3rd year Rs.15,000/- provided the disbursed loan is used properly.

The credit would be repayable within 1 year with 6 years grace period with prescribed markup of 9% per annum. Rebate of 1 % will be allowed in mark-up on timely repayment and proper utilization of the loan.

Crop maximization project: Ministry of Food, Agriculture and Livestock (MINF AL), Government of Pakistan has launched Crop Maximization Project in 109 villages in various districts throughout the country to increase the productivity/yield of crops. Under the project MINFAL has to provide funds of Rs, 299.893 million to ZTBL for disbursing loans to the project farmers for purchase of inputs. Till the time funds of Rs.468 Million have since been received by 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.

PER ACRE CREDIT LIMITS Major Crops Wheat Paddy (Rice) Sugarcane Cotton Maize Minor Crops Overall Credit Limit Per Borrower Sada Bahar Scheme under one window operation or otherwise 16,000 19,000 30,000 21,000 20,000

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 Agro Forest Tree SNo. 1 Trees Bamboo 1st Year 34,000 2nd Year 8,000 3rd Year 3,000

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

Mature Orchard/Fruits crops Pear 24000 Dates 31000

Loquat Plum Apple Papaya Almond Coconut Lichi Cherry Mango Apricot Banana Peach Citrus Types of Security: Immovable Property: Agricultural Land

24000 33000 37000 22600 32000 21000 32000 33000 37000 31000 37000 32000 34000

Strawberry Tea Guava Pomegrante Palm Olive Oil Walnut Persimen Zizi Phus(Bher) Melon Water Melon Musk Melon

25000 60000 24000 33000 22000 13000 23000 15000 25000 16000 16000 16000

Under Pass Book System 80% Outside Pass Book System 70% Under Alienability Certificate 66% Commercial/Industrial Land under Pass Book 80% Outside Passbook System

Urban Residential/Commercial Plots in all localities outside Pass Book 75% Alienability Certificate 66% Residential/Commercial Buildings 70% Lease hold rights of a leased land of CDA/KDA with 99 years lease 70%

Moveable Property and Guarantees: Unconditional Bank guarantee from scheduled Banks Up to maximum amount of an un-conditional Bank guarantee after keeping sufficient margin for un-paid mark-up, cost, charges and expenses. Guarantee issued by Central or Provincial Government

Full amount of loan plus return and other charges.

Government securities 85% of face value or market value whichever is less.

Defense Savings & FEB Certificates 75% of value of certificates presented as security.

Fix Term Deposits Receipts 85% of face value of deposits receipts.

NIT Units 80% of the face value or market value whichever is less.

Life Insurance policies 85% of surrender value

Pledge of Potatoes/Seed Potatoes price or market value which ever is less 75% of Govt. support.

Up to

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.

Debt Equity Ratio For Tubewell/Tractors/Implements/Attachments/Equipments All kinds of Tubewells/ Turbines New Tractor Within 5 years in annual/bi-annual installments commencing one year after first disbursement

25%

No equity but Within 8 years in monthly/quarterly or half 10% of the loan is yearly installments to be decided by Manager to be needed in in consultation with borrower. PLS Account

Used Tractor, Equipments/ attachments/ implements and used tractor

-do-

Within 5 years in monthly/quarterly or half yearly installments to be decided by the Manager in consultation with borrower.

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 Types of Loans Recovery Period Short 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. Medium Term Dairy farming and livestock etc. In yearly/half yearly/monthly Loans installments and within maximum period of 5 years. Long Term Loans 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.

2 3

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. 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 d) Rescheduling of Loan Repayment Facility

ZTBL allows rescheduling of repayment of installments to its borrowers in order to maintain credit discipline and to mitigate their genuine problems in real hardship cases and in areas declared as calamity hit by the respective Provincial Governments

The Rescheduling facility is to be considered by bank on case to-case basis and is to be allowed on borrower's request only.

The relaxation in recovery period shall not be allowed beyond one year in any case. The borrowers shall have to execute a supplementary loan agreement on Non Judicial Stamp Paper of appropriate value to give legal cover to extended period. The borrowers shall have to pay the return for the extended period.

d) Down Payment for Rescheduling of Loans

Rescheduling Number 1st 2nd 3rd

Rate of down payment as against due installments to be rescheduled 10% 20% 30% 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

2011 % 8.695 973.720 77.413 28.689 16.981 -8.284 21.936

2010 % 31.983 707.497 166.845 12.842 -11.432 1.860 11.267

2009 % -18.724 426.058 97.724 13.212 -16.375 -10.364 1.813

2008 % -0.532 428.274 349.899 -2.595 -29.360 -14.614 -0.098

2007 % 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 NET ASSETS REPRESENTED BY Share capital Reserves Unappropriated profit Surplus on revaluation of assets - net of tax

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

5.500 404.287 278.696 30.315 260.729 32.729

0.000 162.741 112.925 10.222 400.125 14.307

0.000 66.838 17.022 2.245 164.838 3.948

0.000 13.928 -18.478 -0.998 78.773 -0.162

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 2007. Vertical 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 2011 % 1.693 15.518 0.000 4.940 68.324 1.117 8.408 100.000 2010 % 2.253 12.790 0.000 8.143 65.655 0.927 10.233 100.000 2009 % 1.516 9.106 0.000 6.594 71.987 0.956 9.841 100.000 2008 % 1.891 9.319 0.000 15.290 63.121 0.823 9.554 100.000 2007 % 1.899 1.762 0.000 3.395 64.739 1.164 11.178 100.000

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

0.722 60.320 6.385 3.771 0.000 0.218 28.584 100.000 100.000

0.501 65.353 5.512 4.086 0.000 0.152 24.396 100.000 100.000

0.385 71.338 4.012 4.460 0.000 0.011 19.796 100.000 100.000

0.333 72.412 3.736 4.527 0.000 0.000 18.989 100.000 100.000

0.279 72.350 4.407 4.523 0.000 0.000 18.418 100.000 100.000

74.223 6.438 19.339 100.000 2.847 100.000

83.179 3.966 12.855 100.000 4.584 100.000

89.669 2.715 7.616 100.000 2.669 100.000

92.606 1.914 5.480 100.000 1.876 100.000

91.682 1.664 6.655 100.000 1.048 100.000

Horizontal Analysis of Profit & Loss Particulars Markup/return/interest earned Markup/return/interest expensed Net markup/interest income Provision against nonperforming loans and advances Provision/(reversal) for diminution in the value of investment Write offs under Government relief packages Bad debts written off directly Net mark-up/interest income after provisions NON MARKUP/INTEREST INCOME Fee, commission and brokerage income Dividend income Other income Total non markup/interest income NON MARKUP/INTEREST EXPENSES Administrative expenses Provision against other assets 2011 % 2010 % 2009 % 2008% 2007%

4.501

-13.362

-26.024

-15.825

0.000

11.279 0.224

9.002 -27.473

-10.618 -35.745

-87.507 29.405

0.000 0.000

-43.546

-9.279

-48.118

38.920

0.000

27.355

-168.737

913.026

-158.617

0.000

0.000

4286.557

15739.293

0.000

0.000

-16.749

58.214

65.541

105.258

0.000

14.982

-101.980

-123.815

-36.551

0.000

82.822 89.283 514.594 506.732 144.932

-2.988 -64.283 509.536 500.567 57.249

5.560 7.133 486.610 478.468 35.344

30.996 7.133 -11.859 -12.217 -30.120

0.000 0.000 0.000 0.000 0.000

85.474 12392.995

55.459 2574.166

13.261 54846.182

7.184 379.466

0.000 0.000

Provision for stolen fixed assets Other charges Total non markup/interest expenses PROFIT BEFORE TAXATION Taxation Current - Prior years Deferred PROFIT AFTER TAXATION Unappropriated profit brought forward Profit available for appropriation Transfer to statutory reserve Transfer to contingency reserve Profit caried forward Basic earnings per share (Rupees)

98.750 241.700 241.700

58.105 55.455 52.854

73.490 -100.000 -44.586

6.965 -107.828 -107.828

0.000 0.000 0.000

175.783

25.485

-56.772

-92.363

0.000

-266600.000 175.638 291.769 455.289 346.096 346.096

2231120.000 49.299 55.548 205.182 105.262 105.262

189060.000 -54.893 -36.775 112.603 12.854 12.854

-12240.000 -92.483 -119.457 160.791 -26.348 -26.348

0.000 0.000 0.000 0.000 0.000 0.000

235.049

33.028

-43.548

-117.742

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.

Vertical Analysis of Profit & Loss Particulars Mark-up/return/interest earned Mark-up/return/interest 2011 % 170.058 70.058 2010% 194.831 94.831 2009 % 187.772 87.772 2008% 106.091 6.091 2007 % 163.098 63.098

expensed Net mark-up/interest income Provision against nonperforming loans and advances Provision/(reversal) for diminution in the value of investment Write offs under Government relief packages Bad debts written off directly Net mark-up/interest income after provisions NON MARKUP/INTEREST INCOME Fee, commission and brokerage income Dividend income Other income Total non mark-up/interest income NON MARKUP/INTEREST EXPENSES Administrative expenses Provision against other assets Provision for stolen fixed assets Other charges Total non mark-up/interest expenses PROFIT BEFORE TAXATION Taxation - Current

100.000

100.000

100.000

100.000

100.000

99.934

84.502

46.186

99.740

147.368

0.066

-0.019

0.264

-0.012

0.043

0.000 0.000 100.000 34.539

15.517 0.000 100.000 -0.926

53.549 0.000 100.000 -12.946

0.273 0.000 100.000 66.804

0.000 0.000 100.000 73.574

0.076 0.197 99.727 100.000

0.041 0.038 99.922 100.000

0.046 0.117 99.837 100.000

0.377 0.771 98.853 100.000

0.252 0.631 98.451 100.000

100.000 92.994 6.934 0.053 0.019 100.000 45.070 100.000 100.052

100.000 97.983 1.866 0.000 0.151 100.000 31.938 100.000 84.049

100.000 65.056 34.937 0.000 0.007 100.000 0.000 100.000 95.833

100.000 99.855 0.494 0.000 0.145 100.000 -3.619 100.000 101.605

100.000 99.651 0.110 0.000 0.000 100.000 32.306 100.000 99.999

- Prior years - Deferred PROFIT AFTER TAXATION Unappropriated profit brought forward Profit available for appropriation Transfer to statutory reserve Transfer to contingency reserve Profit caried forward

0.909 -0.961 100.052 58.644 41.356 100.000 0.000 0.000 100.000

1.103 14.848 84.049 50.603 49.397 100.000 0.000 0.000 100.000

0.000 4.167 95.833 37.410 62.590 100.000 0.000 0.000 100.000

0.000 -1.605 101.605 -17.641 117.641 100.000 0.000 4.096 100.000

0.000 0.001 99.999 66.776 33.224 100.000 13.355 0.000 100.000

Interpetation of Horizontal and Vertical Analysis

Markup/ Return/ Interest Earned Markup/return/interest earned is the amount which the bank earns from its primary function of lending money to its customers. Increase in this income shows that bank is growing, the reason of this growth can be either the increase in customer base or in the increase of rate of lending. When I compare the markup/return/interest earned by the bank in the past 5 years it shows that the bank has improved its primary function in recent years. The year from 2008 to 2010 shows a decline in this income which is a clear sign that in that specific years the bank performance was not satisfactory, the reason of this performance can be the political unrest in the country due to which sufficient attention couldnt be given to banks working or it can be result of large NPLs. In the notes related to markup/return/interest earned it shows that the bank is earning a major part of its income from the loans given to customers, the bank has less focus of investment. However, it is earning a handsome amount from the placement which it has made with other banks. Markup/Return/ Interest Expensed Markup/Return/ Interest Expensed is the expense of bank on taking deposits and borrowings from the SBP. This expense shows an increase as compared to previous years which shows that banks cost of deposits and borrowings has been increased. This increase can be due to two reasons, it can be due to increase in the amount of deposits and borrowing or it can be due to increase in the rate the bank offered on deposits and on borrowing from SBP.

In the notes it shows that bank is paying a large amount on borrowing from the SBP rather than on the deposits. It can be due to two reasons that either bank has deposits in the current account on which it has to pay no or less cost or it is due to less deposits. From the amount of deposits in the balance sheet it is clear that the deposits of bank are not of significant amount as compared to borrowing. I also know that bank is working manly on the amount borrowed from SBP rather than on deposits collected from the general public and institutes. An increase in markup/return/interest expensed is not a bad sign if the markup/return/interest income is also increasing, however if the increase in expense is more than the increase in the income than it will be a negative sign. From the vertical analysis of Profit and Loss account it is clear that the income is 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. Net Markup/Interest Income It is the income which the bank is earning after paying the markup/return/interest expensed. From the horizontal analysis of the profit and loss it is clear that there are many ups and downs in this income which is result of decline in the markup/return/interest income of the bank. But in the year 2008 it shows recovery and it is increased as compared to previous two years of 2006 and 2007. When I look net income in terms of amount in the profit and loss accounts of last five years I find it positive and a handsome amount to bear the other expenses of the bank. Because the horizontal analysis is showing result by taking 2007 as a base year that is why in the year 2009 and 2010 it shows negative sign which means that in these two years the net income of the bank has been decreases as compared to year 2007. But in the year 2011 it again shows recovery. Provision again Non-Performing Loans This shows the cost bank is charging to it P&L account against those loans which may become bad debts; almost all banks try to reduce this cost. This shows the customer base of the bank to which bank is lending, the lesser the cost the better and trustworthy client base the bank has. Horizontal analysis of P&L A/C shows the decline in the recent years in this provision which is a positive sign for the bank. Which shows that banks credit and recovery departments has improved their workings. Provision/ (reversal) against diminution in the value of investment This shows any provision required to charge or reverse for the investment made by the bank. An increase in the provision shows that the investments of the banks are declining in value which will definitely result in loss and if the provision made before is reversed it shows that the value of the investment is increasing. The horizontal analysis of the P&L account shows that the provision created by the bank is reduced in 2008 as compare to 2007 which is a positive sign. The reason of large provision in 2007 can be due to uncertainty in the stock market etc. Write offs under Government Relief Packages 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 2012 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 2011 there is not any amount which is asked by the government to write off but in the year of 2010 and 2009 there is some amount which banks directly written off on the instructions of the government. Net markup/ Interest income after provisions This is net income after charging provisions. An increase in this income is a positive sign which can be due to two reasons that either the net markup/return/interest income has increased or the provision required to be charged by the bank is reduced due to less number of NPLs loans. So, if the net markup/interest income after provision is increasing it is a positive sign because the bank will have more amounts to pay its other expenses like admin expenses etc. and it will result in more Gross Profit. Non Markup/Interest Income It is the income which the bank in earning from its secondary functions. An increase in this income is also a positive sign it shows that the bank is also making its secondary functions profitable. The secondary functions shows the amount earned from the commission charged in the services offered by the bank, the dividend income etc. But this income may also have a portion of income gained by the bank by the sale of scrap or old machinery etc. It is not a positive sign if this income is larger part of total non markup/interest income. Because, the bank will not have the scrap to sale in all years and having larger part of this income of sale of scrap will definitely depicts that the banks profitability can be affected in the coming years. However, if the bank has sold old machinery and in the meanwhile new machinery is added in the assets of the bank than it will be a positive sign because it will show that the bank is working on BMR (Balancing, Modernizing and Restructuring) which will result in better performance. The profit and loss account of the bank is showing an increase in the non markup/interest income which is a positive sign. The vertical analysis of the profit and loss shows that other income is the larger part in non markup/interest income and from the notes it is clear that in the other income, the amount recovered which has been written off previously is making a bigger portion. Recovering a previously written off loan is a positive sign because it is causing an increase in the income of the bank. Non Markup/Interest Expenses It consist on the expenses bank payed for admin expenses and some other expenses. But the admin expenses is usually a large part of this non markup/interest expenses and also it is most important expenditure to have a look upen because it shows that whether the bank is utilizing its human capital efficiently or not. A larger admin expenses is not a negative sign if it is also increasing the income of the bank. However, if the percentage change in the increase in the admin expenses is more than the percentage in the increase in the income than it is a negative sign beacause is paying more to increase its income. Almost all banks try to control this income so that to increase their income.

The ratio of Admin Expenses to Deposits is used to check the cost bank is facing on collecting of deposits which is the main source of money bank required to lend to others to make income. However, in ZTBL the bank relies on borrowing from SBP more than on deposits so the efficiency of admin expenses can not be judge from the ratio of admin expenses to deposits. So, it is difficult to say anything about the cost of admin expenses. From the horizontal analysis it is clear that the admin expenses has been increased in 2011 but the profit of the bank is also increased so it is not a negative sign. By looking in the notices of financial statement it is found that admin expenses consists on a number of expenses, salaries of the staff no doubt a major a part of it but other expenses like traveling expenses, motor vehical cost of repairing etc are also effecting this cost a lot. Because I know that the MCO scheme has become a major part of the banks working so increase in the cost of traveling, rapairing is not a surprise. Profit before Taxation The profit before taxation has been significantly increased in the recent years, the financial statement for the 2012 is still not available on internet nor in print format but some key facts which has been published by the bank for the 2012 shows that bank continues making profit in year 2012 also. When I look in the previous year it found that the profit before taxation is 2.5 times more than it was in 2007. However, the increase in the profitiability is not constant there are ups and downs in it. Like in 2008 and 2009 the profit of the bank has been decresed as comapred to 2007 and in 2010 it again started increasing and this continues till 2012 which have result of more than 2 Billion. 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. Profit after Tax The after tax profit of the bank continued to increase in the recent years which is a good sign and also shows that bank has improved its working a lot than few years before. The profit for the year 2010 is almost 300% more than the 2007 which show that the profit of the bank is tripled in last five years. The same trend continued in 2012 in which the bank also made a record profit. Interpetation of Horizontal and Vertical Analysis of Balance Sheet Cash and Balance with Treasury Banks It shows the amount placed with SBP in order to fulfill the requirement of banking companies ordinance, 1962. There is a decline in the amount with respect to previous year, the reason of it can be the decrease in the volume of deposits due to which the bank is not required to maintain higher placement with SBP. However, the deposits also show an increase in it, so the reason of this decrease in the cash and balances with treasure bank is uncertain. One other can be this that

the bank has placed higher amount with SBP than required in the previous year and that is why in this year the bank has withdrawal the money from its account with SBP. Balances with other Banks Horizontal analysis of Balance sheet shows significant increase in the placement with other banks. It is not a good sign if the placement is in ideal state and is not generating any revenue for the bank. However, from the notes of ZTBL it is clear that the bank has placed amount with other banks in the accounts which are giving markup to the bank. Placing money with other institutions is not a good thing for any bank when does on a large scale because it cannot generate enough money to compensate the opportunity cost the bank is bearing on not investing or advancing this money to its customers. However, the case of ZTBL is different. It borrows money from SBP at fewer rates and lends it to farmers. The rate it charges to farmers is less than the prevailing rate in the market (currently 9%) so by depositing money with other financial institution it can earn more than the rate it is offering to its clients. Because it is an institute developed just for the improvement of agricultural sector so the banks main focus is on lending rather than investing. 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 2012 as compared to 70.7 Billion in 2011. The percentage increase in the horizontal analysis also shows this continuous increase in the trend of advancing. Operating Fixed Assets The assets of the bank are also increased in 2011 and in 2012 the president of the bank also announced to increase it further by constructing new buildings. Increase in the fix assets shows that the bank is optimistic about its future. Borrowings It is the amount which bank has borrowed from SBP. There is no change in this loan from 2007 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 2011 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.

Surplus on Revaluation of Assets-Net of Tax It is surplus amount which is the bank expect to get if it will sell these assets. The market conditions never remain certain; the price of anything can rise or fall in matter of second. This is the reason that organizations use to revalue their assets to record their value according to prevailing market rates. The revaluation of fixed assets also helps banks in raising their equity which result in more lending power of the bank. 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.

Key Financial Trends of 2009 According to Japan Credit Rating Agency on August 2010

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 78base. 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 2011, 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 2012 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 2011 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 (2011: Rs. 13b) during 2012. 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 2011. 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 2012, gross infection in the loan portfolio of the bank remained high at 15.8% (2011: 16.7%). The overall agriculture loan portfolio of the banking sector had gross infection of 16.1% (2011:15.3%) at end-December 2011. 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% (2011:11.2%). Minimum recovery target set by the bank entails 90.8% of current dues and 75% of past dues. In 2012, 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 2011, 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 (2010: Rs. 5.1b) at end- December 2011. 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 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 (2010:Rs. 59.9b) at year end 2011 with increase in deposit to Rs. 8.75b (2010: Rs 5.43b). Borrowings were maintained at Rs. 54.5b at year-end 2009. Liquidity profile of the bank declined in relation to 2010, with liquid assets to total borrowing and deposits reducing to 27 %( 2010:36%). 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 2011. 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 30biannual 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 tbills 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, 2011. 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 2011.

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 (2010: 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 (2010: 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 (2010: Rs 4.8),|" taking total revenues, net of financial charges, to Rs. 11.2b (2010: Rs. 10.4b). Administrative expenses of the bank inclined to Rs. 5.2b (2010: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(2010: 5,370). In December 2010, the bank had introduced SR-2010, a retirement benefit scheme for its employees. A significant proportion of employees switched to SR 2011 from their existing pension scheme in 2010 The scheme was re-opened in 2011 and 1,097 Executives/officers of the bank opted for SR-2010, resulting in an expense of Rs. 677.8 to bank in 2011. Incremental provisioning against non-performing loans declined to Rs. 563 (2010: Rs. 1.9b). The bank posted profit before tax of Rs. 4.6b (2010: Rs. 3.99b) for 2012. Profit for 2011 was reduced to Rs. 1.8b (2010: Rs. 2.6) after adjustment of tax expense of Rs. 2.8b (2011: Rs. 1.4b) which pertained to current and prior year. Capitalization As of December 31, 2011 equity of the bank was higher at Rs. 18.7b (2010: 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% (2010: 22.9%). Net NPLs to Tier 1 capital stood at 57% at end-December 2009. If the proposal of loan conversion into equity materializes, it will provide considerable momentum to capitalization of the institutions.

Quick View of ZTBLs Performance till 2009

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 bank8 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.

Ch. 5:

Assignments I handled during my Internship.

Organogram of Islamabad Branch

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: 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 the (Here page number 16 shows loanee. 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 Islamabad Branch (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. The redemption process in short can be described as the following: Submission of Application Acceptance of application by manager Record of file in the File Movement Register Entries made in the passbook File send to AMO for checking of loan status On approval from AMO, the Manger and Assistant manger signed the notice to issue Passbook 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.

Opening of Current Account In the ZTBL, the current account usually opened only when the person comes there for a loan. On the approval of loan, his sanctioned amount is usually credited to his current account. The procedure of opening of Current Account is not very complicated. The following are the main point in the opening of a new account: Acquiring original CNIC Filling the Current Account Form Filling of Know Your Customer Filling of Current Account Card Registering name in the Current Account Register, (Issuance of A/C No.) Filling of deposit slip of starting amount Signing by AMO and Manager Issuance of Cheque book Opening account in the ledger of bank

1: Acquiring Original CNIC It is mandatory to check the original CNIC of the person before opening of current account. In the ZTBL it is routine to open account when manager sanctioned and signed the amount of loan. Because at that stage it becomes essential to have an account in the bank otherwise the amount of loan will not be paid. The other documents required to attach with the forms are: 2 recent pictures

Copy of CNIC.

2: Filling Current Account Form After obtaining original CNIC the form for current account is filled with the information written on the CNIC. The form includes the following information: Type of account Branch Name Branch Code Name 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

3: Filling of Know Your Customer Form The Know Your Customer form is also attached with the current account opening form and contains the following information: Name Account number CNIC number

Address Purpose of opening of account Monthly income Source of income Type of customer (i.e. Walk in) Public figure Usual mode of transaction (i.e. in cash, cheque) Etc.

4: Current Account Specimen Card Name: Adress: Name of Account Holder

Account No. Type of Account: Name of Account Holder

This side is used to write the name of account This side is used to obtain the signatures of the holder both in Urdu and English. 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. 5: Registering name in the Current Account Register (Issuance of A/C No.) After filling the required forms the name of the new account holder is registered in the Current Account Register. This register requires writing down the name of account holder, his father name, Address and the starting amount. These are the following blocks made in the register requires to fill. Account Number: It Date of Opening of Opening Balance of Name: is account number Account Account Father name: issued to holder. It is Address:

a serial number, so I used to write the next number when I have to open an account. Example: 1567 3-12-2012 1000 Shabnam Naz D/O Muhammad Nawaz Islamabad

When the account number is issued, it is also written in the Account Opening Form and Know Your Customer Form. 6: Filling of Deposit Slip of starting amount To open an account in the ledgers of bank the account holder requires to deposit an initial amount. This amount in ZTBL is usually 1000; however it depends on the amount of loan sanctioned like some loans required to deposit a larger amount with the bank before issuance of loan from the bank. The example of such loan is of Tractor because I have not be given chance to stay with an MCO, so I dont know what exact amount is required to deposit with the bank for any particular loan. The Deposit Slip which I used to fill during my internship consist the following information: Zarai Taraqiati Bank Ltd. Depositors Copy Branch Name: Branch Code: Date: Name: Account Number: Particulars Amount Zarai Taraqiati Bank Ltd. Bank Copy Date:

Branch Name: Branch Code: Name:

Account Number:

Particulars

Amount

Total Amount Rupees in words: Depositors Signatures: Signing Authority:

Total Amount Rupees in words: Depositors Signatures: Signing Authority:

7: Signing by AMO and Manager Then the forms and deposit slip is signed by AMO (Assistant Manager Operation) and Manger to verify that all the requirements of opening an account is met by the account holder.

8: Issuance of Cheque book Than on depositing of a nominal fee of rupee 30 the account holder has been issued a cheque book. In the bank where I have completed my internship, the cheque book is issued by the cashier when the person deposits his starting amount of account and the amount of issuing of cheque book. 9: Opening account in the ledger of bank Unlike other banks, ZTBL is still working on manually written ledger books. However, the bank is also gradually computerizing its records. These ledger books are large books with a number on front of it which helps in finding the record of any particular person. The ZTBL Islamabad branch where I have completed my internship has 52 ledgers at that time with the current account holder of 11595 at the date of 15 12 2012. There will absolutely many accounts which will not be alive. When the depositor deposited the amount his name and other particulars is written down in the ledger so that he can transact with the bank in the future. The ledger of current account contains the following information. Zarai Tarqiati Bank Ltd. Branch name: Islamabad Page no. 177 Branch Code: 20226

Name: Father: Address: Account no: Cheque book: Date 15-12-2012 15-12-2012 16-12-2012

Signature:

Particulars By cash Loan Paid To Cheque. (no.)

Debit

Credit 1000 50000

Balance 1000 51000 1000

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 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 16-12-2012. 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.

ZTBL Flood Relief Fund: Heavy monsoon rains started to hit Pakistan, causing flash floods in several parts of Khyber Pakhtunkhwa, Baluchistan, Punjab and Pakistan Administered Kashmir. This flood have caused huge destruction, hundreds of villages have been swept away. Death toll has risen to more than 1500 people, at least 1.2 million homes have been damaged and an estimated 17.2 million people have been affected by the floods. Floods have caused widespread damage to public infrastructure, with roads submerged and tens of bridges swept away, many hospitals and an estimated 7,173 schools are being severely damaged. Power and communication lines are down in many areas. The economic cost is also huge. Thousands acres of agricultural land has been flooded, at least 3.2 million hectares of standing crops have been damaged and at least 200,000 livestock animals have been lost. This is a snap shot of the situation after the flood and the damage final estimates are yet to make. To help the victims of this flood ZTBL made Flood Relief Fund 2010 and the head office asked all the branches to collect the fund for this flood relief fund. According to circular issued by Head Office every branch make it sure to convince the borrower, depositors and general public to contribute in this fund for this purpose the following procedure is required to follow: From any loan of below 200,000 or any payment from the account of customer below this limit should be deducted with amount of at least 100 rupee to contribute in the flood relief fund. However, it is required to make sure that avoid double deduction from any particular persons payment. But if anyone wants to contribute more than 100 or more than one time he can give at any time. From any payment of more than 200,000 but less than 500,000 the rupee of 500 should be deducted to charge to flood relief fund keeping in view the double deduction. From any payment of more than 500,000 the amount of 1000 should be deducted.

The amount is deducted by filling a deposit slip with the name of the contributor to deposit in the account of flood relief fund (A/C No.3043). For this purpose every MCO (Mobile Credit Officer) is given a deposit slip book so that he can collect fund from the 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 f 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. The vouchers are of three types: Debit Voucher (Receipt of Amount) Credit Voucher (Payment) Transfer Voucher

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) Sample of Debit/Credit Voucher Zarai Tarqiati Bank Ltd.

Branch Code Date Serial No. 154700 Branch----------------Name-----------------Parentage-----------Village---------------Tehsil----------------Debit Cash Voucher (Cash Receipt)

No Particula . rs

Loan G.L Case Hea no./ d A/c no./ Advic e no.

TR Cod e

RO Cod e

Effectiv e Date

Amou nt

Contra Voucher/Cont ra Branch no.

Recor d no./C A Code

Total Amounts in words:--------------------------------------------Enclose:----------------------------------------------------------Prepared by:----------------------------------------------------Checked by:-----------------------------------------------------Authorized Signature:---------------------------------------

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. 2: Loan Case no./ Account no./ Advice no. If the voucher is of recovery than in this column the loan case number of the loanee who has come to pay loan will be written. This column has 6 blocks to write, due to shortage of space these block cant be shown in the above sample of voucher. Loan Case no./ Account no./ Advice no. 3 9 6 7 0 0

3: G.L Head (General Ledger Head) It is the General Ledger Head which is required to debit. These are standard heads used in the entire branches of ZTBL. Like 3056 is the G.L Head for W.H Tax, it will be same when any branch of ZTBL will collect this tax from his customer. 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 December 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 december) 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 December 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 13December, while the amount is deposited by the MCO on 14 December. So, no interest is required to be charged for the day of 14 December 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.

Amount Rs. 2 11 09 000 000

Ps. -

Total

20

000

8. Contra Voucher/Contra Branch No. This column is used when we are responding to some other voucher or branch. During my internship I have used it once time. One of the customer of a bank has received tractor in the Benzir Tractor Scheme but the company failed to deliver the tractor on the agreed upon date.

And it is a contract between the bank and the company that when company will not deliver the tractor on the agreed date, it will be charged with the penalty of 150 rupee per day. So, the bank had a claim on the company of rupee 25,000 due to late delivery to the customer. The company has transferred this amount to the bank account, so definitely the bank has a voucher written against it. Now this penalty is in the bank account which it has to transfer to the customer who has faced difficulty due to late delivery. So, when I transferred the amount from bank account to the customers account I was actually responding to the first voucher created with which the amount was transferred from company to the bank account. So, I was asked to write the voucher number of that first voucher in the column of contra voucher of new voucher with which I am transferring amount to customers account so that in future when any one need to find out that from which reason the account of the customer is credited, he can easily find the contra voucher number from the voucher written to transfer amount to the customer account. And when he will open the contra voucher number, he will find that the amount was transferred by the company as penalty to the bank account. So, in short it is used when we are responding to any other voucher or branch. The Exact view of contra voucher/contra Branch No. and Record no./CA Code are the following. These two head come under the main head of Sundry/Suspense & Central A/C only which is not displayed in the voucher sample due to shortage of space. Sundry/Suspense & Central A/c only Contra Voucher/Contra Branch No. Record Code 3 9 6 7 0 0

no./CA 0 1

9. Record No./CA Code. Record number is the number of the entry in any contra voucher to which we are responding. A voucher can have many transactions written on it as you can see that there are number of rows available in the voucher to write on. So, giving contra voucher number is not the only thing we need to write to give exact reference, we also need to give reference of Record no. of that particular transaction in that voucher. And CA code is used when we are responding to any Contra Branch No. 10. Rupees in Words Rupees in words are compulsory to fill so that to avoid any mistake in writing amount in numbers and also to avoid any misconception in future. 11. Encl (Enclose) Enclose is number of receipt if any attached with the voucher. Like if I want to write a credit voucher to pay some employee who has bought stationary for the office use so I will attach the receipt of the stationary he has bought from the shop with the voucher and I will write (1) in the enclose so whenever anyone will see the voucher he will know that there is a receipt attached with the voucher. 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.

Zarai Tarqiati Bank Ltd. Branch Code Date Serial No. 154700 Branch----------------Name-----------------Parentage-----------Village---------------Tehsil----------------Transfer Voucher

No. Particulars Loan G.L TR RO Effective Amount Contra Record Case Head Code Code Date Voucher/Contra no./CA no./ Branch no. Code A/c no./ Advice no.

Total No. Particulars Loan G.L TR RO Effective Amount Contra Record Case Head Code Code Date Voucher/Contra no./CA no./ Branch no. Code A/c no./ Advice no.

Total Amounts in words:--------------------------------------------Enclose:----------------------------------------------------------Prepared by:----------------------------------------------------Checked by:-----------------------------------------------------Authorized Signature:--------------------------------------Sample of Transfer Voucher Daily Transaction Scroll Daily transaction scroll is written by operations officer every day in a bank. It is the record of all the cash inflows, outflows and transferred on a particular day. Both cashier and operation officer writes his own scroll at the end of day when they have to close the cash. The closing balance in both these scrolls must be same otherwise there are some transactions which have not been recorded correctly either by the cashier or the operation officer. If I will divide the page of scroll than the following are the important columns and part of it: Zarai Tarqiati Bank Ltd. Daily Transaction Scroll Name of Branch--------------------------Branch Code

Date

Sheet Number 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. Voucher G.L No. Head 1 154700 2 701 3 568900 4 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 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 2nd 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. Making Entries in the Ledgers: In ZTBL the record of current accounts and loans are manually maintained. There are many records which have been computerized but still the hand written ledgers are used. Making entries in the Ledgers requires simple concept of debit and credit. However the understanding of banking practices are required so that to follow the exact way of recording any transaction because usually the column written on the ledger books are not used for the purposes for which they are made. The employee usually has established their own way of writing transactions in the ledgers the way in which they feel easy. I have found many columns unused in the ledgers of Sada Bahar Loan Scheme or they have been used to write other information which is different from the heading of columns. Disbursement and Recovery Entries: When a loan is sanctioned and ready to disburse it is recorded in the respected ledgers. I am here taking example of SBS (Sada Bahar Scheme) which is a revolving finance scheme. Every loanee has a unique Loan Case Number which is the base of all the record of his loan. When a loan of SBS is sanctioned its amount is not transferred to the current account of the loanee like it is used to transfer in the AZS (Awami Zari Scheme). In SBS the Loan Case Number is used for all types of transactions, when a loan is sanctioned it is recorded in the SBS ledger with the name of loanee and Loan Case Number is used as an account number from which he can operate. The information which is required to write in the ledger sheet when a new loan has been passed and ready to disburse are following: Loan Case Number Name Parentage Address CNIC Maximum limit

Date of maturity Cheque book number

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 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 01-01-2012: Principal Credit Balance Debit 50,000 1,480 18,520 31,480 1,480 Return Credit Balance Total Outstanding 50,000 51,480 31,480

Date 01-112 31-412 01-512

Particulars To Cheque No. To Return Recovery

Debit 50,000

1,480 Nil

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 01-05-12 and he wants to pay 20,000. The entry is shown in the date of 01-05-12. 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.) Revolving SBS Loan: 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 50,000 Return Credit Balance Total Outstanding 50,000 51,480 31,480 31,720 Nil (A/C Closed) 50,000

Date 01-112 31-412 01-512 01-612 01-612 01-612

Particulars Debit To Cheque 50,000 No. To Return Recovery To Return Recovery To Cheque 50,000 No.

Debit

1,480 18,520 31,480 31840 31,840 Nil 50,000 241 241 1,480

1,480 Nil 241 Nil

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 01-05-12 due to which the principal has been reduced from 50,000 to 31,480. Now the return will be calculated from 01-05-12 to 01-06-12 (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 2nd entry on the date 01-06-12 I have credited all the principal amount and the balance of 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. Opening and Closing Cash

In the beginning of every day the cashier opens the cash in time. The cash remains locked in the safe and it requires two keys two open. One key is always remains with the cashier and the other key remains with the manager; however manager can further gives it to someone else. In the branch where I have completed my internship, the AMO has the second key. 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 1,000,000 Total Dispatch and Diary Dispatching and receiving letter is the routine work in any bank. The letter which the bank sends to others is dispatched while the letter which the bank received is called diary. The bank maintains the proper record of every document which is dispatched or received.

Ratio analysis:

Ratios Avg. Rate of lending Avg. Rate of borrowing Admin Expenses Cost of funds Spread

2011 % 11.297 6.156 83.322 89.479 -78.182

2010 % 10.190 6.150 87.643 93.793 -83.603

2009 % 8.929 5.177 95.770 100.947 -92.017

2008 % 10.377 0.727 98.778 99.505 -89.128

2007 % 14.174 5.766 78.062 83.828 -69.654

Ratios Ratios 2011% 2010 % 2009 % 2008 % 2007 % Net markup to total income 84.239 65.875 71.387 138.212 142.862 Return on assets 2.542 1.106 0.491 -0.154 0.791 Return on Equity 15.418 7.238 3.171 -1.008 5.129 Breakup Value 12.605 11.546 10.849 10.592 10.726 Infection Ratio 16.697 23.686 28.201 36.180 Provision to advances 60.426 55.227 48.630 50.457 Advances to deposits 1433.485 1631.690 2473.332 2448.135 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

2011 % 11.297 6.156 7.975 14.131 -2.834

2010 % 10.190 6.150 6.817 12.967 -2.777

2009 % 8.929 5.177 5.099 10.276 -1.346

2008 % 10.377 0.727 4.846 5.573 4.804

2007% 14.174 5.766 4.482 10.248 3.926

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 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. Provision to Classified Advances 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 2011 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. 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 2011 % 8.695 973.720 77.413 28.689 16.981 -8.284 21.936 2010 % 31.983 707.497 166.845 12.842 -11.432 1.860 11.267 2009 % -18.724 426.058 97.724 13.212 -16.375 -10.364 1.813 2008 % -0.532 428.274 349.899 -2.595 -29.360 -14.614 -0.098 2007 % 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 NET ASSETS

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

REPRESENTED BY Share capital Reserves Unappropriated profit Surplus on revaluation of assets - net of tax

5.500 404.287 278.696 30.315

0.000 162.741 112.925 10.222

0.000 66.838 17.022 2.245

0.000 13.928 -18.478 -0.998

100 100 100 100

260.729 400.125 164.838 78.773 100 100 32.729 14.307 3.948 -0.162 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 2007. Vertical 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 2011 % 1.693 15.518 0.000 4.940 68.324 1.117 8.408 100.000 2010 % 2.253 12.790 0.000 8.143 65.655 0.927 10.233 100.000 2009 % 1.516 9.106 0.000 6.594 71.987 0.956 9.841 100.000 2008 % 1.891 9.319 0.000 15.290 63.121 0.823 9.554 100.000 2007 % 1.899 1.762 0.000 3.395 64.739 1.164 11.178 100.000

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

0.722 60.320 6.385 3.771 0.000 0.218 28.584 100.000 100.000

0.501 65.353 5.512 4.086 0.000 0.152 24.396 100.000 100.000

0.385 71.338 4.012 4.460 0.000 0.011 19.796 100.000 100.000

0.333 72.412 3.736 4.527 0.000 0.000 18.989 100.000 100.000

0.279 72.350 4.407 4.523 0.000 0.000 18.418 100.000 100.000

74.223 6.438

83.179 3.966

89.669 2.715

92.606 1.914

91.682 1.664

Unappropriated profit Surplus on revaluation of assets - net of tax

19.339 100.000 2.847 100.000

12.855 100.000 4.584 100.000

7.616 100.000 2.669 100.000

5.480 100.000 1.876 100.000

6.655 100.000 1.048 100.000

Horizontal Analysis of Profit & Loss Particulars Markup/return/interest earned Markup/return/interest expensed Net markup/interest income Provision against nonperforming loans and advances Provision/(reversal) for diminution in the value of investment Write offs under Government relief packages Bad debts written off directly Net mark-up/interest income after provisions NON MARKUP/INTEREST INCOME Fee, commission and brokerage income Dividend income Other income Total non markup/interest income 2011 % 2010 % 2009 % 2008% 2007%

4.501

-13.362

-26.024

-15.825

0.000

11.279 0.224

9.002 -27.473

-10.618 -35.745

-87.507 29.405

0.000 0.000

-43.546

-9.279

-48.118

38.920

0.000

27.355

-168.737

913.026

-158.617

0.000

0.000

4286.557

15739.293

0.000

0.000

-16.749

58.214

65.541

105.258

0.000

14.982

-101.980

-123.815

-36.551

0.000

82.822 89.283 514.594 506.732

-2.988 -64.283 509.536 500.567

5.560 7.133 486.610 478.468

30.996 7.133 -11.859 -12.217

0.000 0.000 0.000 0.000

144.932 NON MARKUP/INTEREST EXPENSES Administrative expenses Provision against other assets Provision for stolen fixed assets Other charges Total non markup/interest expenses PROFIT BEFORE TAXATION Taxation Current - Prior years Deferred PROFIT AFTER TAXATION Unappropriated profit brought forward Profit available for appropriation Transfer to statutory reserve Transfer to contingency reserve Profit caried forward Basic earnings per share (Rupees)

57.249

35.344

-30.120

0.000

85.474 12392.995

55.459 2574.166

13.261 54846.182

7.184 379.466

0.000 0.000

98.750 241.700 241.700

58.105 55.455 52.854

73.490 -100.000 -44.586

6.965 -107.828 -107.828

0.000 0.000 0.000

175.783

25.485

-56.772

-92.363

0.000

-266600.000 175.638 291.769 455.289 346.096 346.096

2231120.000 49.299 55.548 205.182 105.262 105.262

189060.000 -54.893 -36.775 112.603 12.854 12.854

-12240.000 -92.483 -119.457 160.791 -26.348 -26.348

0.000 0.000 0.000 0.000 0.000 0.000

235.049

33.028

-43.548

-117.742

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.

Vertical Analysis of Profit & Loss Particulars Mark-up/return/interest earned Mark-up/return/interest expensed Net mark-up/interest income Provision against nonperforming loans and advances Provision/(reversal) for diminution in the value of investment Write offs under Government relief packages Bad debts written off directly Net mark-up/interest income after provisions NON MARKUP/INTEREST INCOME Fee, commission and brokerage income Dividend income Other income Total non mark-up/interest income NON MARKUP/INTEREST EXPENSES Administrative expenses Provision against other assets Provision for stolen fixed assets 2011 % 170.058 70.058 100.000 2010% 194.831 94.831 100.000 2009 % 187.772 87.772 100.000 2008% 106.091 6.091 100.000 2007 % 163.098 63.098 100.000

99.934

84.502

46.186

99.740

147.368

0.066

-0.019

0.264

-0.012

0.043

0.000 0.000 100.000 34.539

15.517 0.000 100.000 -0.926

53.549 0.000 100.000 -12.946

0.273 0.000 100.000 66.804

0.000 0.000 100.000 73.574

0.076 0.197 99.727 100.000

0.041 0.038 99.922 100.000

0.046 0.117 99.837 100.000

0.377 0.771 98.853 100.000

0.252 0.631 98.451 100.000

100.000 92.994 6.934 0.053

100.000 97.983 1.866 0.000

100.000 65.056 34.937 0.000

100.000 99.855 0.494 0.000

100.000 99.651 0.110 0.000

Other charges Total non mark-up/interest expenses PROFIT BEFORE TAXATION Taxation - Current - Prior years - Deferred PROFIT AFTER TAXATION Unappropriated profit brought forward Profit available for appropriation Transfer to statutory reserve Transfer to contingency reserve Profit caried forward

0.019 100.000 45.070 100.000 100.052 0.909 -0.961 100.052 58.644 41.356 100.000 0.000 0.000 100.000

0.151 100.000 31.938 100.000 84.049 1.103 14.848 84.049 50.603 49.397 100.000 0.000 0.000 100.000

0.007 100.000 0.000 100.000 95.833 0.000 4.167 95.833 37.410 62.590 100.000 0.000 0.000 100.000

0.145 100.000 -3.619 100.000 101.605 0.000 -1.605 101.605 -17.641 117.641 100.000 0.000 4.096 100.000

0.000 100.000 32.306 100.000 99.999 0.000 0.001 99.999 66.776 33.224 100.000 13.355 0.000 100.000

Interpetation of Horizontal and Vertical Analysis

Markup/ Return/ Interest Earned Markup/return/interest earned is the amount which the bank earns from its primary function of lending money to its customers. Increase in this income shows that bank is growing, the reason of this growth can be either the increase in customer base or in the increase of rate of lending. When I compare the markup/return/interest earned by the bank in the past 5 years it shows that the bank has improved its primary function in recent years. The year from 2008 to 2010 shows a decline in this income which is a clear sign that in that specific years the bank performance was not satisfactory, the reason of this performance can be the political unrest in the country due to which sufficient attention couldnt be given to banks working or it can be result of large NPLs. In the notes related to markup/return/interest earned it shows that the bank is earning a major part of its income from the loans given to customers, the bank has less focus of investment. However, it is earning a handsome amount from the placement which it has made with other banks. Markup/Return/ Interest Expensed

Markup/Return/ Interest Expensed is the expense of bank on taking deposits and borrowings from the SBP. This expense shows an increase as compared to previous years which shows that banks cost of deposits and borrowings has been increased. This increase can be due to two reasons, it can be due to increase in the amount of deposits and borrowing or it can be due to increase in the rate the bank offered on deposits and on borrowing from SBP. In the notes it shows that bank is paying a large amount on borrowing from the SBP rather than on the deposits. It can be due to two reasons that either bank has deposits in the current account on which it has to pay no or less cost or it is due to less deposits. From the amount of deposits in the balance sheet it is clear that the deposits of bank are not of significant amount as compared to borrowing. I also know that bank is working manly on the amount borrowed from SBP rather than on deposits collected from the general public and institutes. An increase in markup/return/interest expensed is not a bad sign if the markup/return/interest income is also increasing, however if the increase in expense is more than the increase in the income than it will be a negative sign. From the vertical analysis of Profit and Loss account it is clear that the income is 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. Net Markup/Interest Income It is the income which the bank is earning after paying the markup/return/interest expensed. From the horizontal analysis of the profit and loss it is clear that there are many ups and downs in this income which is result of decline in the markup/return/interest income of the bank. But in the year 2008 it shows recovery and it is increased as compared to previous two years of 2006 and 2007. When I look net income in terms of amount in the profit and loss accounts of last five years I find it positive and a handsome amount to bear the other expenses of the bank. Because the horizontal analysis is showing result by taking 2007 as a base year that is why in the year 2009 and 2010 it shows negative sign which means that in these two years the net income of the bank has been decreases as compared to year 2007. But in the year 2011 it again shows recovery. Provision again Non-Performing Loans This shows the cost bank is charging to it P&L account against those loans which may become bad debts; almost all banks try to reduce this cost. This shows the customer base of the bank to which bank is lending, the lesser the cost the better and trustworthy client base the bank has. Horizontal analysis of P&L A/C shows the decline in the recent years in this provision which is a positive sign for the bank. Which shows that banks credit and recovery departments has improved their workings. Provision/ (reversal) against diminution in the value of investment This shows any provision required to charge or reverse for the investment made by the bank. An increase in the provision shows that the investments of the banks are declining in value which will definitely result in loss and if the provision made before is reversed it shows that the value of the investment is increasing.

The horizontal analysis of the P&L account shows that the provision created by the bank is reduced in 2008 as compare to 2007 which is a positive sign. The reason of large provision in 2007 can be due to uncertainty in the stock market etc. Write offs under Government Relief Packages 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 2012 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 2011 there is not any amount which is asked by the government to write off but in the year of 2010 and 2009 there is some amount which banks directly written off on the instructions of the government. Net markup/ Interest income after provisions This is net income after charging provisions. An increase in this income is a positive sign which can be due to two reasons that either the net markup/return/interest income has increased or the provision required to be charged by the bank is reduced due to less number of NPLs loans. So, if the net markup/interest income after provision is increasing it is a positive sign because the bank will have more amounts to pay its other expenses like admin expenses etc. and it will result in more Gross Profit. Non Markup/Interest Income It is the income which the bank in earning from its secondary functions. An increase in this income is also a positive sign it shows that the bank is also making its secondary functions profitable. The secondary functions shows the amount earned from the commission charged in the services offered by the bank, the dividend income etc. But this income may also have a portion of income gained by the bank by the sale of scrap or old machinery etc. It is not a positive sign if this income is larger part of total non markup/interest income. Because, the bank will not have the scrap to sale in all years and having larger part of this income of sale of scrap will definitely depicts that the banks profitability can be affected in the coming years. However, if the bank has sold old machinery and in the meanwhile new machinery is added in the assets of the bank than it will be a positive sign because it will show that the bank is working on BMR (Balancing, Modernizing and Restructuring) which will result in better performance. The profit and loss account of the bank is showing an increase in the non markup/interest income which is a positive sign. The vertical analysis of the profit and loss shows that other income is the larger part in non markup/interest income and from the notes it is clear that in the other income, the amount recovered which has been written off previously is making a bigger portion. Recovering a previously written off loan is a positive sign because it is causing an increase in the income of the bank. Non Markup/Interest Expenses It consist on the expenses bank payed for admin expenses and some other expenses. But the admin expenses is usually a large part of this non markup/interest expenses and also it is most

important expenditure to have a look upen because it shows that whether the bank is utilizing its human capital efficiently or not. A larger admin expenses is not a negative sign if it is also increasing the income of the bank. However, if the percentage change in the increase in the admin expenses is more than the percentage in the increase in the income than it is a negative sign beacause is paying more to increase its income. Almost all banks try to control this income so that to increase their income. The ratio of Admin Expenses to Deposits is used to check the cost bank is facing on collecting of deposits which is the main source of money bank required to lend to others to make income. However, in ZTBL the bank relies on borrowing from SBP more than on deposits so the efficiency of admin expenses can not be judge from the ratio of admin expenses to deposits. So, it is difficult to say anything about the cost of admin expenses. From the horizontal analysis it is clear that the admin expenses has been increased in 2011 but the profit of the bank is also increased so it is not a negative sign. By looking in the notices of financial statement it is found that admin expenses consists on a number of expenses, salaries of the staff no doubt a major a part of it but other expenses like traveling expenses, motor vehical cost of repairing etc are also effecting this cost a lot. Because I know that the MCO scheme has become a major part of the banks working so increase in the cost of traveling, rapairing is not a surprise. Profit before Taxation The profit before taxation has been significantly increased in the recent years, the financial statement for the 2012 is still not available on internet nor in print format but some key facts which has been published by the bank for the 2012 shows that bank continues making profit in year 2012 also. When I look in the previous year it found that the profit before taxation is 2.5 times more than it was in 2007. However, the increase in the profitiability is not constant there are ups and downs in it. Like in 2008 and 2009 the profit of the bank has been decresed as comapred to 2007 and in 2010 it again started increasing and this continues till 2012 which have result of more than 2 Billion. 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. Profit after Tax The after tax profit of the bank continued to increase in the recent years which is a good sign and also shows that bank has improved its working a lot than few years before. The profit for the year 2010 is almost 300% more than the 2007 which show that the profit of the bank is tripled in last five years. The same trend continued in 2012 in which the bank also made a record profit.

Competitor Analysis: Cash and Balance with Treasury Banks It shows the amount placed with SBP in order to fulfill the requirement of banking companies ordinance, 1962. There is a decline in the amount with respect to previous year, the reason of it can be the decrease in the volume of deposits due to which the bank is not required to maintain higher placement with SBP. However, the deposits also show an increase in it, so the reason of this decrease in the cash and balances with treasure bank is uncertain. One other can be this that the bank has placed higher amount with SBP than required in the previous year and that is why in this year the bank has withdrawal the money from its account with SBP. Balances with other Banks Horizontal analysis of Balance sheet shows significant increase in the placement with other banks. It is not a good sign if the placement is in ideal state and is not generating any revenue for the bank. However, from the notes of ZTBL it is clear that the bank has placed amount with other banks in the accounts which are giving markup to the bank. Placing money with other institutions is not a good thing for any bank when does on a large scale because it cannot generate enough money to compensate the opportunity cost the bank is bearing on not investing or advancing this money to its customers. However, the case of ZTBL is different. It borrows money from SBP at fewer rates and lends it to farmers. The rate it charges to farmers is less than the prevailing rate in the market (currently 9%) so by depositing money with other financial institution it can earn more than the rate it is offering to its clients. Because it is an institute developed just for the improvement of agricultural sector so the banks main focus is on lending rather than investing. 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 2012 as compared to 70.7 Billion in 2011. The percentage increase in the horizontal analysis also shows this continuous increase in the trend of advancing. Operating Fixed Assets The assets of the bank are also increased in 2011 and in 2012 the president of the bank also announced to increase it further by constructing new buildings. Increase in the fix assets shows that the bank is optimistic about its future. Borrowings It is the amount which bank has borrowed from SBP. There is no change in this loan from 2007 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 2011 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. Surplus on Revaluation of Assets-Net of Tax It is surplus amount which is the bank expect to get if it will sell these assets. The market conditions never remain certain; the price of anything can rise or fall in matter of second. This is the reason that organizations use to revalue their assets to record their value according to prevailing market rates. The revaluation of fixed assets also helps banks in raising their equity which result in more lending power of the bank. 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. 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.

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 affects the growth of the bank. However the bank has improved itself a lot, the profit of the year of 2010-12 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 motivation. 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. Motivation of Human Capital: Human capital no doubt is a precious asset for any organization, without skilled and motivated employees no organization can survive in this competitive environment. ZTBL has mix of experience and young staffs which provide excellence blend of required skills and enthusiasm for progress. But I have found during my internship that the employee of ZTBL is not as much motivated as other banks employees are. The reason behind this is the mechanism of promotion, many of the permanent employees of the bank has not been promoted 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.

ZTBL Launches Deposit Mobilization Schemes

ISLAMABAD: Zarai Traqiati Bank Ltd (ZTBL) has launched its two deposit mo facilitate its clientele besides providing free of cost ancillary financial viability

The bank has offered these deposit schemes to individuals, sole proprietors, maintaining a minimum balance/ investment of Rs 200,000/-for a period of at fee, provided otherwise eligible.

Giving detail of the features of the schemes, the press release says that for balance will be required to be eligible for a profit upto 4% per annum. The pro

The facility under ZBA provides free banking services for the entire quarter, t cheque books for its depositors, if a depositor maintains a monthly average b

Under the Zarai Term Deposit Certificates an initial amount of Rs 25,000/- w months and profit rate on premature withdrawals will be upto 4% payable twic orders/ DDs and free cheque above.

ZTBL management has issued instructions to its braches for more active and commercial and financial viability. This will not increase its spread but also en

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SOURCES OF RURAL CREDIT

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SOURCES OF RURAL CREDIT Credit in the farm sector is available from sector is available from two sources--Non institution and institutional. These two sources of credit

are now discussed in brief. (1) Non-institutional sources of credit. The major non-institutional sources of farm credit are money-lenders, friends, relatives, landlords, shopkeepers and commission agents. Before 1947, the money lenders mostly non-Muslims were the main suppliers of loans to the farmers. After Partition however their importance has decreased to a great extent and the short term credit needs of the farmers are met from commission agents, friends and relatives which supply roughly 50% of total rural borrowings. The traders and commission agents advance loans to the farmers for short period These loans are provided mostly for productive purposes before the maturity of crops. The commission agents force the farmers to sell the produce to them which generally is purchased at low rates. The lenders of the informal sources (friends, relatives etc) have certain advantages over the formal credit sources. The informal lenders usually know the borrowers personally. They require little security for advancing loans. The loan are given for consumption as well as production purposes. The lenders are approachable at all times. They are also lenient in rescheduling loans. However, the informal lenders are also accused of charging higher rates of interest. They extract monopoly profits from the borrowers. As such a need was felt to organize and develop the institutional sources of credit.

(2) Institutional sources of credit.

The major institutional sources of farm credit are ZTBL, Commercial Banks, Cooperative Credit and Taccavi Loans. (1) The Zarai Taraqiate Bank Limited (ZTBL) formerly known as Agricultural Development Bank of Pakistan (ADBP). The ZTBL was established in 1961 through the merger of Development Finance for the supply of credit to agricultural credit. The Pakistan. It contributes over 32.9% of the national institutional agricultural credit. The ZTBL provides short, medium and long term loans for farm and off farm activities. The Bank has five windows of investment (1) Development loans (2) Production loans (3) Agri-business loans (4) Cottage industry loans and (5) Off farm income generating activities loans. It provided about Rs. 34 billion as agricultural loans to farmers during the year 2006-07.

(2) Commercial Banks. Commercial banks were inducted into the field of agricultural credit under the Banking Reforms Act of 1972. The banks, since them, are providing loans to the farmers for meeting their short and medium term requirements. The loans are advanced to the farmers against the security of land, crops, fixed assets and even on personal security. The share of commercial banks in the supply of agricultural credit has considerably improved and was 46.9% during the year 2006-07. Commercial banks disburse agricultural credit for the purchase of inputs, cattle, tractors, dairy farming, installation of tube wells, etc. Banks provide loans under the Supervised Credit Scheme and outside the Supervised Credit Scheme. (3) Cooperatives. The cooperatives are oldest institutional sources of farm credit in Pakistan. The performance of the cooperatives in the spread and utilization of credit to the small farmers is not satisfactory. The loans are mostly utilized by big farmers who have got their pocket societies registered with the Cooperative Department. Share of cooperative banks in the supply of total agricultural credit was 5% in the year 2006-07. (4) Taccavi Loans. Taccavi loans are handled by the Provincial Revenue Department. Necessary founds are allocated for different areas each year in the provincial budgets. The Taccavi loans are primarily given to the farmers for meeting emergencies such as flood, earthquake, famine, etc. The farmers take these advances in the spirit of gift or relief given in calamity and are not serious in repaying them. So this source is now occupying insignificant position in the disbursement of overall credit to the farmers. Agricultural loans are being made available to the farmers at the farmers at low mark up.