Report

National Bank of Pakistan
Preface
We are living in the time of extraordinary change. Economic threats are looming large on
the entire sphere of Pakistans economy. Organizations whether they are services or
manufacturing must design and make products & services and should find better ways to
market them. What was once regarded enough is no more competitive. Today an
organization is either on the leading edge or on the bleeding edge.
In order to be able to cope up with the changing environment it is necessary to have some
practical experience. Just as the whole spectrum of business ins and outs are taught in the
course of MBA studies, similarly an opportunity is provided to the students to translate
their theoretical knowledge into practical shape. The best way to do it is through internship
program. I was selected to do my internship in National Bank of Pakistan, D.H.S. Branch
Lahore. I worked there for six weeks and it gave me a great practical knowledge about the
operations of the bank.
Dedication
I dedicate this report to
Prophet Muhammad (PBUH),

For whom God created this world and,
Who is the only perfect man in this world.
Acknowledgement
Praise to the God, who has given us Islam, who has led us to a faith so exalted and Who in
his mercy, has granted us our Prophet (PBUH) to intercede for us. Praise to Him, who has
ordered the lives of past generations for the instruction of thinking men, and has allowed
the vicissitudes of this life to be a sure proof of the instability of all created things. Salute to
his noble Prophet Muhammad (PBUH), his companions and those who follow him.
First and foremost, I express my profound gratitude to Allah that, He, in his infinite mercy,
enabled me too early through my assignment successfully.
I am thankful to all the officials and staff of the National Bank of Pakistan, who extended
fullest co-operation to me in acquiring the practical knowledge about various aspects of
banking. Special thanks to Mr. Ayyub (Branch Manager), Mr. Asif Javaid (Operation
Manager),Mr. Ishtiaq, Ms Eram Saleem (Credit Officer) and Mr.Yousaf Ihsan (Sales
Officer) for giving me appropriate knowledge of banking activities and more appropriately
giving me proper time, guidance and attention.
At the last, but not the least my special gratitude to my parents, my family and my friends
who are always behind me and whose prayers are permanent source of strength for me.
Executive Summary
Banks are the organizations that are looking forward to give good systems and processes
regarding to delivering financial services. NBP is the oldest bank in the history of Pakistan.
This technological era has put influence on the working of the commercial banking. So,
the customers are demanding higher rates of return along with protection of their funds and
they are always asking for time saving technological procedures.
I started internship at NBP due to their name in the banking sector. After spending some
days in NBP, I have learned how to focus and attract your customer and inserting the
injection of loyalty, by providing better services against their competitors. The provision of
ATM and online banking has changed the way to deal with banking.
I have tried my best to peep into generic as well as real and specific, cumulative problems
faced by the pioneer of the banking industry in Pakistan but that degree of objective
analysis proved to be of little use since the bank is firmly entrenched in the Claws of
unionism and royal bureaucracy. Several chapters have been inducted in the report but they
seem to be very conventional in nature giving supplementary justification to the fact that
NBP is the most conventional of the conventional bank.
As far as this report is concerned it contains a concise description of what I witnessed and
what I learnt during the said period. I have endeavored to render it in simple narrative,
which can be understood by a layman. In this report the methodology, the vision, the goal
and the working of different department of the bank have been spotlighted. Besides it also
encompasses the services offered by the NBP. At the same time, I have in all humility,
ventured a few suggestions which, I believe, could further improve the scope of the banks
services to its customers.
During my stay in NBP Defense Housing Society Branch Lahore I have worked in almost
all the departments of NBP like Account opening, Remittances department, Credit
Department, During my working in Credit Department besides learning the
Credit
procedure, I have learned how to act, how to interact, how to deal, how to investigate and
how to make customer satisfied regarding the selection of appropriate credit facility to
choose.
Introduction of Banking
Bank The Definition
There are various viewpoints about the origin of the word Bank. One point of view is that
it is derived from the word Banc us which means a bench. The other viewpoint is that it
has originated from the German word bank which is called ban co in Italian language. It is
a German word and means a joint stock fund.
In proper words we can define;
An organization, usually a corporation, chartered by a state or federal
Government, which does most or all of the following: receives demand deposits
and time deposits, honors instruments drawn on them, and pays interest
on them; discounts notes, makes loans, and invests in securities; collects
Cheques, drafts, and notes; certifies depositor's checks; and issues
drafts and cashier's checks.
So from above definition we can assess that the main activity or function of banking is
borrowing and lending of money with a margin of gain. However, as far as the present day
banking is concerned, there are a number of different banks, set up under specific different
objectives, performing various functions.
We can classify bank into several categories on the basis of functions and also on the basis
of ownership like; Central Bank, Commercial Banks, Exchange Banks, Saving Banks,
Agricultural Banks, Industrial Banks and on the basis of ownership like; Public sector
banks, Private sector banks and the Cooperative banks.
But in the above classification of banks, we are more concerned with commercial banking.
The importance of commercial banking lies in the fact that they are countrys largest
deposit institution. As such they accumulate savings of people and make them available for
investment, thus promoting capital formation. Moreover, they advance loans to people and
enable them to meet their obligations, help in controlling speculations, and maintain
balance between requirements and availabilities and direct physical resources into desired
channels.
EVOLUTION OF BANKING STRUCTURE IN PAKISTAN

At the time of independence there were only 487 branches of banks working in Pakistan.
The economy of Pakistan was largely dependent on Indian banks. There were only two
Muslim owned banks is sub-continent. Due to lack of resources and communication
network most of the banks were closed and a number of braches were reduced to 195 in
June 1948.
To overcome immediate problems like issuance of currency, exchange control etc. The
reserve bank of India was allowed to act as a central bank of Pakistan. At the time there
were 19 branches of foreign bank working in Pakistan. The Government of Pakistan took
over exchange control from reserve bank of India on April 1 st On July 1st 1948 the State
Bank of Pakistan was founded as a central bank of the country and inaugurated by Quaid-eAzam. The main reasons of establishment of SBP were:
To overcome problem of public debt management and exchange control.
Indian government had with held share of Pakistan amounting to Rs. 75 crore.
Right after the formation of SBP, Habib Bank Ltd. was encouraged to expand its branches,
National Bank of Pakistan was also established in 1949. The first development finance
institution was Pakistan industrial and credit Investment Corporation which was formed in
1947 to encourage industrial sector in Pakistan.
In 1959, United Bank Ltd was formed.
In 1961, Industrial Development of Pakistan was established.
In 1962, National Investment Trust was formed.
In 1966, Investment Corporation of Pakistan was established to encourage

investment in the country.
In 1973, National Development Finance Corporation was reestablished for

providing short-term loans.
On 1st January 1974, govt. of Pakistan nationalized all banks and were brought
down under these names:
NATIONAL BANK OF PAKISTAN
HABIB BANK LTD.
ALLIED BANK LTD.
UNITED BANK LTD.
MUSLIM COMERCIAL BANK LTD.
But now the Financial Structure of Pakistan can be broadly categorized into scheduled
Banks ad Non-Banking Financial Institutions (NBFIs). There are 13 private commercial
banks, 4 privatized commercial banks, 3 nationalized commercial banks and 21 foreign
banks.
COMMERCIAL BANKING IN PAKISTAN

It was very difficult for Pakistan to establish its own banking system immediately after
independence without resources. Following the announcement o the partition plan in June
1947 there was a haste movement on the part of the banks to transfer their funds and
accounts across the borders. The banks having their registered offices in Pakistan were
transferred to India. In an effort to bring about collapse of the new state by the persecuting
an international policy of withdrawal, the Indian bank offices closed quickly. Those banks,
which stayed, were considering the winding up of their business. By 30th June 1948 the
number of scheduled banks in Pakistan declined from mere scratch.
Today there is more than 7000 branches of commercial banks along with an established
network of supplementary financial institutions. All this development in the banking sector
is the result of untiring efforts of four decades
History of National Bank of Pakistan.

The story of NBP is part of our struggle for economic independence. When we won
political independence, mostly Hindus controlled our economy. East Pakistan was spared
from massive migration but its economy was also, being dependent on Calcutta, badly hurt.
Most bankers and business experts left Pakistan and the economic life was brought to a
standstill, these mostly branches of Imperial Bank of India were only in partial operation
with skeleton staff.
It was decided that Reserve-Bank of India would act as the common monetary authority of
both countries up to September 1948. But this arrangement did not prove well. In August
1947, we were given a first installment of Rs. 200 million (20 crore) as our share, leaving a
balance of Rs. 550 million (55 crore) but it was not paid when asked for.
In October 1947 there was fighting in Kashmir, when India refused to give us the amount
of Rs. 55 crore if we did not give up all interest in Kashmir, which we refused. In response,
Reserve Bank of India refused to make even and advance for ways and means. Despite that
India had to pay our 50 crore, (the remaining 5 crore still remain unpaid) There was a
controversy on establishment of our central bank because we had no experience or
expertise but it was resolved and SBP was created, 3 months ahead of schedule, on July 1,
1948, which was the last public appearance of the Quaid-e-Azam SBP claimed its share of
Assets of Reserve bank of India against the Indian currency retired from Pakistan, but this
50 crore India disputed and virtually refused to settle this dispute up till now.
In 1949 (September) U.K. devalued its currency, India followed suit but we did not. India
said we had contravened the agreement of keeping both currencies at par. We said we had
not done that; India had done it arbitrarily without consulting us. On October 3, 1949 the
two central banks were to announce the new par value of both currencies but India denied a
day earlier. India also froze our trade-balance surplus that is still an unsettled dispute. India
also withdraws the Marwari merchants who were employed annually for movement of jute

crop buy financing it. Theyre being no jute industry, prices fell sharply, foreign banks and
foreign merchants stood aside and an agrarian unrest was threatening.
Two Ordinances were, therefore, issued.

1.
Jute Board Establishment Ordinance &
2.
NBP Ordinance date 08-11-1949
NBP was established on November 9, 1949 under the National Bank of Pakistan Ordinance
1949 in order to cope with the crises conditions which were developed after trade deadlock
with India. Initially the bank was established with the objective to extend credit to the
agricultural sector NBP stood behind jute trade, SBP stood behind NBP and the
government stood behind SBP. The bank act as an agent to the State Bank of Pakistan for
handling Provincial/Federal government receipts and payments on their behalf. Speedy it
was such that 6 branches came into being at once and the doubts on our ability to handle
this situation were dispelled for ever Now, as the jute Board and NBP were in the field, the
foreign merchants and bankers also rushed into get their share in the business and
consequently NBP hand to lay out much less finance than it could. Mr. Ghulam Farooq was
chairman Jute Board & Mr. Mumtaz Hassan was chairman NBP. Until June, 1950 NBP
remained exclusively in Jute operaions, thereafter-other commodities were also taken-up.
After that Mr. Zahid Hussain, Governor SBP assumed additional charge also as chairman
NBPs Board of Director, & Mr. M.A Muhajir became its first M.D.
In 1952 NBP replaced Imperial Bank o India. Mr. Mumtaz Hassan and Acting Governor of
SBP negotiated this arrangement. In 1962 when Mr. Mumtaz Hasan became MD (He had
already served NBP for 10 years as its chairman of government Director), the number of
branches had increased from 6 to 239 and deposits from Rs. 5 crore (50 million) to 106
crore (one bn & 60mln), profit, from 3 million (30 lac) to 21 million (2.1.crore) and the
staff increased from 380 to 7091, as compared to 1949-50. In Dec. 1966 its 600 th branch
was opened raising the deposits to 2.31 bn. And staff to 14, 963. Up to 1965, the
shareholders had received 225% of their original investment. Now its has more than 21549
employees 1537 branches and Rs. 208283 million deposit.
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Introduction to Organization
National Bank of Pakistan maintains its position as Pakistan's premier bank determined to
set higher standards of achievements. It is the major business partner for the
Government of Pakistan with special emphasis on fostering Pakistan's economic
growth through aggressive and balanced lending policies, technologically oriented
products and services offered through its large network of branches
locally,
internationally and representative offices.
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Vision Statement of NBP

The vision statement of National Bank of Pakistan is;
To be the pre-eminent financial institution in Pakistan and achieve
market recognition both in the quality and delivery of service as well as the
range of product offering.
Mission Statement of NBP

A mission statement uses to highlight that what is the purpose of existence of a
particular organization. As far as the mission statement of NBP is concerned it is very clear
and understandable to their customers and for the management of the bank.
The mission statement is:
To be recognized in the market place by Institutionalizing a merit & performance
culture, Creating a powerful & distinctive brand identity, Achieving top-tier
financial performance, and Adopting & living out our core values.
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NATIONAL BANK OF PAKISTANS Core Values:

National Bank of Pakistan maintains its position as Pakistans premier bank
determined to set higher standards of achievement .It is the major business partner for the
Government of Pakistan with special emphasis on fostering Pakistans economic growth
through aggressive and balanced lending policies, technologically oriented products and
services offered through its large network of branches locally, internationally and
representative offices.
NBPS aim to be an organization that is founded
On
Growth through creation of sustainable
relationship with our customers.
Prudence to guide our business conduct.
A national presence with a history of

contribution to our communities.
NBP wishes to work hard to.
Meet expectations through Market-based

Solutions and products
Reward entrepreneurial efforts.
Create value for all stakeholders
NBP aims to be
Organization which
Care about Relationships
Lead through the Strength of our Commitment and
Willingness to Excel
Practice integrity, Honesty and hard Work. We believe that these are Measures of
true success.
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They have confidence to be
Leaders in banking industry.
An organization maintaining the trust of stakeholders.
An innovative, creative and dynamic institution responding to the changing needs

of the internal and external environment.
Core Values of NBP in brief.
Commitment
Strength
Leader ship
Best in product
Nationalization of the Bank
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Board of Directors:
S Ali Raza
Chairman & President
Mian Kausar Hameed
Director
Mr. Ibrar A. Mumtaz
Director
Mr. Tariq Kirmani
Director
Sikandar Hayat Jamali
Director
Azam Faruque
Director
Ekhlaq Ahmed
Secretary Board of Directors
Audit committee:
Azam Faruque
M. Zubair Motiwala
Iftikhar Ali Malik
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Objects and Activities:

The Bank is providing all banking services of mercantile and
commercial banking permissible in the country, which include:
Handling of treasury transactions for the Government of Pakistan as agent to the

State Bank of Pakistan.
Providing services under a Trust Deed as Trustee to the National Investment Trust
(NIT) including safe custody of securities on behalf of NIT.
Accepting of deposits of money on current, fixed, saving, term deposit and profit
and loss sharing accounts.
Borrowing money and arranging finance from other banks.
Advancing and lending money to its clients.
Financing of projects, including technical assistance, project appraisal through longterm/short term loans, term finance and etc.
Buying, selling, dealing, including entering into forward contracts of foreign

exchange.
Financing of seasonal crops like cotton, wheat, rice, sugar cane, tobacco, etc.
Receiving of bonds, scrips, valuables, etc. for safe custody.
Carrying on agency business of any description other than managing agent, on

behalf of clients including Government and local authorities.
Generating, undertaking, promoting, etc. of issue of shares and, bonds, etc.
Transacting guarantee and indemnity business.
Undertaking and executing trusts.
Joint venturing with foreign dealers, agents and companies for its representation
abroad.
Participating in "World Bank" and "Asian Development Bank's" lines of credit.
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Providing personalized Hajj services to intending Hajjis.
Product/Service Mix of NBP

The success of any organization especially banks is dependent upon its products
being offered. Product of a bank includes all those services, which a customer can
use effectively in his general and business live.
NBP Main Branch, Lahore offer a wide range of banking services to public and
private sector corporations, partnership, individuals and others. So National Bank
main branch is providing several products as well as services to their customers.
Banks Products
The National Bank is providing several products, which are facilitating
customers and are satisfying their financial needs. It also provides financing for
those projects, which are important for the development of the country like
initially this bank was developed for the development of agriculture industry.
And it is because of this that now agriculture is the most important country of
Pakistan and is contributing a significant amount to the GDP and HNP. Here I
am pin pointing some salient products, which are being offered by National
Bank main branch.
Those are as follow:
Deposits
Letters of Credit
Trade Finance
Traveler Cheques
Credit
Letter of Guarantee
Advances
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Deposits
To receive deposits is a basic function of all commercial banks. Commercial banks
do not receive these deposits for save keeping purpose only. But they accept deposits as
debts. When a bank receives a deposit from a customer, the customer becomes the
creditor while the bank a debtor. When the bank receives the amount of deposit as a
debtor, it becomes the owner of it. It may, therefore, use it as it deems appropriate. But
there is an implicit agreement that the amount owned would be paid back by the bank
to depositor on demand or after a specified time
Deposits are the lifeblood of a bank and their classification is based on the duration and
purpose for which the deposits are to be kept at the bank before the depositors can
withdraw them. At present NBP accepts deposits in both local & foreign currencies and
provides a variety of accounts where these sums are put in at the desire of the customers.
So in general National Bank is providing both local currency as well as foreign currency
deposit accounts; we can see them in detail;
(A)
Local Currency Deposits
In local currency (Pak Rs.) the following type of accounts are available at the bank
1-Current Account
2-Saving Account
3-Short term deposits
4-Fixed deposit receipts
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1. Current Account
These are payable to the customer whenever they are demanded. The bank treats these
deposits as current liabilities
Features:
No profit is given on these accounts
There is no restriction of minimum balance to be kept in these accounts.

2. Saving Account
In such types of account, the depositors are normally allowed to withdraw a limited
amount of money only twice a week. For example, Bank of Punjab has a healthy saving
account with National Bank Main Branch, Lahore.
Features:
Minimum balance of Rs.5000 is required
1.2% interest is paid.
3. Short Term Deposits

In these accounts the amounts are deposited for fixed period but shorter than
that of fixed deposit receipts.
Features:
It may be 3 months, 6 months and 1 year.
Interest is paid with the rate of 1.78% on all above categories.
4.
Fixed Deposit Receipt
In these accounts the amounts are deposited for fixed period and long period of time
Features:
It is 3 years or 5 years.
(B)
For 3 years interest rate is 2.20%.
While for 5 years it is 2.25%.
Foreign Currency Deposits
At present NBP Main Branch accepts US$, GBR, YEN and DM in shape of foreign
Currency deposits. For these foreign currency deposits bank has offered the
following accounts.
1-Foreign Currency Accounts.
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2-Foreign Currency Saving Accounts.
1) Foreign Currency Current Accounts

In these accounts depositors can deposit
a sum of money in any of the above-mentioned currencies. The depositor can also
withdraw any amount subject to the availability of the amount. No profit is given on
these accounts and no restriction as per the minimum balance required
2) Foreign Currency Saving Accounts

NBP pays the interest that is earned on the
sums available in the accounts by making investments. Interest is paid in the currency
in which account is opened.
Other Deposit Accounts

National Bank is offering numerous deposit accounts, here
I am giving head names of some of these accounts;
Fixed deposit account
Short term deposit account
National income daily account
Call deposit
Current account
Foreign currency current account
PLS saving account
Letter of Credit
A documentary letter of credit may be defined as an authority issued by
the opening bank on behalf of the importer in favour of the exporter with the
stipulation that the drafts drawn there under will be duly honored provided that the
terms and conditions as mentioned there in are duly compiled with.
With respect to the documentary credit the following types of documentary letter of
credit are offered by NBP;
Revocable LC
Irrevocable LC
Transferable LC
Back to back LC
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Advances
Advances are the major source of earning income for commercial banks; it is the
interest charged on the money lend to customers. Bank advances to customers are
made either by way of loan or by overdraft on current account.
At present NBP provides short-term loans as well as long-term loans.
Travelers Cheques
National Bank is also serving in traveler cheques to help business
people avoiding passage dangers while moving from one place to another place.
Following are the important conditions regarding traveler cheques;
Negotiability: Pak Rupees Travelers Cheques are a negotiable instrument
Validity:
There is no restriction on the period of validity
Availability: At 700 branches of NBP all over the country

Encashment: At 400 branches of NBP
Limitation:
No limit on purchase
Safety:
NBP Travelers Cheques are the safest way to carry our money
National saving certificates:

National bank also provides the facility of national
saving certificates to make better utilization of public income for the development of the
country.
Salient Features:
Bank advances 90% of the encashable amount
Interest rate is 11%
It is a running finance
Short term
Usually for one year
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Can be renewed at maturity
Defense Saving certificates:

It is almost similar to the national saving certificate and has
same features like
It is a running finance
Short term
Usually for one year
Can be renewed at maturity
BANK SERVICES
Along with above-mentioned products National Bank Main Branch
also provides u numerous services. The difference between products and services is
that products are
Offered while services are rendered but as both serve the same purpose (satisfying
financial needs), therefore, both are treated at equal footing.
Major services being rendered by the National Bank main branch, Lahore are:
Cash
Lockers
National Savings & Investments
Clearing
Collections
Govt. Revenue Collection
Funds Transfer
Utility Bills Collection
Pension & Salary Payments
SBP Treasury & foreign exchange Operations
ATM
Now we will see the detail of some of the services which are
rendered by the bank;
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Cash
Like all other commercial banks, National Bank is facilitating people to handle their
cash transactions and the main branch is working very efficiently in providing people their
cash at right time. National Bank is now providing ATM facility to all the customers and
this cash availability is no doubt a tremendous success that you can have access to your
cash whenever and wherever you want.
National and Defense Saving

As National Bank is now only the public sector bank so
it is facilitating national savings setup by issuing national saving as well as defense saving
certificates to general public. There is a special seat, which is regulated to help people
getting national saving as well defense saving certificates.
Clearing
Like all other commercial banks, National Bank is facilitating people to receive
their amount from other banks. In fact for clearing purposes, National Bank has got a
separate department. It is because National Bank main branch has extensive work in
clearing regard. For clearing purposes, these days we have an organization named as
NIFT which is playing its role in clearing of amounts from one bank to another bank.
Here NIFT stand for National Institutional Facilitation Technologies and it is the
institute, which performs the function of clearance among all the banks on the behalf of the
State Bank of Pakistan. All the banks for clearance purposes appoint this organization.
Previously, this work was done by SBP but now NIFT is performing this function on behalf
of SBP.
Government Revenue Collection

At National Bank main branch, people are
facilitating to submit their dues like income tax, property tax, wealth tax, excise duty and
even amount against penalties. So National Bank is better serving as a public sector bank
and efficiently working for the social welfare of general public
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Utility Bills Collection
As we know utility means gas, water and electricity. So
National Bank is helping people to pay their utility bills and every day it is receiving a
huge amount as collection against utility bills. National Bank has got agency
agreements with these utility departments and it is serving in a well manner and people
at main branch are performing their duty in an effective manner.
Pension and Salary Payments

At National Bank main branch, a large number of people use to get their salaries as
well as pensions.
National Bank deals in following kinds of pensions;
Military pensions
Central
Provincial
Foreign Services
Following is the list of major foreign services provided by NBP to its
customers e .g:
A. Documentary Letter of Credit
B. Bills of Negotiation
C. Foreign Services
D. Bills for collection
Documentary Letter of Credit

A documentary letter of credit may be defined as an
authority issued by the opening bank on behalf of the importer in favor of the exporter with
the stipulation that the drafts drawn there under will be duly honored provided that the
terms and conditions as mentioned there in are duly compiled with.
Bills for Negotiation

In some cases the exporter is not willing to wait for the proceeds of
collection to be remitted. In such cases exporter requests the Bank to negotiate the bills i.e.
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he sends the documents to Bank. In this case Bank examines the documents and arranges
them with the requirements mentioned in the Letter of Credit. When bank satisfied it pays
to the exporter. Now Bank has the right to collect the proceeds on his own behalf from the
importers Bank
NBP performs the functions of both the exporters and the importers Bank as per
its customers status.
Bills for Collection

The exporters and bank receives the documents from the exporter,
examines and dispatches them to the importers bank. The importer, s bank confirms
these, as per the requirements stated in the letter of credit. If founds correct gets the
amount from the customer, advice the exporters bank about the receipt of payment
and in the end makes the payment to the exporters bank.
Remittance
It includes local and foreign currency fund transfer. NBP also provide the
facility to its customers in remitting funds from one place to another place. The
remittance (between two countries). At present bank provides the following instrument
that facilitates the transfer of funds.
TT (telegraphic Transfer)
DD (Demand Draft)
PO (Pay Order)
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NBP SIABAAN HOME LOAN

Saiban (NBP-Housing Scheme)
National Bank of Pakistan (NBP) has announced
the launch of a housing scheme to cover all sections of the society with monthly incomes
ranging from Rs 5,000 to Rs 50,000.
Branded 'NBP Saibaan' (Housing for all), the scheme offers a maximum loan of Rs
7.5 million in accordance to the debt burden criterion. Loans area available for home
construction, home purchase and home renovation, said Syyed Ali Raza, president of the
bank.
Customers can also obtain loans for other business purposes by mortgaging their
existing home a surety. The loan tenure will be three to 20 years for construction and
purchase, and from three to 10 years for renovation and for other purposes. The markup can be fixed or floating and is the most competitive in the Pakistani market, Ali Raza
said. He said the scheme would have a positive impact on other industries and the
services sector.
The scheme was launched at a function in Karachi presided over by Shaukat Aziz,
Pakistan's Finance Minister.
Detail of Saiban
Product Window
Product Definition
For the purchase of ready

residential property House or Apartment.
For construction of self
owned residential land
Home Construction
(open or partially
Loan
constructed upon) leading
to self-occupancy
Home Purchase
Loan
Broad Parameter
Tenure 3
to 20
amount Rs.10m years.
Max. Loan
Max. Loan
Tenure 3amount Rs. 10m 20 years.
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For modifications,
Home Improvement alterations and/or minor
Loan
additions in the house or
apartment
Max. Loan
amount Rs.2m
Tenure 310 years.
Salient Features of SAAIBAN

Loans for all segments of our society having
income above Rs.5, 000/= (Total clubbed income has to be Rs. 10,000/= with no co
applicant earning less than Rs. 5,000/=)
All sizes of loans to suit the customers capacity. Blood relatives/ spouse income can be
clubbed to increase the debt paying capacity.
The target market divided into clearly defined segments
1. 1.
Salaried class (NBP salary account holders and other employees)
2. 2.
Business Class
3. 3.
Self-employed
Long repayment period, therefore minimum possible month installments. Maximum

debt to equity ratio 80:20. (Will vary according to classes and debt burden). Early
repayment allowed Mortgage is protected. That is SAIBAAN will cover the family
even if a borrower dies during the tenure of the loan.
Government Guaranteed Loans Package Special Features:
1. Available up to Rs. 7.500 million (based on debt burden).
2. Long repayment period up to 20 years.
3. Minimum debt to equity ratio: 80/20.
4. Clubbing
of
the
blood
relative
incomes
allowed
facilitating higher debt repayment capacity.

5. Soft Repayment / Markup terms.
6. No registered mortgage, only equitable mortgage.
New Features:
Success of any department depends on the working of the employees.
For this purpose NBP has adopted the policy of hiring well educated and trained
employees. Initially the home remittance services were available at limited banks like
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International Bank and Bank Al jasira, Saudi Arabia. But now this service is available
at 15 overseas branches of NBP. There are some other features as
NBP is providing this service free of cost
Special courier services are hired for this purpose
There is strict monitoring system to make this service more secure
National income Daily Account (NIDA):

This scheme has been introduced in
December 1995 to attract corporate customers. It is a current account scheme and a part of
profit and loss system of accounts in operation through out the country.
Silent Features:
Minimum Rs. 2 million is needed to open the account with no maximum limit
Profit paid on half yearly basis on a monthly average balance the rates vary
according to the slab of deposit
Profit On deposit of Rs. 2 million, the rate is 1%
Condition is a checking account and there is no limit of withdrawals
Short Term Investment:

National Bank of Pakistan has introduced many short-term
investment schemes like
3 month investment
I year investment
These schemes are profit sharing schemes and different %age of profit is offered for
different investments
Equity Investment:
National Bank of Pakistan is also trying to improve its position in
stock market to attract new customers and for the satisfaction of its stockholders. So it is
involved in the following markets
Investment into capital market
Introduction of capital market accounts
28

NBP position in capital market is good it share in capital market is increasing which is a
major cause of increase in its income and more profit to share holders. Better position in
capital market is also a cause of high credibility.
Commercial Financing:
National Bank of Pakistan is also providing commercial loans
for business at small and large scale, agriculturists.
Trade Finance Other Loans:

Agricultural Credits:
Agricultural credits are given against commodities for various
purposes
Salient Features:
Amount of loan depends on the purpose

Interest rate is different on different amount of loan
Bank take commodity as security
It remains under banks custody till the loan is repaid
Bank has its lock on the door of godown
It is guarded by bank guard for the 24 hours
It is usually a short term loan for 1 year
Working Capital and Short Term Loans:

NBP is providing short-term loans for
different projects to companies like
Project finance
Export finance to exporters
Pre shipment and post _shipment financing to exporters
Running finance
Cash finance
Small finance
Discounting and bills purchased export bills purchased
Pre shipment and post -shipment agricultural production loans
Medium term loans and Capital Expenditure:

Financing:
29

NBP also offers log term loans for investment needs. These loans are issued on
profit and loss sharing. By sharing the risk associated with these long-term loans and
investment NBP expedites clients attempts to upgrade and expand their operation thereby
making possible the fulfillment of their client vision. This type of long term financing
proves the banks belief in its clients capabilities and its commitment to the country
NBP Advance salary:
Advance salary is paid to those employees who are working in the
organizations that have their accounts in National Bank.
Features:
11% mark up is charged to the amount of salary paid in advance.
10 salaries are paid in advance.
National Bank of Pakistan and Western Union:

This partnership is a step for economic growth of Pakistan.NBP teams up with
Western Union Financial Services Inc. a worldwide money transfer service, to facilitate the
remittance of money through legal channels.
If you are doing job or business in foreign country, through western union you can send
money in Pakistan and can get that amount in Pak rupees. This helps increase national
income. This will also assist in reaching Governments goal in revitalizing the economic
sector, attaining self-reliance and achieving transparency.
NBP ATM Services for Your Convenience

NBP has joined 1 Link ATM Network, linking it to the endless ATM Banking opportunities.
1 Link is the ATM Network that works for you.
Today marks the formation of a formidable banking technology network - 1 Link.
Eleven banking powers bring you the largest nation wide ATM Network that provides
reliable 24-Hours access to cash.
Services Available on NBP ATMS
Cash withdrawal according to your cyclic limit.
Transfer of funds between PLS Savings Account and Current

Account of the same customer through the same ATM Cards.
30
Account Balance Inquiry.
Instant mini- statement of account listing the last 15 transactions in

account. Request for a new Cheque book which might be collected by the
customer from the branch.
How Much Cash can be Withdrawn

There is a 24 hours cyclic cash withdrawal limit imposed on all ATM cards.
Withdrawal limits depend on the type of customers. Generally, you can have 20,000 in a
day.
PIN (P E R SO N A L I D E N T IF ICATIO N N UM B E R ) M AIL E R
A pin mailer issued to the ATM cardholders carries the PIN number
in a sealed envelope. Cardholder is required to keep the PIN number in a safe place as all
the operation on the ATM is carried out through the same.
NBP and Electronic Government Directorate of Ministry of Information
Technology and Telecommunication launch 24 hours Cash Facility - Through 18 New
ATMS.
Now Citizens of Islamabad/ Rawalpindi - especially the government employees - can
easily withdraw cash or receive salaries 24 hours a day, seven days a week from ATM
at all Online NBP branches.
31
Organizational Chart of NBP

PRESIDENT
SENIOR EXECUTIVE VICE PRESIDENT

GRADE 22
EXECUTIVE VICE PRESIDENT

GRADE 21
VICE PRESIDENT
GRADE 20
ASSISTANT VICE PRESIDENT

- 32 -GRADE 19
GRADE I OFFICER
GRADE 18
GRADE II OFFICER
GRADE 17
GRADE III OFFICER

GRADE 16
32
WORKING OF VARIOUS DEPARTMENTS

1
DEPOSIT SECTION
REMITTANCES
GOVT, RECEPIT & PAYMENT ADVANCE SECTION
ESTABLISHMENT DEPARTMENT
FOREIGN EXCHANGE SECTION
DESPATCHES SECTION
CASH DEPARTMENT
ADVANCES SECTION
CLEANING DEPARTMENT
10
ACCOUNT DEPARTMENT
11
CREDIT DEPARTMENT
33
REMITTANCES SECTION
1.
Demand Draft (DD)
2.
Mail Transfer (MT)
3.
Telegraphic Transfer (TT)
4.
Pay Order
DEMAND DRAFT (DD)

Demand draft is a written order given by the one branch of a bank on behalf of customer to
another branch of the same bank to a certain amount to the certain person.
PROCEDURE FOR PREPARE DEMAND DRAFT.

1.
I
A draft voucher is filled which contains the following information

Name of the parties involved
II Amount to be sent
III Account number (If DD is crossed)
2.
A credit voucher is filled in order to get the excise duty, withholding tax and
exchange commission.
3.
The sender deposits the total amount of the two vouchers i.e. the debit and
credit vouchers.
4.
Then the cashier sends the cash receipt voucher to the account department and
the account records the amount paid in his cash scroll.
5.
Accountant gives the DD leaf along with the DD voucher to his assistant who
records the sender name, amount and receivers name. After writing all the
information in the DD register he gives it to the officer along with th DD for
authentication.
6.
After authentication the DD is handed over o the sender and bank sends the
advice to the concerned branch. So when the party presents the D in the
concerned branch its payment could be made
34

PARTIES INVOLVED IN THE DEMAND DRAFT
The following parties are involved in demand draft
1.
Purchaser of sender
The purchaser is the person who sends the money to a

particular person payable at the certain branch.
2.
Issuing or drawing Branch
The branch from where the demand draft is issued to another branch of the same bank
3.
Drawee Branch
Branch in which the draft has drawn and called upon to pay the amount
4.
Payee
The person who is entitled to receive the amount after presenting the
demand draft in the draw branch.
MAIL TRANSFER (MT)

It is the transfer of money from one branch to another
branch of the same bank through mail service. In mail transfer there is no need a advice as
the amount is directly to the receivers account.
PROCEDURE.
1.
First a voucher is filled in which the sender writes the amount to be sent, name,
account number of the receiving person with the branch name and date
2.
A credit voucher is filled in order to deduct exchange, postage charges and

withholding tax according to the amount of the mail transfer.
3.
The sender deposits the total amount of the two vouchers in the cash
department.
4.
The cashier gives the vouchers to the accountant after affixing received stamp
ad writing the amount in red ink.
5.
Then the account writes the amount paid in the cash scroll and gives the MT to
his assistant.
35
6.
MT leaf is filled according to the information provided in credit voucher He

also writes the same information in the MT register. Then he gives the MT leaf
and MT register to the officer for authentication.
TELEGRAPHIC TRANSFER (TT)

This is the most urgent method of remitting the
money from one place to another place. This method is used when the sender desires to
send urgently, in this case the sender request the manager of the branch to issue T T.
PROCEDURE
For sending the TT the manager applies a test. In the test the manager
uses a coding technique. He writes his own code number, which is allotted, to him as
the bank Brach code. After making al the conformation the concerned branch makes the
payment to the receiver. If the sender wants to convey the same massage through
telephone then he has to pay the charges of telephone along with the TT Charges. First
the person deposit the TT amount along with the charges through the credit voucher
then his TT set to the relevant branch.
PAY ORDER (PO)

A pay order is a written order issued by the bank no its own
branch, drawn upon and payable by itself to pay a specified sum of money to the person
The purpose of a pay order is to transfer the fund from one place to another. It is usually
not issued in favor of the parties of order cities. Usually the pay order is issued for the
local transfer of money from one person to another or form the person to any other
Department. It is used for different purposes. The purpose may be repairs of the branch
or renovation of the branch.
PROCEDURE
The procedure of a pay order varies with the nature of the purpose. If
the work is of huge amount then first the manager writes a letter to the Zonal chief in
order to get sanction of the work. Then the advertisement of the work is given in the
newspaper in order to invite the contractors. But if the work is small then the branch
manager has discretionary power to select the party whose rate is lowest. After
finishing the work the contractor submits the bill of work on his stamp pad. Then the
bank issues a pay order, against the pay orders the contractors gets the amount from the
issuing branch.
36

GOVT. RECEIPT & PAYMENT DEPARTMENT
Govt. Receipt & payment includes different types of work. Now we see one by one.
Utility bills
National Bank accepts the following types of utility bills

Electricity Bills
BLT Bills
Telephone Bills
Sui Gas Bills
PROCEDURE
The cashier in cash section receives utility bills. The cashier posts the
amount of bill in respective scroll ad at the end all the amount of collected bills is
transferred to the respective account. Then representative of the concerned department
collects the amount in the shape of M.T (mail Transfer). The bank takes the collection
commission of Rs. 2 per bill from each type of bill
FEDERAL AND PROVINCIAL TAX
It includes
Income Tax
Central Excise Tax
Sales Tax
Provincial Excise Duty
Provincial Motor Duty
Professional Tax
Provincial Property Tax
PROCEDURE
The customer deposits two or three copies of tax Performa with cash or
through transfer. The cashier enters this Performa in Govt. scroll and one company returned
to the customer. At the end of the day summary is prepared and the total amount is credited
to the relevant head.
37
DEISBURSEMENT OF PENSION
National Bank is fully authorized to disburse the pension to the govt. and Army retired
personnel.
PROCEDURE
For the distribution of pension the branch maintains the pension register,
In order to get the pension, first the pensioner submits his pension voucher with his pension
book that voucher sent too the cash department for the payment to the pensioner after
posting into his account.
ESTABLISHEMENT DEPARTMENT
In National Bank establishment department works for
the maintenance of different type of the expenses and for the provision of funds for
different activities in the Branch. The manager of this department has two types of register.
1.
Charges account register.
2.
Suspense accounts register.
CHARGES ACOUNT REGISTER

In the charges account register following accounts are maintained
Basic Salary
This account deals with the salaries of the employees within that branch when bank have to
pay the salary of any employee the amount of salary is debited to the charges account.
Allowances
Under this had different allowances are paid to employees. But

these are attached with salary and paid with the salary.
Provident fund
It is deduction from the employees salaries which is paid out at his retirement
Medical Attendance
When some employee suffers from any disease the bank allocate fund for him and this
amount is debited to charges account of the patient.
Honorarium to staff
Those types of funds, which are not part of salary, like bonus profit.
38
Staff welfare
To improve the efficiency, the bank provides some special facilities and the fund is
provided from the welfare account. These funds are similar to honorarium fund
Bonus
When the efficiency of employees increases and bank earn profit more
then expectation then bank gives extra bonus to the employees. The provision of bonus is
done through bonus account by debiting to the charges account.
SUSPENSE ACOUNT
When some employee needs some advance amount for them. He can withdraw that amount
from suspense account, which is then adjusted, from his salary
Account. But the bank provides funds I advance within some limits under this account
.OTHER
EXPENSES OF THE ESTABLISHMENT DEPARTMENT
AUDITOR FEE
When any team comes for the audition of some branch then all of their expenses are beard
by active branch. Also bank paid them fix amount as fee the funds for this purpose
provided from this account
RENT
To pay the rent of building under the branch is running is paid from rent account.
RESIDENCE
To pay the rent of employees residence, because they are given this facility some rank. To
allocate funds for this purpose rent account is used
GENERAL INSURANCE
All the property in the branch like cash, gold, prize bonds are insured the maximum limit of
insured property that is .00 millions. In case of any incident insurance company will pay
the damages.
TAXES
To pay tax on bank property like building and vehicles this account is debited
LIGHTING AND POWER
39

To furnish the branch with lights and provides the branch air conditional environment. The
funds paid from this account.
TELEPHONE
The provide the facility to his officer to pay their telephone bills up to certain limit for
example officer grade III have facility equal to 200 local calls. So to pay the bills of these
employees the telephone expenses account is used. Also the branch telephone bills are paid
through this account
PAY OF SECURITY GUARDS
In National Bank some private companies provide security. So to pay their salaries the bank
used this account. With debiting this account and crediting the security companys account.
POSTAGE, TELEGRAMS AND STAMPS
The Charges of dispatch section like expenses of dispatching all the mail and expenses of
telegram and paid through this account. The charges o postage and stamp collected from
customers are credited to current account and at the end of month this amount is transferred
to the postage telegram and stamp account to pay the expenses for the next month.
STATIONERY, PRINTING AND ADVERTISEMENT

The expenses on the vehicle used for branch and branch manager are paid through this
account. It includes the expenses of stationary used in branch.
ENTERTAINMENT
The banks provide a facility to manager to entertain some special clients in his chamber or
outside the chamber.
MISCELLANEOUS EXPENSES
40

Those expenses, which dont have their own account, are paid through this account for
example;
Cartage and freight
Laundry
Local Conveyance
Sundries
PETTY EXPENSES
Petty expenses include the expenses met from petty cash such amount should be at the end
of month to petty expenses instead of sundries.
FOREIGN EXCHANGE SECTION

It is the function to deal with customer in foreign currency. Only few branches of NBP are
allowed to deal in the currency other pak rupee.
PROCEDURE TO OPEN AND ACCOUNT IN FOREIGN CURRENCY

There are two types of foreign currency accounts
FOR RESIDENTS
In order to open the account of Pakistani resident in foreign currency the following
documents required.
I.
Photocopy of ID card
II.
Foreign exchange.
The remaining process is same as in the case of local currency account.
41
FOR NON-RESIDENT.
For non-residents following documents are required.
I.
Photo copy of passport
II.
Photo copy of Visa
The remaining process is same to open an account in local currency.
CLOSING OF A FORGIEN CURRENCY ACCOUNT

To close the foreign currency account the same methods are used as were used in local
currency.
FOREIGN TELEGRAPHIC TRANSFER

The debtor make the payment in his branch and his branch manager sends a telegraphic
message to the responding branch to make the payment to the ultimate client. This is the
quickest method to transfer the funds from one place to another place.
42
CASH DEPARTMENT
The cash department is that through which all the receipts and payments of bank are made.
Also the banks cash record remains with this department there are two types of books used
in this department.
1.
Cash Receipts Book.
2.
Cash payment Book
CASH RECEIPT BOOK

In which the cashier records the entry when some one comes to deposit some amount. The
clients come with pay in slips and the cashier the amount according to the pay in slip, sort
outs the notes, puts a signature, stamps it and record in his book. After stamping the slip the
cashier returns the pay in slip to the customer. Then customer goes to the another bank
officer, he again record this voucher into his cash scroll and returns one part of the pay in
slip to the customer and keeps the other part for the record
CASH PAYMENT BOOK

When some client comes to the branch to withdraw some amount from the account, after
getting the token from deposit section he goes to the cashier, cashier checks his token and
cheque which is referred to him from deposit section. The cashier makes to him required
payment and receives the token from the customer. After recording all the cheques in his
book he returned the cheques in to the deposit section.
CASH BOOK
The sole purpose of the cashbook is to record the total transactions done in each type of
account daily. The closing balance of cash is also included in the cashbook. It is maintained
with the help of various types of vouchers and daybooks. These vouchers and day books of
different heads are as follows:
Charges vouchers.
Suspense Vouchers.
Payment order vouchers
Term depost voucher
43
Call depost vouchers
PLS daybooks
Current daybooks
Cash finance day books
Running finance daybooks
Demand finance day books
Foreign exchange day book
With the help of these vouchers various types of registers are maintained to record daily
transactions done in various accounts. These registers are:
Daily transaction report of PLS / Current account.
Suspense register
Charges register
GENERAL LEDGER
In this ledger the posting is done from the cashbook. With the help of this ledger any
discrepancy in balance of accounts can be easily found out.
GENERAL LEDGER ABSTRACT

It is like trial balance. In this ledger debit or credit balance of each balance of each type of
account is posted from the cashbook. If total debit and credit is equal then it means the
clean cashbook and general ledger is maintained correctly.
44

ADVANCES SECTION
Advances are investments of bank too earn profit. After restructuring of National Bank of
Pakistan, Head Office gives loan targets to each branch that must be achieved for its
survival. The Manager is responsible to achieve these targets in the given period.
TYPES OF LOANS / FINANCES

There are three major types of loans that are offered ed by NBP mostly at the rate of 11%
they are as follows:
Short Term Finances
Medium Term Finances
Long Term Finances
SHORT TERM FINANCES
Short-term finances are sanctioned for increasing Working Capital & Production. These are
given for the period of one year to 3 years maximum. Short Term finance includes the
following types:
Cash Finance
The Bank Gives this loan to the customer & businessman against certain specified
immovable property. It is issued for establishment & extension of industry.
II
Demand Finance
This Loan is given against movable property (called secure Finance) or may be given
against personal guarantee (called clean Fnance). Demand Finance is further divided into
three types:
Staff Finance
This Finance is given to the employees of National Bank of improving their living standard
e.g. for purchasing a motorcycle, car, house, building, computer etc. There is no
markup on this loan except on car & computer buying @ 4%
II
Gold Finance
It is sanctioned for the period of 12 months by pledging gold ornaments.
III
Agricultural (Seasonal Finance)
45

It is given for supporting seasonal crops like Rabi & Kharif. It is sanctioned for six
month only at high markup rate.
Running Finance
This finance is only a secured finance which is sanctioned against
movable security that is easily convertible into cash e.g. security bonds, Govt. certificates
& bonds etc.
Example for this loan is Three Advance Salary. It is newly commenced credit scheme by
NBP.
There advance Salaries is given to Govt. or semi Govt. registered companys employees.
The only condition for this type or credit is that the salary must be directly credited into the
bank.
The borrower must give a blank cheque for security.
Medium & Long Term Finance.

These finances are issued for production & Development of industry & agriculture e.g. for
buying input or building for industry.
These are issued for the period of 5 years or more. The main types of this finance are.
I.
Project Finance
II.
Agriculture (Development)
III.
House building Finance.
All the loans may be fund base or non-fund base.

FUND BASE loans are those which given in cash form to the borrower.
NON FUND BASE loans are those which a given other than cash e.g.
Guarantee. L.C Promissory Note etc.
Banks run their business with the money of depositor, which is repayable to them on
demand. Banker is very conscious while using these funds. They think thousands times
before lending to the borrower. They must keep in mind the following factors before
advancing the loan
1.
Character
46

The first and most important factor considered in the credit analysis is character. The credit
character is base on the borrowers willingness to pay his obligation. The willingness can be
judged by the habits, nature of business, previous record moral reputation, importance of
values to him etc.
2.
Capacity to pay
The bank should judge the financial condition of the borrower. Whether he is able to repay
that amount of loan which he wants to get.
Before advancing the loan bank must be satisfied with the repayment of fund by checking
following resources of borrower.
a.
Sale of Assets
b.
Income
c.
Location of Plant etc.
3.
Capital
The Asset of the consumer may be in form of horse motorcar, furniture etc. the
businessman may own assets in the form of new material, plant machinery, building etc.
The bank should extend the loan in the proportion to the asset head by them. If the assets of
borrower are liquid, he may be giver amount of credit.
If assets are not liquid, then les amount of credit may be given against the value of assets.
Before landing the loan the banker should examine the value of his business and its
prospectus in future. The banker should keep in his maid the owners participation in his
business. The banker should not provide loan more than capital.
4.
Collateral
Collateral means an additional security given against the loan.

Before advancing the loan the banker should preferred get the security of liquid assets
because they can be converted into cash easily. The collateral security may be consisting of
stock, bill of exchange, bill of landing warehouse receipt, bonds etc. Bank must be
carefully examining this collateral security before advancing the loan for security purpose.
Banker should not extend loan on up to the full value of collateral security, the securities,
which are issued by the Govt. may be given 100% loan against them. The other collateral
may set 40%, 50% etc, loan against the value.
47
Main requirements for Sanctioning Loan
I.D card copy
Legal contract between bank & borrower on a security bond
A written application
Promissory Note.
Valuable security
Lien mark in favor of bank
References (at least two)
Latest Financial statements.
Financing Agreement on a prescribed form
Authority letter.
Trust Receipt
Insurance of Securities.
Securities
Before giving a loan to borrower a bank required a valuable security in three ways.
Hypothecation
Pledge
Mortgage
48
Hypothecation
In this type of security, immovable property is pledged by the bank & bank is required a
real value of that property for sanctioning loan. Margin for this security is 50% In
hypothecation bank does not interfere in the business of borrower.
Pledge
In pledge the bank has 90% shares in business of the borrower.
The bank has a right too sold the production & interfere in business transactions. In this
type of security bank pledge the stock & raw material.
The stock must be insured. Stock is controlled & managed by the bank borrower cannot use
raw material & cannot sold its production without the presence & permission of the agent
of bank
Mortgage:
All documents of ownership & registration of movable property is submitted to the bank
with an authority letter which has a agreement to give authority of selling properly in case
when borrower will not repay the loan after a fixed period.
49
CLEARING DEPARTMENT
Every banker acts both as a paying as well as a collecting banker, it may be said that there
in theory no legal obligation on a banker to collect cheques, drawn, upon other banks for
customer. It is however an important function of crossed cheques. Al large part of this work
in carried out through the bankers clearing house were ever it is established.
A clearinghouse is a place where representative of all banks of the city get together and
settle the receipts and payment of cheque drawn on each other. As the collecting banker
runs certain risks in receipt of their ownership the law has provided certain protections to
the banks. The Negotiable Instrument Act, 1881, lays down the drawer or holder of a
cheque or draft may cross the instrument generally or especially. It further lays down that a
crossed cheque can only be paid to a bank, who collects it for a customer who maintains an
account
TYPES OF CHEQUES COLLECTED

a) Transfer Cheques
Transfer Cheques are those cheques, which are collected and paid by the same branch of
bank.
b) Transfer delivery cheques
Transfer delivery cheuqes are those cheques, which are collected and paid by two
different branches of a bank situated in the same city.
c) Clearing Cheques
When the payee or endorsee (which deposits the cheque for collection), and the
drawer of cheque maintains accounts with different banks, the collecting bank can
receive the amount of cheques from the paying banker in any of the following
maners:
I.
It can send its representative with the cheque to each of the payment
banks, and collect each. This procedure is wasteful of time and labor,
cumbersome and risky.
II.
The bank can maintain and account with the paying various banks.
50
ACCOUNTS DEPARTMENT
The main function of the account department of NBP is to maintain general ledger accounts
and after the business hours the function of the accounts officer is to close books
1. FUNCTIONS
There are many other important functions performed by accounts department of NBP. So I
am going to discuss these functions in three steps:
I.
GENERAL LDGER
II.
VOUCHER SYSTEM
III.
TYPES OF VOUCHER USED
GENERAL LEDGER
It is the prime record of the branch reflecting its assets and liabilities ad serves as the
master control of accounting system of the branch it consists of only those accounts which
are authorized by the head office
VOUCHER SYSTEM
Voucher is a written authorization used in approving a transaction for recording and
payment. Voucher is a system, which is generally designed to provide strong internal
control over the transaction, which takes place during the business hours.
Whenever a transaction takes place in any department of the bank.
One debit ad one credit voucher is prepared. At the end of the day, these vouchers are
collected and recorded i.e,
Debit Vouchers are used in two cases
When ever any expense is incurred.
When a depositor withdraws some amount from his account
The account of the customer is debited with the amount and debit voucher is prepared.
The format of the debit voucher includes:
I.
Name of branch
II.
Date
III.
Branch No.
IV.
Account No.
V.
Transaction Code
VI.
Amount and other details (narration)
CREDIT VOUCHERS
51

There are two types of transaction in which credit vouchers are used
When a depositor deposits any amount in his account because the liability of bank
Any income received by the bank e.g. bank draft
Different types of credit voucher are used.
Now in second set these three important functions of Account department of NBP are
described briefly.
I.
All expenses vouchers are routed ask through Accounts Department
II.
Preparation of various statements.
III.
Preparation daily activity report at the end of each day.
EXPENSE VOUCHER
The entire expense vouchers passed by each department are routed through accounts
department these expenses include:
I.
Salaries given to all employees of the bank
II.
Wages
III.
Rent
IV.
Leas Installments
V.
Insurance Vehicle
VI.
Insurance Cash
VII. Utility Bills
VIII. Medical Allowances (Reimbursed)
IX.
Cash carrying charges etc.
Debit Voucher
Debit voucher are used in two cases
The account of the customer is debited with the amount and debit voucher is prepared.
The format of debit voucher includes
I.
Name of branch
II.
Date
III.
Branch No
IV.
Account No
V.
Transaction Number
VI.
Amount and other details
52
Salary Structure
Bonuses
There are four bonuses yearly at Eid-ul-Fitar, Eid-ul-Azha and profit bonus. These bonuses
are credited after every six-month June and December.
Allowances
This includes house allowances, transport and utility allowance.
Provident fund
Provident fund is provided to each employee on his retirement
Pension
Pension is provided at the retirement it is calculated as follows
Pension = total basic * Total Service * 1.10%
PREPARATION OF STATEMENT
Second major function of accounts department the preparation of various statements. These
statements are as follows
Weekly Statements
These weekly statements send to NBP Head Office Karachi
Monthly Statement
These monthly statements are sent at firs to NBP Head Office Karachi. All vouchers and
statements signed and approved by manager accounts or who has authority to sign on
behalf o the bank.
Preparation of daily activity report

It is also the duty of accounts department to prepare daily activity report at the end of eah
day. It includes the detail of following:
I.
Loans transaction
II.
General ledger transaction
III.
Foreign currency related transaction
IV.
All voucher prepared by different relative department on computer.
53
Accounting procedures in NBP
I.
II.
III.
IV.
V.
VI.
VII.
Various departments use debit and credit voucher for recording the transaction.
Accounting department receive the departmental journal for collection of
voucher.
Verification and correction of all the entries in departmental journal.
Sort voucher and arrange them according to their heads.
From departmental journal add all debit and credits for each general ledger
account and write total for each account to its relative account and extend new
balance.
Both the total are equal
Date and sign general ledger and obtain signature of officer
54
CREDIT DEPARTMENT
1.
2.
3.
LOANS
CASH CREDITOR
OVERDRAFT
LOANS
Monetary assistance by a financial institution to a business some financial
problems such as to finance fiscal assets, working capital, bridge finance, etc. The loans are
granted by the bank in lump sum, so this type called fixed or demand loans. Interest is
charged on the whole amount of a fixed loan.. The borrower withdraws whole the amount
of loan. This type of loan is normally granted against security of gold and documents. In
case of demand loans against gold or documents, a demand promissory note for the amount
of loan is taken from the borrower.
Loans are granted under:
Loan against Gold:

Under this type of loan which is granted to the borrower. The Head Cashier estimates the
value of Gold or Gold ornaments through an agent (gold smith) and keeps a margin of 40 to
50 percent. After the opening the gold loan account a token is given to the borrower, which
is a bank receipt.
On repayment of loan, the gold or ornaments held as security for it, together with the
demand promissory note duly discharged is returned to the borrower and his receipt for the
gold ornament taken in the demand loan ledger. This receipts states that the ornaments
returned are complete and in order. Part delivery of ornaments is given against part
payment of a loan but care is taken that the ornaments still in the banks possession fully
covers the balance of the loan outstanding. The interest on gold loan is to be applied with
quarterly rests.
Loan against pledged of stock:

In case of advancing such types of loans, the following precaution is kept in the mind:
I.
Stock pledged must be readily saleable.
II.
Products should be readily saleable.
III.
Advance should be within the borrows means.
2. CASH CREDITOR
55

Under such cash credit account is opened in the name of the customer who borrows from
the bank. Customer is granted a loan up to a certain limit which is sanctioned by the head
office which he draw when he requires interest is charged on the amount actually utilized
by the customer. In order to avoid the danger of idle fund, the bank charges are certain rate
of interest, even if the customer does not withdraw any amount
The credit is usually given against the securities of goods or merchandise as follows:
i)
Advances Against pledge stock in Trade or Products:
When a cash is granted against the pledge of stock or product, cash credit form is taken,
from the certain products or stock, but the actual pledge is created whitin the stock or
finished product are placed under the banks lock and key or the document of title are duly
endorsed to the bank by the borrower.
ii)
Hypothecation of stock on Finished products:
The difference between pledge and hypothecation is that under a pledge the borrowers
goods are placed in the banks possession under own lock, whereas, under a hypothecation,
they remain in the possession of the borrower or guarantor and are merely charged to the
bank under documents signed by them. Even though the documents empower the bank to
take possession of the goods hypothecated, but it is possible that the borrower may actually
resist any attempt.
iii)
Mortgages of property:
Title deeds of immovable property are accepted by the bank only as collateral security or
alternatively as unauthorized security.
3. OVER DRAFTS:
When the bankers permit his customer to overdraw upon his
current account up to a certain limit, it is called overdraft facility provided buy the bank.
The customer is charged with the interest for the amount he has actually overdrawn from
the bank. The customer is free to take the overdraft facility up to the limit whenever he
needs and he can at any time return back the advance to the bank by deposited the amount
with the bank.
There are two types of overdrafts:
I.
II.
Unsecured Overdraft
Secured Overdraft
56
SWOT Analysis:
SWOT Analysis helps evaluating an organizations position in the market. It is a complete
analysis of the strengths, weaknesses, opportunities and threats faced by the organization.
Strengths tell what organization has achieved actually. Their strong points on the basis of
which they have attained this position
Opportunities tell what an organization can do further. It provides guideline for the
development of new goals and strategies for future. By following these strategies
organization can improve its position. Opportunities are obtained by analyzing the
situations of other companies. Their weak points are our opportunities.
Weaknesses are weak points of the organization. Our weak points are opportunities for our
competitors. So SWOT Analysis helps us to know the areas, which need improvement.
Threats are dangers faced by our organization. Threats are of many types like. To overcome
the affects of threats strong marketing and research is required.
SWOT Analysis for the existence of an organization in the market place. Without it we can
never realize where we are at the present moment.
Strengths of NBP:
Pakistan appears on the globe of the world in 1947 and National bank of Pakistan has been
established in 1949 so both are side by side with each other from very long time. There are
many ups and downs in the life on NBP butt still it have achieved a unique position. Now it
has become number one bank of Pakistan.
Nations Trust & confidence:
Nations trust and confidence is the biggest asset of
National Bank .it is the key feature that gives the National Bank confidence of being the
leader in the industry .As national bank works as the agent of GOP so people take it more
trustworthy. Secondly its major share holder is Government of Pakistan and State Bank of
Pakistan so it doesnt have any need to worry about its financing needs. All the major
institute of the country are its customers. Bank do 655 of its transactions directly with
government institutes
57

Sound Financial Strength and Customer Care:
Bank enjoys sound financial strength. And its profitability trend is
rising it is the only domestic bank which has been awarded The best Domestic bank
consecutively in 2001 and 2002 by the renowned journal The Banker UK.it is also the
only domestic bank of the country which had been compared and included by the
prestigious journal The Asia Week with other banks in the region .National bank is the first
bank which started foreign exchange company in order to facilitate the general masses, and
inflow of foreign money and control the undesirable blackmailing of private foreign
exchange companies in the country.
Highest Profitability:
National Bank of Pakistan has earned a net profit margin of 9 billion
in year 2003, which is a record. It has been declared as the best bank in Asia and on 8th
number all over the world. It has highest rate of return, which is 9% and is very high as
compared to other banks in the industry. It is achieving high standards of customer services
and ratio of profitability. Many techniques are being used to enhance the productivity and
good will of the bank in the eyes of common people. National bank is also introducing
corporate culture, risk management tactics.
Deposits:
National Bank of Pakistan has a large number of potential accountholders. So it
has more deposits as compared to other banks. Its deposits are of amount 35 billion
which is a great achievement.
Vast Network of Domestic and International Branches:
NBP has a vast network of branches all over Pakistan and in foreign countries as well. It
has its corporate branches in every city and you can take advantage of its services in your
own city with out any difficulty. Bank divided its operation into two categories domestic
and overseas. It has 118990domestic branches with 29 regional offices, 4 subsidiaries and
16 overseas branches with 5 representative offices and 1 subsidiary and joint venture
More Products & Services:
NBP has a wide variety of products like Demand Draft,
telegraphic Transfer, Mail Transfer S.C (short credit) and Government transaction
58
Pioneering Role in Socio- economic development of the country:
National Bank of Pakistan is the first bank, which started socio- economic
development of country. Because NBP is the first bank after the independence of
Pakistan which started jute and cotton and then other commodities. NBP started
function on Nov.20,1949 it stood behind jute trade SBP stood behind NBP and
government behind SBP.for this purpose 6 branches come into existence at once.
During 1965 war they worked 7 days a week actively and wholeheartedly even at
branches at the hostile border.
Extension of Banking Services to the General Public in Far Flung & less
Developed Areas:
Bank has such a large network of branches that it can easily reach its potential customers.
From the very beginning it started financing commodities like jute and cotton and to build
favorable relations it spread over its net work of branches to such areas where development
is greatly needed.
Sponsorship of Players:
National bank gives job opportunity to sports players. It sponsors them and provides
them employment after retirement from this field. Job post depends on the qualification of
players there is no way to employ a person on a job for which he is not eligible.
High Pays:
National bank gives its employees higher pays. Their basic pay is too very
reasonable and in almost every budget there is some increment on their basic pay. This year
in 2004 Government has announced a 15% increase in basic pay. At top level of hierarchy
pays are higher as compared to lower level.
Government Bank:
National bank is Government bank so in each branch there is great
deal of work. It is under direct control of government and its policies are made under
through law. Public can resist against any policy which in not in their favor.
59
Weaknesses of NBP
National Bank also has many weaknesses, which need attention. Other banks can take
advantage of its weaknesses. If it wants to be the leader in the banking industry it
should over come its weak points.
Slow Working:
A weak point of national bank is that work in all branches is too much due
to Government dealing and staff is not sufficient. So working is very slow as compared to
other banks. Customers want their work to be done in least possible time so they prefer the
bank where services are quick.
Dissatisfaction of Employees:
Pays at lower level of hierarchy are very low so the
employees at the lower level are not satisfied with their job. It is fact that the satisfaction
and dissatisfaction of people affect their behavior. There is direct customer dealing at the
lower level so their behavior can greatly affect the repute of the organization.
Lack of ATM:
Many private and foreign banks are providing the facility of ATM.It is plus
point of other bank and a weak point of NBP.There is only one ATM machine in the main
branch in Lahore. A large amount of revenue is lost due to this reason. So NBP can attract
customers by providing this facility at all branches.
Manual Work:
Few branches of National Bank are computerized. In most of branches there is manual
work. There are many drawbacks of manual work like
Time consuming
More workers are required
Loss of records
Difficulty in searching of old records
60

Implication of Policies:
It is reality that nothing could be done without having a highly
efficient implementation system. National bank is Government bank there is great emphasis
on formation of new policies but no stress on implementation no these policies.
Strong Union:
In National Bank there is strong union of workers so they can compel government to fulfill
their demands.
Lack of Female Counter:
In its branches there is no female counter. Ladies have to wait for
long to get any information, to get cash, and to deposit cash. So there should be a female
counter for their convenience.
Late Promotion of employees:
In National Bank there is no proper system of implementation of promotion policies. Some
employees are working at the same post for ten years with no increment in pay. Promotion
policy depends on the age of employee not on the qualification of the employees. Some
posts are such that there is a limited increment in pay and after reaching that limit there are
no chances of increment even though the employee deserves.
Affect of Politics:
Economic and political condition of Pakistan is not stable. One who comes in power tries
to make and implement new policies for self-benefit doesnt matter they are affective or not
It is very difficult for an organization to work properly in such changing and fluctuating
conditions.
Lack of research & Development:
Banking policies shows great lack of research and
development. Bank doesnt take into account changing environmental factors and doesnt
use proper research of industry and segment analysis. New opportunities and customer
changing behavior is of such important for todays organizations but doesnt take into
account the research methodology for elimination of problems.
61

Untrained employees:
Most of the staff in national bank is poorly educated and not
trained .first of all they dont have proper professional education and training .mostly are
simple graduates or Matric pass so they cant compete highly educated and well trained
employees of other banks in the industry.
Deep Rooted Bureaucratic Approval:
NBP has a traditional approach towards the
implementation of policies .as the policies are approved by the bureaucrats so there is
general tendency that approval takes a lot of time. Due to which many golden opportunities
for good investment are lost by the bank.
Opportunities
People trust on NBP it is its major plus point. Customers accept its products and schemes
because of this trust.
Foreign Investment:
Nation Bank of Pakistan has opportunity of foreign investment. It has
invested a huge amount in foreign companies. Income from other sources and investments
has greatly improved its credit standing.
Electronic Banking:
To survive in this competitive environment electronic banking an on
line services are very important .National bank can improve its working by using electronic
media. This will also increase its customers and their changing demands.
Consumer Banking:
Now every bank is doing consumer banking and is providing general
public with those things which they cant afford to buy other wise. So National bank can
avail this opportunity and can increase its profits and credibility.
Lease Financing:
Bank can also increase its profitability by introducing lease because many
of its customers are getting this facility from other banks .so the lost revenue of its
customers can be got and can increase its profitability.
62
Islamic Banking:
As Pakistan is Islamic country and the banking industry in our country is
working many things against Islam like interest, in Islam there is no concept of interest and
many people dont deposit their money in banks due to this reason .so Islamic banking
would be profitable for the bank.
Secondary market Operations:
Bank has opportunity to start secondary market operations
like it can take more interest in import export and other industry which need financial help
and can make Pakistan economically strong.
Reduction in cost:
Bank can reduce its cost by employing les but professionally educated
workers. By introducing electronic banking costs like paper, stationary, and other many
such things.
Threats
Following threats are faced by National Bank in current era and that can badly affect bank
performance and there is danger to loose customers.
Foreign Banks:
Foreign banks are increasing in number day by day in many important.
They are its major competitors because in these banks employees are very efficient. They
are trained about how to motivate customers and how to convince them that it is the bank,
which provides them best services.
Substitute Products:
National bank should try to introduce more products and schemes
because its competitors are also providing the same services and at less prices. It should
also reduce its charges to avoid customer loss.
63

Powerful Customers:
Today customers are difficult to please. They are highly demanding
and less forgiving. Now almost all banks are providing same services, which have greatly
increased customers bargaining power. They prefer quality services at lower prices. So if
they are not satisfied with your bank they will shift to the other bank.
Lower interest Rates of Other Banks:
National Bank charges high interest rate on advances. Its interest rate is
11%, which is far higher than other banks. So there is danger of loss of potential customers
for advances. To attract more customers and to make MBP Pakistans number bank
Government should reduce its interest rate.
Less Innovative:
Management system of National Bank is very slow, poor and less
innovative. New policies are not acquired in time. Its strategies are same as 10 or 15 years
before there is no change in departments.
Lack of Online Working:
Few branches of National Bank are online. Most of the work is
done manually on registers that affect the budget of the branch because inventory expenses
are higher which include stationary and other things.
Highly Centralized:
National Bank is highly centralized organization, which is a major
cause of delay in implementation of policies. Board of directors according to Governmental
law makes policies. All policies are not applicable at all branches. Only manager of that
branch knows actual requirements of that
Privatization of public sector NCB s DFIs & State Owned Enterprises:
The biggest threat NBP is facing today due to the privatization of these enterprises that
Government undertake decision to denationalize the bank in that case bank would lose its
mot of share that is captured by the bank being the state owned bank
64

Economic Instability:
As Pakistans economic conditions are not stable and are changing very
frequently. There is continuous inflation in the country from past many years. Due to which
people face many problem they dont have money to purchase eatables then how can they
save.
Political impact:
As NBP is government bank so political changes have direct impact on it
working and policy formation process. As government changes and new government come
into power they immediately change every step and decision taken by previous
government. And it has direct impact on the progress and repute of the bank
65
RATIO ANALYSIS:
Ratio analysis involves methods of calculating and interpreting
financial ratios to analyze and monitor the firms performance.
TYPES OF RATIO COMPARISIONS:
There are two types of ratio analysis:
1)
Cross-sectional analysis
2)
Time-series analysis
Cross-Sectional Analysis:
Cross-Sectional Analysis involves the comparison of different
firms financial ratios at the same point in time. Analysts are often interested in how well a
firm has performed in relation to other firms in its industry.
Benchmarking:
A type of cross-sectional analysis in which the firms ratio values are
compared to those of a key competitor or group of competitors that it wishes to emulate.
Time-series analysis:
Time series analysis evaluates the firms financial performance over
time using ratio analysis.
Categories of financial ratios:

Financial ratios can be divided for convenience into five basic
categories:
1)
Liquidity
2)
Activity
3)
Debt
4)
Profitability
5)
Market
66
Ratio Calculations
2007
Rs. 000s
2006
Rs. 000s
Liquidity Ratios
Current Ratio
Quick Ratio
Current Asset
Current Liability
Current Asset - Inventory

Current Liability
237195439
225218807
=1.053
151422197
185972607
=.84
237195439-2501465
151422197-785294
225218807
185972607
=1.04
=0.4762
Total Liability
Debt Ratio
100
Total Asset
645855939
762193593
=84.7%
553178593
635132711
=87.7%
Debt Equity Ratio= long term debt x 100

SHE
645855939
69270631
=93.2
528178593
53044649
=93.1%
28060501
14391079
=1.95
26310577
13634485
=1.93
19033773
42451580
=0.44 84*100=44.84%
17022346
39945062
=.04261*100=
42.61%
Leverage / Gearing Ratio

A) Degree of Indebt-ness
B) Ability of Debt Servicing

Time Interest Earning Ratio
Earning Before Interest & Taxes

Interest
Profitability Ratio
Net Profit Ratio
Net Profit after Taxes

100
Sales
67

Return on Asset (RoA)

100
Total Asset

100
Shareholder Equity
Return on Equity (RoE)
19033773
116337654
=0.163*100=16.3%
17022346
81954118
=0.204*100=20.4%
19033773
17022346
81,543,199
7 0,907,129
=0.2334*100=23.34%
=0.2406*100=24.06%
5147457
2191408
=23.34
36435929
1745016
=20.88
237
23.34
=10.15
120
20.88
=5.74
8154319,000
2191408
=50.3
2,310,795,000
50,910,294
=45.39
48.17
50.3
=0.96
50.24
45.39
=1.12
Marketability Ratio
Earning per Share (EPS)
Net Profit after Taxes Preferred Stock Dividend

Outstanding Common Stock
P / E (Price Earning) Ratio
Book Value per Share
Market to Book Ratio
Current Market Price of Common Stock

Earning per Share (EPS)
Common Stockholder Equity

Outstanding Common Stock
Current Market Price of Common Stock

Book Value per Share
Liquidity Ratios:
A firms ability to satisfy its short-term obligations as they come due is
called liquidity. Liquidity refers to the solvency of the firms overall financial position __
the ease with which it can pay its bill. These ratios are viewed as a good indicator of cash
flow problems. The two basic measures of liquidity are:
1)
Current ratio
2)
Quick (acid test) ratio
CURRENT RATIO:
A measure of liquidity calculated by dividing the firms current assets
by its current liabilities. It measures the firms ability to meet its short term obligations.
Current Ratio Analysis
Year
2007 2006 2005 2004
Current Ratio (Times) 1.05 1.02 1.12 1.08
68
Quick (Acid test) Ratio:

The quick ratio measures the liquidity and is calculated by dividing
the firms current assets minus inventory by its current liabilities.
Quick Ratio Analysis

Year
2007
2006
2005
Quick Ratio (times)
1.04
0.47
.52
2004
1.08
Interpretation:
As the graphs indicate that current and quick ratio of NBP has slightly higher proportion of
current liabilities for the past three years but overall ratio is nearest to one, which is acceptable.
The above ratios show that the over all ability of the bank to pay current liabilities is satisfactory.
Debt ratio:
69

The debt position of a firm indicates the amount of others peoples money being
used to generate profits. The more debts a firm use in relation to its total assets, the greater
its financial leverage.
Financial leverage:
The magnification of risk and return introduced through the use of fixed cost
financing, such as that debt and preferred stock.
There are two types of measuring debt ratio of a firm.
1)
Degree of indebtedness (debt ratio)
2)
Ability to service debts (time interest earned ratio )
Debt ratio:
It measures the proportion of total assets financed by the firms creditors. The
higher this ratio, the greater the amount of other peoples money being used to generate
profits.
Debt Ratio Analysis
Year
2007 2006 2005 2004
Debt Ratio (%) 84.7 87.7
97
96
Interpretation:
As the above ratios and graphs show that the portion of the debt is very high this
shows that the bank is dependent more on debts. But the ratio is decreasing with slow rate.
Now it reaches to 84.7% in current year 2007.
Time interest earned ratio:

It is also called interest coverage ratio, measures the
firms ability to make contractual interest payments it is calculated as follows.
Year
Ratio
Time interest earned Ratio Analysis

2007
2006
2005
2004
1.95
1.93
2.39
2.35
70
Interpretation:
Above data shows that interest earned capacity of the bank is decreasing
with slow rate .In 2004 it was 2.35 and now in it is at 1.95 in 2007 which shows a very
positive impact on the credibility of the bank.
Profitability ratio:
There are many measures of profitability. As a group, these measures
enable the analyst to evaluate the firms profit s with respect to a given level of sales, a
certain level of assets, or the owners investment.
It includes the following ratios:
1)
Net profit margin
2)
Earning per share
3)
Return on total assets (ROA)
4)
Return on equity (ROE)
Net profit Margin:

It measures the percentage of each sales dollar remaining after all
costs, expenses, including interest and taxes have been deducted.
Year
Ratio
2007
44.84
Net profit margin

2006
2005
42.61
39.56
2004
58.2
71
Interpretation:
As the ratios indicate that, the gross profit of the bank is quite good
because of its high cost of services, especially in 2007. The bank has got profit this year
just because of efficient management.
Earnings per share:

EPS represents the number of dollars earned during the period on
behalf of each outstanding share of common stock.
EPS Analysis
2007
2006
23.34
20.8
Year
E.P.S.(Rs.)
2005
3.92
2004
2.44
Interpretation:
. In 2004 it was 2.44 but now it is very above at 23.34 in 2007. It
considers the higher profitability of the bank due to efficient management and operations.
Earning per share is also get good rise this year. However, after covering all its obligations
the company will be in the position to get the benefit of high earning per share in the
coming years. Just like, as the return on total assets and return on equity are not favorable
for the current year
Return on Total Assets:

It is also called the return on investment measures the overall
effectiveness of management in generating profit with its available assets. The higher the
firms return on total assets the better the firm is.
Return On Assets Analysis
Year
2007
2006 2005
R.O.A. (%)
16.3
20.4 14.6
2004
12.32
72
Return on Equity (ROE):

The return on common equity measures the return earned on
common stockholders investment in the firm. It is calculating as follows.
Return On Equity Analysis
Year
2007
2006
2005
R.O.E. (%)
23.34
24.06
20.6
2004
16.8
Interpretation:
The return on assets shows a stable trend from 2004 to 2007 it is round
about 18%.Return on equity also stable throughout this period And it considers to be the
efficient operations of the bank.
Market ratios:
73

Market ratio relate to the firms market value, as measured by its current
share price, to certain accounting values. It is measured in two ways
1)
Price/Earning ratio
2)
Market/Book ratio
Price/Earning Ratio:
It measures the amount that investors are willing to pay for each
dollar of the firms earning. The higher the price earning ratio the greater is investors
confidence.
Price/Earning Ratio Analysis
Year
2007
2006 2005
P.E.R (%)
10.15
5.74
8.63
2004
7.25
Interpretation:
Price earning ratio shows how much investors are willing to pay per
rupees of reported profits. Its price-earning ratio is decreasing in the current year due to
heavy loss from its operations. This will lead to the positive earnings in the later years.
Price earning ratio shows the confidence of the investor on the policies of the bank. In
2004 it was 7.25 and was not satisfactory for the investor point of view. But in 2007 it
10.15 and it consider to be satisfactory as compared to2004
74
Income Statement
Income Statement
2007
(rupees in '
000)
2005
2006
mark-up/ returned interest

earned
50569481
44100934
33692665
mark-up/ returned interest expensed
16940011
13947218
10,321,768
net mark-up interest income

provision against non-performing
loans and advances-net
provision in dominations in the
value of investments
33629470
30153716
23,370,597
4723084
3075723
2,448,739
-40248
bad debt written off directly

net mark-up interest income after
provisions
NON-MARK-UP/INTEREST
INCOME
Fee, commission and brokerage
income
39899
5284
23069
28906735
27782170
21,146,970
6781683
6144628
4,926,604
Dividend income
income from dealing in foreign
currencies
3263246
2891755
1718478
1042827
1333840
1,205,638
other income
-31964
627618
177,839
Gain on the sale of securities
2341690
1169515
1,365,771
total non mark-up/ interest income
13544845
12162892
9392351
Total
42451580
39945062
30,539,321
Administrative expenses
14205911
13443441
11,221,789
other charges
17141
208327
63,208
total non-markup/ interest income
14391079
13634485
11,483,293
PROFIT BEFORE TAXATION
28060501
26310577
19056028
Taxes
9026728
9288231
6346584
PROFIT AFTER TAXATION
19033773
17022346
10885184
75
Common Size Analysis (Horizontal)
Income Statement
2007
2006
2005
mark-up/ returned interest earned
150.09%
130.89%
100.00%
164.12%
135.12%
100.00%

provision against non-performing loans and
advances-net
provision in dominations in the value of
investments
143.90%
129.02%
100.00%
192.88%
125.60%
100.00%
172.96%
22.91%
100.00%
net mark-up interest income after provisions
136.69%
131.38%
100.00%
Fee, commission and brokerage income
137.65%
124.72%
100.00%
Dividend income
189.89%
168.27%
100.00%
income from dealing in foreign currencies
86.50%
110.63%
100.00%
other income
-17.97%
352.91%
100.00%
171.46%
85.63%
100.00%
144.21%
129.50%
100.00%
Total
139.01%
130.80%
100.00%
126.59%
119.80%
100.00%
other charges
27.12%
329.59%
100.00%
125.32%
118.73%
100.00%
147.25%
138.07%
100.00%
Taxes
142.23%
146.35%
100.00%
174.86%
156.38%
100.00%
NON-MARK-UP/INTEREST INCOME
76
Interpretation:
By considering the year 2005 as a base year for analysis there is an
increasing trend in markup interest earned of 50.69% increase in the year 2007. Markup
expenses of the same period are also increasing at the rate of 64.12% in 2007.net increase
in markup interest earned shows positive growth of 43.90% in the current year. Total
markup interest earned showing a stable increase of 31.38% in 2006 and 36.69&in 2007
which is quite satisfactory for the National Bank of Pakistan.
Fees, commission, brokerage Income has risen from the base year to 133.65% in 2007 due
to the efficient management and operations and services of the National Bank of Pakistan.
Dividend income of the shares held by the National Bank of Pakistan of the other banks
and companies are increasing by 89.89%in 2007.Total non-markup income has also
increased significantly in 2007.
Administrative expenses has also increasing trend from the year 2005 to 2007. Profit before
tax has increased at the rate of 19.80%in year 2006 and 26.59% in 2007Profit after tax
showing great contribution of the management and operations of the National Bank of
Pakistan in 2007.
77

Common Size Analysis (Vertical)
Income Statement
2007
2006
2005
mark-up/ returned interest earned
100.00%
100.00%
100.00%
33.50%
31.63%
30.64%

provision against non-performing loans and
advances-net
provision in dominations in the value of
investments
66.50%
68.37%
69.36%
9.34%
6.97%
7.27%
0.08%
0.01%
0.07%
net mark-up interest income after provisions
57.16%
63.00%
62.76%
Fee, commission and brokerage income
13.41%
13.93%
14.62%
Dividend income
6.45%
6.56%
5.10%
income from dealing in foreign currencies
2.06%
3.02%
3.58%
other income
-0.06%
1.42%
0.53%
4.63%
2.65%
4.05%
26.78%
27.58%
27.88%
Total
83.95%
90.58%
90.64%
28.09%
30.48%
33.31%
other charges
0.03%
0.47%
0.19%
28.46%
30.92%
34.08%
55.49%
59.66%
56.56%
Taxes
17.85%
21.06%
18.84%
37.64%
38.60%
32.31%
NON-MARK-UP/INTEREST INCOME
78
Interpretation:
In the vertical analysis of the National Bank of Pakistan by considering the
markup interest income as key figure to analyze the Items of the income statement the total
interest income has shown 33.50% of the total interest and shows a stable trend throughout
the period of 3 years .Expenses and net income also showing the same trend as compared
to previous years .As they showing 9.34% in the previous year from 7.27 in 2005.
Dividend income also showing the same trend other income is showing minor loss in 2007.
Gains on sale of securities are greater from 2006. Total non- markup income has increase
slightly in year 2007.
Administrative expenses stability showing the efficient operational management of the
National Bank of Pakistan. Profit before tax is showing the same trend to the previous year
but taxes are less than the previous year which is making the slightly lower Profit after tax
in the year 2007
Balance Sheet
79
Balance Sheet
2007
2006
2005
(rupees in ' 000)

Cash and balances with treasury
banks
9 4,873,249
7 8,625,227
71196956
Balances with other banks
3 7,472,832
4 0,641,679
31019330
Landings to financial institutions
2 1,464,600
2 3,012,732
16282942
Investments
2 10,787,868
1 39,946,995
156982378
Advances
3 40,677,100
3 16,110,406
268838979
Operating fixed assets
2 5,922,979
9 ,681,974
9454365
Other assets
3 0,994,965
2 7,113,698
23941056
Total
6 45,855,939
5 53,178,593
577718506
Bills payable
7 ,061,902
1 0,605,663
1741156
Borrowings
1 0,886,063
1 1,704,079
8756847
Deposits and other accounts
5 91,907,435
5 01,872,243
463426602
3 3,554
1 3,235
16629
Deferred tax liabilities
5 ,097,831
2 ,387,073
44,62,718
Other liabilities
3 0,869,154
2 6,596,300
23496910
Total
6 45,855,939
5 53,178,593
501900862
Share capital
8 ,154,319
7 ,090,712
5908927
Reserves
1 5,772,124
1 3,879,260
13354256
Unappropriate profit
4 5,344,188
3 2,074,677
19372523
Surplus on revaluation of Assets
4 7,067,023
2 8,909,469
38182938
1 16,337,654
8 1,954,118
75817944
LIABILITIES
Liabilities against assets
Total
Common Size Analysis (Horizontal)
80
Balance Sheet
2007
2006
2005
Cash and balances with treasury banks
133.25%
109.93%
100.00%
120.80%
131.02%
100.00%
131.82%
141.33%
100.00%
Investments
134.27%
89.15%
100.00%
Advances
126.72%
117.58%
100.00%
274.19%
102.41%
100.00%
Other assets
129.46%
113.25%
100.00%
Total
111.79%
95.75%
100.00%
Bills payable
405.59%
609.12%
100.00%
Borrowings
124.31%
133.66%
100.00%
127.72%
108.30%
100.00%
Liabilities against assets
201.78%
79.59%
100.00%
114.23%
53.49%
100.00%
Other liabilities
131.38%
113.19%
100.00%
Total
128.68%
110.22%
100.00%
Share capital
138.00%
120.00%
100.00%
Reserves
118.11%
103.93%
100.00%
234.06%
165.57%
100.00%
Surplus on revaluation of assets - net
123.27%
75.71%
100.00%
Total
153.44%
108.09%
100.00%
LIABILITIES
Interpretation:
81

By considering the year 2005 as base year the cash has increased by 33.25
% in 2007 from 2005. Balance with other banks and landings to institutions are showing
the same trend of increasing from the previous years. Investments were less in 2006 but in
2007 they are higher. Advances to the customers are increasing by running time and
26.72& are higher than 2005.Operating fixed assets are significantly higher and almost
100% in them. Other assets are also increasing and 29.46% greater than 2005.
On the other hand liabilities were very high in terms of Bills Payable. Borrowings and
deposits are also high in than 2005.total liabilities are higher than 2005 and there is 28.68%
increase in the total liabilities.
On the equity side the share capital National Bank of Pakistan has also increased by 38% in
2007.Reserves of the bank are very much higher than 2005.Unappropriate Profit is
significantly higher than the previous years. Total resources are very much higher than the
base year
Common Size Analysis (Vertical)
82
Balance Sheet
2007
Cash and balances with treasury banks
14.69%
14.24%
12.32%
5.80%
7.35%
5.37%
3.32%
4.16%
2.82%
Investments
32.64%
25.30%
27.17%
Advances
52.75%
57.14%
46.53%
4.01%
1.75%
1.64%
Other assets
4.80%
4.90%
4.14%
100.00%
100.00%
100.00%
Bills payable
1.09%
1.92%
0.35%
Borrowings
1.69%
2.12%
1.74%
91.65%
90.73%
92.33%
Liabilities against assets subject to
0.01%
0.00%
0.00%
0.79%
0.43%
0.89%
Other liabilities
4.78%
0.48%
4.68%
100.00%
100.00%
100.00%
7.01%
8.65%
7.79%
Reserves
13.56%
16.94%
17.61%
38.98%
39.14%
25.55%
Surplus on revaluation of assets - net
40.46%
35.28%
50.36%
100.00%
100.00%
100.00%
Total
2006
2005
LIABILITIES
Total
Share capital
Total
83
Interpretation:
In 2007 cash 14% of the total assets which is quite satisfactory for the
bank. Balances with other banks and lending to institutions are showing the same trend to
the base year. Investments are 25% of the total assets and higher than the previous year.
Advances are making the 50% of the total assets and showing significant impact on the
total assets others assets are very much less than advances.
Liabilities in terms of bills payable are almost negligible of the total liabilities. Almost 90%
of the liabilities consist of deposits of the customers and share from the previous year are
stable.
Equity consists of the 7% Shares and reserves are 13% of the capital but less than the
previous years. Unappropriate profit is almost 40% of the total equity and makes the major
portion of the equity.
84
Recommendations for NBP:

The economic environment has changed, creating challenges and opportunities for banking
sector. The privatization drive has emerged as a strong tool of transformation, which is
being recognized as an essential ingredient for the economic well being of the countries.
Today banking industry of Pakistan is passing through the phase of privatization and
mergers. Banks are playing very important role in the economic growth of Pakistan, NBP
no doubt a positive contributor in this respect but still there is a need for improvement to be
more effective and efficient.
National bank of Pakistan is a well-known and successful financial institution in the
banking sector. Although NBP is included in ten top most banks of the world equity as well
as assets wise, but as it is said, nothing is perfect in this world and there is always space for
improvement.
The working of NBP defense branch, T block is satisfactory but still these working
efficiencies are far away from the standard of modern banking.
So my suggestions and recommendations regarding weaknesses and deficiencies with I
found doing my internship period in NBP are as under.
Computerization
It is strongly recommended that NBP should go for computerization
rather than manual work, which is very slow and time-consuming process. In this age NBP
even does not have a partially computerized system where as other new competitor banks
are now going towards online banking services.
This is a computer era; with the use of computer we can increase our efficiency. NBP
should computerize all its branches. By the use of computer properly these branches can
increase their efficiency.
Online Banking
The management should online all NBPs branches; currently only branch
computers are connected with its own branch server. In Pakistan almost all other new banks
are giving online banking facilities to their customer e.g. Allied bank has all its branches
online and each branch is connected with main as well as other branches of different
85

regions. Time is most important character for anyone so, NBP can improve its performance
through doing online its all branches and banking network.
Recovery of Bad Debts

Government should take keen interest to recover its bad debts,
which can improve its financial position. When advancing the loans, management should
take necessary precautions, to save its advances from being bad debts. Therefore banks
shouldnt lend money to those people who are addict of rescheduling of loans due to their
political influence. Instead of providing loans to these culprits, loans must be advanced to
well-reputed businesses and industries having good record of loan repayment.
Development of Training Program:

Present training program for its officers is needed to
be improved. As this program, instead of improving the efficiency of officers is merely a
burden for the bank in the form of heavy T.A & D.A. every year some of employees should
be sent for training to other countries and employees from other branches should be
brought here. Besides, some more reading material should be provided. The purpose should
be to educate employees with the advance studies in their field. Along with the officers, the
training must also be given to clerical staff. Because NBP is being operated on manual
system and training to its staff will directly improve the efficiency of the workers.
Development of Human Resources

Human resources are lifeblood of any organization.
As one wise man said, if your human resource department is strong, your whole
organization is strong and to be a leader in the market you must have to have strong human
resources. Human resource department of NBP is very week. It can be improve by adopting
following suggestions.
HRM department must have a proper plan for placement of employees. There is
also a need of proper recruitment and selection program. New young talent should
be introducing to inject the new ideas. Besides, recruitment policy should be fair
and transparent.
They should improve their present hiring system because at some seats employees
are not eligible for their job.
86
Staff in national bank is short. They should hire two or three more person at NBP, T
block, because total numbers of employees are thirteen and the work burden is
around of fifteen or sixteen people.
The individual efficiency of worthy employees should be rewarded in the form of

proper increments and promotions in grades. Keeping in view the hard work by the
staff members at all levels, promotion should be given and promotion criteria
should be free from favoritism.
Deterioration in efficiency is mostly due to promotion without merit. So,

promotion must be awarded on the merit and also when due. Besides, upper
management should take decisions for promotion of employees on the basis of
professional justice.
To motivate the employees of the bank, regular bonuses and incentives should be
given to them.
Development of marketing plan and strategies:

National Bank of Pakistan is very
week in marketing. NBP should adopt aggressive marketing plan and should develop
marketing strategies accordingly. NBP should flourish certain marketing plans to attract the
customers by giving them certain incentives and beneficial schemes to the customers as
other competitors banks are doing. Besides, banks like City Bank, MCB, and Habib bank
are using media very effectively to increase their business. So, NBP should also use
electronic media for its business development.
Miscellaneous
NBP is a public service oriented institution, so, it should create opportunities for
himself in order to lead or even stay in this immense competition.
NBP should give proper attention to increase customization. It should establish

itself as a customer oriented bank in the mind of the customers in order to win
87

competition. Special attention should be given to the behavior of the employees
towards customers, as the customers are the most important factor of the bank.
Providing appropriate interior decoration, just kike new private banks, must
beautify bank branches internally and externally. Besides the environment of the
office must be comfortable enough so, that the client and staff, must feel comfort
during business in bank.
Working conditions must be improved for employees. Bank will definitely get more
benefits after some expenditure on the working conditions a it improves efficiency
and productivity of the employees.
Flexible work timings must be offered to employees. In NBP workload is very high
and an employee works 60 to 65 hours during one week on average, which is very
high. This ratio either be reduced or each employee must be offered two holidays
per week so that he could get fresh & energetic and his personal life is also not
disturbed.
The management should also increase ATM in their network and they should
improve their ATM systems because at some points ATMs do not work properly
and also a customer has to wait for a long time for operating an ATM account with
the bank.
Political influence on the banking operations must be eliminated.
Internal politics and lobby system should be eliminated.
There must be a friendly environment among all the employees as it enhances the
trust and sincerity.
There are many employees who are working on ad-hoc basis creating
dissatisfaction. The deserved should be made permanent employees.
Branch manager should be trained in every field so that he can serve better
according to the expectations of the customers.
Most of the bank employees are being stickled to one department even for ten years
or more, resulting in expertise in only one job and loosing their grip on other jobs
and banking activities. Concept of job rotation and job empowerment must be used
so that employees are capable of working in all departments with expertise. But in
88

NBP job enrichment is more than job rotation, which is not good because it create a
lot of burden and pressure on the employees.
In todays business environment, people are in hurry. Banking procedures are

complicated and time consuming, which result in wastage of time and money for
consumer. More and more convenient and comfort should be given to customers.
In NBP new reward and punishment system should be introduced. Smart, educated,
skilled, well-spoken and well-dressed, staff should be rewarded and appreciated
while lazy, lethargic staff should be warned and punished.
NBP should also have the management accountability structure. CEOs, branch
manager, operation manager should be evaluated whether they have been successful
in instituting true and sustainable organizational culture and cultural change by
empowering their staff and by breaking the neck of bureaucracy. These executives
should also be asked to provide a cost-benefit analysis of their training and
development expenditures.
Separate counters must be set up to give the facility of bill collection of all the
utilities like Wapda, Sui gas, and telephone bills.
There should be separate cashiers for receipts and payments.
And at the last but most important I often found branch system down and it remain
down even for days. No work is possible with this service. So higher administration
should think about this and proper measure should be taken to create link between
head office, main and regional branches.
Observation and Conclusion
89

I analyzed the National bank completely. I observed its internal and external situation and
control and reached at a conclusion.
Through my point of view in some areas bank occupies strong position in the industry and
in some areas it needs great attention for improvement. I found that implementation of the
policies is very poor. Effectiveness of any organization depends on the implementation of
the policies rather than just making the policies. If it recovers this deficiency it will really
help the bank in increasing its credibility.
In products and services bank occupies a good position and its disbursement is also very
good as its branches are present is almost all cities. But marketing department, which is
responsible for the publicity of its products, is not working well. The demand of the
products depends on the awareness.
After analyzing financial highlights I concluded that bank is in better position than the
previous years. Its profitability is good which shows that bank has cut down many of its
expenses and used the resources quite efficiently. The infrastructure of its branches is far
better than before. And it has brought many changes in the management hierarchy of the
branches, which is a good sign.
Overall conclusion of my analysis and observation of National Bank of Pakistan is that it is
one of the leading banks in the industry. It is a bank on which you can trust. And it is the
bank, which gives most importance to its customers and makes policies for the benefits of
the customers and for the progress and development of Pakistan.
Strong Bank
People have trust in it
Leader in the industry
Major contributor in the economic development of country
90

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National Bank of Pakistan

National Bank of Pakistan

I dedicate this report to

Prophet Muhammad (PBUH),

National Bank of Pakistan

National Bank of Pakistan

National Bank of Pakistan

National Bank of Pakistan

EVOLUTION OF BANKING STRUCTURE IN PAKISTAN

To overcome problem of public debt management and exchange control.

In 1959, United Bank Ltd was formed.

In 1961, Industrial Development of Pakistan was established.

In 1962, National Investment Trust was formed.

In 1966, Investment Corporation of Pakistan was established to encourage

In 1973, National Development Finance Corporation was reestablished for

NATIONAL BANK OF PAKISTAN

National Bank of Pakistan

HABIB BANK LTD.

ALLIED BANK LTD.

UNITED BANK LTD.

MUSLIM COMERCIAL BANK LTD.

COMMERCIAL BANKING IN PAKISTAN

National Bank of Pakistan

History of National Bank of Pakistan.

National Bank of Pakistan

Two Ordinances were, therefore, issued.

Jute Board Establishment Ordinance &

NBP Ordinance date 08-11-1949

National Bank of Pakistan

National Bank of Pakistan

internationally and representative offices.

National Bank of Pakistan

Vision Statement of NBP

Mission Statement of NBP

National Bank of Pakistan

NATIONAL BANK OF PAKISTANS Core Values:

Prudence to guide our business conduct.

A national presence with a history of

NBP wishes to work hard to.

Meet expectations through Market-based

Reward entrepreneurial efforts.

Create value for all stakeholders

Care about Relationships

Lead through the Strength of our Commitment and

National Bank of Pakistan

Leaders in banking industry.

An organization maintaining the trust of stakeholders.

An innovative, creative and dynamic institution responding to the changing needs

Core Values of NBP in brief.

Nationalization of the Bank

National Bank of Pakistan

Chairman & President

Mian Kausar Hameed

Mr. Ibrar A. Mumtaz

Mr. Tariq Kirmani

Sikandar Hayat Jamali

Secretary Board of Directors

National Bank of Pakistan

Objects and Activities:

Handling of treasury transactions for the Government of Pakistan as agent to the

Borrowing money and arranging finance from other banks.

Advancing and lending money to its clients.

Buying, selling, dealing, including entering into forward contracts of foreign

Receiving of bonds, scrips, valuables, etc. for safe custody.