INTERNSHIP REPORT ON NATIONAL BANK OF PAKISTAN MAIN BRANCH SWABI (0406)

SUPERVISED BY SIR ASIM

SUBMITTED BY TAHIR AHMAD ROLL NO: 19130 MBA (FINANCE) SEESION 2009-11

DEPARTMENT OF MANAEMENT SCIENCES HAZARA UNIVERSITY MANSEHRA

INTERNSHIP REPORT ON NATIONAL BANK OF PAKISTAN MAIN BRANCH SWABI (0406)

Internship Report Submitted To the Department Of Management Sciences for the Partial Fulfillment of the Requirements for the Degree of Master of Business Administration

DEPARTMENT OF MANAEMENT SCIENCES HAZARA UNIVERSITY MANSEHRA

COMMITTEE APPROVAL FOLIO

External Assessor

Mr.__________________________________Signature___________________

Supervisor

Mr.__________________________________Signature___________________

Chairman

Mr.__________________________________Signature___________________

DEPARTMENT OF MANAGEMENT SCIENCES HAZARA UNIVERSITY MANSEHRA

INTERNSHIP CERTIFICATE

DEDICATION

I dedicate my efforts and hard working to my beloved parents, respected teachers and great friends whose love, Prayers and supports have a great contribution in my carrier development. Tahir Ahmad

PREFACE

This is a compulsory obligation of MBA (Finance) program to complete an internship in finance and give report on its activities. This requirement provides me a chance to explain the student of MBA with practical working of an organization.

Apparently, NBP being a large organization of Pakistan became the best choice for me. I performed my practical work of about two months in NBP Main branch SWABI. During my internship I was rotated in different sections of finance & advance department and got some understanding of their operation and procedures.

The staff of NBP was very much supportive to me. They provided me with guidance and related material to write a report. I feel satisfaction to convey my sentiments that it was got a lot time in my career.

II

AKHNOWLEDGEMENT

First of all on the completion of my report I am very thankful to all those people and their sincere cooperation that they provide on various stages. The problem which is faced by every student is the selection of a report. I am very thankful to my honorable supervisor Mr. ASIM UR-REHMAN for helping me in the time of uncertainty. During the execution and preparation of my report. I had a real chance to learn from his huge knowledge and vast experience.

Then I am very thankful to all staff members of national bank main branch SWABI they guide me and provide me valuable information which helpful in the preparation of my report.

Finally I am very thankful to almighty Allah who gives me strength to complete my task successfully.

Tahir Ahmad MBA (Finance)

III

TABLE OF CONTENTS
Dedication Preface Acknowledgement Table of Contents Executive Summary List of Tables List of Charts I II III IV VIII IX X

Chapter # 1 Introduction to Study

1.1 Background of research study 1.2 Purpose of the research study 1.3 The study objectives 1.4 Restriction of the research study 1.5 The Benefit of the study 1.6 Methodology of the Research

1
1 1 2 2 3 3

Chapter # 2 Evolution of Banks in Pakistan

2.1 Introduction
2.2 2.3 2.4 2.5 2.6 Definition of Bank Banking Evolution in Pakistan Banking Growth during (1948-1970) Banking Reforms 1972 Islamization of banking system in Pakistan 2.6.1 Islamization of banking 2.6.2 Re investment and deregulation of bankig-1991 2.6.3 Interest free Banking 2.6.4 History of National Bank of Pakistan 2.6.4.1 Mission statement of NBP 2.6.4.2 Objective and Goals 2.6.4.3 Board of Directors 2.6.5 Branches of NBP 2.6.6 Objectives of NBP 2.6.7 Main function of national bank 2.6.8 Accept deposits
IV

4
4 5 5 6 8 10 11 12 13 13 14 14 14 15 15 16 16

2.6.9 Agency services 2.6.10 Summary of the chapter

17 17

Chapter # 3 Departmentalization of NBP

3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 3.13 Introduction Demand drafts Swift system Letters of credit Travelers cheques Pay order Ail transfers Foreign remittances Short term investments National Income Daily Account (NIDA) Equity investments Commercial finance Trade finance other business loans 3.13.1 Agricultural Finance 3.13.2 Corporate Finance International banking Cash and Gold Finance Advance salary loan Departmentalization 3.17.1 Cash department 3.17.1.2 Receipt 3.17.1.3 Payments 3.17.1.4 Cheques and their Payment 3.17.1.5 The Characteristics of Cheque 3.17.1.6 Parties to Cheque 3.17.1.7 Types of Cheques 3.17.1.8 Payment of cheques 3.17.2 Clearance department 3.17.2.1 In - Word Clearing Books of bank 3.17.2.2 Out-Word Clearing Books of bank Advances department of Bank
3.18.1 Name and address of the borrower

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18 18 18 19 19 19 20 20 21 22 22 22 22 22 24 25 26 26 26 27 27 27 27 28 28 28 29 30 30 31 32
32

3.14 3.15 3.16 3.17

3.18

3.18.2 Principles of Advances 3.18.3 Different Forms of Loans 3.19 Remittance department of Bank 3.20 Human resource management
V

33 35 36 38

3.21 Deposit department of the bank 3.21.1 Account opening in a bank 3.21.2 Cheque issuing 3.22 Department of foreign exchange

40 40 42 42

Chapter # 4 SWOT ANALYSIS

4.1 4.2 Introduction Strength 4.2.1 Oldest institution 4.2.2 Alternate duties in SBP is absence 4.2.3 More deposit than other banks 4.2.4 Employees benefits 4.2.5 Broad network 4.2.6 Strictly followed rules & regulation 4.2.7 Professional competence 4.2.8 Healthy environment 4.2.9 Relation between staff & employees Weaknesses of NBP Opportunities 4.4.1 Electronic banking 4.4.2 4.5 Threats 4.5.1 4.5.2 4.5.3 4.5.4 4.6 Emergence of new competitors Political pressure by elected government Downsizing Customers complaints Micro financing

44
44 45 45 45 45 46 46 46 46 46 47 47 48 48 48 49 49 49 49 49 50

4.3 4.4

Competitive analysis

Chapter # 5 Financial Ratio Analysis

5.1 5.2 5.3 5.4 National bank of Pakistan five years performances at glance Ratio analysis of the bank Those parties which is interested in ratio analysis Ratio analysis 5.4.1 Cash ratio 5.4.2 Gross profit margin ratio 5.4.3 Net profit margin ratio 5.4.5 Return on equity
VI

52
52 53 54 55 56 57 58 59

5.5.5 5.5.6 5.4.7 5.4.8 5.4.9 5.4.10 5.4.11 5.4.12

Return on assets Investment deposit ratio Debt to equity ratio Debt to Assets Ratio Ratio of Advance deposits Ratio of Assets Turn over Earning to Price Ratio Dividend yield ratio

60 61 62 63 64 65 66 67

Chapter # 6 My Internship Program

6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 6.12 6.13 Introductions Department of account opening Opening account Deposits Withdrawals Issuance of cheque book At counter Recording of voucher Recording of pension Clearing department Remittances department Collections of bills department Sequence of cheques

68
68 68 69 70 70 70 71 71 72 72 72 73 73

Chapter # 7 Recommendation and Suggestion

7.1 7.2 7.3 7.4 Introduction Planned and healthy competitions To establish a research cell National Bank Reward System

74
74 74 74 75 78 79

Bibliography Annexure 1

VII

EXECUTIVE SUMMARY

One of the most important functions of the bank is to do as financial agents for their customer. And get reward which they offer .Bank Performed a key role in the economic development of the country. A strong economy depends on a good banking system. NBP is one of the leading banks in Pakistan, and it is consider one of the best banks in south Asian region. My report consists on the various functions which are performed by national bank. My report is mainly consisting on secondary data with use of primary data. My report is objective in nature and gives subjectivity on financial analysis. First part consists on the evaluation of bank. Function and services in second part. The third part is about financial analysis and recommendation is given. The NBP is one of the leading commercial banks in Pakistan which consist of round about one thousand two hundred branches all over Pakistan.NBP perform various function for his customers. The commercial banking is stated as a conventional business. One of the major functions of the NBP is the custodian of the public fund and these funds are safe in the bank. The banks advance the fund to the needy person and make living. The bank performs all these function efficiently and effectively.

VIII

LIST OF TABLES

S.NO
1 2 3 4 5 6 7 8 9 10 11 12 13

DESCRIPTION
NBP Board of directors & designations NBP FIVE years performance at a glance Cash ratio Gross profit margin ratio Net profit margin ratio Return on equity ratio Return on assets ratio Investment deposit ratio Debt to equity ratio Debt to assets ratio Advance deposit ratio Asset turnover ratio Earning to price ratio Dividend yield ratio

PAGE. NO
14 54 57 58 59 61 62 63 65 66 67 69 70 71

14

IX

LIST OF CHARTS

S.NO
1 2 3 4 5 6 7 8 9 10 11 12 Cash ratio

DESCRIPTION

PAGE.NO
58 59 60 62 63 64 65 67 68 69 71 72

Gross profit margin ratio Net profit margin ratio Return on equity ratio Return on asset ratio Investment deposit ratio Debt to equity ratio Debt to asset ratio Advance deposit ratio Asset turnover ratio Earning to price ratio Dividend yield ratio

Chapter # 1

INTRODUCTION OF REASERCH STUDY

1.1

Back Ground of Research Study

With the name of Allah, I am starting to write my internship report it is a part of the academic requirement according to the higher education commission plan for the completion of 16 years study in MBA (Finance). Therefore as a student of management sciences it is required for a student to undergo for an internship program for the period of two months as an internee in an organization. The internship will help the students to gain the practical knowledge of working environment in an organization.

National bank of Pakistan was established in 1949 and is performing its duties efficiently. And rapidly expand his branches in all over the country, due to this it becoming the largest commercial bank of the country. The commercial bank offer various function for his customer.

1.2

Purpose of the research study

The main purpose of the study is to collect the relevant information is to prepare internship report on national bank of Pakistan. To watch carefully, analyze and communicate the relevant data successfully and in a useful manner. The main purpose of the study is: To put theories in practically work done in organization The second is the is developmental interpersonal skill

1.3

The Study Objectives

Discuss the detail study of National Bank of Pakistan. Discuss thorough study of National Bank of Pakistan.

To knowing the different operations and getting practical knowledge of the National Bank of Pakistan.

1.4

Restriction of the Research Study

Doing something is far better than doing nothing it is not possible that the report is complete in all respect. This study was organized in accordance with the objective of the study. The study may not consist on detail explanation of various facts and figures due to the nature of study. The second limitation is that the bank not offers all the facts because some facts are very important and keep them. Another limitation is that the required data is not easily available due to most important in nature. In the limited time period it is not possible to understand and analyze all the operation of the bank in a very short time period.

1.5

The Benefit of the Study

This study gives benefit to the finance student particularly the banking students because in this report the financial analysis section and provide a detail financial analysis which is helpful for finance student. In addition, NBP main branch SWABI a little recommendation given at the last of the report.

1.6

Methodology of the Research

My report is consisting on my two months internship program in NBP Main branch SWABI. My research methodology in this report based on collection of primary as well as secondary data. My personal observation is my best source of observation while having discussion and working with staff members. Suitable organized interviews and discussion also help me in this concern. My personal observation and take a comprehensive interview from staff member of the staff member is the primary source of data collection in my report. In the preparation of my report I get help from study magazines, Annual report of the bank as well as from internet

Chapter # 2

EVALUTION OF BANKS IN PAKISTAN

2.1

Introduction

There are separate view about the word bank that how it originated. Some of the author says that the word of bank is derived from the Latina word BANCUS which means bench another view about the word bank is that it is derived from the word Bank which means a joins tock company. The word bench is used because the JEWS doing business and exchange money on benches in the market place therefore it is used the word bench. When the business is failed? The people are damaging the bench. For this the word Bankruptcy is introduce.

In fact human feel the importance of bank when it start to become aware the importance of money used as a medium of exchange. The banking system is develop as early as 2000BC.At that time the bank give more importance to Bank for this temples are used for the respect. During (1686-1788BC) the term loan were started. The Bank gives loan and gets interest in return. For this purpose the borrowers provide guarantee or pledge their valuable goods with bank. In Greek the temples are used for the identification people deposit their saving for safe custody with banks. In middle of the twelve century in Europe the trade and commerce expand and the banks give advances to business man and the banking business at that time expand. The modern Banking system starts on 14century from Barcelona.

2.2

Definition of Bank

A Bank is financial institution deals with money and credit .It accept deposit from individual, companies and household at a lower rate of interest and gives them at a high rate of interest to those who need them. Another definition of bank is it accepts deposit from household and firm and give to other house hold and firm.

2.3 Banking Evolution in Pakistan

The first stage in the evolution of banking in Pakistan is very difficult days for the entire banking sector. Began almost from scratch in 1947, now days the county has complete power of banking and financial institution to deal effectively with different need of the economy.

In March 1947 there are 3599 offices of India scheduled bank out of which 499 are situated in Pakistan. At time of division it was clearly decide that Indian bank should continue his function in the new dissolving state of Pakistan till Sep 30, 1948. In 1947 due to instability the banking sector suffer losses.

Due to this instability the banking services is badly effect in Pakistan. At that time the offices which are registered in Pakistan are transfer to India. The action is taken to save the emerging state of Pakistan. The number of schedule bank is decline.

2.4

Banking Growth during (1948-1970)

In this difficult situation it is necessary is to make a committee to develop a scheme of central banking laws for Pakistan. The opinions of many specialists are the insufficiency of skilled employed. In this situation it is difficult to arrange and functioning as a Central bank.

For this the government takes alternative decision to set up a full valuable central banking power. Another factor of this decision is that the country current situation is not good enough for this the rehabilitation of bank is necessary and this work is only done by Central Bank. The step is taken to establish Central Bank the step is taken by QUAID-EAZAM Muhammad Ali Jinnah on July 1, 1948.

The first function of the Central bank is to issuing notes of Rs 5, 10 and100. Another task of Central Bank is to organize for the substitute of the reserve bank of India notes which is continued without interpretation at time of transitional period by Pakistan currency. Another quick and important task of new Central Bank is to develop national Banking system in the country. To serve as an agent and as the movement of its credit policies, NBP was establishing under an ordinance in November 1949. It start his work with six offices from the former East Pakistan. The important task is given to the new institution is to appointed the head of its Board of Director in 1950. Due to the support of the government the new institution grows rapidly. The State Bank provides advances to the new bank to help it to spread his credit facilities in the country. The state bank governor serves as a president of the National Bank of Pakistan.
6

To widening the institutional framework of the financial system the state bank also provide loan to the Agriculture and Industry to promote it. The State Bank of Pakistan takes power to control the operation of banking business in Pakistan. Furthermore the shortage of trained person is the most serious problem faced by the State Bank of Pakistan. For this the central bank starts a scheme which is called the employ training scheme in which the skilled person is adopted for banking service.

The commercial Bank was settled and registered as a schedule Bank. Due to this the two new institutions are develop which is called investment cooperation and industrial credit was introduce. In 1958 the State Bank of Pakistan celebrates the first decade of start working. At that time there was only 197 Bank offices is present. It is increased up to 309 at the end of June 1959.

At the time of AYUB Khan Government the banking sector was strongly influence due to the development of transfer of business in food grains to the private sector and making up the commodity market. The demand of fund rise and the bank expand the bank credit to the private sector. Due to the expansion of the institutional framework the new Pakistani bank was established which is called the United Bank Limited.

The creditor structure increases rapidly during the sixty decade. The Bank extends its business in Pakistan as well as several countries in the world. The bank offices increase up to 1595 at the end of June 1966.Some new banks were include as a schedule banks.

Due to the impact of economic growth and the scope of private enterprises bank raises its credit from Rs. 1460 millions to Rs. 5761 million. Thus total expansion to private sector in the bank credit during the period is Rs.4305 million, which gave the annual increase of Rs. 863 million. The bank deposit rise from Rs. 2,495 million to Rs. 6886 million during the five years that ended June 1966 compared to Rs. 235 million in the coming five years. Time deposit was increased from Rs.949 million to Rs.3231 million and demand deposits rise from Rs.1998 million to Rs.3660 million. The time deposit rapidly increases. In June 1966 the ratio of time deposit to total deposit is raised as compare to five years earlier. Next silent feature is to increase the bank deposits behind the expansion of Bank credit. The bank mostly depends on the central bank finance. The borrowing power of central bank rise during in 1961 to 1966.Banks advances increase as compare to their investment.

The total number of Bank offices increased from 1,521 at the end of June 1966 and at the close of June 1971 reach up to 3,135. At that time the bank deposits growth rapidly.

2.5 Banking Reforms 1972

In 1972, May 31, 1972 new technique is used to increase the bank performance which is required for the economic growth and equal social treatment. The main purpose of this reform is to equitable distribution of Bank credit, and improving bank performance. The importance of Banking system is very impressive in organize savings of society and fulfill the credit requirement of the economy. But at the same time the Bank had

commonly fail to develop social justice and also failed to play a successful role in
8

occurring a wider and equitable benefits of economic growth. Due to the ownership the commercial and industrial interest the misuse of bank resources. The urban area required heavy credit, for agriculture, small business, newly export and housing had obviously remained inadequate and the term finance facility for industry was fully absent.

The Banking reforms bring in May 31, 1972 the state bank of Pakistan have a wider power. It has power to dismiss directors and other managerial personnel, if required and appoint administrators during this period. The bank also has power to select directors on the board of every bank. The time limit given to each bank director is not more than six years continuously. According to the rule the paid up capital of not less than five percent of its total deposits.

The bank also transfers ten percent of their profit as a cash reserve of each year it became equal to paid up capital. With a view to varied the ownership of the bank and the bank were required to increase new capital from market. Not secured loan given to director, their families or firms and companies were totally forbid. The bank reform also bring to develop new institution is to achieve objectives. The national credit advice was set up under the supervision of the state bank with representation from the government and the private sector. Another important task of the bank is the economy annual credit need with the safe limit and credit expansion with reference of annual development plan.

Credit plan cover both the private and public sector. To allocate agriculture for various purposes the advisory committee is farmed which is called national credit council and

agriculture advisory committee, to gather the operation or agriculture credit to provide credit to the target area to develop agriculture sector. A new export committee was establishing at that time to encourage the small borrower to provide credit for this credit guarantee scheme is introduce.

The same time two new financing were establish. The people finance the purpose of this to provide finance to small income people and other which is called National finance Development Corporation provide finance to public sector and industries.

2.6

Nationalization of Banking System in Pakistan

The reforming of banking system after eighteen months the government took action is to nationalize the banking system. The main objective of nationalization is: To distribute equally credit to different people and sector. Nationalization of bank act is called bank nationalization act 1974. To gather the banking policies in various area of possible joint activity.

The government gives capital in the hand of few rich bankers to develop economic growth rapidly and get social welfare. Under this act the state bank and all commercial banks include in Pakistan carrying his business or outside the country brought under the government ownership with effect from Jan, 1975.The federal government get the ownership of the entire Pakistani bank which is situated in Pakistan. Under the nationalization act all the chairman ,directors and executive of different banks were removed from their offices, the central board of the banks and all local bodies were also
10

dissolved .Pakistan banking council was establish to carry the activity of the Nationalized Commercial Banks. At the time of nationalization of banks, at least 15 Pakistani commercial banks include 3324 offices all over in Pakistan and 75 offices in foreign countries. HABIB Bank limited National Bank of Pakistan United Bank Limited Overseas HABIB Bank limited Muslim Commercial Bank limited Commerce Bank limited Australia Bank limited Standard Bank limited Premium Bank Limited Bank of Bahawalpur limited SARHAD Bank limited Pak Bank limited Punjab provincial co-operative bank limited Lahore commercial limited

The government nationalization steps were very smooth and give positive result.

2.6.1 Islamization of Banking

Next major development in the banking history in Pakistan is to introduce the interest free banking system which starts from the beginning of 1980. This decision is taken to

11

get rid of inters from the operation of national investment trust and the house building finance corporation of Pakistan. Different changes were made in banking and other laws with the object of ushering in a new system of banking. This is called SHARIA. A new system was introduced which is called MUDARIBA companies ordinance 1980. Thus the interest free system is started from all nationalized commercial banks. The state bank of Pakistan provides finance to participation term certificate and also provide against promissory notes by MUDARIBA certificate. In order to compile interest free transaction of different banking definition such as debtor, creditors and advances credits and deposits were revised. The bank provide loan to the student without interest. A Banker equity limited company was introduced in 1978 to help the industrial sector primarily on free interest basis. The various schemes were introduce in the Islamization process: MUDARIBA Financing MUSHARIKAF Financing Hire purchase financing Specific purpose MUDARIBA.

2.6.2 Re Investment and Deregulation of Bankig-1992

It is realized that the importance of public sector in the economy is more and banking sector has more earning in the private sector the privatization of banking sector is restarted by the Muslim league government . Muslim commercial are invested in two phases while ABL was to its employees. During this time new banking were establish and perform his work successfully. Now NBP is government bank rather than SBP.

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2.6.3 Interest Free Banking

In 1982 the concept of interest free banking system was introduce and for his different technique are used to get positive result. For this new product were used in Pakistani banks.

2.6.4 History of National Bank of Pakistan

NBP was established under NBP ordinance No.19 of November 10 .1949. British Govt. re valued its currency in September 1950, India also doing so but Pakistan did not. Due to this crisis start between two countries and India refused to lift the Pakistan jute. For solving this problem a decision were taken to establish export NBP jute. NBP is a position to set high objective and achieve it.NBP is the major business partner of the Government of Pakistan. NBP provide high quality product and services through its large network of branches locally and internationally and their representative offices.

In 1949there was only subsidiary bank which is called The Bank of Bahawalpur on December 5 1948 by the previous Bahawalpur state.

i)

In 1948 the total deposits of all Pakistani branches was 4.2%, which rise up to 40% in 1951.

ii) iii)

Growth of deposit was also increased in bank portfolio in advances. NBP advances were also rise in high margin.

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2.6.4.1 Mission Statement of NBP The mission statement of The National Bank of Pakistan is to make complete and

competitive

with all international performing standard, high quality, unique operation,

skilled staff and financial strength from other banks in the country. And also provide high quality services to its customer. And try to do much more for its customer as compare to other banks and to develop every activity of bank.

2.6.4.2 Objectives & Goals An organization one aim plan that recommend clear scope and express direction to the planning effort of organization and achieve market recognition both in the delivery of service and quality range of product offering.

2.6.4.3 Board of directors The following are board of director of the NBP members and their designation

Table 1
Name Ali Raza Dr. Waqar Masood Iftikhar Ali Malik M. Zubair Motiwala Sikandar Hayat Jamali M.Khalid Malik S.M. Rafique Designation Chairman And President Director Director Director Director Director SEVP & Secretary to Board of Director

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2.6.5 Branches of NBP

Branches of NBP working both within the country as well as outside country its 30 regional office in Pakistan and 1190 branches & four subsidiaries. And sixteen overseas branches and six other branches.

2.6.6 Objectives of National Bank of Pakistan

The main objective of NBP is the maximization of profit. This objective is achieved from two ways:

1. By increasing deposits. 2. And to charging interest on loan given to business community as well as private sector. When the bank provides better facilities to its customer according to their requirement the deposit will increase automatically. When deposits increase the bank borrowing power increase and thus bank receive high profit in this way. The deposits also increase when the bank provide attractive services to its customers. There are two factors which help to raise deposits. To offer maximum loan to its customer Bring improvement in the services which provide to the customer Keep better relationship with his customers

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2.6.7 Main Functions of NBP

National bank of Pakistan performs different functions. NBP involve in financing to foreign trade. Other major function receives deposits, and gives these deposits as a loan. Function of the National bank.

2.6.8 Accept Deposits

This function is important because the bank customer keep their funds with bank. For this bank different types of account provide to its customer

Current Account:

This type of account called demand liability on current deposits. In this type of account the bank do not pay any inters. This type of account only by industrialist and businessman. This type of account is opened by minimum amount of Rs.600.

Profit & Loss Sharing Deposit Account

This type of account is open with minimum of Rs. 600/- This type of account also called checking account. From this type of account the money can easily withdrawn and depositing. In PLS profit is calculated in every month but only paid after six months.

Profit & Loss Term Deposits Account In this type of bank account the deposits are kept foe a specified time period .In this type of account the easily not withdrawals. In this type of account the interest rate is different depend upon on time period.
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2.6.9 Agency Services

The NBP also provide unique services to its customers which include:

I) Collection of Dividends: National bank of Pakistan deal with sales and purchase securities due to this it also provide dividend or interest received on share or invested money.

II) Collection of Cheques: Another important function of NBP is the collection and payment of cheque. NBP serve as agent for his customers.

III) NBP Serves as an Agent: The NBP acts as a representative for its customers.

IV) General Utility Services: The NBP also provides different utility services:
a. b. Clearance of utility bills Lockers facility

c. Acts as a referee d. Supply of information

2.6.10

Summary of the chapter

First of all we discussed banking evolution in Pakistan than we discuss banking reforms 1973 than we discuss nationalization of banks, history of national bank and last mission statement and function of NBP.

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Chapter # 3

DEPARTMENTALIZATION OF NBP

3.1

Introduction

This chapter includes services and departmentalization of National Bank of Pakistan. Services are the output of the firm which is in abstract form. This is the spine of every organization to earn profit. Different services which are offered by NBP are as under.

3.2

Demand Drafts

If you need for speedy, reliable way to transfer money the demand draft is used for this purpose. Any person obtains demand draft from a bank branch.

3.3

Swift System

This system is used for offering quick service in the remittance area. This system is developing of the computerized test keys, which get rid of the manual application of tests that often cause delay in the payment of home remittance. This system is work on a number NBP-APKKA. All overseas branches used this system for drawing remittance. With use of this system the money can safely and speedily transfer money for personal needs and our business.

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3.4

Letters of Credit

NBP starting to deliver for its business customers the great variety of option in the area of money transfer. For commercial enterprise the letter of credit services is used. Due to this the transaction is easily done.

3.5

Travelers Cheques

It is a negotiable instrument in there is no restriction on the period of the maturity of the cheque. At all seven hundred branches uses rupees traveler cheque and this can be in cashed in all 410 hundred branches of NBP. This type of cheque purchase at any time .It is the safest way of carrying money.

3.6

Pay Order

Another facility which is provide by the NBP transfer money is the pay order it is a secure way to transfer money from one place to another. For this service the bank charges a very little amount. It is charged Rs. 50 for NBP account holder and Rs 100 is charge by the non account holder , it charges only 25 Rs for student on payment of fees of educational institutions. If someone want duplicate of payments order they

charges Rs. 100 for NBP account holder and Rs 150 for non account holders.

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3.7

Ail Transfers

It is another quickly and safely mode of transfer money. For this the bank deducts the minimum amount. They charges Rs. 50 exchange rate and 75 Rs as postage charges on issuing of mail transfer.

3.8 Foreign Remittances

Another facility which is offered for its customer in the area home remittance the NBP taken the following step to: Meet the SBP instruction for timely and quick offering of remittances to the beneficiaries. Through banking system increase home remittances.

New Features: The present system of home remittance is used and revised to bring improvement and well trained functionaries are used to provide reliable and efficient remittance services to nonresident at 15 foreign branches of Arabia. Apply hard monitoring system is to ensure the highest possible security. A Zero Tariffs: NBP is offer home remittance services without any deduction. For delivery of home remittance the special services are hired. Bank (UK) Ltd & Bank al-JAZERA Saudi

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3.9

Short Term Investments

The National Bank of Pakistan offer high profit whether the investment is made for the short time period or for long time period. NBP profit rate are more attractive and provide service and security as well.

3.10 National Income Daily Account (NIDA)

This system was introduced in December 1996 to attract corporate customers. This is a current account system and part of PLS system of accounts throughout the country. Salient Features: Profit is paid on half yearly basis From Rs two million are required to open this account The rate of deposit vary according to the deposits There is no limit of withdrawals because this is a checking account

Rates of NIDA From Rs 3/- million to Rs 50/- the rate is 1.5%. From Rs50/- million but less than Rs 500/-million, the rate is 1.6%. From Rs 500/- million but below Rs 1000/- the rate is 1.7%. From Rs 1000/- and above the rate is 1.85%.

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3.11 Equity Investments

National Bank of Pakistan performs his activity in the stock market to improve its economic base and restore investor confidence. The bank now play active role in

development of stock market NBP is involved in the following:

Introduction of capital market Investment into the capital market involve in capital market is to increase its earning which is result in return

NBP

offered to current account holder .

3.12 Commercial Finance

National bank of Pakistan devote team of professionals truly needs of professionals, agriculture, large and small business and other segment of the economy. They are the best source in making NBP product and services work for them.

3.13 Trade Finance Other Business Loans

There are two types of trade finance:

3.13.1 Agricultural Finance

National Bank of Pakistan provides agriculture finance to become solid confidence, obligation and satisfaction gain of farmer who produce best agriculture product.

22

Agricultural Finance Services:

A new product is introduced by NBP which help the farmer to increase his production on per acre basis from minimum amount of input. The purpose of this system is to make farmer to role model for other farmers. It helps to increase production across Pakistan.

Agricultural Credit:

Three object behind this strategy of NBP Providing reliable infrastructure for agriculture customers To help the farmer to utilize the funds efficiently to develop and achieve better production Different packages provide to farmers and additional input with technical knowledge and supervision of farming.

Agricultural Credit (Medium Term): i) ii) iii) iv) v) vi) Credit offer for water course improvement Credit provide for production and development Credit provide for Wells Credit also offer for farm power Development loans for tea plantations Credit provide for fencing

vii) For solar energy viii) Credit offer for equipment sprinklers

23

Farm Credit:

National Bank of Pakistan also support financially with time of three months to one year on renewal basis.
i) ii) iii)

Land improvement loan Operating loans Equipment loans provide for the purchase of tractor also provide loan for livestock ,care and feeding of live stock

Production Loans:

The bank also provide loan to the farmer for the purchase of seeds, fertilizers, sprays and all cover under this scheme.

3.13.2 Corporate Finance i) Working Capital and Short Term Loans

National Bank of Pakistan also provide project finance to export refinance to exporters, running finance, pre shipment and post shipment to exporters, cash finance, discounting & bills purchased, export bill purchased /pre shipment / post shipment and agriculture production loans.

ii) Medium term loans and Capital Expenditure Financing:

NBP provide loan to its customer to fulfill capital expenditure and long term investment. This type of financing prove that the bank trust on its clients capabilities and its commitment.
24

iii) Loan Structuring and Syndication:

NBP want to build strong relationship not only with borrowers but also with bank investor. Our syndication capabilities are complemented by our own capital strength and by industry teams, who bring specialized knowledge to the structure of a transaction.

iv)

Cash Management Services:

With help of this service the clients sales collection will be channeled through wide network of NBP branched which is spread throughout the country. In fact with the help of NBP you will be provided everything, which help to manage your cash flow more

accurately.

3.14 International Banking

The national bank of Pakistan is at the leading position of international banking in Pakistan. The national bank of Pakistan proves by the fact that it has the branches in all of the major financial capital of the world. The new institution which recently introduce by the national bank of Pakistan is called wings which comes under the risk management group. The role which is performed by this institution is: To effectively maintain the NBP exposure both in foreign and domestic level as a correspondence. Build and maintain the monetary quality on national bank of Pakistan relationship with the representative to support trade in the country as well as treasury and other important area of business by the means to distributing the bank profitability.
25

To produce increase number of trade finance business and revenues.

National Bank Offers: National bank of Pakistan offer very low rates on exports and other international banking product. Offer a different way to local commercial banks in international banking.

3.15

Cash and Gold Finance

It means loan given against the gold. The loan is keep with bank as mortgage and bank give loans against the gold. It is the area of consumer financing. The loan is taken by the borrower for common use

3.16

Advance Salary Loan

This type of loan is given to those who are the government servants. The bank gives loan of fifteen months up to their salary.

3.17

Departmentalization

Every organization divided into different parts on the basis of their function this division is called departmentalization. So following are the main departments of national bank.

3.17.1

Departments of National Bank Pakistan

26

3.17.1.1

Cash department

This department of the bank performs the following function.

3.17.1.2

Receipt

The money which either comes or goes out from bank the record should be kept .the recording of cash is the function of cash department. The deposit of customer with bank is controlled and record in ledger account. The ledger account of every customer is different and has a separate ledger card.

3.17.1.3

Payments

It is the primary responsibility of bank to repay the deposit of their customer .this payment is made to the customer through cheque.

3.17.1.4

Cheques and Their Payment

Cheque is a negotiable instrument which is drawn on a specified bank not expressed to be payable other than on demand. A cheque is considering the bill of exchange. It has all characteristics which are mentioned under the negotiable instruments act, 1881. It is a unconditional order written by the drawer which drawn on specified banker, which is signed by the drawer the bank require to pay the stated amount on demand a certain sum of money on order to a specified person or to the bearer of the instrument .

27

3.17.1.5

The Characteristics of Cheque

There is no specific form of words or design of a cheque, but in order to attain the requirement which is stated in section six. The characteristic of cheque are as under. The cheque should be in written form It is an unconditional order It is drawn on a specific banker The payment of cheque is payable to a specific person It is a sum of certain money The cheque is signed by the drawer

3.17.1.6

Parties to Cheque

There are three parties of the cheque which is Drawer, Drawee and a payee The drawer The drawee and The payee

3.17.1.7

Types of Cheques

All banks in Pakistan deal with three types of cheque.

a) Bearer Cheques It is that type if cheque which is cashable at the counter of the bank. The bank makes payment to the person which shows this type of cheque.

28

b) Order Cheques This type of cheque also cashable at the counter of the bank but the payment was only made to that person which name is written on the cheque. The holder of this type of cheque satisfies to the banker and gives specific identification.

c) Crossed Cheque This is the third type of bank cheque which is not cashed at counter. In this type only payees account will be credit.

3.17.1.8

Payment of Cheques

It is a primary contract between bank and customer to repay the money to its customer which he deposits with bank. It is the important function of bank to repay the deposits to its customer. This function is one which differentiates the bank from other. The bank receive deposits and have a legal right to make payment is in due course. In due course means the time of instrument is reached. It is a shorter responsibility of a bank to accept the cheque of the customer if he fulfills the following requirement: The first requirement is that the cheque should be in their original form The cheque should not be crossed It is drawn on a specified bank In customer account the cash is sufficient available The cheque should be presented on banking hours The date of the cheque should not be expired

29

3.17.2 Clearance Department

A commercial bank set up an association which help to interchange and settlement of credit claims .The main function of this department is performed by the state bank of a country by law are by tradition. The SBP operate this system. NBP is a representative of SBP and performed this function .after the Second World War there is a rapid growth take place in the banking sector. The use of cheque is also increased for making payment. Now the big problem which is faced by all commercial banks is the settlement of obligation. When a person drawn a cheque. The holder of the cheque deposits this cheque at the same account at the drawer bank. So the mutual obligation arises and interbank debits from the use of cheque. Due to this the total assets and liability remain

unchanged. When a person receives cheque he is rarely the depositor of the cheque in the same bank as the drawer. He deposits that cheque with his bank. Now the cheque is deposited becomes a creditor of the drawer bank. The amount of this cheque will be paid by transferring it from cash reserve .the cheque which is drawn by bank become debit to the bank in which the cheque is deposited. At that time the creditor bank receive a large number of cheques which is drawn on other bank giving to make payment of the cheques. For this the bank offers the clearing facility. For this the meeting is held in the bank to perform the clearing facility. In which all detail discuss in the meeting which is performed.

3.17.2.1

In - Word Clearing Books of bank

This type of book used by bank to record all cheques which is being received by bank in the opening clearing. In this book all the detail is recorded which is related with cheque.

30

3.17.2.2

Out-Word Clearing Books of bank

This is the opposite of the above book the bank use this type of book to record about all the cheque which is delivered to another bank.

3.18 Advances Department of NBP

This is the important department of bank. From this department the major portion of profit is received by bank the main function of this department is to make plan about the loans. All the advances are controlled by credit management division of head office. Bank is profit earning institute. It accepts deposits from people and individual at a lower rate of interest and gives this deposit to the needy person at higher rate of interest. The expansion of credit is the important activity of all financial institution it is the main source of earning but risk is also involved in credit expansion .if any person want to give loan from NBP for this purpose a specific form is filling which include the following information :

3.18.1 i)

Name and Address of the Borrower. The present financial position of a borrower in a particular branch from which the borrower took the loan. Whether it returns the loan or not.

ii) iii) iv)

Also take into consideration all the detail of the account of other bank Whether it provides security against loan is not. Also take into consideration the present financial position of the company on the basis of their balance sheet and income statement.

31

v)

At the time of lending loan take the written promise from the borrower that he shall return this loan in future.

3.18.2 Principles of Advances

Loan is given to the borrower on the basis of consideration while giving loan. i) Safety ii) Liquidity iii) Dispersal iv) Remuneration v) Suitability five principal which take into

i)

Safety

The bank give advances to different customer on different account such is saving account, current account, call deposit account, special notice account and time deposit account. It identify that all the money which is hold of the bank is originally the customer money. So the bank ensure to the depositor s that his deposit in the safe custody.

ii)

Character

Another important factor which is related with the safety of advance. There is no alternative for character. At the time of given loan see the character of the borrower whether it is bad are good whether he repay the loan are not. It is the important principal

32

of advancing loan to see the them.

past record of the borrower at the time of given loan to

iii)

Capacity

This factor is related with the management ability it identifies business position in the past and also tells us what future requirement is. The financial resource of a businessman is not very wide but due to solid management ability he makes the business very profitable. If the management is have not ability the business give him loss and the banker also face loss.

iv)

Capital

The investor invests money in the business. The commercial bank offers short term loan to commerce and industry. Some of the borrower demanded that the bank provide capital which is required to their business. Due to this the bank makes the partner. The banker must think carefully that the amount which is borrowed from bank is reasonable are not.

v)

Liquidity

It is another principal of advancing loan. it means that either the borrower repay the loan at the time of emergency or not because the borrowing amount is payable on demand or as a whole usually the borrower repay the loan steadily so the chances of further advancing loan is reduce and for other customer the fresh loan is allotted .so advancing loan the principal are keep in mind while giving loan. vi) Dispersal

33

The bank advances loan is widely bases so the borrower takes the advantages from the loan. The borrower need to use the borrowing fund in wide range sector like industry ,commerce ,farming ,agriculture ,small business ,housing projects and various other financial concern in order of priorities. Distribution of advances is very important point of security.

vii)

Remuneration of Salary

The major source of bank earning is the interest which is charged on the money borrowing loan by the customers. The banker require enough earning to meet the following to have enough money to pay the interest on the money deposit with bank to have enough money to pay salary to the bank staff to have money to pay the expense and depreciation of bank fixed assets if any loss occurs have enough sum to cover the loss To have enough money to pay dividend to the shareholder

viii)

Suitability

It means that advances not allowed giving selected and suitable borrowers but also keep in mind the overall country development .before advancing loan the bank should ensure that the purpose of loan is confirm. And loan is granted under the recent credit policy which is applied by the state bank of the country.

34

3.18.3 Different Forms of Loans

NBP advances loan to different people in different way which are as under:

i)

Cash finance

It is important forms of advancing loan by bank to its customer this type of loan are usually made against the pledge or hypothecation of goods, produce or merchandise. The bank allow to its customer to borrow money up to a certain limit at once or when required. The customer prefers this type of advances because the bank charges on the amount actually utilized by the borrower. If the borrower fails to utilize the full limit in this case the bank lose profit on the UN utilized amount. In order to fulfill this loss the bank provide cash finance agreement to special clause according to this the borrower paid some portion the loss occur due to un utilize amount of money.

ii)

Overdraft/Running Finance

This is another important farm of bank advance in this farm the bank allow its trusteed customer to withdrawn the axcess amount from its current account balance so overdraft occurs. This facility offer against colletral securities which is called secured overdraft. When the borrower to fail to give any security except of his personal security this facility is called clean overdraft .In overdraft the borrower take advantages because the borrower pay the service charges only on the outstanding amount against him.

35

iii)

Demand Financing/Loans

The bank offer the facility of demand financing in this facility the customer borrow money up to a fixed amount from bank which is payable at a future fixed date . The borrower pay the loan amount in lump sum for the agreed period and also paid the interest on the entire amount. Thus the fixed amount of money gets by the borrower for personal consumption.

3.19 Remittance department of NBP

It is another important department of NBP it means sent sum of money for the payment of something. The main function of this department either to transfer money from one bank to another bank, or and from one branch to another branch the following remittance offer by NBP: i) ii) iii) iv) Demand draft Tele graphic transfer Pay order Mail transfer

i)

Demand Draft

It is important mode of transfer for this the customer must fill the application form. this form consist on important information related with customer such as name ,account number and senders name .The amount of demand draft is deposited by the customer in the branch. When the payment made the demand draft is prepared and give to the customer. The bank credit the customer account when the demand draft is originating
36

branch comes to the responding branch when the DD comes for clearance the account is debited. Two types of DD: a) b) Open Demand draft: in this type of draft the payment is made directly Cross Demand Draft: in this type of draft through account the payment is made

NBP Charges for demand draft When the amount is up to Rs. 50,000/- only 50 rupees is charged If the amount is increase from Rs. 50,000/ only 0.1 % is charged

ii)

Pay Order

This is another important facility of the bank for his customer when the money is transfer locally from one place to another place for this purpose the pay order were made . It is the simplest, easier and secure way to transfer money the fixed amount of commission of Rs. 25 per pay order from the account holder and from non account holder Rs. 100 commission is charged.

iii)

Telegraphic Transfer

It is another facility which is offered by bank for his customer it is also called cable transfer for making remittance it is the quickest method. It is an order by telegram to a bank to pay a specified amount of money to a specific person. The application form is filling by customer to avail this facility. To keep the record the voucher is prepared and sent by email for keep as a record .From the customer the TT charge is deducted and these charges are: Fax charges on telegraphic transfer = actual minimum Rs.125.
37

While in cable transfer the bank uses secret codes which are only known to this department and branch manager.

iv)

Mail Transfer

It is another important facility offer by bank for its customer it is used when the money is not required immediately through mail transfer the remittance can also paid. The bank send written instruction through mail to the paying bank for a specified amount of money should be paid. NBP charges on taxes mail no extra charges are taken by bank. Minimum postage charges on email transfer is Rs. 40/-

3.20 Human Resource Management

For the success of any service organization HR play very important role .Due to this the interaction is made among men and machines .The customer satisfaction depend upon on their attitude the positive attitude win the customer and negative lose it. The positive attitude develop when there is contributing environment available due to this environment the organization achieve its objectives. Man is more important than machine to keep the customer happy. But some organization gives a little importance to it Some aspect which is related with human resource of national bank is as under:

i)

Selection & Recruitment of an Employee

The bank believes on merit but practically the selection of employees is not done. some of the bank employee are low educated , appointed on the basis of their family back ground etc. due to this qualified student remain jobless.
38

ii)

Job for Life

Some of the bank employees enjoying their job for life .Because there is no risk involve in early retirement the fixed period is sanction for the bank employee so they not their job potentially the productivity of bank employee is low due to this reason.

iii)

Performance Evaluation

The evaluation of bank employee defends on their annual confidence at the end of each year. This is the out dated method due to the following reason is no longer used: The subjectivity method is involved in this method After a long period the employees performance is evaluated The employees objective are not quantified In the process evaluation employee participation is not ensured

iv)

Inter Personal Relationship

It is consider the most important assets of an organization. But the human being is also considering the most volatile. In a place where people work together the relationship is build with the each other which lead to conflict and NBP is no exception. Most conflict is traced by NBP in the following heading: Lack of communication is the biggest reason for conflict.

v)

Diversity in Values

Another reason which is responsible for conflict is the perception of value, cultural background and life style.
39

vi)

Discipline & Authority

discipline and

The key success of any organization is depending on maintaining implementation of authority. In NBP this table is not strictly maintained.

3.21 Deposit Department of the Bank

These kinds of department perform and control the following activity i) Opening of an account in the bank ii) After the opening of account next the issuance of cheque book to customer iii) Either the opening of bank current account iv) Either the opening of saving account v) Cancelation of cheque vi) Cash

3.21.1 Account opening in a bank

The relationship between customer and banker start while opening a bank account. Before the opening of bank account the check the customer from different aspect such as customer integrity .its occupation , its financial position all detail are given at the time of opening an account .the bank investigate the following reason. To eliminate are avoiding from frauds Provide safe guard against unintentional overdraft To full detail about customer And lack of proper attention and care

Some other formalities are also check while opening a bank account
40

i) Proper application ii) Preface iii) Sample of a signature iv) Minimum require deposit v) Carrying the account Pay-In-Slip Book Pass book Issuing of cheque

i)

Customer Qualification

The banker and customer relationship is a contractual one. The customer has the following qualification. i) The customer is noise mind ii) The customer has the age of majority iii) The customer is which is not prohibit by law iv) Legally the agreement should be made v) Expressly not declare

a) Accounts types The main types of account are as under Individual Account Joint account Special type of account
41

i) Partnership account ii) The account of joint stock company iii) Society, club and association account iv) The Agents account v) The Trust account vi) Administrator and executive account vii) The account of Pak rupees nonresident account viii) Foreign currency accounts

3.21.2

Cheque Issuing

To account holder the bank issue the cheque book the basic requirement for issuing cheque Application slip must be signed by the account holder While at time of transaction the entry should be record in issuing cheque book.

3.22 Department Of Foreign Exchange

This department mainly perform function which is related with foreign business. The department main function is as under: i) Dealing in letter of credit ii) Dealing in foreign currency in foreign account iii) Dealing foreign remittance

42

i)

Dealing in Letter of Credit

In the area of transfer money beginning to offer to business customer the wide range of transfer money. Letter of credit is essential for commercial enterprises it is the best way to do your business transaction.

ii)

Dealing Of Foreign Currency Account

This account mainly deal with currency which include euro, dollar account etc.

iii)

Dealing Of Foreign Remittance

Foreign remittance is the main function of this department.

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Chapter # 4

SWOT ANALYSIS

4.1 Introduction
SWOT analysis is the abbreviation of S stand for strength , W stand for weaknesses , O stand for opportunities and T stands for threats .SWOT analysis carefully assess the value of an organization strength and weakness related with internal position of an organization and environment. opportunities and threats related with organization external

It is a situational analysis which consists on strengths, Weaknesses, opportunities and threats which affect the organizational performance. The overall evolution of a company strengths, weaknesses, opportunities and threats is called SWOT analysis.

It is a best strategy to develop organization mission by 1. 2. 3. Explore the organizations opportunities and threats Naturalizing it threats. Avoiding ,correcting are eliminate the organization weaknesses

For formulating strategy SWOT analysis is one of the important step using the organization mission that clarify its meaning. Manager evaluates the value of internal strengths different competencies and weaknesses and external opportunities and threats. The main goal of every organization is to establish good strategies and exploit
44

opportunities and to enhance strengths neutralize threats and avoid weaknesses. In SWOT analysis identify the problem which is faced by an organization and its remedial action.

4.2 Strength
4.2.1 Oldest Institution
National Bank of Pakistan is one of the oldest banks of Pakistan therefore people have confident on that bank and hence its customer base is strength from the plus point as a customer and the additional value services as the privilege for the bank. It is the largest commercial bank in Pakistan with a network of over 1199 branches inside country and one subsidiary indifferent 17 countries.

4.2.2 Alternate Duties in SBP Absence

The National Bank of Pakistan performs additional services for its customer as well as for other banks in the absence of the state bank.

4.2.3 More Deposits than Other Banks

It is the important quality of a bank to have more deposits as compare to other banks. This is because of confidence which a customer have on bank. Due to this the NBP is the oldest bank in banking sector and enjoy this benefit over all others bank which have not by other banks.

45

4.2.4 Employee Benefits

The national bank of Pakistan provides different benefit for its customer. The bank offer two benefits on EID UL AZHA & EID UL FITAR .This additional benefit is given to motivate the employees.

4.2.5 Broad Network

Another advantage of the bank over his competitors is the broad bases of network branches which are spread in the country as well as outside country. Due to this the bank offers its services to its customer on time.

4.2.6 Strictly Followed Rules & Regulation

It is strength of national bank of Pakistan to follow rules and regulation strictly by their employees.

4.2.7 Professional Competence

The employees of NBP are highly professional and skilled with background in business administration, Banking and economic etc. These professional skills enable the employee to perform and understand the employee and carry his function effectively.

4.2.8 Healthy Environment

It has a pleasant working environment as compare to other to other bank branches in the area. There is very healthy environment for working which is increasing the employees performance.
46

4.2.9 Relation between Staff & Other Employees

There is a good relationship between managers and their employees. And manager is very cooperative with its customer as well to their customer. The manager helps the staff at time of critical situation. Highest profitability is also the strength of the branch. It deals almost all affairs in the government. NBP open different branches in different rural area to facilitate farmer. Offer 15 package advance salary given to needy people. National bank of Pakistan acts as agent of the state bank.

4.3
i)

Weaknesses of NBP
One of the weakness of national bank of Pakistan is that it not taken into deliberation to employee ii) Complaint of the customer is not taken into thought. It hampers the image of the bank. iii) During the hurry hours due to the lack of staff, clients wait for their role for long time. iv) v) Marketing efforts are not make to encourage the bank. General people didnt have the knowledge about the polices and new post of the national bank of Pakistan. vi) NBP is under the taking sides force.

vii) It is a nationalized bank, so the government manipulate is very much in the management of national bank of Pakistan.
47

viii) Discrimination and preferential treatment during selection, transfer, encouragement, and increments. ix) x) xi) No job revolution according to rules and regulation. The number of branches of NBP is diminishing every year. Poor quality counters service during the dash hours.

xii) Lack of scheme and projects to invest the money. xiii) Limited staffing and no adequate period of management. xiv) Irregular distribution of work. xv) No much utilize of computer as it is vital.

4.4

Opportunities

4.4.1 Electronic Banking

Due to the advancement of technologies the world is become a global village particularly the communication sector. More emphasize is to get the modern technology is to improve the performance. The national bank uses this technology to ensure the 24 hours on line banking service a day. Due to this the National bank has advantage over its competitors.

4.4.2 Micro Financing

In the field of micro financing there in the market a lot of opportunities available so for NBP to take step and adopt this system to fulfill the requirement of its customer. Other opportunities which are available are: Offer different services to its customer on time than competitor to get confidence of its customers due to this deposit will increase

48

and opportunities of advancing more loan and get profit. Due to this the financial position of bank increases from its competitors.

4.5

Threats

4.5.1 Emergence of New Competitors

The availability of competitors is the major threat for NBP specifically the foreign banks. Because the foreign bank has more financial power and have skilled employees this the bank takes the step to avoid this kind of threats. . For

4.5.2 Political Pressure by Elected Government

Now a day the power of political pressure in the country is affecting the performances of banks. The Bank give loan to the political members due to this the sense of insecurity develops.

4.5.3 Downsizing
The bank now a days take the step of downsizing which is threat of bank employees and they feel insecurity when they perform its work and job. Due to this it affect the overall performance of the employees as well as the bank

4.5.4 Customer Complaints

There is no specific system is to finish the complaint of its customers. Now days it is a time to satisfy the customer satisfaction. And the NBP take no action in this regard.

49

4.6 Competitive Analysis Porters five forces model:

The porters five forces model is widely used approach for competitive analysis this is because of the high extreme of competition among companies the main five competitive forces.

i) Rivalry among Competitive Firms:

In this competitive force the only company is successful when they provide competitive advantage over its competitors. It is a lowering price strategy and also has best quality series. NBP charging a very little amount on the service which they provide to its customer such as demand draft, telegraphy transfer , mail transfer and some other services to the customer and to the nation, because the NBP is a nation bank.

ii)

Potential Entry of New Competitors

When the entry of a new firms into a particular industries is easy the competition among firm increase. The entrance is restricted of a firm which have own tariff and patents etc. this type of market exist in Pakistan there are quality service and low charges is available. So there are no threats to NBP from potential entry it is a public sector bank because no new bank takes over on it.

iii)

Potential Development of Substitute Products

This is the factor which affects the competition. In this situation the substitute is available the product of that industry. For example the bank offering saving facility which is also
50

providing by the GPOs in Pakistan so they compete in the field. The bank offer the saving facility which is also provide by the GPOs. If the bank offers low rate of interest than GPOs that the people turn to GPOs instead of NBP. People prefer high interest so

why people deposit their deposits in saving account instead of current account. Another example is the ATM which is used as a substitution of presenting cheque at counter and cashes it. The NBP lacking in this field the bank need to improve this field to compete with its competitors.

iv)

Bargaining Power of Suppliers:

It is another force of porter five forces model the bargaining power effect the intensity of competition. There is the availability of large number of suppliers .In case of bank supplier is the customer because they supplies the money to the bank. The bank charge low charges from its customer. NBP is very good in this field. The bank cut low charges on remittance. So that is competition to other banks.

v)

Bargaining Power of Consumers:

When the customer is large in number and their volume are also large so it represents the major force to affecting the intensity of competition. So number of customer for bank is very high in Pakistan. The bank offer different services and product to its customers. The number of national bank is very high. Now it is the responsibility of NBP is to offer good product and services to their customer and to attract them. There is also the interest policy present which is also threat for national bank.

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Chapter # 5

Financial Ratio Analysis

Introduction
The financial analysis is varying according to the special interest of the analyst it always involves the use of different financial statement primarily the balance sheet and income statement .the balance sheet summarize assets, liabilities and owner equity of a business at for a specified period of time and income statement summarizes revenues and expenses over a particular period of time. The financial analysis provides the conceptual frame work for analyst with an interlocking means for structuring the financing.

5.1

National Bank of Pakistan Five Years Performances at

Glance
Table 2
years items Total assets Deposits Advances investment S/holder equity Pretax profit 2010 RS. 4718608 3955681 1609902 1661960 181341 90091 2009 RS. 4328035 3628663 1405471 1435253 142793 60453 2008 RS. 4150892 3496172 1703193 717592 119595 30166 2007 RS. 3716369 3164930 1403187 726091 113787 10231 2006 RS. 3504061 2947543 1225590 914861 103589 5204

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After tax profit Earnings per shr Return on assets No. Of branches No. of employs

41980 11.23 5% 1690 18972

22532 6.49 3.40% 1240 12195

11494 4.08 2.80% 1254 15163

4616 2.24 1.30% 1482 15351

318 1.21 01.20% 1441 15541

(Source Annual reports 1998, 2000, 2002, 2003)

It is much clear from the above table that the NBP performance is going higher and higher the total assets are increased as compare with previous years. The trend is upward if we drawn a graph. Profit is increase from year to year. The number of NBP branches decreases because of automation and large network of other bank. But now the NBP is in a position to compete with other bank and now it is consider one of the best banks of the year.

5.2

Ratio Analysis of the Bank

The financial analysis tells us the financial strength and weakness of the firm. In which develop the proper relationship between the balance sheet and the profit and loss account and making decision according to the organization for this the organization used a analytical tools. The financial analysts assess the financial condition and performance of business activity. This analytical tool which is used by management is called ratios analysis. It is varies according to the specific interest party. The purpose of analysis depends on the nature of analysis.
53

5.3

Those Parties Which Is Interested In Ratio Analysis

i) Trade Creditors

The trade creditor is the first party which is interested in the ratio analysis, because it is the firm ability to recover their claim as soon as possible.

ii) Suppliers of Long Term Debt

The second party is the supplier which is interested in the ratio analysis because is mainly concerned the survival and solvency of the firm. Analyze the firm ability to generate cash to pay interest. Long term creditors analysis the historical financial statement to make analysis about the future solvency.

iii) The Investors

Another party which is concerned with ratio analysis is the investor. Because the investor invests money in the firm share are most assess about the steady growth in earning. The investor mainly focuses on the analysis of the firm current and future profitability. They also focus in the firm financial structure of the level it effect the firm earning power and risk.

iv) Management
The next party which is interested is the organization and management is to see that how much successfully utilize the available resources or not and the financial position is sound are not.

54

So thus management employee financial analysis for the purpose of internal control and to provide what capital supplier seeks in financial condition and performance from the business and from internal control. The management needs to take financial analysis in order to control and plan effectively.

5.4

Ratio Analysis

The comparison between the two figures of balance sheet and income statement is called ratio.

55

5.4.1 Cash Ratio

This ratio is derived by dividing cash by current liability. This ratio is tells us that the cash is enough for the payment of current liabilities or not. The formula of cash ratio is Cash ratio= cash/ current liability Table 3 year Cash ratio 2010 0.134 2009 0.15 2008 0.22 2007 0.21 2006 0.19

Graph 1

Cash Ratios
0.25 0.2 0.15 0.1 0.05 0 2010 2009 2008 Cash Ratios 2007 2006 Cash Ratios

Explanation: It is clear from the above table & graph that the national bank of Pakistan is a better position in 2010 as compare to other years the bank has enough cash to meet their liabilities.

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5.4.2 Gross Profit Margin Ratio

The ratio shows the profit margin in sales/revenue. Formula for gross profit margin is: Gross profit/interest earned Table 4 years G/ profit margin 2010 51.9 2009 46.6 2008 39.67 2007 29.59 2006 28.9

Graph 2

g/profit margin
60 50 40 30 20 10 0 2010 2009 2008 g/profit margin 2007 2006 g/profit margin

Gross profit margin relates profit of the organization to its sale interest earned in case of bank. From the above calculation it is very much clear that the gross profit margin ration have upward trend which shows that how much they using their profit to earn profit. The profit of the firm relate to its revenue. It is the measure of the efficiency of the firms it tells us that how a firm uses its deposit to earn more revenue. From the above position that indicates the bank position is better than the previous year.
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5.4.3 Net Profit Margin Ratio

This ratio indicates the firm profitability of sales/interest received after taking consider all the income tax and expenses. The ratio calculation is: Net profit margin ratio= net profit after tax /interest earned. Table 5 years Net profit margin 2010 21.6 2009 3.18 2008 3.67 2007 1.55 2006 1.7

Graph 3

net profit margin

25 20 15 10 5 0 2010 2009 2008 net profit margin 2007 2006 net profit margin

Interpretation: From the above calculation it is much clear that the performance on NBP is very good. The trend is upward .it tells us a firms net income per rupee of revenue. In the above table in 2010 one rupees give as advance earn 21.6 rupees which is good. The NBP gives advances to the people at high margin which help them to earn more profit.

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5.4.4 Return On Equity:

This type of formula derived by profit after tax dividing by share holder equity. Return on equity compares net profit after tax to the share holder s equity. Dividing profit after taxation by share holders equity. ROE compares net profit after taxes to the Share holders Equity. It is calculated from the following formula: Return on equity= profit after taxes/share holder s equity Table 6 years Return on equity% 2010 23.1 2009 9.4 2008 6.55 2007 2.7 2006 0.2

Graph 4

return on equity
30 20 10 0 2010 2009 2008 return on equity 2007 2006 return on equity

Interpretation: from the above calculation it is clear that the ratio is upward trend of NBP. It is because that NBP get high profit. It tells us the earning power on the share holders investment. Ratio has an upward trend of NBP. It is because of high net profit they have earned. It tells us the earning power on the shareholders investments. It is because of high investments by NBP and effective expense management.

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5.5.5 Return On Assets:

This ratio shows the efficiency of an organization that how an organization utilizes their assets to earn more profit as compare to other organization. This ratio relates profit to assets. The ratio is calculated as: Table 7 Years Return assets % 2010 on 0.9 2009 0.52 2008 0.23 2007 0.12 2006 0.01 Profit after tax/total assets

Graph 5

return on assets
1 0.8 0.6 0.4 0.2 0 2010 2009 2008 return on assets 2007 2006 return on assets

Interpretation: the above calculation indicates that that the national bank utilizes its assets very efficiently in 2010 as compare to other years. In 2010 the profit earnings ratio is high as compare to 2009. It indicates that NBP is in a better position.

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5.5.6 Investment Deposit Ratio:

This ratio indicates the comparison of investment and deposits. This ratio is calculated as: Investment deposit ratio= investment/deposits Table 8 years Investment deposit ratio % 2010 42.01 2009 39.66 2008 20.54 2007 22.94 2006 31.03

Graph 6

investment deposit ratio

50 40 30 20 10 0 2010 2009 2008 investment deposit ratio 2007 2006 investment deposit ratio

Interpretation: from the above table it is much clear that NBP are using their deposits very efficiently, and earning high profit. This ratio is upward trend, which show the performance of NBP is very good. Now it is the confirmation from top management to invest 35% of its deposits. This may reduce its profit. But can be fruitful in long term.

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5.4.7 Debt to Equity Ratio:

This ratio shows the amount contributed by creditors and shareholders. This ratio shows that up to what extent the firm takes loan and uses this loan. The ratio is calculated from the following formula. Total debt/share holder equity Table 9 years Debt 2010 to 24.5 2009 28.6 2008 22.7 2007 20.9 2006 30.4

equity ratio %

Graph 7

debt to equity ratio

40 20 debt to equity ratio 0 2010 2009 2008 debt to equity ratio 2007 2006

Interpretation: The above table indicates that the efficiency of NBP is increase and high. In the year 2006 the debt ratio is high which is not good but it decrease in continuously in other years which is a good sign for Bank. Because the creditors are happy in low ratio. Due the low ratio the fire s financing in high level which is being provided by the share holders.

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5.4.8 Debt to Assets Ratio:

The above ratio helps us that up to what extent the organization are financed from debt. The calculations are as under: Total debt /total assets Table 10 years Debt 2010 to 0.96 2009 0.94 2008 0.90 2007 0.94 2006 0.95

assets ratio%

Graph 8

debt to assets ratio

1 0.95 0.9 0.85 2010 2009 2008 debt to assets ratio 2007 2006 debt to assets ratio

Explanation: We know that high the ratio of debt higher will be the rate of risk and lower the ratio of debt lower will be the rate of risk. From the above calculation it is clear that first of all the debt ratio is high then decrease and then again high. Which indicate the high risk involve in the organization. Debt to asset ratio serves comparable function to debt to equity ratio. May be the ratio is high due to the depositing ratio is high because the deposits is the obligation of customer on bank.

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5.4.9 Ratio of Advance Deposits:

This ratio indicates that how much proficiently the bank advances the deposited money to the borrowers. Calculation of Advances deposit ratio: Advances/deposits Table 11 years Advances deposit ratio% 2010 0.50 2009 0.39 2008 0.49 2007 0.45 2006 0.42

Graph

advance deposit ratio

0.5 0.4 0.3 0.2 0.1 0 2010 2009 2008 advance deposit ratio 2007 2006 advance deposit ratio

Explanation: From the above it is clearly identified that the ratio of advances in 2010 is high as compare to other preceding years. This is good sign for the bank because it shows the efficiency of the bank that he advances the deposits in efficiently manner. Due to this the banks increase their profitability.

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5.4.10

Ratio of Assets Turnover:

The connection of net sales /revenue to total assets is known as the total assets turnover ratio. The formula of assets turnover ratio is as: revenue/total assets Table 12 years Asset t/o ratio % 2010 1.09 2009 0.10 2008 0.08 2007 0.08 2006 0.09 Assets turnover ratio= total

Graph 10

asset turn over ratio

1.2 1 0.8 0.6 0.4 0.2 0 2010 2009 2008 asset turn over ratio 2007 2006 asset turn over ratio

Explanation: This ratio indicates the efficiency of an organization that how he will utilize their assets to earn revenue. It is clear from the above ratio that the ratio in 2010 is high as compare to other preceding years which indicates that the organization in a good position in efficiently utilize their assets to generate more revenue.

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5.4.11 Earning To Price Ratio:

The ratio indicates the relationship between the original price per share and the earning price per share. It is calculated as Price to earnings ratio: original price per share/ earnings per share Table 13 years Price to earnings ratio% 2010 0.98 2009 1.7 2008 3.30 2007 3.2 2006 11.23

Graph 11

earning to price ratio

12 10 8 6 4 2 0 2010 2009 2008 earning to price ratio 2007 2006 earning to price ratio

Explanation: it is much clear from the above table & graph that the ratio decrease tremendously it is because that of the reason that earnings per share increase due to decreasing in price to earnings ratio.

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5.4.12 Dividend Yield Ratio:

Projected annual dividend divided by the market price of the stock. The calculations of this ratio are as under: Dividend yield: total dividend /market piece

Table 14 years Dividend yield% 2010 0.25 2009 2.56 2008 1.73 2007 3.42 2006 2.5

Graph 12

dividend yield
4 3 2 1 0 2010 2009 2008 dividend yield 2007 2006 dividend yield

Explanation: from the above calculation it is much clear that the dividend is increasing in 2006 & 2007 but after this it decreased due to high market price and low dividend. In 2007 is far better as dividend yield is concerned, it is due to the amount of number of shares outstanding decreasing.

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Chapter # 6

MY INTERNSHIP PROGRAME

6.1 Introductions
My work activity at the bank branch: Under my internship program at main branch of NBP SWABI. I have performed different activities which are as under: i) Account opening ii) Deposits iii) Withdrawals iv) Issuance of cheque book v) At counter vi) Recording of voucher vii) Recording of pensions viii) Clearing department ix) Remittance department x) Bills collection department xi) Sequence of cheques

6.2 Department Of Account Opening

My first activity in the bank is opening an account .i gain the practical knowledge about bank account. This department duty is to open current account, saving account .fixed deposit account the customer categorized under the following heading:

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i) ii) iii) iv) v)

Individual account Joint account Company account Staff account Others account

6.3 Opening an Account:

First of all a customer want to open an account with bank need them to fulfill a prescribed form by the bank. For opening an account the person is required to bring some references. Introducer may be the person who has account in the banks. Some important information is the name and account number the person is written on the space provided in the specimen signature card. Then after that find out whether it a true person or not. One of my activities to fill the account form when a person comes in the bank for opening an account he fulfills some requirement about the account opening. First is required himself to introduce .require nation ID card. Then two photos required. Next of kin ID card. To find out whether the customer is the govt. servant are not. To verify the customer ID card through NADRA verification software .it tells us whether the id card is correct are not .when all the requirement are fulfill .Then application form is filled for customer.

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6.4 Deposits
The following procedure is under taking upon receiving deposit from customers:

i)

While take deposits from customer it is clearly ensure that the name and account number are clearly identified

ii) iii) iv)

To verify the amount this is agree with total amount on the deposits slip. The pay in slip gives to the customer for bank transaction. The last the cheque is signed by directors, partner or employees of a company after each transaction the bank credit the customer account.

6.5 Withdrawals:
Through cheque the amount is withdrawn of a customer from his account. The amount is only withdrawn from account where the account is opened in that bank .there is no permitted to any third party to withdrawals the amount of cheque .During banking hours all the deposit and withdrawn transaction are made.

6.6 Issuance of Cheque Book:

Another activity which I performed is the issuance of cheque book. After two weeks of account opening we give a cheque book to account holder. I also give a new cheque book to old account holder. If account holder wants a new cheque book before giving a new cheque book verify his signature. The presence of account holder is necessary to get a

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new cheque book. If in case a cheque book is given to third party the following procedure should be followed:

i) ii) iii) iv)

The account holder gives the authority letter to third party. In this letter the account holder verify the signature of the third person. To verify the signature of the third person by the manager. And thus the bank gives a new cheque book to the account holder.

6.7 At Counter:
My activity which I performed at counter I spend two weeks in the counter. In counter my duty is to fill the demand draft (DD) slip. It drawn by a bank on its branch which is situated in other area. I fill the DD form for admission at that time .it includes writing the branch name in the demand draft is drawn. The charges of a draft are Rs.25 for students and Rs.50 for others.

6.8 Recording of Voucher:

Recording of a voucher is also an important activity which I perform. People who bring voucher of any tobacco for clearance the certain provision of document are necessary for recording of that voucher: i) ii) NIC OR written proof.

If a person doesnt have their ID he should be bring written proof from Tobacco Company.
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6.9 Recording of Pension:

Another activity which i performed during my internship is the recording of pension. The pension related both from the army retired employees and railway retired employees is recording in the pension book.

6.10 Clearing Department

I have worked for two weeks in this department .The main branch receive cheques from its entire branch and makes the lot of this cheque again. The NBP sends all these cheque to state bank where clearing house is exits. The representative receives the cheques in the clearing house and sends this cheque to their relevant branches where the validity of these cheques is verified and the accounts of the relevant clients are affected. This procedure is completed within two days.

6.11 Remittances Department

I have worked in this department for one week. The main function of this department is the transfer of money from country to country and from one place to another place. For this the bank uses the following documents: i) ii) iii) Demand drafts Transfer of mail Telegraphic transfer

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6.12 Collections of Bills Department

I spent one week in this department. Here I collected utility bills, electricity bills, water and telephone bills etc.

6.13 Sequence of Cheques

Another activity which I performed is the sequence of cheques. Early in the morning when I reached to the bank starting work which I performed is to series all the cheques which remain in previous day in the bank. I perform this task very successfully. Some other activity is to filling the advance salary form and making a tea one day.

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CHAPTER # 7

RECOMMENDATION AND SUGGESTION

7.1 Introduction
Although National Bank of Pakistan is included in the top ten most banks of the world equity as well as assets wise. For further improvement I recommend to the bank in various sectors as follows:

7.2 Planned and Healthy Competitions:

The national bank of Pakistan needs to understand about its competitors and make plan to compete with these competitors efficiently and effectively. And work more than competitors do.

7.3 To Establish A Research Cell:

The national bank of Pakistan need to establish research sell because it necessary to get information about the present action about its competitors for the expected future action. So in this way the successful strategy can be formulated. And make easy to compete with other banks.

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7.4 National Bank Reward System

National bank need to adopt strong reward system as compare to its competitors. The NBP need to give the special incentive and packages to its employees. Due to this the employees work hardly for the best interest of the organization and thus organization achieves its goals efficiently. So the bank needs to keep his employees happy. i) The NBP need to immediately rehabilitate the personnel policies. Through newspaper advertisement selection should be made. In this way the more intelligent and qualified staff should can be formulated. Due to hiring the qualified staff the bank achieves its objective successfully. ii) Strongly recommended that NBP should use the computerization system rather than manual system. The manual system is very slow and time. It is a consuming process. The NBP still not commonly used the computerized system but the private banking system used computerized system to going on line banking service to satisfy his customer. iii) Government should need to taken to keen interest to recover its bad debts to improve its financial position. Before giving any loan to customer it should ensure that the financial position of that customer is sound .And has the ability to repay the debts on time. Bank does not loan given to those person which is not good. iv) The training should be given to all the bank staff as well as the bank officers. The NBP mainly use the manual system so for that the training helpful for the staff and this way the employees get successful training and to improve his duty.
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v)

The National Bank of Pakistan using the training program to improve the efficiency of its officer. But the NBP not uses this program permanently instead of improving the efficiency of officers is just a burden for the bank in the shape of heavy T.A., D.A. and cost.

vi)

The bank needs to improve the working condition for his employees. If the banks expend some money on the working environment it will help the benefit of the bank. Because the friendly environment keep with their

employees help to improve the productivity of the employees. So the bank needs to create the friendly environment with their employees. vii) NBP need to increase the marketing plans to attract the customer by giving them incentives and different packages to its customer other than competitors do. When the employees and customer are happy the bank efficiency towards profit earning also increases. viii) There is also required a proper selection and recruitment program. The new qualified staff should be hired which introduce new ideas. ix) The NBP need to give promotion on the basis of merit instead of on the basis of seniority. x) The bank employees should be given a positive attitude towards its customer it is necessary because if the customer is happy from the employees attitude and behavior then the customer coming in the bank happily. Due to this the customers of the bank increase. xi) In NBP there are some employees which work on temporary basis. Therefore they should need permanent employees instead of temporary employees.

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xii) xiii) xiv)

The Bank need to eliminate the political instability. To give regular bonuses and incentive to motivate the employees of the bank There should be develop the friendly environment among the employees it enhances the trust and sincerity among the employees.

xv) xvi) xvii)

The bank needs to give attention towards the share of traveler cheque. The recruitment policy should be transparent and fear. In the field of selling the branch manager should be trained to serve better according to the customer expectation.

xviii) The Bank management should increase the branch limit expenditure to attain or fulfill the necessary expenditure of personnel relation.

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Bibliography
i ASRAR H SIDDIQUE, (1983) Practice and law of banking in Pakistan; third addition, Royal book Co. Karachi. ii AVASHTI, & SHAIRAN, (1983) public Administration; sixth addition, New York: MCGRAW Hill Book Company. iii K. K Dewitt, (1984), modern economic theory, 4rth addition south western publication company, Dallas. iv CHHABRA SHERMAN, (1983) Human resource managing , 7th addition South Western publication company v CHHABRA T.N (1985), Principles & practice of management; Delhi, D.R printing services. vi Daryl R. Conner, (1986), Managing organizational change dangers and opportunities report, O.D resources, Inc, Atlanta, GA. vii King David, (1987), Money and Banking; London; Edward Arnold press. viii Lusk Edward J. (1979) Financial and management control, A Health care perspective; USA, Aspen System Corporation. ix Edwin, b. FLIPPO, (1976), Principles of personnel management; McGraw Hill Co. Tokyo. x Grant smith, Personnel administration and industrial relations, third addition Lung King tong company limited Hong Kong, 1984, page 349. xi FRED LUTHENS, (1985) Organizational behavior; editions N.R McGraw Hill Company. xii Greenly Gordon. (1989), Strategic management; UK McGraw Hill Book Company.
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Annexure - 1
Management Members at NBP Main Branch SWABI Name designation organization

Mr. NAEEM MAYAR Mr. QURBAN BADSHAH Mr. ZULFIQAR Mr. QAISER SHAH Mr. SHAH MUHAMMAD

Branch manager Manager Operation

NBP SWABI NBP SWABI

Incharge clearing & collection deptt.NBP SWABI Incharge credit department Incharge govt. department NBP SWABI NBP SWABI

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