TABLE OF CONTENTS
Table of Contents....................................................................................................................1 Objectives of Studying the Organization.................................................................................5 Brief History of National Bank of Pakistan...............................................................................6 Nature of National Bank of Pakistan........................................................................................9 Business volume of National Bank of Pakistan......................................................................11 Branch Network of National Bank of Pakistan........................................................................15 Number of Employees of National Bank of Pakistan..............................................................17 Product Lines.........................................................................................................................18 Deposits.............................................................................................................................19 Current Deposits.............................................................................................................19 PLS Saving Deposits........................................................................................................20 Fixed Deposit Account (Time Deposits)...........................................................................21 Foreign Currency Account...............................................................................................21 NBP Premium Aamdani...................................................................................................22 National Income Daily Account (NIDA)............................................................................22 Advances............................................................................................................................24 NBP Saibaan....................................................................................................................24 NBP Advance Salary........................................................................................................25 NBP Cash & Gold.............................................................................................................27 Students Loan Scheme...................................................................................................27 NBP Karobar- President’s Rozgar Scheme.......................................................................27 Corporate Advances...........................................................................................................31 Cash Finance...................................................................................................................31 Running Finance/ Overdraft............................................................................................31 Demand Finance.............................................................................................................31 Remittances.......................................................................................................................32 Demand Drafts................................................................................................................32 Travelers Cheques..........................................................................................................33 Letter Of Credit ..............................................................................................................33 Foreign Remittances ......................................................................................................34 Swift System...................................................................................................................34 Mail Transfer...................................................................................................................35 Telegraphic Transfer.......................................................................................................35
Page |2 Pay Order........................................................................................................................35 Miscellaneous.....................................................................................................................36 Lockers............................................................................................................................36 NBP Cash Card................................................................................................................36 International Banking......................................................................................................37 Organizational Structure of National Bank of Pakistan..........................................................38 Board of Directors..............................................................................................................38 Senior Management...........................................................................................................41 Corporate & Investment Banking Group..........................................................................43 Compliance Group...........................................................................................................45 Islamic Banking Group....................................................................................................46 Treasury Management Group..........................................................................................47 Credit Management Group..............................................................................................49 Audit & Inspection Group................................................................................................50 Human Resource Management & Administration Group.................................................52 Information technology group.........................................................................................53 Financial control Division................................................................................................54 Overseas Coordination & Management Group................................................................55 Commercial & Retail Banking Group .............................................................................56 Special Assets Management Group.................................................................................57 Employee Benefits, Disbursements & Trustee Division...................................................58 Core Banking Application................................................................................................60 Operations Group............................................................................................................61 Provincial & Regional Management....................................................................................62 Branch Management..........................................................................................................63 Organizational (Management) levels at NBP.........................................................................63 Top Managers.....................................................................................................................64 Middle Managers................................................................................................................64 First Line Managers or Lower Level Management...............................................................65 Non Managerial Employees................................................................................................65 Hierarchy of National Bank of Pakistan..................................................................................65 Organization Structure of the Branch....................................................................................66 Centralized Decision Making..............................................................................................67 Downward Communication................................................................................................67 Chain of Command.............................................................................................................68
Page |3 Authority and Responsibility...............................................................................................68 Delegation..........................................................................................................................69 ...........................................................................................................................................69 Departments of the Branch...................................................................................................69 Clearing House Department...............................................................................................70 Remittance Department.....................................................................................................74 Account Opening Department............................................................................................76 Cash Department...............................................................................................................77 Deposits Department.........................................................................................................79 Advances Department........................................................................................................80 Computer Department.......................................................................................................82 Online branches..............................................................................................................82 Batch Branches...............................................................................................................82 Manual Branches.............................................................................................................82 Pension Disbursement Department....................................................................................84 Accounts Department........................................................................................................84 Structure of Branch’s Accounts Department.........................................................................86 Bank Accounting Operations.................................................................................................90 Role Of CFO (Chief Financial Officer).....................................................................................92 Use of Electronic Data in Decision Making.............................................................................96 Information System Resources of NBP...............................................................................97 People Resources............................................................................................................97 Hardware Resources.......................................................................................................98 Software Resources........................................................................................................98 Data Resources...............................................................................................................99 Network Resources.........................................................................................................99 Sources of Funds...................................................................................................................99 Generation of funds.............................................................................................................102 Allocation of Funds..............................................................................................................107 Critical Analysis (Theory vs Practical) .................................................................................111 Balance Sheet.....................................................................................................................113 Income Statement...............................................................................................................114 Financial Statements Analysis.............................................................................................115 Ratio Analysis...................................................................................................................116 Profitability Ratios.........................................................................................................117
....................................................................................................................................................................................................131 Horizontal Analysis............127 Capital Adequacy Ratios...............................................................................................................................................................177 Conclusions.........................................................................135 Horizontal Analysis of Income Statement...................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................180 Recommendations.................................................146 Vertical Analysis..............144 ................153 Vertical Analysis of Balance Sheet...............................................163 ......................................................................................................146 ..................175 Short falls/ Weaknesses of National Bank of Pakistan....................................130 Operating Performance Ratios.165 Bank Analysis with refernce to commercial Banks listed on stock exchange......134 Horizontal Analysis of Balance Sheet...........................154 Vertical Analysis of Income Statement..................................................................................................................................................................123 Debt Ratios......172 Future prospects of National Bank of Pakistan............................................................................181 References..............................................................................................................................................................................................Page |4 Liquidity Ratios..................................................................................................................183
To familiarize with the different departments in the organization and their functioning. analyze and interpret the relevant data competently and in a useful manner. As an internee I want to achieve following objectives during my internship and organization study: 1.
I was also keen to gain professional experience in an actual testing environment. 8. This internship is also very necessary to gain confidence and become aware of the mechanism of an organization. 11.Page |5
OBJECTIVES OF STUDYING THE ORGANIZATION
The primary purpose of this study is to fulfillment of the requirements for the degree of MBA (Banking & Finance). 2. To relate theory with practice. The secondary purpose of this internship is to understand how the theoretical knowledge can be applied to the practical situations and examine an organization’s financial issues and identify its opportunities/ problems and also suggest corrective measures. To enable myself to understand how the key business process are carried out in organization. To familiarize with a business organization. To observe. To enhance my learning experience by application of fundamental concepts previously learned.For this connection each student of this particular course is required to undertake training in a relevant organization selected by them. 5. for a period of 6-8 weeks. I want to develop my skills in the application of theory to practical work situations. 4. To understand how information is used in an organization for decision making at various levels. 10. 3.
6. To acquire good work habits and sense of responsibility.
. 7. To develop my attitude conducive to effective interpersonal relationships.
The bank in collaboration with the cotton board provided the necessary Credit facilities to the trade and the crisis was tided over. I want to enhance my knowledge of the discipline of banking administration. the country was once again faced with a crisis in the cotton trade when prices was crashed and touched the lowest level since independence following the cessation of hostilities in Korea. The National Bank of Pakistan came forward to establish its offices in the Cotton growing areas and extended credit facilities liberally in order to restore stability to the market.1 The National Bank of Pakistan has its headquarters in Karachi. National Bank of Pakistan was established on November 9. The Bank’s Karachi and Lahore offices were subsequently opened in December 1949. The Bank commenced its operations from November 20.
BRIEF HISTORY OF NATIONAL BANK OF PAKISTAN
The history of National Bank of Pakistan is part of Pakistan’s struggle for economic independence. The Bank acts as the agent to the State Bank of Pakistan for handling Provincial/Federal Government Receipts and Payments on their behalf. In 1951. East Pakistan and directed its resources in financing of jute crop. which has expanded through the years as diversification took place. 1949 at six important jute centers in the then. The normal procedure of establishing a banking company under the Companies Law was set aside and the Bank was established through the promulgation of an Ordinance. To
develop my interpersonal communication. The Bank has also played an important role in financing the country’s growing trade. The nature of responsibilities of the Bank is different and unique from other banks/financial institutions. the bank also provides services as trustee to National Investment Trust (NIT) including safe custody of
. The bank operates 1249(2008) branches in Pakistan and 22(2008) overseas branches.Page |6 12. 1949 in order to cope with the crisis conditions which were developed after trade deadlock with India and devaluation of Indian Rupee in 1949.
13. Under a trust Deed. Initially the Bank was established with the objective to extend credit to the agriculture sector. Pakistan. 1949 under the National Bank of Pakistan Ordinance. due to the crisis situation that had developed with regard to financing of jute trade.
It has been the recipient of The Bank of the Year 2001. NBP will confer annual awards to the best books in Urdu and in all prominent regional languages published during the defined period. in terms of institutional restructuring. In 2002 the Bank signed an agreement with Western Union for expanding the base for documented remittances.2 National Bank of Pakistan is today a progressive. public transport scheme.
. For the promotion of literature. A number of initiatives have been taken. to enhance business and cater to the different segments of society. The Bank has expanded its range of products and services to include Shariah Compliant Islamic Banking products. This project introduces technology based system to handle inward remittances efficiently. efficient. It has provided generously to philanthropic causes whenever the need arose. Global Finance. and customer focused institution. NBP Saibaan. 2006 and 2007. in policies and procedures. These include NBP Karobar. adoption of Capital Adequacy Standards under Basel II framework. The Bank is also the largest sponsor of sports in Pakistan. NBP recently initiated the Annual Awards for Excellence in Literature. self employment scheme for unemployed persons. Some schemes have been specifically designed for the low to middle income segments of the population. the Best Foreign Exchange Bank –– Pakistan for 2004. business and industries. administrator to Qarz-e-Hasna loans to students. in internal control systems with special emphasis on corporate governance. The National Bank of Pakistan has assets worth Rupees 737976. Patronage from NBP would help creative work in the field of literature. 2008. by ensuring that the Bank's branches keep a track of the remittance received from abroad till its final receipt. in the up gradation of the IT infrastructure and developing the human resources. 2005.44 million on September 30. and NBP Cash n Gold. changes in the field structure.Page |7
securities on behalf of NIT. It has taken various measures to facilitate overseas Pakistanis to send their remittances in a convenient and efficient manner. National Bank has earned recognition and numerous awards internationally. It has developed a wide range of consumer products. NBP Advance Salary. 2002. The National Bank of Pakistan has implemented special credit schemes like small finance for agriculture. 2004 and 2005 Award by The Banker Magazine. NBP Kisan Dost. More recently it has started Electronic Home Remittances Project.
It also undertook Government Treasury operations. At separation of East Pakistan NBP lost its branches there. 1957 NBP established a branch in Baghdad.
. • • 1967 The Tanzanian government nationalized the Dar-Es-Salaam branch. Kisan Time Awards – 2005 for NBP's services in the agriculture field. one in Karachi and one at Chittagong.-owned. The Asian Banker. It has also been presented a Recognition Award –– 2004 for having a Gender Sensitive Management by WEBCOP AASHA besides other awards. 1947 by the former Bahawalpur State • • • • • 1955 By this time NBP had branches in London and Calcutta. Offices in Karachi and Lahore followed. 1962 NBP established a branch in Dar-es-Salaam.3 The precise summary of National Bank of Pakistan regarding its countrywide and overseas operations is as fallows: • 1949 National Bank of Pakistan (NBP) was established under the National Bank of Pakistan Ordinance 1949 and was 100% govt. Global Finance. 1971 NBP acquired Bank of China's two branches. NBP acted as an agent of the Central Bank wherever the State Bank did not have its own Branch.Page |8
Best Emerging Market Bank from Pakistan for the year 2005. 1964 The Iraqi government nationalized NBP's Baghdad branch. • • 1950 NBP established a branch in Jeddah. 1965 The Indian government seized the Calcutta branch on the outbreak of hostilities between India and Pakistan. The Bank in 1950 had one subsidiary ‘The Bank of Bahawalpur’ on December4. Tanganyika. Saudi Arabia. Its first branches were in jute growing areas in East Pakistan. It is listed amongst the Region's largest banks and also amongst the largest banks in South Asia 2005. NBP merged with Eastern Mercantile Bank and with Eastern Bank Corporation. Iraq.
249 (2007:1. Turkmenistan commenced operations. which has expanded through the years as diversification
. The bank also handles treasury transactions for the Government of Pakistan as an agent to the State Bank of Pakistan for handling provincial/Federal Government receipts and payments on their behalf. Kazakhstan. 2005 NBP closed its offshore branch in Cairo. 1994 NBP amalgamated Mehran Bank (est.232) branches in Pakistan and 22 (2007:18) overseas branches (including the Export Processing Zone branch.Page |9
1974 The government of Pakistan nationalized NBP.
NATURE OF NATIONAL BANK OF PAKISTAN
National Bank of Pakistan was incorporated in Pakistan under the National Bank of Pakistan Ordinance. The bank is engaged in providing commercial banking and related services in Pakistan and overseas.
• • • • •
1977 NBP opened an offshore brain Cairo. The National Bank of Pakistan has also played an important role in financing the country’s growing trade. of which NBP would own 45% and United Bank 55%. 1949 and is listed on all the stock exchanges in Pakistan. The bank operates 1.4 The nature of responsibilities of the Bank is different and unique from other banks/financial institutions. 1947). the bank also provides services as trustee to National investment Trust (NIT) including safe custody of securities on behalf of NIT. NBP and United Bank agreed to merge their operations to form Pakistan International Bank. 1997 NBP's branch in Ashgabat. 1991). 2001 State Bank of Pakistan and Bank of England agree to allow only 2 Pakistani banks to operate in the UK. As part of the concomitant consolidation of the banking sector. Under a Trust Deed. 2000 NBP opened a representative office in Almaty. Karachi). NBP acquired Bank of Bahawalpur (est.
2003 NBP received permission to open a branch in Afghanistan.
rice. • • • • • • Generating. including technical assistance. promoting. Carrying on agency business for any description other than managing agent. of issue of shares and. term deposit and profit and loss sharing accounts. valuables. including entering into forward contracts of foreign exchange. project appraisal through long term/ short term loans. which include: • Accepting of deposits of money on current. Transacting guarantee and indemnity business. Providing personalized Hajj services to intending Hajjis. Advancing and lending money to its clients. etc. for safe custody. etc. Participating in “World Bank” and “Asian Development Bank’s” lines of credit. Joint venturing with foreign dealers. fixed. term finance and musharika certificates. selling.P a g e | 10
took place. Financing of seasonal crops like cotton. sugar cane. bonds etc. Receiving of bonds. on behalf of clients including Government and local authorities. Undertaking and executing trusts. undertaking.
. The bank is providing all banking services of mercantile and commercial banking permissible in the country. saving. etc. agents and companies for its representation abroad. dealing. wheat. • • • Borrowing money and arranging finance from other banks. etc. Financing of projects. • • • • Buying. tobacco.
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BUSINESS VOLUME OF NATIONAL BANK OF PAKISTAN
Rupees in Millions Year Total Assets Deposits Advances Reserves Investments
2004 553.822.07 5 10.26 0 139. To analyze the trend in these items the Horizontal analysis of each item is calculated.9 95
2007 762.4 35 340.350.231.1 00 15.939.047 170.09 6
2005 577.041 18.104.22.1687.907.719. advances. reserves and investments.686
2006 645.946.536.794.426.986.01 6 412.8 68
2008 817.7 11 501.4 06 13.46 7 465.2 43 316.758.32 6 624.602 268.71 7 220.132.872.787.12 4 210.838.985.772.914 149.86 5 19.
.941.779 13.4 91
Horizontal Analysis (%)
Total Assets Deposits Advances Reserves Investments
100 100 100 100 100 104 100 122 125 105 117 108 143 128 94 138 127 154 146 141 148 134 187 184 114
The business volume of National Bank of Pakistan is stated in terms of total assets. deposits.813.571.879.5 93 591.114 463.
A NALYSIS The deposits and other accounts of National Bank of Pakistan show a mixed trend during all years.
. The deposits are increased 27% & 34% in the years 2007 and 2008 respectively. There was an increase of 48 % in 2008 as compare to base year and 10% as compare to 2007.P a g e | 12
The Total Assets of National Bank of Pakistan fluctuates during all years as they show an increasing trend. In the year 2005. the deposits were increased very marginally. The year 2007 represents second highest percentage on account of total assets as it was increased to 38%. with the year 2006 represents an increase of 8%. The total assets are increased 4 % in 2005 and 17 % in 2006.
The reserves are increased 25 %.P a g e | 13
A NALYSIS The advances made by National Bank of Pakistan shows an increasing trend in all years as compare to base year. The advances were increased 22 % in the year 2005 and 43 % in 2006 as compare to base year. 28 % & 46 % in the years 2005.
. The year 2008 represents highest increasing percentage of 84% as compare to base and previous years. The reserves of National Bank of Pakistan fluctuate during all years as they show an increasing trend.
A NALYSIS The Banks’ reserves are banks' holdings of deposits in accounts with their central bank plus currency that is physically held in bank vaults (vault cash). This implies that National Bank of Pakistan is keener to advance money to lenders. 2006 & 2007 respectively. The year 2007 represents an increase of 54 % and 2008 represents highest percentage among all years that is 87 % as compare to base year.
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A NALYSIS The investments made by National Bank of Pakistan fluctuate during all years. The year 2006 indicates a decrease of 6% in investments. There was an increase of 5 % in 2005. The year 2007 represents an increase of 41 %. The investments are increased 14 % in 2008 as compare to base year.
. highest among all years. however investments are decreased 27 % as compare to the year 2007.
8 million accounts & Bank maintains its presence in all the major financial centers of the world through its 22 (2008) overseas branches and 5 representative offices. who control 40 zones and 15 single Branch zones headed by Zonal Chiefs. Bank has also a presence on the internet. Baku (Azerbaijan) and Almaty (Kazakhstan) to take advantage of the emerging opportunities in CIS countries. Of these. 12 corporate branches and 1249 domestic branches headed by Branch Managers. Presently the National Bank of Pakistan is divided into various Groups headed by SEVPs/EVPs. Bank is at the forefront in the acquisition and application of new technologies in every aspect of its banking facilities. The bank has 12 SWIFT local centers. Its field operations are controlled by 29 regions ( Annexed II) reporting to as many Regional chiefs. Today the Bank has more than 8. Apart from having a vast branch network. It has acquired leased telephone lines for on-line banking. three representative offices have recently been set up at Tashkent (Uzbekistan). The Bank has 12 Regional Computer Centers to cover various on-line and batch system requirements of branches and controlling offices. Bank is at the forefront in the acquisition and application of new technologies in every aspect of its banking facilities. The National Bank
. It has acquired leased telephone lines for on-line banking.P a g e | 15
BRANCH NETWORK OF NATIONAL BANK OF PAKISTAN
With the geographical development of its branches. Bank’s role Apart from having a vast branch network. the National Bank of Pakistan has been able to extend its services to a much larger number of Pakistanis all over the country.
5 The Branch network of National Bank of Pakistan is divided into following categories
• • • • • • •
ATM network ( Total ATMs 101 & Total ATMs machines 104) Domestic network ( 1249 Branches) Islamic network ( 5 Branches) Online network ( 156 Branches) Overseas network ( 29 Branches) Swift network ( 12 Branches) Customer Facilitation Centers (6 Customer Facilitation Centers)
. an Asset Management Company (a joint venture with NIB Bank & Fullerton Fund Management of Singapore). The Bank has representative offices in Beijing. The Head Office formulates and implements the strategic. It has agency arrangements with more than 3000 correspondent banks worldwide. NBP Capital Ltd. NBP Modaraba Management Company Ltd. NBP Exchange Company Ltd. currency circulation. Almaty. Kazakhstan. The branches' activities relate to the State treasury service. banking and financial supervision. and CJSC Bank. First Investment Bank and NAFA. United National Bank (UK). in London.P a g e | 16
of Pakistan has 156 online branches throughout the country. Tashkent. The Bank's organizational structure reflects the three levels at which it operates: international. and the analysis of economic and financial developments at the local level. The Bank has representative offices abroad. Chicago and Toronto. management and operational policies. The Bank's geographical organization consists of branches located in the regional capitals and in some provincial capitals. The Bank's joint ventures are. New York and Tokyo. payment system services. a number of officers are seconded as financial experts to Italian embassies and consulates. national and local. It has modernized its services by installing Automated Teller Machines (ATMs) called “CASH LINK” at selected branches. Its subsidiaries are Taurus Securities Ltd.
express or implied. an employee is any person hired by an employer to do a specific "job". where the employer has the power or right to control and direct the employee in the material details of how the work is to be performed. employees usually provide the labour. In most modern economies. Of the three factors of production. the term employee refers to a specific defined relationship between an
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Agriculture branches ( 825 Branches)
NUMBER OF EMPLOYEES OF NATIONAL BANK OF PAKISTAN
Permanent Temporary/ On Contractual basis Bank's own staff strength at the end of the year Outsourced Total Staff Strength 13237 842 14079 2350 16429
An employee may be defined as: "A person in the service of another under any contract of hire. Employees perform the discrete activity of economic production. Specifically. oral or written." 6An employee contributes labor and expertise to an endeavor.
In marketing. product may refer to a single item or unit. investment products.
The most precise definition of product is anything capable of satisfying needs. A product line is defined as “A group of products that are closely related because they function in a similar manner. which differs from those of customer. The National Bank of Pakistan offering for sale several related products individually. the word "product" has referred to anything produced. which represent most of the available work force in National Bank of Pakistan. The relationship between National Bank of Pakistan and its employees is usually handled through the Human Resource Management & Administration Group & Employees benefit disbursement & trustee division. which is commonly known as product lining. The economic or commercial meaning of product was first used by political economist Adam Smith.7 Since 1575.P a g e | 18
individual and a corporation. credit cards. the word has referred to "thing or things produced”. or any grievances that employee may have. a group of equivalent products. are sold to the same customer
. These trade Unions utilize their representative power to collectively bargain with the management of bank in order to advance concerns and demands of their membership. services and ideas. There are differing classifications of workers within National Bank of Pakistan. a product is anything that can be offered to a market that might satisfy a want or need. loans. and the disbursement of any benefits which the employee may be entitled. The consumer banking products include personal accounts. treasury products and many more. or client. these are: • • • Permanent Temporary / On Contractual Outsourced
The Employees of National Bank of Pakistan are organizing into trade unions. Since 1695. These groups handle the incorporation of new hires. a grouping of goods or services. In general usage. or an industrial classification for the goods or services. including tangible items.
with his meager annual income.9 Current Accounts/ Basic Banking accounts are opened. The Bank with its huge network of 1243 branches garners savings from both the rich and the poor in urban as well as rural areas. autonomous corporations. and customers are required to maintain a minimum balance. No profit is paid on the balances of current/basic banking accounts.
These are payable to the customer when ever they are demanded. Because of their nature. Because National Bank of Pakistan has a long heritage of trust and professional commitment. Even a poor farmer in a remote village.
. This is because Current Deposits may be withdrawn by the depositors at any time. and in all other cases where the accounts are to opened under the order of a competent court of law. firms etc. he incurs the obligation of paying all cheques etc. When a banker accepts a demand deposit. Any Pakistani citizen can open his/her account for any deposit scheme at any of its Branches strategically located throughout Pakistan. companies. on proper introduction and submission of required documents along with initial deposit prescribed from time to time. feels secure to safe keep his minuscule savings in National Bank of Pakistan. No balance maintenance condition is applied on basic banking account. Basic banking accounts are opened for an individuals (single or joint) only whereas current accounts are opened for individuals (single or joint) Charitable institution.P a g e | 19
groups. associations. The bank is authorized to deduct service charges (incidental charges) on current accounts levied through its half yearly schedule of charges. or fall within the given price ranges”. drawn against him to the extent of the balance in the account.
The National Bank of Pakistan offers to their clients a variety of Deposit Schemes with personalized services at competitive rates of interest. in case the average balance falls below the minimum balance as prescribed by the bank. educational institutions. these deposits are treated as current liabilities by the banks. are marketed through same types of outlets. and as such the bank is not entirely free to employ such deposits. Bankers in Pakistan do not allow nay profit on these deposits. provident and other funds of benevolent nature of local bodies. failing which incidental charges are deducted from such accounts.8 The followings are the main consumer banking products of NBP.
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PLS SAVING DEPOSITS
In Pakistan a Savings Deposits Account can be opened with a very small amount of money, and the depositor is issued a cheque book for withdrawals. Profit is paid at a flexible rate calculated on six monthly basis under the Interest Free Banking System. There is no restriction on the withdrawals from the deposit accounts but the amount of money withdraw is deleted from the amount to be taken for calculation of products for assessment of profit to be paid to the account holder. It discourages unnecessary withdrawals from the deposits. In order to popularize the scheme the SBP has allowed the Savings Scheme for school and college students and industrial labour also. The purpose of these accounts is to inculcate the habit of savings in the constituents. As such, the initial deposits required for opening these accounts are very nominal. 10NBP charge Rs.500 for opening of PLS Savings deposits. The silent features of profit and loss sharing and saving accounts of NBP are as fallows 1. These accounts can be opened by individuals in their own single or joint name. The PLS savings account can also be opened for provident fund or other benevolent funds of companies, firms, organizations, NGO’s and educational institutions. 2. PLS saving account can be opened with a minimum amount of Rs.500/- only 3. To share in the profit a minimum balance of Rs.500/- must be maintained in the account. The minimum balance on sixth and last of month will qualify for the profits. The profits will be calculated on the basis of monthly minimum balance for the periods of six months i.e. from January to June and July to December 4. The head office of NBP determines the profit or loss on PLS saving deposits and advice its branches the rate and time of distribution of these profits. 5. There shall be no restrictions on maintaining the maximum balance in PLS saving account. 6. On the first day of Ramzan each year the Zakat at the rate of 2.5% will be deducted from these deposits on the balance of that day. But if depositors affix an affidavit of Zakat
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deduction along with account opening form or he is a non-Muslim, no Zakat will be deducted from his account.
FIXED DEPOSIT ACCOUNT (TIME DEPOSITS)
The deposits that can be withdrawn after a specified period of time are referred to as Fixed or Term Deposits. The period for which these deposits are kept by the bank ordinarily varies from three months to five years in accordance with the agreement made between the customer and the banker. Profit/Return is paid to the depositors on all fixed or Time deposits, and the rate of profit/Return varies with the duration for which the amount is kept with the banker. By lending out or investing these funds, the bank earns more than the Profit/Return that it has to pay on them to the depositors.11 By giving an advance notice to the bank the deposit can be withdraw from the bank before the expiry of the period. Fixed deposit accounts have higher rate of interest as compare to other accounts. The rate of interest rises with the length of period and the amount of deposit. The bank grants to the depositor a fix deposit (FDR) which is not transferable to any other person. The silent features of fixed deposit account of NBP are as fallows 1. The PLS term deposit are opened for individuals in their own single or joint names, companies firms and other organizations. 2. The PLS term deposit receipt are issued for any amount. There is minimum or maximum limit or deposits in a single term deposit account. 3. PLS term depositors may be allowed some facilities against the security of these receipt credits, after making “Lien” on the relevant receipt and subject to recovery of service charges. 4. Under term deposit scheme the depositors not cease to earn the profit immediately, after the respective maturity date.
FOREIGN CURRENCY ACCOUNT
Government of Pakistan has introduced many important reforms in Foreign Exchange Control in the country since February, 1990, for the purpose of strengthening the Foreign Exchange Reserves. One of these reforms relates to foreign currency accounts, which can be opened in United States Dollars, Pound Sterling, Euro and Japanese Yen in any of the authorized branches
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of commercial banks throughout the country.12 Foreign currency accounts are opened, on proper introduction and submission of required documents along with an initial deposit prescribed from time to time. Rates of return on foreign currency deposits are subject to fluctuation as determined in accordance with State Bank of Pakistan directives and will be paid on six monthly basis whereas the return on term deposit/SNTD will be paid on maturity or as prescribed by SBP. The bank shall have no responsibility for or liability to the account holders for any diminution due to taxes imposed or depreciation in the value of funds credited to the account whether due to devaluation or fluctuation in the exchange rate or other wise.
NBP PREMIUM AAMDANI
NBP Premium aamdani is a retail product of the bank. The amount of investment required for this account is Rs. 20,000/-to Rs. 5,000,000.The investment period is 5 years. Zakat and withholding tax will be deducted as per rules. In NBP premium aamdani, the account holders have benefit of free demand draft, pay order; free cheque book and NBP cash card (ATM+Debit). The Financing facility is available up to 90% of the deposit value. 13 Profit paid every period as follows: Period 1st year 2nd years 3rd years 4th years 5th years Profit Rates 7.50% 8.50% 9.50% 10.50% 11%
a) NBP Premium Saver
NBP Premium saver is a retail product of the bank. The minimum saving balance of Rs. 20,001 and a maximum balance of Rs. 300,000 are required for opening a premium saver account. Two debit withdrawals allowed in a month and no limit on number of deposit transactions. The profit is calculated monthly and Paid on half yearly basis. Free NBP Cash Card (ATM + Debit) facility is available to account holder.14
NATIONAL INCOME DAILY ACCOUNT (NIDA)
The scheme of National income daily account was launched in December 1995 to attract corporate customers. It is a current account scheme and is part of the profit and loss system of
Profit is paid on half yearly basis on monthly balances.500.000 10.75%. the rate fluctuates from 1.000 9.the rate is 1.and above the rate is 1. the account will be converted to the ordinary PLS SB account for the purpose of calculating profit.000 4 38000000
• • • •
INCOME DAILY ACCOUNT
From Rs 2/.75 • It is a checking account and there is no limit of withdrawals. the rate is 1.000. that any depositor wishes to withdraw the amount and the balance in his account is less than the required amount.million but below Rs 1000/.000
10. Deposits in the NIDA accepted on the condition that the depositor shall always maintain a minimum balance as prescribed by the bank in his account. From Rs 500/. The rates of profit vary according to the slabs of deposit.4%.2 million to 2.million but less than Rs 500/-million.6%. On Deposits of Rs. An example of how the NIDA accounts are maintained is shown on the next page.
Date Description of Transaction C Debit (-) Credit (+) Balance Days Products
500.4 to 1.the rate is 1.
S ALIENT F EATURES
• • • Rs 2-million is required to open an account and there is no maximum limit. From Rs50/.million to Rs 50/.P a g e | 23
accounts in operation throughout the country.000 million.5%. In the event however.000. From Rs 1000/.
100.000 163.000 2.000.700 161.000 164.100.200.P a g e | 24
08/05/2008 11/05/2008 15/05/2008 18/05/2008 20/05/2008 22/05/2008 23/05/2008 25/05/2008 27/05/2008 31/05/2008 01/06/2008 06/06/2008 10/06/2008
Cash Transfer Cash Cash Cash Cash Cash Cash Cash Transfer Cash Transfer Cash
9. home renovation and purchase of land plus construction.510.000 5.000 78.000 160.000 81.000. It has different product items which are home purchase.909. If anyone has a Home Finance Facility outstanding with another bank he can have it transferred to NBP through a hassle-free process.
The NBP Saibaan is retail product of the bank.000. home construction.700
National Bank of Pakistan plays a pivotal role in translating the government's development plans in terms of growth in industrial.039.500.600. Accordingly the Bank has formulated its Credit Policy under the guidelines of SBP-the Central Bank of Pakistan.909.200.009.000.000 163.600.000 163.000 300 700.000
9.000 500.600.200.700 164.870.509.700 36. 15 A brief description of these products is as fallows
3 3 4 3 2 2 1 2 2 4 1 5 4
28800000 253800000 326400000 480600000 318400000 328400000 163500000 327020000 327019400 656038800 161909700 989548500 752158800
75. commercial and agricultural sectors in Pakistan.600.000 84.000.000 1.000 197.000 10.000 3.700 188.
Local & other bodies who are maintaining their Salary A/Cs at NBP..000/Employer will provide undertaking that borrower’s Salary and end of service benefits will route through his/her Salary A/C maintained at NBP during the tenure of the loan and his/her end of service benefits are at least equal to the amount of Advance Salary required.
. Its hassle free acquisition with no prior formalities and easy availability in a short turn around time is attributed as the most distinguishing features of the product.16 You can avail up to 20 net take home salaries with easy repayment installments.P a g e | 25
TYPE OF ADVANCE Home Purchase (House or Apartment) Home Construction Home Renovation Purchase of land Plus Construction
Financing Amount Rs. NBP Advance Salary.. Autonomous. 15 Million Rs. the leading personal loan product of the country. Semi-Govt. 490. 35 Million Rs. The terms and conditions of NBP Advance salary is shown on next page:
T ERMS & C ONDITIONS
Eligibility Repayment Maximum Loan Amount Security Permanent Employees of Govt. The product is offered countrywide. Direct deduction from Salary A/C Rs. 35 Million Rs. is maintaining its inimitability ever since it was launched. This was only possible due to its swift growth and remarkable loan disbursement of over 118 billion. Semi Autonomous.35 Million
Financing Period 3 to 20 years 3 to 20 years 3 to 15 years 3 to 20 years
Debt to equity Ratio 85:15 (maximum) 85:15 (maximum) 80:20 (maximum) 80:20 (maximum)
NBP ADVANCE SALARY
The NBP Advance salary has been the flag-ship product for NBP.
Max. at actual Your Salary disbursing NBP Branch. Repayment Period Advance in terms of # of net take home salaries Markup Rate Processing Fee Verification Charges Life Insurance Documentation Charges Contact Remaining Service Age Debt Burden Minimum net take home salary Three (3) Undated Cheques 5 years (60 months) Up to 20 net take home salaries 15 % (Based on diminishing balance method) 1% of Loan Amount Rs 500/No Insurance of any kind.P a g e | 26
Hypothecation of Consumer durables owned by the borrower. At the time of approval and disbursement the applicant’s remaining service age should be 6 months after maturity of the loan 50% no minimum take home requirement
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NBP CASH & GOLD
With NBP’s Cash & Gold, the customers meet their need for ready cash against their idle gold jewelry. The rate of mark up is 13% p.a. This product has following features17 • Facility of Rs. 7,000 against each 10 grams of net contents of gold • No maximum limits of cash • Repayment after one year • Only gold ornaments acceptable • Weight and quality of gold to be determined by NBP's appointed schroffs • No penalty for early repayment
STUDENTS LOAN SCHEME
Pursuant to the announcement made by the Federal Finance Minister in his 2001-2002 budget speech, a Student Loan Scheme (SLS) for Education was launched by the Government of Pakistan in collaboration with major commercial banks of Pakistan (NBP, HBL, UBL, MCB and ABL). Under the Scheme, financial assistance is provided by way of Interest Free Loans to the meritorious students who have financial constraints for pursuing their studies in Scientific, Technical and Professional education within Pakistan. The Scheme is being administered by a high powered committee comprising Deputy Governor, State Bank of Pakistan, Presidents of the commercial banks and representative of Ministry of Finance, Government of Pakistan. 18
NBP KAROBAR- PRESIDENT’S ROZGAR SCHEME
The solution of Pakistan’s major socio-economic problems primarily lies in the development and growth of small & micro businesses. These will not only provide employment opportunities to ever-growing population demand but will also become the catalyst for breaking the vicious circle of poverty. In this regard, NBP has developed a full range of Products under the President’s Rozgar Scheme with a brand name of “NBP KAROBAR”. The scheme will be offered to eligible
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young and literate citizens of Pakistan, falling within an age group of 18-40 years having a minimum qualification of Matriculation (except for females in the PCO/Tele-center product). The eligible borrowers will be required to make a down payment of 15%. Asset and Life & Disability insurances will be mandatory under this scheme. The 15% down payment will include 1st year’s asset insurance premium. However, the cost of life and disability insurance will be borne by GOP. The mark-up rate for the 1st year will be 12% and for the subsequent years it will be 1 year KIBOR + 2%. Fifty percent (50%) of this rate will be paid by the customer i.e. 6% and the balance of 6% will be borne by GOP. Additionally, first 10% of the losses under the scheme will be taken-up by GOP. Initially, under the President’s Rozgar scheme, NBP will offer following products: a) NBP Karobar Utility Store (under a Franchise with Utility Stores Corporation) b) NBP Karobar Mobile General Store (without USC Franchise) c) NBP Karobar Transport d) NBP Karobar PCO e) NBP Karobar Tele-center
NBP K AROBAR U TILITY S TORE
The product has been designed in collaboration with “UTILITY STORES CORPORATION OF PAKISTAN (USC)” to provide financing facility of an average amount of Rs.100, 000/- for a maximum period of five years with grace period of three months. This is available to all eligible citizens of Pakistan for setting-up small-scale Retail Outlet or Mobile Utility Store. The USC will give its franchise to qualifying Pakistani citizens. Following two financing options are available under this product:
1. NBP KAROBAR Utility Store (Shop)
The Financing facility is available to set-up a small scale Retail Outlet (Utility Store in a shop) for purchase of furniture & fixtures. This is also applicable on payment of security deposit / advance rent under franchise from the USC. However, stocks will be purchased by the customer.
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2. NBP KAROBAR Mobile Utility Store
Financing facility available to purchase a 2/3 wheeler, 4 stroke Petrol/CNG/LPG Vehicle (Auto Scooter / Motorcycle Rickshaw) with attached Loader body (Thehla type) under franchise from the USC to carry utility goods for retail sale ideally in areas where accessibility to conventional utility stores is difficult.
NBP K AROBAR M OBILE G ENERAL S TORE ( WITHOUT USC F RANCHISE )
This financing program has been designed on the similar pattern of Mobile Utility Store. The only difference is that the borrower will have the liberty of procuring stock/supplies/grocery items from open market. Under this product the average loan size of Rs.100, 000/- will be given for a maximum period of five years with a grace period of three months.
NBP K AROBAR T RANSPORT
The NBP Karobar Transport is designed to finance 2/3 wheeler, 4 stroke Petrol/CNG/LPG Vehicle (Auto Scooter / Motorcycle Rickshaw) to the eligible citizens of Pakistan for providing less expensive environment friendly transport facility. Under this product average loan size of Rs.100, 000/- will be provided for a maximum period of five years with a grace period of three months.
NBP K AROBAR PCO
This product is designed to finance setting-up a PCO. NBP will be providing financing for the purchase of Mobile/Wireless Telephone Set with connection, Credit Balance. The average amount of financing under this product will be Rs.5, 000/- for a maximum period of two years with a grace period of three months.
NBP K AROBAR T ELE - CENTER
This product is specially designed to finance setting-up a Tele-center. NBP will be providing financing for the purchase of Mobile/Wireless Telephone Set with connection, Computer, Printer and Fax machine cum Photocopier etc. to establish tele-center on a rented shop or owned premises. The average amount of financing under this product will be Rs.50, 000/- for a maximum period of two years with a grace period of three months.
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When it is against collateral securities it is called “Secured Overdraft” and when the borrowing customer cannot offer any collateral security except his personal security. When bankers allow loans to their
. When a borrower requires temporary accommodation his banker allows withdrawals on his account in excess of the balance which the borrowing customer has in credit. In order to offset this loss. This accommodation is generally allowed against collateral securities. the accommodation is called a “Clean Overdraft”. The main difference between a cash finance and overdraft lies in the fact that cash finance is a bank finance used for long term by commercial and industrial concern on regular basis. according to which the borrower has to pay markup/service charges on at least on self or one quarter of the amount of cash finance limit allowed to him even when he does not utilize that amount.
RUNNING FINANCE/ OVERDRAFT
This is the most common form of bank lending. produce or merchandise. while an overdraft is a temporary accommodation occasionally resorted to. the banker has to lose return on the un-utilized amount. In cash finance. The borrower prefers this form of lending due to the facility of paying markup/services charges only on the amount he actually utilizes. it is called a “loan”.
When a customer borrows from a banker a fixed amount repayable either in periodic installments or in lump sum at a fixed future time. because he has to pay service charges only on the balance outstanding against him. a borrower is allowed to borrow money from the banker up to a certain limit.P a g e | 31
This is a very common form of borrowing by commercial and industrial concerns and is made available either against pledge or hypothecation of goods. the banker may provide for a suitable clause in the cash finance agreement. If the borrower does not utilize the full limit. The borrowing customer is in an advantageous position in an overdraft. either at once or as and when required. and an overdraft thus occurs.
When a customer requests his banker to provide him with a banker’s draft. an order to pay money. As far as possible the banker’s draft should be crossed and it should never be drawn payable to bearer. payable to banker. and the borrowing customer has to pay interest on the entire amount. Banker’s drafts payable to order on demand are within the protection of Sections 10 and 131-A of the Negotiable Instruments Act. the person in possession of it cannot compel that bank to pay it. that is. are not cheques or bills.19
. Thus the borrower gets a fixed amount of money for his use. if a demand draft drawn on a bank by its own branch bears a forged endorsement. This application form should be signed by the purchaser or by those persons who have been duly authorized to act on his behalf. When a person requires a draft he should be asked to complete the prescribed application form in which he should state the amount of the draft. the bank is discharged by payment in due course”. drawn by one office of bank upon another office of the same bank for a sum of money payable to order on demand.
Drafts drawn by one branch on another branch or on the Head Office of same bank or vice versa. the name of the payee. The amount of loan is placed at the borrower’s disposal in lump sum for the period agreed upon.P a g e | 32
customers against collateral securities they are called “secured loans” and when no collateral security is taken they are called “clean loans”. and the place of payment. as these have no distinct drawer and drawee. he should enclose with his written request a cheque covering the amount of the required draft and other charges etc. purports to be issued by or on behalf of the payee. Section 85-A reads: “ Where any draft. while the banker feels satisfied in lending money in fixed amounts for definite short periods against a satisfactory security. However. the amount of which is to be debited to his account.
can purchase a Demand Draft form a bank. Letter of credit state the limit of the credit and the time during which it is held at the disposal of the grantee. Before issuing. speedy and reliable way to transfer money. the bankers receive an amount equal to the face value of the cheques. the paying banker must insist that the holder signs in his presence. Claused credit etc. Any person whether an account holder of the bank or not. Foreign currency travelers cheques are issued and encashed in accordance with the provisions of the Exchange Control Regulation Act. There are many kinds of letter of credit such as Revolving credit. If you are a commercial
. but they are neither negotiable nor transferable.21 NBP is committed to offering its business customers the widest range of options in the area of money transfer.P a g e | 33
The National Bank of Pakistan provides demand drafts at very reasonable rates with safety. It has following features Negotiability Validity Availability Encashment Limitation Safety Pak Rupees Traveler’s Cheques are a negotiable instrument There is no restriction on the period of validity At 700 branches of NBP all over the country At all 400 branches of NBP No limit on purchase NBP Traveler’s Cheques are the safest way to carry our money
LETTER OF CREDIT
Letters of credit are very useful instruments in facilitating commercial relations between businessmen at various places.
They are generally issued for the convenience of person travelling abroad. and also charge a small commission. The travelers’ cheques are for fixed amount and are treated as Order cheques payable only to the purchaser whose specimen signature appears on each traveler’s cheque itself. Letter of credit may be revocable. While making payment. but some Pakistani banks issue them in Pakistan currency also for use within the country as well. 1947.20 The National Bank of Pakistan provides their services for traveler’s cheque at very reasonable and competitive rates. Back to Back credit.
. and ease of transaction.
The SWIFT system (Society for Worldwide Inter bank Financial Telecommunication) has been introduced for speedy services in the area of home remittances. The new features of NBP foreign remittances include: • The existing system of home remittances has been revised/significantly improved and well-trained field functionaries are posted to provide efficient and reliable home remittance services to nonresident Pakistanis at 15 overseas branches of the Bank besides United National Bank (the joint venture between NBP and UBL in UK). • • • Zero Tariffs: NBP is providing home remittance services without any charges. Special courier services are hired for expeditious delivery of home remittances to the beneficiaries.P a g e | 34
enterprise then our Letter of Credit service is just what you are looking for. NBP Letters of Credit are the best way to do your business transactions. which eliminates the manual application of tests that often cause delay in the payment of home remittances. The SWIFT Center is operational at National Bank of
. With competitive rates. Meet the SBP directives/instructions for timely and prompt delivery of remittances to the beneficiaries. The system has built-in features of computerized test keys. Saudi Arabia. Strict monitoring of the system is done to ensure the highest possible security. and Bank AlJazira. security. National Bank of Pakistan has taken a number of measures to: • • Increase home remittances through the banking system.
To facilitate its customers in the area of Home Remittances.
NBP charges for this service are extremely competitive.40/.for
. as usual.if sent by registered post locally Rs. Using the NBP network of branches. It charges Rs 25/. The fundamental principles of such transfer are otherwise identical with the Mail Transfer.if sent by registered post inland on party’s request. It is one of the quickest means to transfer fund through the use of telex/fax/internet or cable. NBP pay orders are a secure and easy way to move your money from one place to another. which is sent from one branch to another on the order of payer to payee through wire. Payment to the beneficiary is affected directly by the drawee office upon identification or through credit into beneficiary’s bank account.P a g e | 35
Pakistan with a universal access number NBP-PKKA. which is advised by telegram. we can safely and speedily transfer money for our business and personal needs. It charges Rs 50/.for NBP account holders on issuing one payment order. the remittances can also be made by mail transfer (MT).for NBP non-account holders on issuing one payment order. 40/. And. Postage charges on mail transfer are actual minimum Rs. Debiting to the buyer’s account at the selling office and crediting to the recipient’s account at the paying bank make the payment under this transfer. And NBP also offer the most competitive rates in the market.
Telegraphic Transfer is a form of remittance. The charges of NBP are very low all over the Pakistan. and charges Rs 100/.postage charges on issuing mail transfer. They charges Rs 50/. It is the message. telex or fax machines.
A Mail Transfer is a form of remittance in which the amount remitted by a customer or a noncustomer is directly credited to the account of the beneficiary with another branch. Here the selling office of the bank sends instructions in writing by mail to the paying bank for the payment of a specified amount of money.exchange rate and RS 75/. Move your money safely and quickly using NBP Mail Transfer service. NBP taxes mail charges from the applicant where no excise duty is charged. All NBP overseas branches and overseas correspondents (over 450) are drawing remittances through SWIFT.
NBP provides another reason to transfer your money using our facilities. As such remitting office is not required to issue any instrument payment to the remitter for delivery to the beneficiary. When the money is not required immediately.
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students on payment of fees of educational institutions. The followings are the main features of this product: • • You won't need to carry a lot of cash with you every time you go out.for non account holders. the court opens his locker in the presence of his heir as mentioned in his will or and his belongings are given to them and the locker is closed. 1Link & M-NET ATM’s across the country. If the key of the locker is lost company providing these lockers breaks the locker and new lock is fitted in its locker and lock is destroyed in the presence of the locker holder and bank charges RS 1200 for that.
National of Pakistan also provides lockers facility in the country. which lets you pay directly from your account as an alternative payment method to cash. Whenever the locker holders come to open the locker. If some one want a duplicate of payment order they charges Rs 100/. Secure and Safe transaction.
NBP CASH CARD
NBP Cash Card is a 24-hour direct access ATM/Debit card to your bank account. his signatures are verified by the officer and then will be able to open his locker. The NBP Cash Card holders are able to transact at any of the 4000 + Merchants where Orix logo is displayed and can withdraw cash from NBP. The officer has master key to apply on the locker but he cannot open the locker of any person. No lockers are issued to any unknown person. In case the locker holder dies.for NBP account holders and Rs 150/. The locker holder provides the bank has specimen signature. The lockers issued only to the depositors. The dual control system is used for lockers. The transaction is authorized and processed by entering PIN.
treasury and other key business areas.)
Enable To Withdraw Cash From 1-Link ATMs / MNET ATMs. which is placed under the Risk Management Group. Enable to Make Purchases from Around 4000 POS (Merchants) Countrywide including 2500+ POS in Karachi. Additionally. The role of the Financial Institution Wing is:• • To effectively manage NBP's exposure to foreign and domestic correspondence Manage the monetary aspect of NBP's relationship with the correspondents to support trade. Utility Bill Payment etc. the Bank has recently set up the Financial Institution Wing.P a g e | 37
Account Information on tips (like: Mini Statement. Balance Inquiry. thereby contributing to the bank's profitability • Generation of incremental trade-finance business and revenues
No Card Issuance Fee for first 12 Months
National Bank of Pakistan is at the forefront of international banking in Pakistan which is proven by the fact that NBP has its branches in all of the major financial capitals of the world.
The bank has clearly defined organizational structure. which supports delegations of authority and accountability. It provides the basic framework within which functions and procedures are performed. The Organization Structure (Annexed I) shows the internal operations and reporting lines of the National Bank of Pakistan. which are related to decision making. which provides a framework for successful operations. These activities must be well coordinated so that the goals of the organization are achieved successfully. The National Bank of Pakistan’s Departmental key roles and functions are as follows:
BOARD OF DIRECTORS
. and communication of these decisions. There exists a properly defined financial and administrative power of various committees and key management personnel. The internal operations of the Bank are organized into 15 main departments and divisions headed by senior management of the bank and are report directly to the Board of Directors. The organizational structure of National Bank of Pakistan is centralized because all the decisions of the bank are taken by the top Management.P a g e | 38
ORGANIZATIONAL STRUCTURE OF NATIONAL BANK OF PAKISTAN
A well-developed and properly coordinate structure is an important requirement for the success of any organization. which supports clear lines of communications and reporting relationships. The operation of an organization involves a number of activities. Any organization needs a structure.
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Pursuant to Section 11 of The Banks’ (Nationalization) Act, 1974, the number of Directors of the Bank shall not be less than 5 and not more than 7, excluding the President. The Federal Government may, if deems necessary, appoint a Chairman of the Board in respect of the Bank. At present National Bank of Pakistan’s Board of Directors consist of 6 Directors and a President who is the Chief Executive of the Bank and presides over the meetings of the Board. The responsibilities of Directors include the followings:22
The Board of Directors shall assume its role independent of the influence of the Management and should know its responsibilities and powers in clear terms. it should be ensured that the Board of Directors focus on policy making and general direction, oversight and supervision of the affairs and business of the Bank and does not play any role in the day-to-day operations, as that is the role of the Management.
The Board shall approve and monitor the objectives, strategies and overall business plans of the institution and shall oversee that the affairs of the institution are carried out prudently within the framework of existing laws & regulations and high business ethics.
All the members of the Board should undertake and fulfill their duties & responsibilities keeping in view their legal obligations under all the applicable laws and regulations. The Board shall clearly define the authorities and key responsibilities of both the Directors and the Senior Management without delegating its policy-making powers to the Management and shall ensure that the Management is in the hands of qualified personnel.
The Board shall approve and ensure implementation of policies, including but not limited to, in areas of Risk Management, Credit, Treasury & Investment, Internal Control System and Audit, IT Security, Human Resource, Expenditure, Accounting & Disclosure, and any other operational area which the Board may deem appropriate from time to time. The Board shall also be responsible to review and update policies periodically and whenever circumstances justify.
6. As regards Internal Audit or Internal Control, a separate department shall be created which shall be manned preferably by professionals responsible to conduct audit of the Bank, Various Divisions, Offices, and Units Branches etc. The Head of this department will report directly to the BOD or Board Committee on Internal Audit.
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The business conditions and markets are ever changing and so are their requirements. The Board, therefore, is required to ensure existence of an effective ‘Management Information system’ to remain fully informed of the activities, operating performance and financial condition of the institution, the environment in which it operates, the various risks it is exposed to and to evaluate performance of the Management at regular intervals.
The Board should meet frequently (preferably on monthly basis, but in any event, not less than once every quarter) and the individual directors of an institution should attend at least half of the meetings held in a financial year. The Board should ensure that it receives sufficient information from Management on the agenda items well in advance of each meeting to enable it to effectively participate in and contribute to each meeting.
The Board should carry out its responsibilities in such a way that the external auditors and supervisors can see and form judgment on the quality of Board’s work and its contributions through proper and detailed minutes of the deliberations held and decisions taken during the Board meetings.
share the load of activities, the Board may form specialized committees with well-
defined objectives, authorities and tenure. These committees, preferably comprising of ‘Non- Executive’ Board members, shall oversee areas like audit, risk management, credit, recruitment, compensation etc. these committees of the Board should neither indulge in day-to-day affairs/operations of the bank and enjoy any credit approval authority for transaction/limits. These committees should apprise the Board of their activities and achievements on regular basis.
Board should ensure that it receives management letter from the external auditors
without delay. It should also be ensured that appropriate action is taken in consultation with the Audit Committee of the Board to deal with control or other weaknesses identified in the management letter. A copy of that letter should be submitted to the State Bank of Pakistan so that it can monitor follow-up actions. The Following table mentioned the names & designation of Board of Directors of National Bank of Pakistan:
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Name Syed Ali Raza Mr. Sikandar Hayat Jamali Mian Kausar Hameed Mr. Ibrar A. Mumtaz Mr. Tariq Kirmani Mr. Muhammad Arshad Chaudhry Mr. Mohammad Ayub Khan Tarin Mr. Ekhlaq Ahmed
Designation Chairman & President Director Director Director Director Director Director Secretary Board of Directors
The senior management of National Bank of Pakistan is consists of Group chiefs, who report directly to the Directors of Bank. The whole functions of National Bank of Pakistan are performed under these Groups. The National Bank of Pakistan has following groups and divisions: • • • • • • • • • Corporate and investment Banking Group Operations Group Credit Management Group Audit & Inspection Group Compliance Group HRM & Administration Group Commercial & Retail Banking Group Treasury Management Group Special Assets Management Group
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• • • • • •
Employees benefit & Disbursements Group Overseas & Coordination Group Islamic Banking Core Banking Application. PMO Financial Control Division Information Technology Group
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Masood Karim Shaikh Shahid Anwar Khan Dr. our corporate and investment banking has substantially increased its fee base income this year by being the lead advisor in a number of transactions in the corporate world of Pakistan The challenges to corporate business in year 2007 were manifold including reduction in Private Credit Investment as a result of slowing down of economy as well as rising interest rates. Treasury Management Group EVP & PSO to the President EVP & Secretary Board of Directors EVP/Divisional Head. Overseas Coordination & Management Group EVP & Divisional Head. The
. Human Resources Management & Administration Group SEVP & Group Chief. PMO Financial Controller & Divisional Head. structured financing and debt / capital raising transactions with the objective of providing entire range of corporate and investment banking solutions to its valued clients under one umbrella. Islamic Banking EVP & Head. This group performs its function through its following two units: • • Corporate Banking Investment Banking
The corporate and investment banking will continue to play a major role in loan syndications. Asif A. energy. Disbursements & Trustee Division EVP & Group Chief. Khurshid Maqsood Ali Tahir Yaqoob Anwar Ahmed Meenai Naeem Syed Aamir Sattar Atif Hassan Khan
Group Name & Designation
SEVP & Group Chief. The Corporate Banking Group achieved excellent results in 2007 with a number of landmark transactions in cement. In addition to the funded income. Mirza Abrar Baig Amer Siddiqui Muhammad Nusrat Vohra Amim Akhtar Ekhlaq Ahmed Tajammal Hussain Bokharee Mrs. Brohi Imam Bakhsh Baloch Ziaullah Khan Dr. Operations Group SEVP & Group Chief. Core Banking Application. Special Assets Management Group EVP & Divisional Head Employee Benefits. Audit & Inspection Group SEVP & Group Chief. Compliance Group SEVP & Group Chief. Commercial & Retail Banking Group SEVP & Group Chief. Information Technology Group
CORPORATE & INVESTMENT BANKING GROUP
The corporate & investment banking group is headed by Mr. Masood Karim Shaikh. Credit Management Group SEVP & Group Chief. communication and fertilizer sectors. Financial Control Division Group Chief (A). Corporate & Investment Banking Group SEVP & Group Chief.
Despite these threats and challenges at NBP. The Area Managers of National Bank of Pakistan are appointed to manage relationships and to better service the needs of multinationals and large local corporate. the largest mutual fund in Pakistan. The National Bank of Pakistan has initiated a structured approach to corporate banking by introducing a single point of contact through Relationship Managers. new Relationship Managers as well as team leaders has been inducted to expedite this process.8 billion in 2008. NBP has the largest equity portfolio in the banking sector primarily due to 27% holding in NIT units. In addition the bank's corporate loans yields also faced pressure as substitute form of funding sources are available in the market in form of Islamic financing. For this purpose. An investment banking team has also been formed by National Bank of Pakistan to offer specialized services to major relationships including advisory and debt syndications. our corporate team not only increased the volume as well as the yield of the loans they also maintained a strong franchise with the leading Pakistani corporate so as to ensure that NBP not only maintains its market share but is in a position to meet any challenges in future. During the year 2008 the bank redeemed 10% of its NIT holding covered under LoC. NBP during the year also participated in a number of TFC issues and mutual funds subscriptions thereby increasing the overall yield on investment portfolio. The National Bank o Pakistan have special focus on Corporate Banking with a presence in all major locations through out the country. ranging from short to medium and long term lending Trade related financing. mutual funds.P a g e | 44
increasing pressure on the textile industry reduced the lending to this sector. 1. Foreign currency financing. offering full range of Banking products / services and one window interface through designated Relationship Managers.
. issuance of debt instruments like TFCs and Bonds and the Capital markets. Corporate Banking offers tailor made products / solutions as required by corporate customers which includes: The key features of corporate Banking includes: • • • Funded facilities. which resulted in capital gain of Rs.
Anti money laundering laws and regulations. and act as liaison with State Bank of Pakistan concerning the issues related to compliance. Guidelines for KYC. Regulations issued from time to time by the Management. letter of credit etc. Ziaullah Khan and is report directly to the President/ Chief executive of NBP. The Compliance Officers will serve as a contact point between President /Chief executive officers and senior management. Monitor compliance of Administrative/Operational Instructions. In order to keep the working of Audit Department aligned with the best international practices 'Compliance Group’ has been created. in letter and spirit. Customized products / solutions
The Compliance Group of National Bank of Pakistan is headed by Mr. minimize legal and regulatory risks. rules. Timely submission of accurate data / returns to regulator and other agencies. Rules. with regard to functioning of compliance program provide assistance in this area to branches and other departments of the bank. and regulations by constantly reviewing and reporting status of compliance and non-compliance.P a g e | 45
All sorts of non-funded facilities / services which include Cash receipts / payments. Remittances. thus.
. Collections. Review over the compliance carried out by the audit departments. The Compliance Group of NBP is set to ensure that all relevant laws are complied with. and. The Compliance officers will primarily be responsible for Bank’s effective compliance relating to: • • • •
Relevant provisions of existing laws and regulations. Monitor and report suspicious transactions to President / Chief Executive Officer of the bank and other related agencies. guarantees.
The functions of compliance group of National Bank of Pakistan are as fallows:
Study and emphasize compliance of best international practices in audit of various functions of NBP. This group is responsible for monitoring compliance of various administrative / operative instructions.
Collection of Export Bills. Anwar Ahmed Meenai. Deposit Schemes being offered by NBP’s Islamic Banking Branches include the following:
a) Current Deposit Scheme b) Profit & Loss Sharing (PLS) Deposit Scheme
Commercial and Corporate customers requiring financing will have the following financing facilities available to them to meet their requirements: a) Murabaha b) Murabaha Facility c) Ijarah (Leasing) In addition to Shariah acceptable standard general banking services. Al-Hamdulillah. two more Islamic Banking branches at Lahore and Peshawar started operations. having tremendous potential and growing at a very fast pace all around the world. The products & services being offered by National Bank of Pakistan’s Islamic Banking are fully Shariah Compliant and have been certified by NBP’s Shariah Advisor.P a g e | 46
Prepare and put up a consolidated Report to the Directors of National Bank of Pakistan regarding the status of compliance and non-compliance of the recommendations agreed by the Departmental Management. in addition to active participation in various Sukuk transactions. NBP's plans for the year 2008 include opening of Faisalabad and Rawalpindi branches with the focus on growing organically by opening more standalone Islamic Banking branches. Collection of Local Bills. the progress of Islamic Banking in Pakistan has also been commendable during the last Five years.
ISLAMIC BANKING GROUP
The divisional head of Islamic Banking group is Mr. Islamic Banking is one of the emerging field in global financial market. The year 2007 marked the first year of Islamic Banking operations. utilizing NBP's existing branch network of 1.200 plus conventional branches and looking into strategic acquisitions for expansion in this field. following services are also being offered at the Islamic Banking Branches: • • • • • Letter of Credit Facility Handling of Remittances Issuance of Bank Drafts and Pay Orders. During the year under review.
This way they are able to lock a higher yield for a relatively long term rather than take the risk of re-
. Its ability to offer tight prices. corporate and retail clients. National bank treasury is currently regarded as a market leader in both foreign exchange and rupee denominated products because of its emphasis on service quality. Currently the National Bank of Pakistan offer following Treasury Products:24
P LAIN V ANILLA FX P RODUCTS
NBP Treasury Management Group is a market price maker and trend setter in the plain vanilla Foreign Exchange products. The client base does not consist of only blue chips ones but encompasses public sector clients. National bank has one of the largest FX book in the country. coupled with timely and accurate research making it a bank of choice for clients seeking to favorably position their currency risk As a result. Local presence across the nation as well as internationally. multinationals. local conglomerates as well as individuals. Muhammad Nusrat Vohra.
P AKISTAN I NVESTMENT B ONDS
Pakistan Investment Bonds issued by Government of Pakistan are a preferred means for a majority of institutional investors to invest their surplus funds for a longer time horizon. The Treasury management group of National Bank of Pakistan’s offer:23 • • • • Narrowest bid / offer spread and quickest on line quotes Customized solutions to minimize risk and optimize returns as per the needs and circumstances of the clients Focus on building sustained and long term relationship with institutional. The NBP treasury and capital market group has developed a reputation of being the market leader in coming up with customized solutions for a large and varied client base that is spread virtually all across the country.P a g e | 47
Government Collections Utility Bills Collection
TREASURY MANAGEMENT GROUP
The group chief of Treasury management group of National Bank of Pakistan is Mr. retail sector.
The first ever Derivative transaction of the Pakistani banking sector was done by NBP. NBP is the leading Primary Dealer for PIBs primarily because of its inventory size and the appetite for such a long-term instrument given its deposit base. For example. PIBs are highly secured and risk free as they are guaranteed by the government of Pakistan. NBP can execute such large orders through its own book. While most foreign / private banks would have to go to the secondary market in order to satisfy a large order from an institutional investor. This means that it can offer tight prices for large amounts even under volatile market conditions. Furthermore. if the borrower feels that the interest rate might go up in the future.
D ERIVATIVES P RODUCTS
NBP treasury Management group has been at the forefront in developing the derivatives market in Pakistan and has contributed both individually and from the FMA (Financial Market Association) front as well. than he may choose to enter into a Pay Fixed – Received Floating swap with its bank to effectively hedge its floating rate loans. This allows the clients to develop and implement their views about the evolving interest rate scenario. Various structures of currency options are available including • • Knock-ins / Knock outs Participating Forwards
I NTEREST R ATE S WAPS
A client can convert a fix rate loan into floating rate one or vice versa by using these derivative instruments.P a g e | 48
pricing after relatively shorter time periods. Some of the more common derivative structures being offered include: C URRENCY O PTIONS An option gives the buyer the right but not the obligation to buy or sell an asset at a pre-specified date and price. So the upside profit potential is unlimited whereas the downside loss is protected at a pre determined level. C ROSS C URRENCY S WAPS
The divisions of this group are distributed according to different areas which are: 1) NWFP Azad Kashmir Sind & Balochistan area wing 2) Karachi area wing 3) Special Credit Cell & Punjab area Wing The functions of this department include: • • Enforcing the State Policies. This group usually deals with Bank’s allocations of payments or cash application. payment systems and the associated financial risk management. supervising the staff to execute orders
. options and derivatives. and the pursuit of optimum performance consistent with those risks. the effective control of the risks associated with those activities. financial regulations. honesty. screening of customers and only those who is credit worthy are allowed to do business.
Presentations of information on which treasury-management decisions are to be taken reflect the principles of trustworthiness. The client’s exposure is shifted from PKR KIBOR to USD LIBOR.P a g e | 49
This product allows a client to convert its rupee based loans into a dollar based loan. The functions of Treasury management group include:
The Management of National Bank of Pakistan’s holdings in and trading in government and corporate bonds. reconciliations and also maintaining positive working relationships with customer during the debt collection or credit review and approval process. Employing National Bank of Pakistan’s treasury-management policies and practices accurately reflect the legal and regulatory regimes under which the Bank operates. truthfulness and objectivity. Shahid Anwar Khan. banking.
CREDIT MANAGEMENT GROUP
The group chief of Credit Management Group is Mr. financial futures.
The management of cash flows. Review of National Bank of Pakistan’s treasury-management policies and practices on a regular basis with a view to identifying ways of minimizing the risks of losses through improved checks and safeguards and through clarity and segregation of responsibilities and dealing procedure. and credit rules of the bank Framing credit policies and regulations. currencies. money-market and capital-market transactions. internal fund movements.
Its mission is to strive for soundness & stability of the financial system and safeguard interest of stakeholders through proactive inspection. compatible with best international practices. thereby ensuring public confidence in the system. dealing with the legal affairs consulted and coordinated Establishing development rules on credit. maintenance of proper records and processes. procedures. compliance with applicable laws and regulations and internal policies with respect to conduct of business. However. It is one of the core departments at NBP. guiding and supervising the branch-banks to deal with credit business Managing the authorized business. The management and the employees at all levels within the Bank are required to perform as per these approved Internal Control System components. reviewing existing procedures and policies and ensuing that control procedure and policies are amended for time to time wherever required. dealing with the acceptance draft. processes and tasks as approved by the Board of Directors that facilitate effective and efficient operations. In order to assess the branches. The management ensures that an efficient and effective Internal Control System is in place by identifying control objectives. Imam Bakhsh Baloch. estimating the loaning accounts Responsible for reporting the credit statistic statement Responsible for training client managers Responsible for dealing with other work according to the directors of the bank Responsible for the credit-registered consulting system. regulating the five-graded loans
AUDIT & INSPECTION GROUP
The group chief of National Bank of Pakistan’s Audit & inspection group is Mr. Audit & inspection group conducts regular audit & inspection of branches.P a g e | 50
• • • • • • •
Putting forward the proposal of credit management and development. This group plays a vital role in meeting NBP’s main responsibility of supervising the bank’s soundness of the system and protection of the interest of depositors. Internal Control System is designed to manage rather than eliminate the risk of failure to achieve objectives and provide reasonable but
. Bank's management has established and is managing an adequate and effective system of internal control which encompasses the policies. The Internal Control System ensures quality of external and internal reporting.
Sensitivity and System & Controls) rating is a criteria to determine the frequency of inspection of banks as weak institutions are given greater attention.
E XTERNAL A UDIT
The Board of Directors on the recommendations of Audit Committee has also recommended name of Messer’s Ford Rhodes Sidat Hyder.P a g e | 51
not absolute assurance against material misstatement or loss. Asset Quality. as auditors of National Bank of Pakistan. The current chairmen of audit committee of NBP are Azam Faruque. Earnings. Chartered Accountants and Yousaf Adil Saleem & Co. Regions and Groups at Head Office on an on-going basis to evaluate the efficiency and effectiveness of Internal Control System.26 For the purpose of inspection the National Bank of Pakistan inspects its branches through inspectors. flexibility exists in policy for frequency of inspections depending upon the need to maintain safety & soundness.
. The State Bank of Pakistan conducts the regular full scope examination of banks pursuant to an inspection schedule. Inspections are conducted on regular basis in the branches. Liquidity. Compliance Group is also in place with independent Compliance Officer in 119 Branches and 29 Regional Compliance Chiefs with supporting staff to take care of compliance related issues to strengthen the control environment. The scope and audit programs are set by the State Bank of Pakistan. Ibrar. Special investigations (targeted inspections) are also conducted as and when circumstances so warrant on the basis of complaints or market reports about specific institution. Management. Mumtaz & Mian Kausar Hameed. In addition to that. The CAMELS (Capital.25 The audit system of National Bank of Pakistan consists of following: a) Internal Audit b) External Audit c) Statutory Audit
I NTERNAL A UDIT
The Bank has an independent Internal Audit Group that conducts audit of all Branches. however.
S TATUTORY A UDIT
The statutory audit of National Bank of Pakistan is conducted to meet the particular requirements of State Bank of Pakistan. A.
Review and ensure accuracy and reliability of accounting records and financial reports. automation technology and MIS. Evaluate and ensure that approved policies and procedures meet legal and regulatory requirements. Mirza Abrar Baig. procedures and give recommendations for improvements. operational and Corporate Governance aspects of the Bank’s activities. Examining those resources are acquired economically. and conduct job evaluation process. The other functions of this group include
. Examine and evaluate effectiveness of existing policies. conduct job analysis. This Division is responsible for fresh induction of employees and other professionals through a rigorous induction process in order to ensure presence of quality professionals. recommend improvements and provide policy guideline
HUMAN RESOURCE MANAGEMENT & ADMINISTRATION GROUP
The group chief of Human resource management & administration group is Mr. Dr.P a g e | 52
The National Bank of Pakistan has to pay a penalty of Rs. Following units and areas of work are the part of this division. Review the applications and effectiveness of risk management procedures and risk assessment methodologies in financial. Review various reports of Bank’s subsidiaries. used efficiently and safeguarded adequately.20000 for each mistake in the Books and procedures as prescribed by the law plus surcharge of per day from the date of mistake to the date of statutory audit. This group is responsible to develop annual manpower plan for National Bank of Pakistan. • • • • • • • • Review financial. The functions of Audit & inspection group of National Bank of Pakistan are as fallows: • • Examine and evaluate adequacy and effectiveness of the internal control systems in the Bank. prepare job descriptions. Identify opportunities for cost savings in Bank operations and make recommendations. Perform testing of both transactions and functioning of specific internal control procedures.
and meet overall business goal.
INFORMATION TECHNOLOGY GROUP
The group chief of Information technology group is Mr. The National Bank of Pakistan with its capabilities. Foster a culture of acknowledgement and appreciation amongst employees for introducing innovative business practices. Encourages employees to seek promotion/transfers to fill internal openings and meet employees’ personal objectives. focusing on solutions that intend to reduce operating costs. The group’s objective is to provide appropriate technical solutions to business requirements and develop state of the art integrated system that will facilitate internal and external stakeholders to acquire accurate information in the most effective manner. Lahore and Peshawar.P a g e | 53
. Systematically observes & measures employee’s/candidate’s performance for the purpose of recruitment. Facilitates in establishing successful productive working relationships through effectively orienting new employees to their respective departments/divisions and to their positions. Conduction of evaluation of positions and grades to ascertain employees’ position in the grade structure. improves end user performance.
Conducting motivation surveys and developing market based employee satisfaction & retention strategies. Atif Hassan Khan. This group is formed to implement latest technology to keep National Bank of Pakistan online with the domestic and international financial industry. selecting and recruiting the right people from the market. This Group supervises all the staff colleges. and other stakeholders in order to promote efficiency and stability in the financial market. The group firmly works on adopting latest organizational theories & change management processes to bring in efficiency. at Karachi. This group also performs following functions: •
Deals from placing job advertisements to timely recruitment of competent personnel by using modern selection techniques. methodologies and experience aims at technological advancement in bank. showing extra ordinary efforts for achievement of goals and enhancing Bank’s corporate image uses various methods of recognition ranging from simple “Thank you” letters to elaborate celebrations and monetary rewards. Islamabad. selection and promotions.
Atif Hassan Khan. Maintenance of Federal & Provincial Government Account on the basis of receipt and payments. Preparation of Annual Financial Statements Accounting Policies for the bank. critical to NBP. through its Security plans and policies. IT group focuses on safeguarding the information assets and relevant systems. as adopted by the Bank. Monthly Abstract. Quarterly profit updates to the Board of Directors.P a g e | 54
The group provides services and solutions to improve and strengthen NBP’s technology portfolio and identify future requirements. Coordination and facilitation for Business planning and budgeting function in the Bank and periodic reporting to the management and to the Board. The financial control division is responsible to perform and manage following functions:
Maintenance of books of accounts and preparation of financial statements of the Bank in accordance with the IAS. who is also financial controller of National Bank of Pakistan. Consolidation of Departmental Budgets. Besides providing these useful resources. Daily Reserves and Weekly review reporting.
• • •
. The information technology group has following divisions: • • • • • • • • • • • • In-house Development Software development Web development Central Server System Admin – UNIX System Admin – Windows Customer Support Database Management Network Management Production Support Administration Director Section
FINANCIAL CONTROL DIVISION
This division is headed by Mr.
P a g e | 55
Short/Medium term investment and Swap deposits and maintenance of Foreign Currency accounts and revaluation of Foreign Currency Assets & Liabilities. Making of payments to external suppliers and employees of the Bank after independent verification of transaction documents on the basis of bills/ invoices/claims approved by the processing units.
. Selecting and opening overseas account under supervision. Showing business requirement of costumers and development of new products. keeping track of physical location of assets. Tahir Yaqoob. To record all the expenses regarding repair/ maintenance and rent taxes for NBP buildings and equipments. The functions of this group are as follows: • • • • • Establishing marketing strategy. and establishing and harmonizing the business among agent banks. To deal with various administrative matters arising in the Finance Department.
OVERSEAS COORDINATION & MANAGEMENT GROUP
The group chief of NBP’s overseas coordination & management group is Mr. assets transfers and overall responsibility to manage and maintain assets physical inventory. Assets capitalization. policy and management system of foreign exchange. This department is in charge of the management and operation of foreign exchange business including marketing and operating of the financial products and trade financing of foreign exchange in the light of National foreign exchange management policy. To respond to various queries rose from various internal and external sources.
Checking and verifying the selected financial transactions to ensure accuracy and compliance to respective rules and regulations. • Managing and operating foreign fund of the whole bank. Corresponding and dealing with foreign exchange business among branches. publicizing foreign exchange business. Making annual operating and working plan. To ensure the smooth and unhampered running of the Fixed Assets Management function. training managers of customer-service for foreign exchange business. and is the governing department of foreign exchange.
stand-by L/C. The Bank is setting high-speed satellite link along with the extension of S. register foreign loans and manage foreign exchange account. acceptance.P a g e | 56
Making deposit and loan rate of each wholesale foreign exchange according to management and market situation of deposit and loan rate of foreign exchange Focusing on direct marketing of VIP customers and overall plans to put all resources together so as to provide one-stop service. Management and operation of researching credit. Declaring international balance. Managing and operating SWIFT system and foreign exchange system. establishing and improving foreign exchange files. industry governing department and foreign exchange department.
The National Bank of Pakistan is shifting focusing on expanding its market share in trade finance. Regularly examining the executive results of all system of foreign exchange and renovate all the problems. Organizing international business research and statistic. Retail banking includes retail lending and deposits. applying for new foreign business category to the People’s Bank of China according to current foreign exchange policy. and consult and testimony business. trust and estates.W. customs. foreign exchange bill discount. Contacting and corresponding with National foreign trade department. Managing turnover position of exchange settlement and sales. home remittance and foreign investments. Supervising wholesale foreign exchange deposit and payment to defend money laundering and bank swindle. banking services. Examining and approving international business financing(import & export bill purchase. Examining and approving the branches launching foreign exchange business. Amer Siddiqui.
COMMERCIAL & RETAIL BANKING GROUP
The group chief of National Bank of Pakistan’s commercial & retail Banking group is Mr.T service to large domestic and international branches. international non-financing guarantee and so on) .
• • • • • • • •
Auditing foreign exchange business.IF. documentary credit. making accounting report forms and business report forms.
This group is responsible for developing and managing brands which serve the investment needs of the consumer market.
SPECIAL ASSETS MANAGEMENT GROUP
The group chief of Special assets management group is Mr. The consumer market in Pakistan has not only grows exponentially over the last decade or so. These Centers would work in conjunction with the existing set–up of Commercial Lending done throughout the NBP branch network. and focuses on deposit mobilization. The objective is to target the untapped sectors and provide them professional quality service. real estate. guarantees. bills of exchange and deposits. focusing on individual consumers and small and medium size enterprises. but the needs of this segment have become extremely diverse. with quick turn around time in decisions for customer satisfaction. asset stripping.P a g e | 57
private lending and deposits. size of the branch and its capabilities to deliver the desired service in order to attract quality customers. This group is responsible for serving the needs of the retail and commercial market. Further this customer friendly and dedicated set up at convenient locations would help in improving the image of the Bank as well. export finance.27 Commercial banking includes project finance. We expect and hope to reduce the turn around time and become more competitive and market oriented. security enhancements and structured sell-
. through one window operations and Relationship Managers stationed at those centers. trade finance. it is but imperative to continue offering innovative consumer credit schemes. The main purpose of these centers is to generate ancillary business in addition to funded and non-funded facilities. merchant / commercial / corporate cards and private labels and retail. trust and estates investment advice. merger & acquisition strategies. lending. In order to sustain competition. The Special Asset Management Group (SAMG) is a group of people with specialized skills in managing the "stressed" assets of National Bank of Pakistan. factoring. The National Bank of Pakistan plan to establish commercial centers across the country looking at the business potential in the area. banking service. provision of value added services based on modern technology and undertaking the centralized marketing and advertising for the Bank. This group is engaged in the development and management of retail credit schemes. Tajammal Hussain Bokharee. The group was created with a view to enable restructuring and recoveries through various initiatives like innovative work-outs.
Thus. We have revamped our special assets management business and have coordinated our efforts to expedite recoveries and settlements. As a means of ensuring that the resources of the bank safely protect the investments involved. The function of the National Bank of Pakistan’s Employee benefits. This means that this department is likely to take time to evaluate all options when involved in settling estates. and in some cases see to the disposition of the estate of a deceased customer.
NATIONAL B ANK
D EFINED B ENEFIT P LANS
P ENSION S CHEME
. Mrs. One of the factors that make the use of this department so attractive is that it tends to be somewhat conservative with their management approach. provide estate planning support. disbursement & trustee division is to handle the administration of trust funds. the department makes it relatively easy for the client to deal with other matters. this department also provides a number of other agency services. The group has also been working with / advising various governmental and regulatory bodies in evolving a framework for implementing international best practices like asset reconstruction companies in the country. and be less involved in the task of protecting assets that are already established and set on a path of consistent growth. Along with estate settlement. establishing guardianships. the investor can focus more on family or other business matters. This methodical approach is often in line with the motivation for establishing the asset in the first place.P a g e | 58
downs. DISBURSEMENTS & TRUSTEE DIVISION
The divisional head of this division is Mr.
EMPLOYEE BENEFITS. With provision coverage of 84% we believe that going forward our Special Assets Management Group will make major contribution towards the Bank's profitability through recoveries and reversal of provision charge as a result of declassification / rescheduling. which was to provide a source of financial support for loved ones. or administering trusts that have been set up for the survivors of a major depositor. Khurshid Maqsood Ali. even after a parent or significant other has died. such as functioning as the trustee of record for corporate bonds or administering a pension or profit sharing plan.
Provision is made in the financial statements based on the actuarial valuation using the Projected Unit Credit Method. G RATUITY
The bank also operates an un-funded defined benefit gratuity scheme for its eligible contractual employees. Actuarial gains/losses are recognized in the period in which they arise. P OST
RETIREMENT MEDICAL BENEFITS
The bank operates an un-funded defined post retirement medical benefits scheme for all of its employees. The bank’s costs are determined based on actuarial valuation carried out using Projected Unit Credit Method. Net cumulative un-recognized actuarial gains/losses relating to previous reporting period in excess of the highest of 10% of present value of defined benefit obligation or 10% of the fair value of plan assets are recognized as income or expense over the estimated working lives of the employees. Provision is made in the financial statements based on the actuarial valuation using the Projected Unit Credit Method. Actuarial gains/losses are accounted for in a manner similar to the pension scheme. B ENEVOLENT
The bank also operates an un-funded defined benefit benevolent scheme for its eligible employees. the bank reduces the resulting asset to an amount equal to the total of present value of any economic benefit in the form of reduction in future contributions to the plan and unrecognized actuarial losses and past service costs. Provision is made in the financial statements for the benefit based on actuarial valuation carried out using the Projected Unit Credit Method. Where the fair value of plan assets exceeds the present value of defined benefit obligation together with unrecognized actuarial gains or losses and unrecognized past service cost.
E MPLOYEES '
.P a g e | 59
The bank operates defined benefit approved funded pension scheme for its eligible employees. Actuarial gains/losses are accounted for in a manner similar to pension scheme.
SBP decided to entrust all funds and transfer all record relating to Qarz-e-Hasna scheme for education to the bank with the instructions to perform all work relating to the Fund. The National Bank of Pakistan is in process of negotiating the charge of fee in consideration of administrative services to the LTCF. multi banking and multi channel strategies.
N ATIONAL B ANK
N ATIONAL I NVESTMENT T RUST (NIT) Under a trust deed. This is possible as the entire Customer Database is centrally located at the central Data Centre
CORE BANKING APPLICATION
The head of core banking application is Mr. PBC was dissolved in January 1997. safe custody and maintaining unit holder’s accounts. the bank provides services. The liability is determined based on actuarial valuation carried out using the Projected Unit Credit Method.E -H ASNA F UND The work relating to Qarz-e-Hasna Scheme was attended by Pakistan Banking Council (PBC) since inception.P a g e | 60
The bank accounts for all accumulating compensated absences when employees render service that increases their entitlement to future compensated absences. the bank manages on behalf of the Government of Pakistan. The single biggest achievement of implementing the Core Banking Solution is that each customer is truly the customer of the Bank and not just the customer of the Branch. LTCF established from the proceeds of loans disbursed by various international funding agencies for financing private sector energy development projects. Naeem Syed. where his/her account is maintained.
Q ARZ .TERM C REDIT F UND (LTCF) Consequent upon the NDFC amalgamation. as a trustee to NIT and is performing functions of sale/purchase of NIT units. L ONG . In order to fill the void created by the dissolution of PBC and in order to continue the scheme. The customer can go to a branch anywhere in the country and perform a transaction. The core banking application is an integrated application that supports real time.
Phone Banking and Mobile Banking.P a g e | 61
and can be accessed throughout the network of branches. The National Bank of Pakistan is currently improving the service orientation at its branches. This group is being created to efficiently collect and utilize the feedback from the branches to support product development and enhance the quality of service. • Business Process Re-engineering Core Banking would enable implementation of BPR initiatives of a Bank and facilitate centralized handling of various processes. The operations group is in the process of
. Branches would do less and less back office work and would be able to focus on marketing. • Integration with strategic sectors Core Banking integrates all strategic sectors of Banking such as Trade Finance. The transactions are performed using multiple channels such as ATMs. as these constitute the “front line” of the Bank in terms of contact with its customers.
Key features of the Core banking application of NBP
• 24X7 Banking As a result of implementing Core Banking. • Strengthening MIS. AssetLiability Management and Corporate Balance Sheet. It provides updated data for generating various reports for Management information system (MIS). • Anywhere Banking Customers can avail of banking services across the branch and Channel network irrespective of location where their account is maintained. Asif A. most of the facilities being offered by bank are available to Customers 24 hours a day. 7 days a week. customer relationship management and cross selling. the information related to these areas is centrally available for use or reference. Business processes in all the branches of National Bank of Pakistan update a common database in a central server located at data centre. Internet Banking. Dr. branches and administrative offices can concurrently avail updated data when required.
The group chief of National Bank of Pakistan’s Operation group is Mr. As data is located on CDC. and will facilitate Decision Support System (DSS) and Executive Information System (EIS). which gives a consolidated view of bank’s operations. Brohi. DSS and EIS Core banking application is more than just a transaction processing system. As a result. Treasury.
” We made concerted efforts and took a number of initiatives. utility and government collections. A number of branches have been shifted to prominent and spacious locations. Business hours have been extended with establishment of customer facilitation offices at the regional levels to help on the spot resolution of customer complaints. We are transforming our branches to give a modern look and convenience. We are committed and focused towards good quality customer service and in 2007 with the motto of “Putting a smile on our Customer's face. We also have established specialized customer facilitation centers to exclusively cater to pension payments.W. Workshops and seminars were conducted to disseminate the very important message of “Excellent Customer Service”.FP & Kashmir
These provinces are sub-divided into regions.P a g e | 62
introducing E-Commerce initiatives based on customer friendly technologies. These are expected to reduce counter traffic at our branches and will increase our distribution channels for better and convenient services. The group creates products to utilize the benefits of E-Commerce for its customers.
PROVINCIAL & REGIONAL MANAGEMENT
There are four executives of National Bank of Pakistan to supervise the Bank’s maters of every province. as they are called Provincial Chiefs. The provincial management includes: • • • • The Provincial Chief Punjab The Provincial Chief Sind The Provincial Chief Baluchistan The Provincial Chief N. The regional management of National Bank of Pakistan is divided into two areas which are:
. which are responsible for the supervision in their circles and deal with the problems of their respective Regions. the regions are controlled and manage by Regional heads. These provincial chiefs are responsible for the entire banking operations in their respective provinces.
The detail about National Bank of Pakistan’s regions is shown as Annexed-II at the end of the report. Europe & USA.P a g e | 63
The overseas regions include Middle East. in order to facilitate its functions on branch level appoints Branch Managers & other staff according to branch’s activities and volume of business. The branch managers are responsible for all functions and staff within the branch office. hiring and firing. The job of branch managers is to take charge of the entire operation of his branch.
The National Bank of Pakistan. Far East. overseeing training. and Central Asia. and the servicing of each deposits. the acquiring of deposits. These regions are sub divided into Zones. the investing or converting such deposits into earning assets. assuring that proper procedures are followed. are performed. that is.
. The other functions involves scheduling of employee work hours. and reporting to upper management any problems or providing reports and updates as required by bank’s protocol. making sure that everything runs smoothly. b) The degree to which officers and employees contribute their talents to the progress and welfare of the bank in discharging duties and responsibilities. The country has been divided into 29 regions by National Bank of Pakistan to facilitate its functions.
ORGANIZATIONAL (MANAGEMENT) LEVELS AT NBP
Successful and profitable banking management deepens upon two principal factors: a) The manner in which the function of banking. the in charge of a Zone is called Zonal Chief.
The bank has directors for superintendence and direction of its business. plant manager or division manager. organizing. leading and controlling of the resources and staff of the whole region. managing director. These individuals typically have titles such as executive vice president. They are responsible for making the plans and establishing goals the run their business smoothly all over Pakistan & around the globe. These members are also responsible for making the policy of the bank. regional management falls under this category.. chief operating officer. In NBP. The NBP have its top management in their head office at Karachi. a) Centralized (Centralized Management tends to concentrate decision making at the top of the organization) b) Decentralized (Decentralized disperses decision making and authority throughout and further down the organizational hierarchy) National Bank of Pakistan has a centralized type of management because all the decisions are taken by the top management.P a g e | 64
Management is a distinct process consisting of activities of planning. Gujranwala region etc. The National Bank of Pakistan has four types of management levels which are as fallows:
Top managers are responsible for making organization-wide decisions and establishing the plans and goals that affect the entire organization..
. Among seven member of group Chief Executive is called the president. president. chief executive officer or chairman of the board. project leader.28 The management has two types i. The Government appoints six directors as members and one president. organizing. These managers manage the work of first line managers and may have titles such as department head. They are responsible for the planning.e.
Middle managers include all levels of management between the first line level and the top level of the organization.29 NBP divided his management into various regions such as Rawalpindi region. actuating and controlling performed to determine and accomplish stated objectives with the use of human being and other resources.
The non managerial employees of NBP consist of OG-II. values. people. grades.
NON MANAGERIAL EMPLOYEES
Non managerial employees are not concerned with any decision making. A body of clergy organized into successive ranks or grades with each level subordinate to the one above. classes etc. The nature of their job is repetitive & clerical as they do same work again & again.P a g e | 65
FIRST LINE MANAGERS OR LOWER LEVEL MANAGEMENT
First level managers are the lowest level of management and manage the work of non-managerial individuals who are involved with the production or creation of the organizations products. • A series in which each element is graded or ranked
. The hierarchy may include: • • Categorization of a group of people according to ability or status. OG III and clerical staff. These managers are responsible for planning. The branch managers of NBP fall under this category. They are normally specialized in their work.
HIERARCHY OF NATIONAL BANK OF PAKISTAN
The Hierarchy (An arrangement of objects. organizing. any system of persons or things ranked one above another) of National Bank of Pakistan is shown as Annexed III at the end of this report. elements.. orders. leading and controlling the staff and all affairs of the branch.
Regional & Zonal chiefs are ranked 3rd.
ORGANIZATION STRUCTURE OF THE BRANCH
A well-developed and properly coordinate structure is an important requirement for the success of any organization. The Officers Grade I. 4th & 5th respectively. and communication of these decisions. or one thing. a body of ecclesiastical rulers. II & III are ranked 8th at the hierarchy of National Bank of Pakistan. It provides the basic framework within which functions and procedures are performed.
. The lower level of National Bank of Pakistan is consist of Clerical & non.clerical staff.
The President of National Bank of Pakistan is ranked Top at the hierarchy. which are related to decision making. These activities must be well coordinated so that the goals of the organization are achieved successfully.
An organization with few things. which provides a framework for successful operations. The other six directors of National Bank of Pakistan are ranked second in the hierarchy.P a g e | 66
A body of officials disposed organically in ranks and orders each subordinate to the one above it. at the top and with several things below each other thing. The Provisional. The vice President & assistant vice Presidents of National Bank of Pakistan are ranked 6th & 7th respectively. Any organization needs a structure. The operation of an organization involves a number of activities.
Communication is the process by which information is exchanged and understood by two or more people. It is a sort of visual presentation of the organizational structure. Operation Manager I controls Clearing house & Remittance Department and Operation Manager II controls Deposits. Advance & Branch accounts department. This chart defines the line of authority in the branch and its departments. the rules so established must also be designed in the light of abilities and motivation of the human recourse available. By analyzing the organization structure of the branch following elements can be found in the structure. The purpose of an organizational structure is to help in creating an environment for human performance. The branch also has two cashiers responsible for cash & Pension disbursement department reports directly to branch Manger.
CENTRALIZED DECISION MAKING
The Branch Manager of National Bank of Pakistan is responsible for all the affairs of the Bank. All the employees of the Bank are report directly to the Branch Manager. Although the structure must define the task to be done. The BBO (Branch Back Office System) Operator controls computer department of the branch and is report directly to Operation Manager I and Branch Manager. It specifies the duties and responsibilities of the personnel or staff of the branch.P a g e | 67
The organization chart & Organogram of National Bank of Pakistan Rawat Branch is shown on Annexed IV & Annexed V at the end of this report. The same pattern is followed at National
. Downward communication is the message and information sent from top management to subordinates in a downward direction. The branch has two operation Managers. The Chief Accountant controls Accounts department & is report directly to branch Manager. usually with the interest to motivate or influence the behavior of others in the organization. All the decisions relating to Branch are made by him and the subordinates have to obey these decisions. Both of them are report directly to the Manager regarding affairs of their departments.
issues orders and allocates resources to achieve organizational desired outcomes. By analyzing the chain of command of NBP. the Manager of the branch sent orders.
AUTHORITY AND RESPONSIBILITY
The chain of command illustrates the authority structure of National Bank of Pakistan Rawat Branch. as there is scalar pattern
. information & messages to following subordinates • Operation Manager I • Operation Manager II • BBO ( Branch Back Office System) Operator • Chief Accountant • Cashier I • Cashier II • Clerk I • Clerk II • Non Clerical Staff
CHAIN OF COMMAND
The chain of command is an unbroken line of authority that links all persons in an organization and shows who reports to whom. one can come to the conclusion that. as well as every one knows the successive levels of management all the way to the top. Authority is the formal and legitimate right of the manger to make decisions. The authority and responsibility for different tasks and duties are different. By analyzing the organizational structure of the National Bank of Pakistan Rawat branch it can be found that there is a scalar principle followed with in the branch because each and every employee of the branch knows to whom they can report.P a g e | 68
Bank of Pakistan Rawat branch.
Head of department manages each department & officials of the branch follow procedures. The departments working within National Bank of Pakistan Rawat branch are as under:
. which managers use to transfer the authority and responsibility to position below in the hierarchy. Most organizations today encourage managers to delegate authority to the lowest possible level to provide maximum flexibility to meet customer needs and adapts to the environment. At National Bank of Pakistan Rawat branch Operation Managers have some authority & responsibility relating to affairs of the Branch.
DEPARTMENTS OF THE BRANCH
Banking procedures are divided between various departments. therefore it is implied that everyone in his position knows that what is one’s authority and what is the responsibility and the authority it allocated. In National Bank of Pakistan each branch is divided into various departments depending on their size and volume of business.
Delegation is the process.P a g e | 69
followed at the organizational setup of NBP. Different departments do their jobs in occurrence with the bank policies.
Computer Department 4. Deposits Department 5. Remittance Department 3. the process of settlement would clearly be very cumbersome and time consuming if every cheques/instrument had to be sent by the collection bank to each of the drawee banks or branch upon which different collection items are drawn and to individually pay the proceeds to each of the bank sending cheques/instrument in for collection. Therefore. to be collected and credited to their accounts. banks receive cheques/instruments from other banks. usually National Bank of Pakistan (NBP) performs this function. Account Opening Department 7. The SBP co-ordinates clearing activity through its offices. some other bank. But the clearing house facility is available only for cheques/instruments drawn on banks situated within the same city/clearing house area. the banks act as Collecting Banks when they send cheques/instruments for collection and as paying Banks. Therefore. deposited by customers of the banks drawn on the customers of the drawee banks. Similarly. the banks have evolved what is called the Bankers Clearing arrangement. The Clearing System enables cheques to be paid or cleared centrally and settlement made for receivables and payables between the banks. Clearing House Department 2. set up in big cities and towns.
C LEARING P ROCESS
. Where SBP does not maintain its own office. Cash Department 9.P a g e | 70
1. Advances Department 6. banks receive cheques and other financial instruments from their customers drawn on other banks. Since each bank receive and sends cheques/instruments for collection to and from an number of banks. Pension Disbursement Department
CLEARING HOUSE DEPARTMENT
As part of their daily business activity. when they receive cheques/instruments for collection from other banks. Accounts Department 8. called the Clearing Houses.
also called Inward Clearing.m.
Timing:(Monday to Saturday)
Each bank will send competent representative to exchange the cheques. are returned back to the Clearing House and a credit is claimed and obtained there against. at an appointed time.
R ULES & R EGULATIONS
• i. Any cheques/instruments received by a bank that cannot be paid.30 p.P a g e | 71
Under the clearing arrangements. for the purpose of depositing their own customers . the appropriate customers’ accounts are credited and clearing House account is debited. which works on the following general lines: All the banks operating in a city who are members of the Clearing House maintain an account with the SBP’s Clearing House. due to insufficient balance in its customer’s account or for any other reason. Each bank is required to insure that all cheques and other negotiable instruments are properly stamped and suitably discharged
.m. and are taking back by each bank to its bank/branch. • •
C LEARING H OUSE
1st Clearing at 10:00 a. At the Clearing House accounts of all the banks are debited by the total amount of cheques/instruments drawn on their customer’s accounts and credited with the amount of their customer’s cheques/instruments drawn on other banks. Similarly. first meeting in the morning. 2nd Clearing at 2. Every day representatives of all the banks in every city meet the Clearing House. as per the list of cheques submitted by each bank. The amounts of each cheques/instrument is debited or recovered from each drawee customers’ account and credited to the Clearing House account. ii. cheques/instruments to be collected from other banks and receiving cheques/instrument drawn on their account holders from the others banks. The cheques/instruments received. the State Bank of Pakistan (SBP) offers a Clearing House or a centralized exchange facility. against the amount credited by the Clearing House as Outward Clearing.
The State Bank of Pakistan debit the account of each member of the clearinghouse with the proportionate working expenses incurred on the operation of clearing house. Amount in words and figures does not differ. The instrument is suitably discharged. Signature of the drawer appears on the face of the instrument. Instrument is not mutilated. it should be properly authenticated. There should be no material alteration. if so. These expenses are very nominal. It should not stale or post dated or without date.
O UTWARD C LEARING
The following points are to be taken into consideration while an instrument is accepted at the counter to be presented in outward clearing: •
The name of the branch appears on its face where it is drawn o.
• • • • • • • • •
. Endorsement is in accordance with the crossing if any. Each bank is required to maintain sufficient funds in the principal account with SBP to meet the payment obligations. If an instrument received other than National Bank of Pakistan then special crossing stamp is affixed across the face of the instrument.P a g e | 72
• • •
An objection memo must accompany each and every cheque when return unpaid duly initialed. Clearing stamp is affixed on the face of the instruments. paying-in-slip and counterfoil (The stamp is affixed in such a manner that half appears on counterfoil and paying-in-slip). The amount of the instrument is same as mentioned on the paying-in-slip and counterfoil. where a bearer cheque does not require any discharge and also an instrument in favor a bank not need be discharged. If order instrument suitably indorsed and the last endorsee’s account being credited. The title of the account on the paying-in-slip is that of payee or endorsee (with the exception of bearer cheque).
The entry of the instrument returned unpaid is made in Cheques returned Register. The instruments are detached and sort out department wise. Account No) 4. Then the following steps are to be taken: 1. The particulars of the instruments are compared with the list. Instrument no. The particulars of the instrument and the pay-in-slip or credit voucher are entered in the outward clearing register. The instruments are sent top the respective departments
. The schedules are prepared in triplicate. The instrument along with duplicate schedule and house page are sent to the main office. the credit vouchers are balanced from the instruments and are released to the respective departments against acknowledgement in the register. The entry is made in the inward clearing register (serial no. The house page is prepared from schedules in triplicate. 9. 7. If the instrument is not to be presented again in clearing then a covering memo is prepared. The grand total of the house page is taken and agreed with that of the outward clearing register. 3. 4. 5. 3. The schedules and house pages are signed by the house in charge with branch stamp. 8. 10. 2. 2. The covering memo along with returned instrument and objection memo is sent to the customer who sent the same to his account. two copies which are attached with the relevant instrument and the third is kept as office copy. Serial no is given to each voucher. 6.P a g e | 73
The instrument along with pay-in-slip is retained while the counterfoil is given to the customer duly signed. The register is balanced. The instruments are arranged bank wise.
I NWARD C LEARING
more Holidays declared by the Central Govt. Remittances through banking channels save time. National Bank of Pakistan transfers money in the following ways. every year. but normally special clearing is held on last working day of half yearly and yearly closing i. The instruments are scrutinized in each respect before honoring the same. • • • • • • • • Pay Order Demand Draft Mail Transfer Telegraphic Transfer Pay Slip Call Deposit Receipt Letter of Credit Traveler’s Cheque
The Job responsibilities & requirements of remittance department include:
. Funds transfer facility or remittance of funds is on of the key functions of the banks all over the world.P a g e | 74
5. at a time. costs less and eliminate the risks involved in physical transportation of money from one place to another. 30th June and 31st Dec.e.
The Remittance department deals with the transfer of money from one place to another.
S PECIAL C LEARING
In addition to the normal clearing function at Clearing house it is mutually agreed to hold an extra clearing at the clearing house on the particular day and time which is known as “special clearing” it is arranged due to the rush of work arising out of say.
clearing. Inland remittances including Demand Drafts and Pay Orders
• • •
Ensure high standards of customer services within the assigned turn around time Ensure compliance with SBP's regulations and internal controls handling cash. Clearing. issuance of pay-orders & drafts. or requests for a remittance. which are • • • • Remitter Remittee Issuing Bank paying Bank
One who initiates. and SBP/Compliance guidelines
Responsible for Cash. and deposits the money to be remitted.
. local remittances.P a g e | 75
Responsible for money transfers. asks for a remittance to be made. The bank charges him a commission for this service. and other related activities at branch level
There are four parties involved in Remittance. maintenance of cheque books & ATM cards and all other counter specific products and services
Ensure highest level of customer service in a professional and competent manner Must ensure that the activities are carried out strictly in accordance with the laid down procedures/processes. collection items. The remitter comes to the issuing or originating branch. He may or may not be the branch’s customer.
I SSUING B ANK
The bank that sends or affects the remittance through demand drafts. who has attained the age of majority and is of sound mind can open and maintain his/her account. integrity. and limited liability companies as well as non-profit organizations like clubs. Any individual. It also issues checkbooks to customers. Pay order etc
P AYING B ANK
Paying Bank also knows as the drawee branch.
• • • •
Transfer within the branch Transfer from one branch to another Transfer from one bank to another bank in the same city Transfers from one bank to another bank in two cities. Similarly. Mail Transfers. The documents required for National Bank of Pakistan’s Account opening are showed as Annexed VII at the end of this report. trusts.
. A Remittee is also the one who receive the payment. Two or more individuals may open an account jointly.
ACCOUNT OPENING DEPARTMENT
The opening of an account is the establishment of banker-customer relationship. occupation and the nature of business of the perspective customer. associations and NGO’s etc. partnership firms. The bank officer tactfully obtains information about character. A person who wishes to open an account with the bank has to fill an account opening form obtained from any branch of National Bank of Pakistan. or the payee. may open their accounts. The person in whose name the remittance is made.P a g e | 76
A Remittee is also called the beneficiary. societies. This department performs the duty of opening accounts for customers. It has to make the payment (usually located in a different city or country). responsibility. telegraphic transfers. the branch on which the instrument is drawn. business organizations such as sole proprietary concerns.
As bank is borrowing and lending institution. Maintaining account opening register. security in a sense that there should be no embezzlement of funds or in money leaded to bank by any party or person. Determining the correct residential and permanent address. Pasting of forms in register after release from general banking in charge. Proper completion of documentation.P a g e | 77
The following requirements are necessary for opening an account. Identification of the new customer. Another aspect is that cash department is for the security purpose. Guide the customer about the requirements of the account opening and form filling. Check the forms whether they are correctly completed or not. Ascertaining the genuineness of the stated occupation business of the customer. Stamping on the form. Completion of all relevant columns of the Account opening form. Cash department perform following functions
. Preparing checklist. Issuance of cheque books. Issuance of accounts maintenance certificate. therefore cash is the top most priority of Bank. The efficiency of bank is also related to this department the more efficient the bank is the stronger and busy is the cash department.
• • • • • • • • • • •
A CCOUNT O PENING D EPARTMENT
Providing account opening form according to the customer's requirements. Closure of account Verification of signature in case of cheque presented before releasing of account opening from SS card is not yet scanned
All physical movement of cash in the bank is made through the cash department.
Normally cash department performs following functions • • • • • • • • • • Collection of funds Acceptance of deposits Collection of utility bills Payment of checks Remittances Act according to any standing instructions Transfer of funds from one account to another Verification of signatures Posting Handling of Prize bond
The two main activities of cash department are as fallows:
D EPOSIT C ASH I N C USTOMER ’ S A CCOUNT
When the customer want to deposit amount in his account at opening of account or after that then he has to fill a deposit slip that shows the amount and the account in which the cash will be deposited.
M AKE P AYMENTS F ROM C USTOMER ’ S A CCOUNT
. the bank’s most valued relationships. Then teller will receive amount and credit the customer’s account that shows increase in customer’s bank account. This department is the showcase of the bank and conveys the first impressions about the bank’s commitment to professionalism in its systems and procedures and to courteous and efficient customer service.P a g e | 78
Cash department owes its important to the fact that it is a major point of contract between the bank and the customer.
The BBO operator also sees the stop payment instructions. C OMPUTER T ERMINAL P ROCESS The cheque is received in computer terminal. Like all other Banks. whether received from account holder or not. Amount in words and figure are same.
The primary function of National Bank of Pakistan is to accept and receive surplus money from the people. It should be bearer cheques so the word bearer should not cross. which they willingly deposit with the Bank. National Bank of
. P AYMENT O F C ASH After posting the cheque the operation manager cancelled the cheque and returned back to cashier. The following points are important. If the signature is not same it is returned back otherwise forward to BBO Operator for posting. After considering these points BBO Operator post the cheque in BBO (Branch back office system) and forward to operation manager. The cashier enters the cheque in cash paid registered and pays against the second signature of receiver on the back of the cheque. Cheque is drawn on same branch Cheque is not post dated.P a g e | 79
When the customer draws a cheque on the bank to pay a certain amount then BBO Operator will debit the customer’s account that shows reduction in his account balance. where BBO operator checks the balance of the account holder.
R ECEIVING O F C HEQUES The cash is paid against the cheques of the client.
After receiving the cheques the cheques the operation manager verify the signature of the account holder and the signature on the cheques.
After analyzing and detailed investigation. because it is the main source of earnings. Some advances are of the following nature
. The National Bank of Pakistan offer different deposit schemes to its customers. The major portion of the profit is usually earned through this department. The deposit department accepts/collects deposit from accountholders. It attracts surplus balance from the customer at low rate of interest and makes advances at a higher rate of interest to the individuals and business firms. Credit extensions are the most important activity of all the financial institutions. while some loan applications are submit to higher authorities for their approval. which includes the following: • • • • • • • Current Deposits PLS Saving Deposits Fixed Deposit Account ( Time Deposits) Foreign Currency Account NBP Premium Aamdani Foreign Currency Account National Income Daily Account (NIDA)
The bank is profit seeking institution. the credit management division of head office directly controls all the advances. The advances Department receive application from intending borrowers. they decide whether to approve the loan or not. Some loan approvals are made by the Manager of the branch within his powers as prescribed by the bank’s higher authorities. The job of this department is to make proposals about the loans.P a g e | 80
Pakistan also take incitation to attract as much depositor’s as it can. Advances department is one of the most sensitive and important department of the bank. After receiving application the advance department processes it further.
Accruals & recovering of Markup on finances on periodical basis. Approval of transfer of funds through DD-TT. MT. Demand finance. and annually statement to the hire authority. Staff finance. monthly. Preparation and posting of vouchering of all type of finance. PO. Preparation of weekly. IBCO etc to various branches by debiting the limits. 4.
. quarterly. 5. 2. Finance against imported merchandise etc for sanction of finance limit from the hire authority. Cash finance. 3.P a g e | 81
• • • • •
Loan against Gold Agriculture advance to farmers Medium term advance for working capital Long term advance for setting industry Short term advance to businessman
The National Bank of Pakistan offer following products (Advances) to its customers • • • • • NBP Saibaan NBP Advance Salary NBP Cash & Gold Students Loan Scheme NBP Karobar
The Advances department deals in following transactions: 1. Preparation and submission of proposals of Running finance. Export finance.
monthly & quarterly. which are directly. Transfer of funds from one account to another account of the party taking the authority letter. BAS was establish in the beginning while BBO is currently implemented now efforts are under way to convert all branches into Electronic Banking System (EBS) which is used by online branches as this system does not require a person to remain sitting till the branch closed its daily operation but the system automatically close it self when the branch timing is over. These branches have dumb terminal directly linked with central computer. 9. Timely submission of returns/reports. Preparation of advances record. Checking of computer outputs of the department on daily basis. In Regional head office through On Line.
The branches where all transactions are carried out manually and records are maintained on registers usually stored in big wardrobes.
This department is playing a very important role in making the banking procedures faster and helping the bank for providing better services to its customers.P a g e | 82
6. link with central computer AS-400. The database in head office is also based on this system. 7.
The branches where all transactions are carried out with the computer base system but these branches are not connected to the central computer with wide area net working. The National Bank of Pakistan has three types of branches in all over Pakistan. Balancing of all financing heads. terminal data goes to head office central computer. Branch Automated System based (BAS) on UNIX. Manual branches reports Regional head office regarding their daily transactions. Except for branches those are On Line as they transfer there daily
. Branch Back Office (BBO) based on FoxPro. Batch branches are using three type of system. 8. weekly. these included
The branches. Branch Integrated System (BIS) based on FoxPro in Karachi mostly branches are facing this problem. daily. 10. through wide area networking through fiber optics.
In the end of day print out of the data enter in central computer is taken. These floppies and manual are bring in by riders.P a g e | 83
data directly through there own terminal. These and other such errors are seen by the person in charge. current account. Any Incomplete information for any branch and any information require by that particular branch is sent to that branch. activities of all branches are recorded in a central computer. advances etc termed as “Daily Transaction Report”. The floppy disk is directly inserted in the computer. As day-to-day. other than used in HO (EBS) also caused errors. Sometime retrieving data from the system (BAS. BBO. There are fourteen riders in total who bring information form all branches located in Karachi region. and BIS). duplicate cheques (this error occur when the last objection is not removed).
DATA RECEIVING CENTER
Data form batch branches reach the main branch in floppy diskettes while form manual branches it is in form of hard copy. Date in Valid. The operator of that terminal takes the data from the computer and converted it in to a text file through that terminal the data finally goes to the central computer. This computer is attached with the terminal of central computer.
The next task after receiving the data is to enter that data in to a computer.
. Clerk in charge register all diskettes and manual in registers called “job booking register” one for each of two type of data. Data comprises of transactions in profit loss account. Other errors include Unmatched (This error occurs when document no matched with the previous one exists). More over material is used to make a WST which is sent to State Bank of Pakistan. no master (when opening of new account is not mentioned). This program is designed in away that it demand “Hash Value” value before opening the floppy for further action this value serve the purpose of password or pin code send by the branch on entering that value the data enter in to the computer.
E RROR H ANDLING
Errors of different origin occur when the data goes to central computer. The program in used is based on “COBOL” language.
This department performs following functions: • • • • • Making Pension Payments Opening of Account of Pensioner Entry of amount paid to pensioner in Government Pensioners Register Verifications of Signatures of Pensioners Making Demand Draft Purchase Register
Accounts Department of the bank can be considered the most important department.F48 General Ledger General Ledger. merging stage comes. Before merging. after which a proof list is printed out. Proof list is checked by the Accounts Department. where Accounts Department starts performing its function. The pension disbursement department is responsible for making pension payments to Government Pensioners. these are posted into respective computer terminals by the relevant departments. This is the stage.Abstract
. This department is basically concerned with processes and activities of recovering. Actually the process of this activity starts from the preparation of all the required vouchers by different related departments. The bank performs this function through Demand Draft Purchase or simply called DD Purchase. a batch list is printed out by Computer Department and duly checked by the respective departments. sorting. The account department prepare following vouchers and reports • • • Monthly Profit & Loss account. The person who wants to receive his/her pension from National Bank of Pakistan can open an account with any branch of National Bank of Pakistan. summarizing and reporting data resulting from the whole day transactions of all the departments. When these vouchers are prepared.P a g e | 84
PENSION DISBURSEMENT DEPARTMENT
The National Bank of Pakistan was Pakistan’s leading institution which performs the function of pension payments or disbursements to pensioners. After this.
F21 General Ledger.P a g e | 85
• • • • • • • • • • • • • • • • • • • • • • • • • • • •
Check Book Issue Register Western Union payments Register Demand Notices Miscellaneous Book Bank Transfer scroll Posting NBP Advance Salary Daily Statement.Head wise Hash Value Register End of Day register Posting National Income Daily Account (NIDA) Monthly return register Charges A/c register P-L-S Profit list Weekly Telegram Mail Transfer Register Government Scroll Provident file Government Scroll Debit & Credit Transfer Responding Advice Dispatched Register-F15 Cash Remittance IN Cash Remittance OUT NBP General Account Utilities register Statement of affairs Closing entries Daily activity checking Minor expense recording
P a g e | 86
STRUCTURE OF BRANCH’S ACCOUNTS DEPARTMENT
The structure of National Bank of Pakistan’s Accounts department is shown as Annexed VI at the end of this report. The Accounts department of the branch is controlled by the Chief Accountant under direct supervision of Branch Manager. The Branch has one cashier & two
Preparing financial statements that are reported to Regional Management of National Bank of Pakistan. projections. and recommendations.
Preparing financial statements and accounting reports for distribution to the branch Manager for their planning. improve efficiency in branch activities. and programs affecting the central accounting system and records and installs or recommends changes as appropriate.
Designing and operating a system to capture.
. The head of branch’s Accounts department is called Chief Accountant.
Ensuring the integrity and reliability of the information system. record. process. and store all relevant documents and information about the financial activities of the branch. control. The BBO (Branch Back Office system) Operator has also assist Chief Accountant in various tasks.
Directs and participates in the development and revision of procedures in order to meet requirements of law.P a g e | 87
clerks for assistance and help of Chief Accountant. He also directs a wide variety of accounting activities and meets important deadlines & analyzes and interprets accounting data of the branch. who performs his functions under direct supervision of Branch Manager.
Directs and reviews the study of new and revised laws. BBO Operator and clerical employees of the branch engaged in the maintenance of a variety of accounting records. and preventing fraud from inside and outside the branch. on which important administrative decisions are based. and decision-making needs.
Directs and reviews the preparation of periodic and special financial statements. and coordinate branch activities with those of other departments. provide services to Branch Manager. rules. The other responsibilities of Chief Accountant include:
Plans and directs the activities of Cashier. The Chief Accountant is responsible for the central accounting records and controls over all financial transactions of the Branch.
P a g e | 88
The Chief Accountant with the help of branch’s clerical staff is preparing following reports: o Monthly Profit & Loss account.F48 o Daily Statement.F15 o Cash Remittance In o Cash Remittance Out o NBP General Account
.F21 o General Ledger o General Ledger Abstract o General Ledger head wise o Bank transfer Scroll o Posting NBP Advance Salary o Misc Book o Posting National Income Daily Account (NIDA) o Monthly return file o Charger List o PLS Profit list o Weekly Telegram o Government Scroll o Government Scroll Dr & Cr o Transfer Responding Advice Dispatched Register.
P a g e | 89
o Clearing register
Debit & Credit supplementary
Debit supplementary is used for debit voucher and credit supplementary is used for credit voucher books and register maintained by bank are as fallows General ledger included:
• • • •
Statement of daily affairs Cash book or cash cum day book Transfer book Income & expenditure ledger
Income & expenditure includes: 1. 5. Discount
Service charges Commission from utility services Salaries allowances & provident fund Rent taxes insurance lighting Profit paid on deposits and borrowings Auditor’s fee & legal charges
. 3. 4. 7. 6.
or control. The three column form of individual ledger is used because it has a column for checks paid or other debit entries. All the accounts shown in Annexed are opened and managed through BBO. The most important record keeping and report generated by Bank’s Accounts Department is Statement of the Bank. BBO enable Bank to record a variety of transactions. The statement of the bank shows the general. one for deposits or other items credited.P a g e | 90
BANK ACCOUNTING OPERATIONS
The National Bank of Pakistan’s accounting consists in making computerized. Individual Ledgers are the accounts in which accounts with depositors are kept. accounts of the
. All the Remittances of the bank are recorded managed and control through BBO. The BBO enlist Chart of Accounts of the Bank shown in Annexed VIII. The most common part of BBO which is operating by the BBO Operator is Individual Ledgers. They are kept so that the balance of each depositor's account may at any time be readily seen. and they should be frequently balanced to verify their correctness. The “End of the Day” report is also generated through BBO. written and permanent records of every transaction. For Computerized recording of transactions the bank used software called BBO (Branch Back Office). and a third for showing the balance after each entry or the day's entries are made in the account.
The reason they must settle. is not on account of the possible loss of ten cents. To "post" means to enter in the proper columns either the debits or credits on the ledger. Another important book which is used by the National Bank of Pakistan is journal. every Rupee of liabilities is accounted for by another Rupee of resources. the balance of each depositor would appear opposite his name. Often they become embittered at what seems to them a tyranny when the small sum of money involved is considered. For instance. as in all other bookkeeping. is that for every debit there must be a credit. A ledger is a book used to keep a record of balances. On the other side. and the total debit or credit is then posted on the ledgers. the paying teller and the receiving teller will each keep a record of checks cashed or deposited payable within the bank. but it would be entirely impractical. All other books. upon the wall of every banking room." The records made by one clerk upon one set of books go to check the records of another clerk upon a different set of books. and the difference between them represents the balance either due by or to the bank. there would be an itemized list of the loans with the names of the borrowers. however." while the collection scratcher is the "black book. Often they become known among the clerks by some other name descriptive of their general appearance. Instead of total deposits. Skillful accounting lies in making
. The first principle in bank accounting. For instance. "Accuracy first" is a motto that should be framed. and the various books of the bank show the detail of these items. The books used by National Bank of Pakistan are of various kinds and their purpose is indicated by name. the general ledger scratcher in one bank is known as the "red book. figuratively at least. The debit postings of the individual bookkeeper would agree with the teller's figures. a book in which daily transactions are listed in regular order as to accounts. but because the most important principle in bank accounting is involved. to enter every figure directly on the statement of condition. In accordance with this fundamental theory the books are maintained. instead of loans and discounts. Each bank employee has had the experience of remaining at his desk until a late hour at night checking up his day's work searching for a difference of a few cents. With respect to the statement. cards and sheets used by bank of whatever nature is a part or subdivisions of these books. and vice-versa.P a g e | 91
bank. Similarly each accounts at the end of the day for each item of cash is balanced. It would not be impossible.
The bank has sold Rs. less the check for Rs 200 which is charged to the account of the drawer." Or a transaction may appear on one side of the statement only.1000 is made. For example. makes the reflection of the performance doubtful.
ROLE OF CFO (CHIEF FINANCIAL OFFICER)
The performance of any organization is reflected by the financial statements.P a g e | 92
the fullest possible use of original entries. a corresponding increase of Rs. evaluating operating results. any ambiguity if remains there.600 in the item "due from banks. 600 payable in another city. There comes the code of
. Due to increased governance requirement there arises a need to empower the chief accountant and to make him responsible by requiring him to sign the accounts.00 of the bonds it owns. On the resource side. 000. consisting of Rs. a deposit of Rs. operational reporting and interpreting. establishing internal control procedures to safeguard the companies assets. then.5. on the liabilities side there is an increase of Rs 800 all of which appears in the item "deposits" being the total Rs. the role of CFO becomes very important as he controls the reflection of performance. At the end of the day (assuming this to be the only deposit). preparing income tax returns.1000.200 cash and checks as follows: Rs. Therefore. preparing budgets. so that the financial statements give credible information to its users. which is reported to different authorities and the organization is assessed by them. The code of corporate governance provides the guidelines and opportunity to do this. at the same time having a check on all figures to guard against either error or fraud.200 on the bank itself and Rs. and they must perform their job with professional competency and integrity. The Chief Financial Officers of National Bank of Pakistan used to perform several tasks which were preparing accounts.800 and this is made up by an increase in the cash of Rs 200 and an increase of Rs. Every transaction ultimately affects the bank's statement of condition by debit or credit.
These are: • Annual business planes. forecasts and long term planes.P a g e | 93
corporate governance. removal and remuneration terms and conditions of employment of the chief financial officer of a listed company shell are determined by the Chief Executive Officer with the approval of the Board of Directors. Chief Accountant becomes Chief Financial Officer (CFO). The appointment.
The Chief Financial Officer is required to furnish necessary and classified information to the board of directors along with his analysis and suggestions as the Chief Financial Officer attends the board meetings. consideration and decision of the boards of directors by the CFO. significant issues are required to be placed for the information.
The new responsibilities apply to all Chief Financial Officers of Listed Companies.
Q UALIFICATION R EQUIREMENT
The qualification requirement is defined under the code of corporate governance that is the person appointed as the Chief Financial Officer must be
Member of recognized body of professional accountants or A graduate from a recognized university or equivalent. Mostly the CFO presents the financial position relating to the period which has been over. Insurance Companies. the person likely to be most in command of these implication is on the spot and immediately available for questions. cash flow projection. any issue with financial implications is being discussed.
. With the new role.e. In order to strengthen and formalize corporate decision-making process. where the organization will be. Banks and DFIs. having at least 5 years experience in handling financial and corporate affairs of a listed company. and the period which has to come that is the financial position attained and the financial projection i. which makes the chief accountant powerful and more responsible.
as applicable in Pakistan. agents. and deposits made by the company. have been followed in preparation of financial statements and any departure there from has been adequately disclosed. advances. the results of its operation. cash flows and changes in equities. • • • • The financial statement. including trade debts and inter-corporate finances. International accounting standards. etc. prepared by the management of company.P a g e | 94
• • • •
Budgets include capital.
. including penalties on late payments and other dues. to a creditor.
The Chief Financial Officer is required to provide all the necessary data to be presented in the “Director’s Report”. For this purpose Chief Financial Officer must ensure the following. including any adverse judgment or order made on the conduct of the company. Default in payment of principal and/or interest. manpower and overhead budgets along with variance analyses. Quarterly operating results of the company as a whole and in terms of its operating divisions or business segments. There are no significant doubts upon the companies’ ability to continue as going concern. Details of joint ventures or collaboration agreements or agreements with distributors. or default in payment of public deposit.
Failure to recover material amounts of loans. Significant public or product liability claims likely to be made against the company. • • The system of internal control is sound in design and has been effectively implemented and monitored. bank or financial institution. present fairly its states of affairs. Proper books of accounts of the company have been maintained Appropriate accounting policies have been consistently applied in preparation in financial statements and accounting estimates are based on reasonable and prudent judgment.
The CCG does not prescribe the time for submitting half yearly accounts to the shareholders. the accounts and financial statements are signed by the Chief Financial Officer before they are sent to concerned authorities. 1984 and timely submission of accounts by companies. fines have been imposed on chief executives. which requires half yearly accounts to be submitted within two months of the close of first half. It has recently imposed penalties on Directors of nine listed companies who failed to prepare and circulate the quarterly accounts. The Securities and Exchange Commission of Pakistan is exercising strict vigilance to ensure compliance of 4th and 5th schedule of the Companies Ordinance. Here we can refer to section 245 of companies’ ordinance 1984 for this purpose. The CCG requires a limited review of half yearly accounts by external auditor.
E XTERNAL R EPORTING
Chief Financial Officer now has extensive responsibilities for internal and external reporting. All the information required for decision-making by the Board of Directors and Chief Executive is processed and furnished by the Chief Financial Officer. Furthermore. external reporting requirement is fulfilled by Chief Financial Officer. Annual audited accounts are now required to be submitted within four months of the close of financial year.CCG requires that the listed companies submit their quarterly accounts to the shareholders within one month of the close of the first and third quarter of year of account.P a g e | 95
There has been no material departure from the best practice of corporate governance as detailed in the listing regulations. Apart from this.
An understanding of the effective and responsible use and management of information systems and technologies is important for managers. Decision making can be regarded as an outcome of mental processes leading to the selection of a course of action among several alternatives. The management of a business can use information systems in their decision making process. business professionals. Information systems play a vital role in the e-business and e-commerce operations. Before proceeds it’s important to discuss precisely about decision making. enterprise collaboration and management.30 The output can be an action or an opinion of choice. Every decision making process produces a final choice. and other knowledge workers in today’s internetworked enterprises. the field of information systems has become a major functional area of business administration. Thus.P a g e | 96
USE OF ELECTRONIC DATA IN DECISION MAKING
The technological development in the field of information systems make it possible for management to use electronic data in decision making. A significant part of decision
. and strategic success of businesses that must operate in an internetworked global environment.
Execute your plan. See more on extending your options for your decisions on my brainstorming tips page.
The decision making of Management of National Bank of Pakistan rely on information system resources which includes people and a variety of hardware. software. What lessons can be learnt? This is an important step for further development of your decision making skills and judgment.
Identify the purpose of your decision.
Evaluate the outcome of your decision and action steps.P a g e | 97
making skills is in knowing and practicing good decision making techniques. data. and communications network technologies as resources to collect. What standards and judgment criteria should the solution meet?
Determine the best alternative. 3. What factors does the problem involve? Identify the principles to judge the alternatives.
Put the decision into action. transform. This is much easier after you go through the above preparation steps.
Brainstorm and list different possible choices. Use your standards and judgment criteria to determine the cons and pros of each alternative. and disseminate information in Bank. One of the most practical decision making techniques can be summarized in following simple decision making steps:
1. Transform your decision into specific plan of action steps.
Evaluate each choice in terms of its consequences.
6. Generate ideas for possible solutions.
INFORMATION SYSTEM RESOURCES OF NBP
. What is exactly the problem to be solved? Why it should be solved?
. but also all data media. These are the employees of the Bank who spend most of their time communicating and collaborating in teams and workgroups and creating. The software developers create computer programs based on the specification of system analysts of National Bank of Pakistan. They include System analysts. Specifically. from sheets of paper to magnetic or optical disks. Bank uses BBO system.
Application Software: These are the programs that direct processing for a particular use of computers by employees of the Bank. that is. The system analysts of National Bank of Pakistan design information systems of the Bank based on the information requirements of the end users. The followings are the examples of National Bank of Pakistan’s software resources:
System Software: The National Bank of Pakistan uses Windows Operating Systems for controls and supports the operations of a computer system. such as computers and other equipments. These people resources include end users and Information system Specialists.P a g e | 98
People are required for the operation of all information systems. tangible objects on which data are recorded. technical.
The software resources of National Bank of Pakistan include all sets of information processing instructions. It also includes sets of operating instructions called programs. The Information systems Specialist are people who develop and operate information systems. and clerical IS personnel of National Bank of Pakistan. Microsoft Office suit as application software.
The Hardware resources of National Bank of Pakistan include all physical devices and materials used in information processing. system operators. which direct and control computer hardware. and other managerial. The Management and employees of National Bank of Pakistan are end users and Knowledge workers of information system. software developers. it includes not only machines. using and distributing information.
8.P a g e | 99
The data resources of National Bank of Pakistan are typically organized.969.154. and data technologies which are needed to support the operation and use of a communication network.7 90 465.0 79 501.84 7 463.83 1
Horizontal Analysis (%)
.941.068.907.0 63 591. 243 26.751 19.
Network Support: The Bank uses hardware.71 2 13. and stored in a BBO system that can be accessed by Manager for an analysis and decision making.3 14
5.92 7 13.869.31 9 15.924. 602 24. software.879. 717 23.872. processed. and communication control software such as network operating systems and Internet Browser packages (Opera).571.10 6 10.596.974.756.0 41 8.090.04 7 40.92 6 624.1 24 10. 435 30.458.
The network resources of National Bank of Pakistan include:
Communication Media: The Bank’s communication media include cellular and landline. The Bank uses communication processers such as Modems and internetwork processors.536.426.813.886.656. and accessed by a variety of data resource management technologies.2 60 11.084.908. stored.4 50
7. The data about Branch transactions is accumulated.772.1 54
8.939.0 16 39.9 14 11.704.
SOURCES OF FUNDS
Rupees in Millions Year Share Capital Reserves Borrowings Deposits Other Liabilities
2004 2005 2006 2007 2008
Horizontal analysis of each item is calculated. deposits and other liabilities etc. The increase in share capital during all years indicates share holder’s concern toward National Bank of Pakistan and efficient bank’s Management policies. To analyze trend. borrowings. The share capital of National Bank of Pakistan shows an increasing trend in all years as compare to base year.P a g e | 100
Share Capital Reserves Borrowings Deposits Other Liabilities
100 100 100 100 100
120 125 79 100 108
144 128 106 108 115
166 146 98 127 134
182 184 365 134 172
The National Bank of Pakistan’s sources of funds includes share capital. reserves.
A NALYSIS The Share capital refers to the portion of a Bank's equity that has been obtained by trading stock to a shareholder for cash or an equivalent item of capital value.
There was a marginal decrease of 2% in bank’s borrowings in the year 2007. however same are increased 6 % in 2006 as compare to base year. The reserves are increased 25 %. The borrowings were decreased 21 % in 2005. 2006 & 2007 respectively. The year 2008 represents highest increasing percentage of 84% as compare to base and previous years.
. The reserves of National Bank of Pakistan fluctuate during all years as they show an increasing trend. 28 % & 46 % in the years 2005.P a g e | 101
A NALYSIS The Banks’ reserves are banks' holdings of deposits in accounts with their central bank plus currency that is physically held in bank vaults (vault cash). The year 2008 represents highest percentage of borrowings as these were increased to 265 % comparing with base year and are increased 267 % as compare to 2007.
A NALYSIS The National Bank of Pakistan’s borrowings fluctuates during all years and shows a mixed trend.
3 33 14.35 2006 44.782.392.9 34 30.71 2005 33. The year 2007 represents second highest percentage as deposits are increased to 27%.8 2007 50.304.7 35 13.4 70 28.629.162. highest among all years.415. The other liabilities were on their peak percentage in 2008 as the shows an increase of 72%. with the year 2006 represents an increase of 8% as compare to base year.942.7 70 8.
A NALYSIS The other liabilities of National Bank of Pakistan are fluctuating during all years and show an increasing trend. In the year 2005 the deposits were increased very marginally.8
. The year 2005 indicates an increase of 8 % and 2006 indicates an increase of 15%.569.947.8 97 21.087.4 81 33.1 70 12.544.2 16 16.146.692.
GENERATION OF FUNDS
Rupees in Millions Year
Markup/return/interest earned Net markup/interest income Net markup/interest income after provisions Total non-markup/ Interest income 2004 20.6 65 23.7 98 37.639.906.7 16 27. The year 2008 indicates an increase of 34%.387.P a g e | 102
A NALYSIS The deposits and other accounts of National Bank of Pakistan show a mixed trend during all years.8 2008 60.370.0 30 26.153. The other liabilities in the year 2007 represent an increase of 34%.100.058.9 70 9.9 35 12.
503.944.5 01 241 234 229 163 203 234
62 42.0 28 161 162 167 113 146 159
92 39.6 01 100 100 100 100 100 100
1 30.000.945.4 86 11.0 78 23.0 62 26.9 98 291 258 206 198 203 192
Horizontal Analysis (%)
The National Bank of Pakistan’s generation of funds include • • • • • • Interest earned Net interest income Net interest income after provisions Total non markup interest income Total income ( Interest plus non.3 21 19.310.Interest) Profit before Taxation
.060.451.539.977.056.P a g e | 103
Total income ( Interest + non-Interest) PROFIT BEFORE TAXATION Markup/return/interest earned Net markup/interest income Net markup/interest income after provisions Total non-markup/ Interest income Total income ( Interest + non-Interest) PROFIT BEFORE TAXATION
6 20.5 80 28.5 77 211 210 220 146 191 220
P a g e | 104
The interest earned by National Bank of Pakistan fluctuates during all years. highest among all years.
A NALYSIS The net markup/ Interest income of National Bank of Pakistan fluctuates during all years as it shows an increasing trend. The percentage is increased 158 % in 2008. The interest earned is increased 61% in 2005 and 111% in 2006.
. as it was increased during all years as compare to base year. It was increased 62 % in 2005 and 110% in 2006 as compare to base year. The year 2007 represents second highest percentage on account of Net markup/ Interest income as it was increased to 134%. The year 2007 represents second highest percentage on account of interest earned as it was increase 141 %. comparing with base year. The year 2008 represents peak percentage of 191 % as compare to all years.
A NALYSIS The Total non. It was increased 13% in 2005 and 46% in 2006.P a g e | 105
A NALYSIS The net markup/ interest income after provisions fluctuates and shows a mixed trend during all years. It was increased 67% (2005).
. highest among all years. The income is increased 63 % in 2007. There was an increase of 98% in 2008. second highest among all years. 120% (2006) and 129% in 2007. The income is increased 106 % as compare to base year but the same was decreased by 23% as compare to 2007.markup/ Interest income of National Bank of Pakistan shows an increasing trend during all years.
The total income is increased 103% in 2007 and also increase very marginally in 2008. The year 2008 indicates an increase of 92% as compare with base year but it was decreased in 2008 by 42% as compare to 2007. It was increased 46% in 2005 and 91% in 2006. It was increased 59% in 2005 and 120% in 2006.
A NALYSIS The profit before taxation of National Bank of Pakistan fluctuates and shows a mixed trend during all years. The year 2007 represents highest percentage on account of profit before taxation as it was increased to 134%.P a g e | 106
A NALYSIS The total income of National Bank of Pakistan shows an increasing trend.
The Bank has an investment portfolio in which it allocate its funds for crediting to borrowers.0 56
155 105 122 103 125
23. 686 268.9 79 30. 100 25. 779 9.96 9 19.128.8 65 24.986.922.9 65
204 141 154 282 162
17. 868 340. Horizontal analysis of each item is calculated. The National Bank of Pakistan allocate its funds in Lending’s to financial institutions.113.217. investments.282.6 98
219 94 143 105 194
163 114 187 263 233
Horizontal Analysis (%)
After the acquisition of the funds their allocation becomes necessary.5 69
100 100 100 100 100
16.65 5 44.350.3 22 149.6 00 210.787. To analyze trend in these items.03 2 170.7 32 139. 995 316.681. operating fixed assets and other assets etc.946.454.464.838. 075 9.141.511.36 5 23. advances.822.202.550.4 91 412. 096 220.9 42 156.994.985. The Bank seeks the best way for making investment to get more profit with the maximum security. 406 9.P a g e | 107
ALLOCATION OF FUNDS
Rupees in Millions Year Lending’s to Financial Institutions Investments Advances Operating Fixed Assets Other Assets Lending’s to Financial Institutions Investments Advances Operating Fixed Assets Other Assets
2004 2005 2006 2007 2008
10.677. investment in the stock market etc.794.
.110.012.97 4 37.941.
The lending’s increased by 55 % in 2005. The year 2007 also shows an increase of 104 % as compare to base year. There was an increase of 5 % in 2005. highest among all years. however investments are decreased 27 % as compare to the year 2007. The year 2006 indicates a decrease of 6% in investments.
A NALYSIS The investments made by National Bank of Pakistan fluctuate during all years.P a g e | 108
A NALYSIS The lending’s to financial institutions by National Bank of Pakistan fluctuates during all years. The investments are increased 14 % in 2008 as compare to base year. The year 2008 indicates an increase of 63% as compare to base year but lending’s decreased by 41% in 2008 as compare to the year 2007. The year 2006 represents highest percentage of 119 % among all years on account of lending’s to financial institutions. The year 2007 represents an increase of 41 %.
There was a very sharp increase in operating fixed assets in the year 2007 of 182 % as compare to base year. There was an increase of 163% in 2008 as compare to base year but the same was decreased by 19% as compare to 2007. This implies that National Bank of Pakistan is keener to advance money to lenders.
.P a g e | 109
A NALYSIS The advances made by National Bank of Pakistan shows an increasing trend in all years as compare to base year. The year 2007 represents an increase of 54 % and 2008 represents highest percentage among all years that is 87 % as compare to base year. The advances were increased 22 % in the year 2005 and 43 % in 2006 as compare to base year. There was an increase of 3 % in 2005 & 5 % in 2006.
A NALYSIS The operating fixed assets of National Bank of Pakistan shows a mixed trend during all years.
. The other assets are increased 25 % in 2005 and 94 % in 2006.P a g e | 110
A NALYSIS The other assets of National Bank of Pakistan are fluctuating during all years. The year 2007 indicates an increase of 62% as compare to base year. The other assets of National Bank of Pakistan are on their peak percentage of 133 % in 2008 as compare with base year.
The securities for the loans are handled in the same way as theory says like mortgage. In accounting.P a g e | 111
CRITICAL ANALYSIS (THEORY VS PRACTICAL)
During Internship it was my prime objective to furnish my knowledge (Theory) to various practical situations. under assets. bills. pledge. but part of worksheet is prepared like trial balance. but in practice there are some more types used by bank like running finance. and on the liabilities side. This part of report is the essence of the internship. analysis of practical versus theory requires a distinct approach. banks don’t prepare worksheet.. overdraft. C ONCLUSION
. A bank's balance sheet is different from that of a typical company. you'll see deposits and borrowings. Instead. You won't find inventory. loans etc. All other concepts of remittances. The theory written in the books in cases is not implemented as it is. or accounts payable. The practical work presents an analytical problem while relating theory with practice. demand finance etc. advances against insurance policies or liquidation procedure is the same. you'll see mostly loans and investments. as this will help to better understand the working environment of the bank by finding the relationship between what is written in the books and what is actually going on in fields. foreign exchange deposits. There is some difference lies in types of loans in bank that is theory talks about four or five types of loans that is cash finance. As a result. In some cases theory is implemented with a little modification but in other cases theory has nothing to do with practice. letters of credit are in accordance with theory almost. hypothecation. accounts receivable.
Theory gives the direction to understand the processes and the terminologies going across the World using best business practices in a broader view covering each and every aspect of possible business scenarios. On the contrary practical life is specific.
.P a g e | 112
To me. enclosed in a jar.
969 _ 553.68 6 268.838.924.344.016 _ _ 33.154.922.347 24.156 8.927 13.472.712 13.092.794.536.113.21 8
NET ASSETS REPRESENTED BY Share capital Reserves Unappropriated Profit
17.641.249 37.058 23.872.217.718 503.P a g e | 113
Rupees in Millions ASSETS Cash and balances with treasury banks Balances with other banks Lending’s to financial institutions Investments Advances Other assets Operating fixed assets Deferred tax assets
2004 2005 2006 2007 2008
94.10 0 30.067.7 35 46.227 40.902 10.9 39 116.426.182.784.074.365 _ 577.965 25.608 17.245.459.552 49.270.079 501.679 23.758.063 40.462.110.474 38.99 5 316.219.625.238
7.974.012.068.260 32.747 24.879.677 53.464.869.456.073 553.550.813.986.926 591.188 69.571.132.596.656.24 3 _ 13.345.71 7
1.649 28.235 26.77 9 23.204.450 4.469
8.985.387.041 16.231.629 24.326
LIABILITIES Bills payable Borrowings from financial institutions Deposits and other accounts Sub-ordinated loans Liabilities against assets subject to finance lease Other liabilities Deferred tax liabilities net
7.214.790 465.719.40 6 27.6 54 25.631 47.756.454.899.914 9.202.185 506.86 8 340.158.047 52.832 21.061 10.671 11.019.274 39.032 170.5 93 81.831 _ 715.154 5.282.939.663 11.677.554 30.097.60 2 _ 16.994.985.7 12
10.458.084.713.07 5 19.741.319 15.491 412.954.855.569 9.322 149.4 67
4.956 31.378.751 19.002 21.908.106 10.43 5 624.572 817.942 156.161.216
.193.772.698 9.681.847 463.330 16.367.704.941.056 9.873.7 67 21.4 02 74.756 38.941.204 81.974 _ 635.061.178.884 10.511.59 3
106.732 139.141.299.600 210.350.044.09 6 220.340.71 1
94.946.314 29.506 36.787.907.337.344.11 4
78.300 2.090.909.196.503.865 44.886.831 645.446.10 8 102.1 18
7.605.655 3.979 _ 762.822.969.124 45.
940.942.6 65 10. 935 1.37 0 2.387.1 98
Markup/return/interest earned Markup/return/interest expensed Net markup/interest income Provisions against non-performing advances provision for/(reversal of) diminution in the value of investments provision against off balance sheet obligations bad debts written off directly Net markup/interest income after provisions NON MARKUP/ INTEREST INCOME Fee.297 Nil 32.692.16 5 12.718.593.446.722.47 8 1.878.162.539.7 68 23.969.557 Nil 875.6 54
102.77 1 -1.205.944.782.153.781.075.964 147.72 3 2007 50.171. 716 3.926.35 4 2005 33. 062 13.042.84 0 1.4 81 16.947.21 8
Rupees in Millions
2004 20.891.947.363 13.087.7 68 37.945.39 8 14. 078 18.69 0 -31.144.68 3 3. 321 11.146.19 5 1. 970 4.443.707
-245.82 7 2.248 Nil
373. 486 8.321.7 89
39.05 7 395.54 6 27.245.36 9 16.503. 770 5.08 4 2008 60.899 Nil 4.954.P a g e | 114
46.0 11 33.75 5 1.341.333.629.748.000
14.970.839 9.60 4 1.8 5 14 28. 26.979 177.7 12
81.544.284 2.86 3 1.459.7 98 23.461 Nil 5. Commission & brokerage income Dividend income Income form dealing in foreign currencies Gain on sale & redemption of securitiesnet Investments classified as held for trading Other income Total non-markup/ Interest income Total income ( Interest + non-Interest) NON MARKUP/ INTERSET EXPENSES Administration expenses
185.245.304. 892 39.559.723.370.451.73 9 2006 44.113 8.707 1.221.51 5 -4.008.223. 735 216 6.9 11 7.205. 580 14. 897 2.92 7 21.3 33 6.415.069 2.058.569.9 34 13.169.515.618 12.273.100.371.427 1.7 16 20.099.249 4.365.392.98 8 47.1 18
116. 845 42.884.7 32
74.807 1. 170 6.464 627.639.878.73 10.906.24 6 1.263.3 51 30.337.881
-709.63 8 1. 030 10.4 41
-40.80 1 23. 862 42.2 18 30.925.93 2 3. 470 4.62 8 2.340.
483.981 9.6 50
391.521 583. 234
FINANCIAL STATEMENTS ANALYSIS
Financial analysis is a process which involves reclassification and summarization of information through the establishment of ratios and trends.074.919. It is a valuable tool used by investors and creditors.762. 601 4.3 72 5. are more
.456 60.950. 929
39.00 0 847. such as bonds.206 11.283 208.098.729 5.147.695. 080 23.892.933.056.652 61.634. 293 19.496 12.133. Creditors and investors who buy debt securities.154. 444 9.361 19. Investors who buy stock are primarily interested in a company's profitability and their prospects for earning a return on their investment by receiving dividends and/or increasing the market value of their stock holdings.060 36.298 63.221 21.022.346. Financial statement analysis is the process of examining relationships among financial statement elements and making comparisons with relevant information.59 8 530.72 8 19.731 9. 770
43.6 77 4.311.40 8 15.782. 079 28.291 6.344. 998 11. 457
130. bonds.5 23
168.497 Nil 323.50 0
747.00 2 1.22 9 6.502. 501 8.458.310. 773 32.958 -15. 485 26. 346 19.70 9 291.327 13. 590 45.195.033. 028 7.284 8.288. financial analysts.23 1 17.007 51.391.58 4 12.026. The goal in analyzing financial statements is to assess past performance and current financial position and to make predictions about the future performance of a company.90 2
198.141 14.914.000.161.060.3 28 11.P a g e | 115
Other provisions written off Other charges Total non markup/ Interest expenses PROFIT BEFORE TAXATION Taxati Curren on t Prior years Deferr ed PROFIT AFTER TAXATION Unappropriated Profit brought forward Transfer from surplus on revaluation of fixed assets on account of incremental depreciation Profit available for appropriation
-17.027 17.372. and other financial instruments.243 8.542.435. 577 8.24 2 7. and others in their decision-making processes related to stocks.
and solvency ratios. The analysis of financial statement refers to the examination of the statements for the purpose of acquiring additional information regarding the activities of the business. liquidity.P a g e | 116
interested in liquidity and solvency: the company's short-and long-run ability to pay its debts. Since ratios adjust for size. After calculating ratios for each year's financial data. vertical analysis. the analyst can then examine trends for the company across years. who frequently specialize in following certain industries. Liquidity ratios are measures of the short-term ability of the company to pay its debts when they come due and to meet unexpected needs for cash.
Ratio analysis enables the analyst to compare items on a single financial statement or to examine the relationships between items on two financial statements. and ratio analysis. This must be done with a view to forecasting the firm’s future prospective. Three primary types of financial statement analysis are commonly known as horizontal analysis. liquidity ratios. Analysts can obtain useful information by comparing a company's most recent financial statements with its results in previous years and with the results of other companies in the same industry. Financial analysts. such as stocks and bonds. Profitability ratios are gauges of the company's operating success for a given period of time. routinely assess the profitability. The overall objective of financial statement analysis is the examination of a firm’s financial position and returns in relation to risk. The users of the financial information often find analysis desirable for the interpretation of the firm’s activities. and solvency of companies in order to make recommendations about the purchase or sale of securities. Solvency ratios indicate the ability of the company to meet its long-term
. Ratios are often classified using the following terms: profitability ratios (also known as operating ratios). using this analytical tool facilitates intercompany as well as intercompany comparisons.
Good earning performance enables a bank to fund its operations. A high gross profit margin indicates that a Bank can make a reasonable profit. Gross profit margin indicates the relationship between gross profit and interest earned. remain competitive in the market and increase or decrease in market funds.5 5 200 6 59. These ratios indicate the firm’s overall effectiveness of operations and give us idea how well firm utilized its resources in generating profit and shareholder value.4 8 200 8 37.
G ROSS P ROFIT M ARGIN R ATIO
Gross profit margin ratio is used to assess the profitability of a Bank's core activities. Formula = Gross Profit / Interest earned (Revenue) Year Ratio %
200 4 57.1 7 200 5 56.7 4
.P a g e | 117
obligations on a continuing basis and thus to survive over a long period of time. Profitability ratios relate profit to sales and investments.6 5 200 7 55. Financial ratios allow for comparison: • • • • Between companies Between industries Between different time periods for one company Between a single company and its industry average
The continued viability of any bank depends on its ability to earn an appropriate return on its assets and capital.
74% in 2008..7 2 200 6 38.6 3 200 8 25. including interest and taxes have been deducted.5 7 200 5 37. The lowest percentage among all years. Formula = Net Profit after Taxes / Interest earned Year Ratio %
200 4 29. The gross profit is 37.
N ET P ROFIT M ARGIN R ATIO
Net profit margin measures the percentage of revenue remaining after all cost and expenses.3 6
. large branch network and committed workforce are some of fundamental strengths that enabled NBP to achieve exceptional in a very competitive market.The National Bank of Pakistan’s wide range of product offering.P a g e | 118
A NALYSIS The Year 2006 has been an outstanding year with the bank recording the highest profit in its history i.5 9 200 7 37.e.. 59.65 %.
59%.0 5 20 06 0. The Banks with low profit margins tend to have high asset turnover.0 6 20 07 0.
A SSETS T URNOVER
This ratio is useful to determine the amount of revenue that is generated from each Rupee of assets. Formula = Revenue/ Total Assets Year Rati o
20 04 0. the percentage is decreased in 2007 as it was 37. 2007 and 2008 indicates almost same percentage of 0.63%.0 5
A NALYSIS The year 2004 represents a ratio of 0. The net profit margin is on its lowest level at the end of 2008 as it indicates a percentage of 25.P a g e | 119
A NALYSIS Net profit margin shows positive trend till 2006 and was the highest in the same year as it was 38. The National Bank of Pakistan’s assets turnover in 2006 is 0.05% on account of bank’s assets turnover.06.0 3 20 05 0.63%.
C APITAL F UND
. those with high profit margins have low asset turnover. peak ratio among all years. lowest among all years. The years 2005. The primary reason of this decline is current global economic conditions and current political crisis in Pakistan.03.0 5 20 08 0.
2006 (4.01 1 200 5 0.95).2 5 20 20 07 08 4.13.02 1 200 6 0.9 2 20 05 3.95) shows an increasing trend.13 2
A NALYSIS The above given ratios suggest that the profitability of the bank has a mixed trend during five years.P a g e | 120
This ratio relates the net profits to the amount of capital funds that have been employed in making that profit.92).
This ratio indicates the profit earned by the bank on the resources employed.018 4
.02 6 200 20 7 08 0. The first three years 2004 (2. Formula = Net markup received / Capital Funds Year Ratio
20 04 2.02 0.12) and has increased in 2008 as the ratio was 4.1 4. indicating more profitable operations of the bank.9 5 20 06 4. Formula = Net income after taxes / Total Assets Year Rati o
200 4 0. 2005 (3. It was decreased in the year 2007 (4.
026 (2007). Formula = Net income before taxes / Total Deposits Year Rati o
200 4 0.036 7
.021 (2005) and 0.02 5 200 5 0.04 0..
This ratio indicates to what extent deposits which represent funds mobilization on the part of the bank contribute towards income generation.04 1 200 6 0. 0.011(2004). 0..024 (2007) and 0.05 2 200 20 7 08 0.e.018 (2008). The ratio was decreased to 0.P a g e | 121
A NALYSIS There was an increase in the utilization of the resources till 2006 i.
036). Formula = Income Tax expense/ Pretax Income Year Ratio %
20 04 0. would seem to indicate that the Bank's operational managers are more responsible for a company's profitability than the company's tax accountants. This effective tax rate gives a good understanding of the tax rate the company faces. and resulting net profit margin. Although the ratio was decreasing in 2008 (0. This amount will often differ from the company's stated jurisdictional rate due to many accounting factors. A relatively stable effective tax rate percentage.P a g e | 122
During all five years the return on deposits ratio of National Bank of Pakistan shows a mix trend. However bank is able to reduce its tax burden because the Bank is able to adopt Tax management techniques to lessen the tax burden. indicating Bank is more keen to kept deposits and a change in policy of the Bank regarding its funds mobilization.3 2
A NALYSIS The effective tax rate of National Bank of Pakistan was highest in the year 2004 (0.
E FFECTIVE T AX R ATE
This ratio is a measurement of a company's tax rate. including foreign exchange provisions.3 2 20 08 0.3 3 20 06 0. The year 2006 (0.052) was the best year for bank in terms of its funds mobilization.4 8 20 05 0.3 5 20 07 0. which is calculated by comparing its income tax expense to its pretax income.
the higher the current ratio. liabilities exceed current assets. It must be greater than 1. although nearly depleted.P a g e | 123
The liquidity position of a bank is like a reservoir. cash equivalents. In theory. the company has a ratio amount of current assets available.1 of liabilities. Formula = Current Assets / Current Liabilities
Ye ar Ratio 20 04 0. Liquidity can be defined as: “The bank’s ability not only to meet possible deposit withdrawals but also to provide for the legitimate needs of the economy as well”
C URRENT R ATIO
Current ratio is a measure of the current adequacy of company's current assets to meet its current obligations. the better. just before the start of the rainy season. although three quarters full just before the summer drought. payables. accrued expenses and taxes). If it is less than 1.9 6 20 06 1. marketable securities. For every Rs. It may be adequate. current portion of term debt.8 3 20 05 0.0 2 20 20 07 08 1. The concept behind this ratio is to ascertain whether a company's short-term assets (cash.0 1. receivables and inventory) are readily available to pay off its short-term liabilities (notes payable.12 0
. Or it may be inadequate.
96) were not satisfied for bank as current assets are less than current liabilities. The year 2007 (1.12) the management of bank is able to increase its current ratio.
C ASH R ATIO
This ratio shows that the cash is enough for payment of current liabilities or not.02) the management of National Bank of Pakistan is able to overcome this problem. representing highest and 2005 (2.0 7 20 08 2. Formula = Cash / Current Liabilities Year Ratio
20 04 4. Again in the year 2008 (1.6 9
A NALYSIS The cash ratio of National Bank of Pakistan shows a mixed trend during five years of operations. This ratio is obtained by dividing cash by current liabilities. However. the ratio is satisfactory as per standards of this ratio.
D EPOSIT R ATIO
.8 5 20 06 2. in 2006 (1.85) & 2008 (2.9 6 20 07 3.0 9 20 05 2.69).00) is also good for bank as per standards of this ratio. During all years. For a bank this is the cash held by the bank as a proportion of deposits in the bank.83) and 2005 (0. representing lowest ratio in all five years.P a g e | 124
A NALYSIS The year 2004 (0.09). The year 2004 (4.
Formula = Advances / Total Deposits Year Ratio%
200 4 47.02 8 200 6 0.4 2 200 5 58.0 1 200 6 62.
T OTAL A SSETS
It is an indication of Bank’s funds management policies.9 9 200 20 7 08 57. stands highest in 2008 ( 66. Formula = Due from banks / Total Assets Year Ratio
200 4 0.5 66.03 6 200 20 7 08 0.021 8
.01 9 200 5 0. This shows that the bank has greater potential to advance additional loans.P a g e | 125
It demonstrate the degree to which bank has already used up its available resources to accommodate the credit needs of its customers.08%) as compared with the previous year figures.08 6
A NALYSIS This ratio. During all other years the ratio is quiet satisfactory representing National Bank of Pakistan’s credit management decisions. a comparison of funds generation and its funds mobilization. indicates the total loans sanctioned by the bank in relation to total amount of money deposited with the bank.02 0.
028. 196.036 among all years. 197.028 in the year 2005.019 in 2004 and 0.P a g e | 126
A NALYSIS The National Bank of Pakistan’s due from banks to total assets ratio is fluctuating and indicates a mixed trend during all years. 42.
It shows the relationship between what the bank owes from other banks and what is due to it. There was a decrease in ratio at the end of financial year 2007 that is 0. The year 2006 represents highest ratio of 0. Formula = Due from banks / Due to banks Year Ratio %
200 2005 2006 2007 20 4 08 94. The ratio is 0.021) on account of due from banks to total assets.8 185. The year 2008 represents a decrease in ratio (0.33 3 95 62 18
196.02 3 200 20
7 08 0.018 and the year 2008 represents the peak percentage of 0.024 in 2004 and decreased to 0. The year 2007 represents the lowest percentage of 0. The ratio is 0. The year 2008 represents the lowest percentage of 42.33 on account of due from banks to due to banks. The ratio is increased in 2006 as the ratio is 0. Formula = Due to banks / Total Deposits Year Rati o
200 4 0. 185.01 0.
T OTAL D EPOSITS
This ratio is an indicative of the proportion of the lending from the financial institutions in relation to the total funds raised by the bank in the form of deposits.
.023.18 in 2007.065 8
A NALYSIS The due to banks to total deposits ratio of National Bank of Pakistan is fluctuating and indicates a mixed trend during all years.P a g e | 127
A NALYSIS The ratio indicates an increasing trend till 2007 that is 94.02 4 200 5 0.62 (2006) and 197.01 9 200 6 0.065.019 in 2005.95 (2005).83 (2004).
35 200 5 97. as opposed to total assets in the debt ratio. Formula = Total Liabilities/ Total Shareholder’s equity Year Rati o
2004 112. The ratio is further decreased in 2006 as it shows a
.35 % in 2004. The ratio is decreased to 97.7 7 200 6 89. Similar to the debt ratio. comparing total liabilities to shareholders' equity.
T HE D EBT
E QUITY R ATIO
The debt-equity ratio compares a company's total liabilities to its total shareholders' equity.5 7 200 7 93. the greater the amount of debt held by a company the greater the financial risk of bankruptcy. a lower the percentage means that a company is using less leverage and has a stronger equity position.1 7
A NALYSIS The debt to equity ratio of National Bank of Pakistan shows a ratio of 112.4 7 200 8 91. lenders. In general.P a g e | 128
These ratios give users a general idea of the company's overall debt load as well as its mix of equity and debt. the debt-equity ratio provides another vantage point on a company's leverage position. Debt ratios can be used to determine the overall level of financial risk a company and its shareholders face. To a large degree.77% in the year 2005. in this case. This is a measurement of how much suppliers. creditors and obligors have committed to the company versus what the shareholders have committed.
66 0. The lower the ratio. The year 2008 represents the ratio of 91.
I NTEREST C OVERAGE R ATIO
It shows whether the bank is earning enough profit before mark up charges to be paid to the financiers and the taxation obligations due to the government in order to remain solvent.47%.85 times 2006 1.5 or lower.85 times & 1.17% . The interest coverage ratio is used to determine how easily a company can pay interest expenses on outstanding debt. There was an increase in the ratio as it shows a percentage of 93.83 times 2005 1.57%.P a g e | 129
percentage of 89. The National Bank of Pakistan’s interest coverage ratio is 1.83 times in the year 2005. its ability to meet interest expenses may be questionable. Formula = Earnings before interest & Taxes / Interest expense Year Ratio
2004 1.89 times 2007 20 08 1.89 times
. The ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) by the company's interest expenses for the same period. When a company's interest coverage ratio is only 1. The ratio was increased in the years 2005 and 2006 as it was 1.97 times times
A NALYSIS The amount of interest a Bank pays in relation to its revenue and earnings is tremendously important. the more the company is burdened by debt expense.
The year 2008 represents highest ratio of 0. Formula = Provision against non-performance loans & advances/ Profit or loss before taxation Year Rati o
20 04 0.1 7 20 08 0.97 times in 2008.
L OAN L OSS C OVERAGE R ATIO
Banks use the loan-loss coverage ratio to define the quality of its assets and how well it protects itself from losses caused by problematic loans. The higher this ratio is.47 on account of loan loss coverage.13 in both years.P a g e | 130
respectively.17. as compare to all years.1 3 20 06 0.
CAPITAL ADEQUACY RATIOS
.66 times is observed in 2007.1 3 20 05 0. There was a slight decrease in this ratio as it was 0. the better the bank is handling itself in regards to loans.4 7
A NALYSIS The loan loss coverage ratio of National Bank of Pakistan is almost same in the years 2004 and 2005 as it was 0. The year 2006 shows an increase in loan loss coverage ratio as it was 0. The ratio is further decrease to 0. representing the lowest ratio among all years. There sudden decrease of 1.1 2 20 07 0.12 in 2006.
1. the better it is for shareholders. The ratio is increased in 2005. but the ratios do give users insight into the company's performance and management during the period being measured. 2006 and 2007 as the graph shows ratios of 1. Formula = Capital Funds / Total Assets Year Ratio %
20 04 0. these ratios look at how efficiently and effectively a company is using its resources to generate sales and increase shareholder value.0 1.07 respectively.02. the better these ratios are. These ratios look at how well a company turns its assets into revenue as well as how efficiently a company converts its sales into cash.
.89 in 2004.
OPERATING PERFORMANCE RATIOS
Each of these ratios have differing inputs and measure different segments of a company's overall operational performance.1 0 20 20 07 08 1. Basically. In general. The ratio is keeping its trend and also increases in the year 2008 as it was 1.0 2 20 06 1. representing lowest ratio in all years.8 9 20 05 1.09.P a g e | 131
C APITAL F UNDS
T OTAL A SSETS
This ratio indicates the extent of the funds employed by the bank in the total resources as shown in the balance sheet. The ratio is 0.09 7
A NALYSIS The National Bank of Pakistan’s Capital funds to Total Assets ratio is increased during all years.10 & 1.
The ratio increases 2.
F IXED A SSETS T URNOVER
This ratio is a rough measure of the productivity of a company's fixed assets (property. plant and equipment etc) with respect to generating revenue.. this indicator simply measures the amount of Rupees sales or revenue.23 (2005). The higher the Rupee figures the better. This annual turnover ratio is designed to reflect a company's efficiency in managing these significant assets.1 3 20 07 1. their investment in fixed assets represents the single largest component of their total assets.
R EVENUE P ER E MPLOYEE
As a gauge of personnel productivity.2 8 20 05 3.64 in the year 2007 however it was increased in 2008 as the ratio is 1.7 6
A NALYSIS The fixed assets turnover ratio of National Bank of Pakistan has an increasing trend till 2006. we'll look at the fixed-asset turnover ratio and the sales/revenue per employee ratio.
. Formula = Revenue/ Operating Fixed Assets Year Ratio %
20 04 2.76.13.. generated per employee.P a g e | 132
In this section. 4. For most companies. The year 2006 represents highest fixed assets turnover ratio for National Bank of Pakistan i.e. The bank’s efficiency to utilize these assets has been decreased to 1.2 3 20 06 4. which look at how well the company uses its fixed assets and employees to generate sales.6 4 20 08 1.28 (2004) to 3.
2587.85 (2004). 87 2006 2431. 1858.
.87 (2005).38 (2006) and 2583. There was a marginal increase in the year in the year 2008 i.e. 1274.... representing the peak percentage in all years. 85 2005 1858. 08
A NALYSIS The ratio has been showing an increasing trend till 2007 i.94 (2007).08. 2431..P a g e | 133
Formula = Revenue/ Number of Employees Year Rati o
2004 1274.e. 38 2007 2583. 94 2008 2587.
It is conducted by setting consecutive balance sheet. • Horizontal analysis provides little insight into why the trend occurred in a financial model. income statement or statement of cash flow side-by-side and reviewing changes in individual categories on a year-to-year or multiyear basis. whilst simple to execute and useful to a certain extent. Such percentages are calculated by selecting a base year and assign a weight of 100 to the amount of each item in the base year statement. • Horizontal analysis does not address the challenge of negative numbers. • Horizontal analysis does not provide insight into whether the trend in the financial model results was superior/inferior to some benchmark. speed and extent of a trend(s). Thereafter.
. These limitations include: • Being highly dependent on the selection of base year and the period under examination in the financial model. the amounts of similar items or groups of items in prior or subsequent financial statements are expressed as a percentage of the base year amount. has its limitations. A comparison of statements over several years reveals direction.P a g e | 134
This technique is also known as comparative analysis. The resulting figures are called index numbers or trend ratios. The horizontal financial statements analysis is done by restating amount of each item or group of items as a percentage. The most important item revealed by comparative financial statement analysis is trend. Formula = Current Year amount / Base Year amount * 100 Horizontal analysis.
of assets Bills payable Borrowings Deposits and other accounts Liabilities against assets subject to finance lease Deferred tax liabilities net Other liabilities Total Liabilities 2004
100 100 100 100 100 100 100 100
75 62 155 105 122 103 125 104
83 82 219 94 143 105 194 117
100 75 204 141 154 282 162 138
113 77 163 114 187 263 233 148
100 100 100 100 100 100 100 100 100 100 100
120 125 182 179 24 79 100 97 15291 108 104
144 128 350 135 147 106 108 78 8179 115 117
166 146 495 221 98 98 127 197 17467 134 138
182 184 573 99 142 365 134 148 Nil 172 133
. institutions Investments Advances Operating fixed assets Other assets Total Assets LIABILITIES Share Capital Reserves Unappropriated profit Surplus On Reval.P a g e | 135
HORIZONTAL ANALYSIS OF BALANCE SHEET
Horizontal Analysis (%)
ASSETS Cash Balances with other banks Lending’s to fin.
P a g e | 136
A NALYSIS The National Bank of Pakistan’s Cash & balance with treasury banks shows a mixed trend during all years. while the year 2006 represents highest percentage of 18%. In 2008 the percentage is increased by 13% as compare to base year. There was a marginal increase in the year 2007. The year 2005 represents lower percentage (38%).
A NALYSIS The Balances of National Bank of Pakistan with other banks shows a decreasing trend as compare to base year. It was decreased by 25% in 2005 and 17% in 2006.
however investments are decreased 27 % as compare to the year 2007. The year 2007 also shows an increase of 104 % as compare to base year. There was an increase of 5 % in 2005. highest among all years. The investments are increased 14 % in 2008 as compare to base year.P a g e | 137
A NALYSIS The lending’s to financial institutions by National Bank of Pakistan fluctuates during all years. The year 2006 indicates a decrease of 6% in investments.
A NALYSIS The investments made by National Bank of Pakistan fluctuate during all years. The year 2006 represents highest percentage of 119 % among all years on account of lending’s to financial institutions. The year 2007 represents an increase of 41 %. The lending’s increased 55 % in 2005.
. The year 2008 indicates an increase of 63% as compare to base year but lending’s decreased by 41 % in 2008 as compare to the year 2007.
. There was a very sharp increase in operating fixed assets in the year 2007 of 182 % as compare to base year. The year 2007 represents an increase of 54 % and 2008 represents highest percentage among all years that is 87 % as compare to base year. There was an increase of 163% in 2008 as compare to base year but the same was decreased by 19% as compare to 2007. The advances were increased 22 % in the year 2005 and 43 % in 2006 as compare to base year. There was an increase of 3 % in 2005 & 5 % in 2006. This implies that National Bank of Pakistan is keener to advance money to lenders.P a g e | 138
A NALYSIS The advances made by National Bank of Pakistan shows an increasing trend in all years as compare to base year.
A NALYSIS The operating fixed assets of National Bank of Pakistan shows a mixed trend during all years.
The other assets are increased 25 % in 2005 and 94 % in 2006. The other assets of National Bank of Pakistan are on their peak percentage of 133 % in 2008 as compare with base year. The year 2007 indicates an increase of 62% as compare to base year.P a g e | 139
A NALYSIS The other assets of National Bank of Pakistan are fluctuating during all years. The increase in share capital during all years indicates share holder’s concern toward National Bank of Pakistan and efficient bank’s Management policies. The share capital of National Bank of Pakistan shows an increasing trend in all years as compare to base year.
A NALYSIS The Share capital refers to the portion of a Bank's equity that has been obtained by trading stock to a shareholder for cash or an equivalent item of capital value.
The year 2008 represents highest increasing percentage of 84% as compare to base and previous years. The bank’s Unappropriated profit is increasing very sharply during all years as compare to base year.
. The reserves are increased 25 %. Unappropriated profit is part of shareholder equity.
A NALYSIS The Unappropriated profit are Earnings of National Bank of Pakistan not paid out as dividends but instead reinvested in the core business or used to pay off debt. 28 % & 46 % in the years 2005. 2006 & 2007 respectively.P a g e | 140
A NALYSIS The Banks’ reserves are banks' holdings of deposits in accounts with their central bank plus currency that is physically held in bank vaults (vault cash). The reserves of National Bank of Pakistan fluctuate during all years as they show an increasing trend. indicated bank’s strict dividend payout policy and concern towards reinvestment options.
The year 2007 represents highest percentage of 121%. It was increased 79% in 2005 and 35% in 2006. The year 2008 also shows an increase in bank’s bills payable as it increases to 42% as compare to base year. The percentage is decreased by 1% in 2008 as compare to base year and 122% as compare to 2007. The year 2005 is best for bank in terms of reduction in bills payable.
. The year 2006 represents a higher percentage of bank’s liability as it increase 47% as compare to base year.P a g e | 141
A NALYSIS The National Bank of Pakistan’s surplus on revaluation of assets fluctuates and shows a mixed trend during all years.
A NALYSIS The National Bank of Pakistan’s bills payable is showing a mix trend during all years.
In the year 2005. the deposits were increased very marginally. The borrowings were decreased 21 % in 2005. with the year 2006 represents an increase of 8%. The deposits are increased 27% & 34% in the years 2007 and 2008 respectively
. The year 2008 represents highest percentage of borrowings as these were increased to 265 % comparing with base year and are increased 267 % as compare to 2007. There was a marginal decrease of 2% in bank’s borrowings in the year 2007.P a g e | 142
A NALYSIS The National Bank of Pakistan’s borrowings fluctuates during all years and shows a mixed trend.
A NALYSIS The deposits and other accounts of National Bank of Pakistan show a mixed trend during all years. however same are increased 6 % in 2006 as compare to base year.
There was a sharp increase in 2008 as it indicates a percentage of 72%. with the year 2005 (3% decrease) and 2006 (22% decrease) shows a decreasing trend and the year 2007 (97% increase) & 2008 (48 % increase) shows an increasing trend as compare to base year. highest among all years.
. The year 2005 indicates an increase of 8 % and 2006 indicates an increase of 15%.P a g e | 143
A NALYSIS The National Bank of Pakistan’s Liabilities against assets subject to finance lease were fluctuate during all years.
A NALYSIS The other liabilities of National Bank of Pakistan are fluctuating during all years and show an increasing trend. The other liabilities in the year 2007 represent an increase of 34%.
515 153 220 176
160 521 207 161 234 168
205 2.924 831 Nil Nil Nil Nil Nil 100 20 72 17 142 100 100 113 146 146 191 163 203 198 203
100 100 100 100 100 100
126 615 763 129 159 145
151 -54 2.P a g e | 144
HORIZONTAL ANALYSIS OF INCOME STATEMENT
Rupees in Millions
Markup/return/interest earned Markup/return/interest expensed Net markup/interest income Provisions against non-performing advances provision for/(reversal of) diminution in the value of investments provision against off balance sheet obligations bad debts written off directly Net markup/interest income after provisions NON MARKUP/ INTEREST INCOME Fee.042 219 192 238
.459 4.318 7.872 2. Commission & brokerage income Dividend income Income form dealing in foreign currencies Gain on sale & redemption of securitiesnet Investments classified as held for trading Other income Total non-markup/ Interest income Total income ( Interest + non-Interest) NON MARKUP/ INTERSET EXPENSES Administration expenses Other provisions written off Other charges Total non markup/ Interest expenses PROFIT BEFORE TAXATION Taxati Curren on t 2004 100 100 100 100 2005 161 157 162 161 2006 211 213 210 203 2007 241 258 234 312 2008 291 364 258 699
-382 Nil Nil 16 136 220
100 Nil 100 100 100 70 127 167
122 Nil 270 628 229 206
100 100 100 100
97 135 119
121 227 132
133 256 103
155 226 393
852 110 205 155
63 -394 161 275 329
46 Nil 26.P a g e | 145
Prior years Deferr ed PROFIT AFTER TAXATION Unappropriated Profit brought forward Transfer from surplus on revaluation of fixed assets on account of incremental depreciation Profit available for appropriation
100 100 100 100 100
-130 -1.058 1 156 130 307 544 250 769
A NALYSIS The interest earned by National Bank of Pakistan fluctuates during all years. The year 2007 represents second highest percentage on account of interest earned as it was increase 141 %. as it was increased during all years as compare to base year.83 -2. The interest earned is increased 61% in 2005 and 111% in 2006. The year 2008 represents peak percentage of 191 % as compare to all years.
. highest among all years. The year 2008 shows an increase of 264 %. The year 2007 represents second highest percentage on account of Net markup/ Interest income as it was increased to 134%. comparing with base year. The year 2007 represents second highest percentage on account of interest expensed as it was increases to 158% as compare to base year.
A NALYSIS The net markup/ Interest income of National Bank of Pakistan fluctuates during all years as it shows an increasing trend. as it was increased 57 % (2005) and 113 % (2006). The percentage is increased 158 % in 2008.P a g e | 146
A NALYSIS The interest expense of National Bank of Pakistan shows an increasing trend in all years. highest among all years. It was increased 62 % in 2005 and 110% in 2006 as compare to base year.
It was increased 67% (2005). The year 2008 represents peak percentage of 55%. 120% (2006) and 129% in 2007.P a g e | 147
A NALYSIS The net markup/ interest income after provisions fluctuates and shows a mixed trend during all years. The income is increased 106 % as compare to base year but the same was decreased by 23% as compare to 2007. Commission and brokerage income of National Bank of Pakistan fluctuates during all years. The year 2007 represents an increase of 33%. It was decreased 3% in the year 2005 and increases 21 % in the year 2006.
A NALYSIS The Fee.
represents higher percentage among all years.
. The income has its lowest percentage in 2007 as it was increased 3 %. The dividend income is increasing 35 % in the year 2005 and 127 % in 2006. The year 2008 represents an increase of 126 % as compare to base year and a decrease of 30% as compare to 2007.P a g e | 148
A NALYSIS The dividend income of National Bank of Pakistan fluctuates during all years. as it shows a mixed trend during all years. It was increased 156% in 2007. It was increased 19 % in 2005 and 32 % in 2006. The year 2008 represents highest percentage on account of bank’s income from dealing in foreign securities as it was increased 293 % as compare to base year and 290% as compare to the year 2007.
A NALYSIS The National Bank of Pakistan’s income from dealing in foreign securities fluctuates during all years as it shows an increasing trend.
There was a sharp increase in National Bank of Pakistan’s other income as it was increased to 42% as compare to base year and increased 125% as compare to 2007. to 63%. It was increased 13% in 2005 and 46% in 2006. The year 2007 represents the lowest decreasing trend of 83%.
A NALYSIS The Total non.
. The percentage is increased 52 % in 2008 as compare to base year. comparing with base year. There was an increase of 98% in 2008. The income is increased 63 % in 2007. highest among all years. second highest among all years.markup/ Interest income of National Bank of Pakistan shows an increasing trend during all years. It was decreased 80 % in 2005 and 28% in 2006 as compare to base year.P a g e | 149
A NALYSIS The other income of National Bank of Pakistan fluctuates during all years as it shows a mixed trend. but it was decreased 11% as compare to 2007.
highest among all years. The percentage is increased 105 % in 2008. It was increased 46% in 2005 and 91% in 2006.P a g e | 150
A NALYSIS The total income of National Bank of Pakistan shows an increasing trend. The year 2007 represents an increase of 60%.
A NALYSIS The administration expense of National Bank of Pakistan is increased 26 % in 2005 and 51 % in 2006 as compare to base year.
. The total income is increased 103% in 2007 and also increase very marginally in 2008.
It was increased 29%. The year 2008 represents peak percentage of 119% in 2008. 53% and 61% in the years 2005. The year 2007 represents highest percentage on account of profit before taxation as it was increased to 134%.P a g e | 151
A NALYSIS The Total non markup/ Interest expenses of National Bank of Pakistan fluctuates and shows an increasing trend as compare to base year. It was increased 59% in 2005 and 120% in 2006.
. The year 2008 indicates an increase of 92% as compare with base year but it was decreased in 2008 by 42% as compare to 2007.
A NALYSIS The profit before taxation of National Bank of Pakistan fluctuates and shows a mixed trend during all years. 2006 and 2007 respectively.
The profit after taxation is increased 105% in 2005 and 175 % in 2006 as compare to base year. The Year 2007 has been an outstanding year with the National Bank of Pakistan recording the highest profit after taxation in its history as the percentage increases to 207 % comparing with base year.P a g e | 152
A NALYSIS The current taxation of National Bank of Pakistan fluctuates during all years as it was increased during all years as compare to base year.
A NALYSIS The National Bank of Pakistan’s Profit after taxation fluctuates during all years as it was increased during all years as compare to base year. The year 2008 indicates an increase of 150 % as compare to base year and a decrease of 57 % as compare to 2007. The year 2007 and 2008 indicates an increase of 68 % & 138 % respectively. It was increased 45 % in 2005 and 76 % in 2006.
while on the balance sheet it is total assets. In a balance sheet. In Vertical analysis.
. This approach to financial statement analysis. for example. in an income statement. whether across the years for a single company or across different companies. The term vertical analysis applies because each year's figures are listed vertically on a financial statement. also known as component percentages. Common-size balance sheets and income statements can be more easily compared. Vertical analysis is a technique for identifying relationship between items in the same financial statement by expressing all amounts as the percentage of the total amount taken as 100. the analyst calculates each item on a single financial statement as a percentage of a total. The total used by the analyst on the income statement is net sales revenue. each expense is shown as a percentage of the sales revenue. produces common-size financial statements.P a g e | 153
When using vertical analysis. various components of the financial statements are standardized by expressing them as a percentage of some bases. cash and other assets are shown as a percentage of the total assets and.
94 76.34 2.95 6.22
1.96 5.10 2.09 2.64 4.81 77.53 1.19 6.02 2.66 3.82 27.30 1.14 100 12.15
1.15 4.02 4.07 2.41 2.00 1.61 0.86 1.95 1.45 100
0.40 4.66 44.57 21.18 0.75 100 12.50 2.00 1.50 5.30 2.93 1.48 1.P a g e | 154
Examples of common-sized statements include: •
Components of the balance sheet expressed as a percentage of total assets Components of the income statement expressed as a percentage of sales or revenue
VERTICAL ANALYSIS OF BALANCE SHEET
Vertical Analysis (%) 2005 2006 2007
ASSETS Cash Balances with other banks Lending’s to fin.00 39.92 2.66 3.90 27.70 3.46 100
13.37 2.89 1.30 3.64 1.25 4.69 2. institutions Investments Advances Operating fixed assets Other assets Total LIABILITIES Share Capital Reserves Unappropriated profit Surplus On Reval.82 27.97 4.88 50.79
1.91 1.69 49.66
1. of assets Bills payable Borrowings Deposits and other accounts
.43 6.89 6.17 46.43 77.45 4.32 5.07 9.00 84.07 5.09 20.52 80.57 1.
A NALYSIS The cash balance of National Bank of Pakistan fluctuates during all years.0030 Nil 4.0031 0. The cash balance percentage is decreasing in 2005 (12.17 100
0.37 4.32 %) and 2006 (12. of 12.19%).05 100
0.0029 0.12 100
0. The year 2004 representing highest percentage of cash balance among all years that is 17.77 4.01 4. There was a slight increase in the year 2007 as compare to the years 2005 & 2006.0021 0.0044 0. The year 2008 indicates second highest level of National bank of Pakistan’s cash balance as it was 13.P a g e | 155
Liabilities against assets subject to finance lease Deferred tax liabilities net Other liabilities Total
.57% for National Bank of Pakistan regarding its lending’s to financial institutions. In the year 2004 percentage is 1.82%.92 % and a percentage of 4. indicates 6.90%. The year 2006 represents peak percentage of 3. The year 2005 along with the year 2007 indicates the same percentage of 2.3%.
A NALYSIS The lending’s to financial institutions by National Bank of Pakistan shows a mixed trend. The percentage is decreased in 2008 indicating a percentage of 2.69% in 2008. second lowest among all years.37% in 2005 and has increased slightly in 2006.09%. The percentage is decreased to 5.P a g e | 156
A NALYSIS The National Bank of Pakistan’s balances with other banks has its peak percentage of 9% in the year 2004. The percentage is again decreased in 2007 with a percentage of 4.
however it was increased in 2007 to 27.88% in the year 2008. The first three years of analysis shows an increasing trend that is 39. representing peak rate among all previous years.17%.53% (2005) and 49% in the year 2006.69% in 2006.
. The year 2004 shows a percentage of 27% and the year 2005 show 27.91% (2004). There was a decrease in bank’s advances to 44.5%.7% in 2007.
A NALYSIS The advances made by National Bank of Pakistan are fluctuating and indicates mixed trend in all years.66 %. representing peak percentage among all years.P a g e | 157
A NALYSIS The investments made by National Bank of Pakistan are fluctuating and showing a mixed trend. The percentage is decreased to 21. however in 2008 the percentage is increased to 50. 46. The percentage is again decreased to 20.
75% (2006).50% in 2006.45% in the year 2008.64% in 2005 and 1. however it was increased to 5. The operating fixed assets are increased to 3.66% in the year 2004.
. The year 2008 indicates a decrease in bank’s operating fixed assets as it reduces to 2. The percentage of other assets is decreased to 4.96%.P a g e | 158
A NALYSIS The operating fixed assets of National Bank of Pakistan shows a percentage of 1.
A NALYSIS The other assets of National Bank of Pakistan fluctuate during all years. There was a slight decrease of 1.46%.14% (2005) and 5. which is increased till 2006 that is 4. The year 2004 has a percentage of 3.40% in 2007.07% in the year 2007.
The percentage of share capital is further increased in 2006 and shows 1. Despite the decreasing trend in previous two years. There was a slight decrease in 2007 as percentage was 1. The reserves of the bank are decreasing in 2006 & 2007.09% among all years.15% and 2.02% in 2005.P a g e | 159
A NALYSIS The share capital of National Bank of Pakistan shows a mixed trend in all years.07%. The above graph shows a percentage of 1. the National Bank of Pakistan is
.07% respectively. The year 2008 represents highest percentage of 1.34% in the year 2005. shows a percentage of 2. It was 0.95% in 2004 with an increasing trend of 2.
A NALYSIS The reserves of National Bank of Pakistan fluctuate and indicate a mixed trend.10%.89% in 2005 and shows an increasing trend of 1.
57%. There was a sharp increase in 2007 of 6. 5. The year 2005 represents highest percentage of 6. lowest among all years.48%.95% in 2007 and a peak percentage of 6.
A NALYSIS The Unappropriated profit of National Bank of Pakistan is increased during all years.61%.97% in 2006.89% in 2005.66% in 2004.18%. It shows a percentage of 3.41% in 2008. but it was decreased in 2006 as percentage is decline to 4. 4. It shows a percentage of 1.86% in 2004. 2.43%.P a g e | 160
being able opt achieve highest percentage of reserves in 2008 as the percentage increased to 2.
A NALYSIS The surplus on revaluation of assets is fluctuating and shows a mix trend. however surplus is again decline in 2008 and shows a percentage of 2.
43% of bank’s borrowing among all years.25%.81%. The borrowings are increased in 2006 shows a percentage of 1.64% with a decline of 0.3% in 2004.52%. The percentage is again increased in 2008 as it shows a percentage of 1.
A NALYSIS The Borrowings of National Bank of Pakistan shows a mixed trend in all years.
. The percentage is decline in 2005 as it shows a decrease of 0. There was a sharp increase in 2006 of 1.3%.93% in 2007.94%. The percentage is 2% in 2004 with a decline in 2005 shows a percentage of 1. There was a sharp increase in bank’s borrowing in the year 2008 as it shows a percentage of 4. The year 2007 represents lowest percentage of 1.P a g e | 161
A NALYSIS The bills payable by National Bank of Pakistan indicates a percentage of 1. lowest percentage in all years.
15%.12% and 4.
A NALYSIS The other liabilities of National Bank of Pakistan fluctuate and show a mix trend in all years. The other liabilities were decline in 2006 and 2007 shows a percentage of 4. The National Bank of Pakistan is not being able to reduce its
.42 % in 2008. The year 2004 represents peak percentage of 84.05% respectively.22% in 2005. The deposits are decline to 80. 77. The year 2005 represents percentage (4. 77.17%. The percentage of other liabilities in 2004 is 4.32%) of bank’s other liabilities.79% in 2006.66% in 2007 and 76.P a g e | 162
A NALYSIS The deposits and other accounts of National Bank of Pakistan decreased during all years.
85%. highest percentage among all years.P a g e | 163
other liabilities in 2008 as the graph shows a percentage of 4.
VERTICAL ANALYSIS OF INCOME STATEMENT
2004 100 31 69 7 2005 110 34 77 8 2006 110 35 75 8 2007 119 40 79 11 2008 143 56 87 25
Markup/return/interest earned Markup/return/interest expensed Net markup/interest income Provisions against non-performing advances provision for/(reversal of) diminution in the value of investments provision against off balance sheet obligations bad debts written off directly Net markup/interest income after provisions
1 0 Nil 0 8 60
-1 Nil 0 7 69
-2 Nil 0 6 70
0 Nil 11 26 68 61
Commission & brokerage income Dividend income Income form dealing in foreign currencies Gain on sale & redemption of securitiesnet Investments classified as held for trading Other income Total non-markup/ Interest income Total income ( Interest + non-Interest) NON MARKUP/ INTERSET EXPENSES Administration expenses Other provisions written off Other charges Total non markup/ Interest expenses PROFIT BEFORE TAXATION Taxati Curren on t Prior years Deferr ed PROFIT AFTER TAXATION Unappropriated Profit brought forward Transfer from surplus on revaluation of fixed assets on account of incremental depreciation Profit available for appropriation
24 6 5 0 Nil 4 40 100
16 6 4 4 0 1 31 100
15 7 3 3 0 2 30 100
16 8 2 6 0 0 32 100
19 7 9 1 0 3 39 100
42 0 0 43 57 24 4 0 28 30 28
37 2 0 38 62 23 -4 1 21 42 30
34 0 1 34 66 22 1 0 23 43 48
33 1 0 34 66
43 5 1 46 54
20 28 1 Nil 1 21 45 76 -10 18 36 107
.P a g e | 164
NON MARKUP/ INTEREST INCOME Fee.
The interest expense is increase in 2005 as it shows a percentage of 34%. There was a marginal increase in 2006. The bank earned 143% interest in this year. The year 2008 is unique in terms of bank’s interest earned.P a g e | 165
The interest earned by National Bank of Pakistan fluctuates and shows an increasing trend during all years. In the year 2004. 110% in 2006 and 119% in 2007. as interest expanse shows a percentage of 35%. The year 2008 represents a percentage of 56%. highest among all years.
. the interest expensed is 31%.
The interest expense of National Bank of Pakistan shows an increasing trend during all years. 110% in 2005. The year 2007 also shows an increase of 40%. All other years shows an increasing trend that is 100% in 2004.
There was an increase in income in 2007.P a g e | 166
A NALYSIS The net markup/ interest income of National Bank of Pakistan fluctuates and shows a mixed trend during all years. There was a slight decrease in net markup/ Interest income as the percentage is 75%. There was a marginal increase in 2006 as the percentage is 70%. lowest among all years. The year 2005 represents an increasing trend as percentage is 69%. as the graph indicating a percentage of 79%.
A NALYSIS The net markup/ Interest income after provisions fluctuates and shows a mixed trend.
. The percentage is 69% in 2004 and shows an increasing trend in 2005 as percentage is 77%. The year 2008 represents peak percentage of 87% of net markup/ Interest income. The percentage is 60% in 2004. The banks income is decreasing in 2007 & 2008 as the percentage is 68% and 61% respectively.
commission & brokerage income.P a g e | 167
A NALYSIS The Fee.
A NALYSIS The dividend income of National Bank of Pakistan is showing a mixed trend during all years. The year 2004 represents highest percentage of 24% on account of fee. The year 2004 and 2006 indicates almost same percentage of 6%. The percentage is decreased in 2005 & 2006 as percentage is 16% & 15% respectively. The year 2007 represents a peak percentage of 8% on account of dividend income.
. Commission & brokerage income of National Bank of Pakistan fluctuate and show a mixed trend during all years. There was a slight increase in 2007 & 2008 as percentage is 16% & 19% respectively. The year 2006 & 2008 shows a percentage of 7% each.
3% and 2% respectively.
A NALYSIS The Total non markup/ Interest income of National Bank of Pakistan fluctuates and indicates a mixed trend during all years. The percentage is decreased in 2005. The year 2004 represents highest percentage of 40% among all years. The percentage is decreased in 2005 as it was 31%. The years 2007 and 2008 indicates an increasing trend as percentage is 32% & 39% respectively. There was a slight decrease in 2006 as percentage is 30%. The year 2008 represents highest percentage of 9% on account of income from dealing in foreign securities.
. 2006 and 2007 as the percentage in these years is 4%.P a g e | 168
A NALYSIS The National Bank of Pakistan’s income from dealing in foreign securities shows a percentage of 5% in 2004.
A NALYSIS The total non markup/ Interest expenses of National Bank of Pakistan are 43% in 2004. highest among all years. The expenses are decreased in 2005 as percentage is 37%. The year 2006 and 2007 also shows a decreasing trend as percentage is 34% & 33% respectively. The expense is decreased in 2005 as percentage is 38%. The administrative and operating expenses of bank are increased in the year 2008 as the percentage is 43%. The total interest expense of bank is increased in the year 2008 as the percentage is 46%. The year 2006 and 2007 also shows a decreasing trend as percentage is 34% in each year. highest among all years. representing second highest percentage among all years.
.P a g e | 169
A NALYSIS The administrative and operating expenses of National Bank of Pakistan are 42% in 2004. representing second highest percentage among all years.
There was a decrease in bank’s Profit before taxation as percentage is reduces to 54%. The years 2005.P a g e | 170
A NALYSIS The National Bank of Pakistan’s current taxation fluctuates and shows a mixed trend in all years. The year 2008 represents peak percentage of 28% on account of current taxation. The year 2006 and 2007 shows almost same increasing trend as percentage is 66%. The percentage is 23% in the year 2004. lowest among all years. 2006 and 2007 shows a slight decrease in bank’s current taxation as percentage in these years is 23%.
.The percentage is increased in 2005 as it shows a percentage of 62%. 22% and 20% respectively.
A NALYSIS The National Bank of Pakistan’s Profit before taxation is 57% in the year 2004.
There was a decrease in bank’s Profit before taxation as percentage is reduces to 36%. The percentage is increased in 2005 as it shows a percentage of 42%. The year 2006 and 2007 shows a slight increasing trend as percentage is 43% & 45% respectively. representing the lowest percentage among all years.
.P a g e | 171
A NALYSIS The National Bank of Pakistan’s Profit after taxation is 30% in the year 2004.
The securities traded on a stock
.27 2.14 180.57 0.85 81.4 287.02 -0.55 3.59 2.38 24.43 -0.11 6.85 621.05 1.88 12.36 34.6
1400 1249 757 1038 1100 38 272 90 155 203 34 231 55 111 41 111 240 69 31 176
Habib Bank NBP Allied Bank MCB United Bank First Women Bank of Punjab Soneri Bank Askari Bank Bank Al.3 4.39 0.44 4.18 173.41 0.98 328.98 0.12 344.04 217.02 8.3 85.84 112.27 9.05 -2.57 101.81 14.97 350.03 3.01 6.96 22.Falah Saudi Pak Faysal Bank KASB Bank Meezan Bank NIB Bank Mybank Atlas Bank Standard Chartered JS Bank Habib Metropolitan
AA+ AAA AA AA+ AA+ BBB+ AAAAAA AA BBB+ AA AAA A A+ AAA A-
AA+ 11 A AA+
A stock exchange is a corporation or mutual organization which provides "trading" facilities for stock brokers and traders.95 0.17 0.71 788.29 4.43 23.7 276.5 8.24 5. to trade stocks and other securities. Bn) Bn) (Rs.72 465.01 2.08 128.73 153.82 64. Bn)
584.04 93.32 136.42 168.43 1.31 2.69 -0.34 2.09 142.02 4.45
As of June 2008 Deposits Advances Profit After (Rs.47 30.22 3.12 -1.77 42.02 50.54 5.51 7.35 99.88 7.23 1.81 0.54 1.6 18.53 293.52 1.11 4.01 38.11 1.5 126.61 194.54 28.28 5.36 173.66 71.22 7.22 5.12 31.1 2. Bn) (Rs.21 167.02 23.03 17.22 7. Bn) Tax (Rs.4 180.62 87.81 8.46 0.57
Earnings Branch Credit Per share Network Rating (Rs)
9.46 6.31 53.7 735.16 1.34 576.88 12.59 0.8 1.02 27.08 0.34 -0.7 450.43 333.25 11.74 177.65 38.97 411.83 137.72 5.28 10.85 45.Habib Bank of Khyber Bank Al.41 0.47 0.39 0.79 4 8 5 5.98 45.83 114.54 6.67 -4.61 32. Capital (Rs.82 0.33 57.73 0.95 0.45 228.75 24.59 8.53 1.61 0.25 0.13 1.16 192.68 5.12 0.97 6.P a g e | 172
BANK ANALYSIS WITH REFERNCE TO COMMERCIAL BANKS LISTED
ON STOCK EXCHANGE
Financial Position of Commercial Banks Registered in Pakistan
Name of Commercial Bank Paid up Reserves Assets (Rs.75 0.44 -0.06 4. Bn)
7.61 44.48 35.75 9.63 0.31 0.2 1.97 1.
To be able to trade a security on a certain stock exchange. a substantial balance sheet of sound asset quality. Limited awarded highest standalone credit rating of AAA to NBP.
. The National Bank of Pakistan enjoys the highest credit rating amongst Pakistani banks. The financial position of commercial banks registered on stock exchanges in Pakistan. In Pakistan securities are traded on three stock exchanges which are Karachi stock exchange. stable deposit base. comments about NBP say a lot about the bank:31
“The organization has been able to strategically manage and build on its competitive advantages
which has translated into the strong and well managed improvement in profitability trend observed over the last few years. Lahore stock exchange and Islamabad stock exchange. The JCRVIS Credit rating Co. 1974.P a g e | 173
exchange include: shares issued by companies. JCR. Deposits are also guaranteed by the Government of Pakistan under the Banking Nationalization Act. are shown in preceding page in terms of their: • • • • • • • • Paid-up Capital Reserves Assets Deposits Advances Profit after tax Earnings per share Credit rating
The best way to analyze these commercial banks is to analyze their credit ratings. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. it has to be listed there.VIS Credit rating Co. unit trusts and other pooled investment products and bonds. and strong liquidity and capitalization levels” NBP’s key strength remains its extensive outreach and a low cost.
Provides detailed information in response to detailed questionnaire 6. deliberates on appeals by client. asset quality and profitability. Signs agreement for an initial rating 2. Conducts post due diligence analysis 9. Submits a detailed questionnaire to the issuer/client 5. Therefore. Consents to release of preliminary/initial rating to the public in case of non-mandatory ratings
. in terms of maintaining growth. JCR-VIS believes that the current economic situation puts certain leading industrial sectors and the general consumer under financial stress. Rating Committee decides the preliminary/initial rating
12. In this regard the management has entered into an agreement for the acquisition of a core banking software which is likely to be implemented over the next few years. Conducts a preliminary study 4. Submits preliminary information materials 3. the second half of 2008 and 2009 are likely to be challenging for the banking sector as a whole.P a g e | 174
There have also been significant improvements in the management practices of the bank and a focus on enhancement of systems and controls. Sub Committee recommends preliminary/initial rating 11. Discusses
the rating rationales and rating issues with client
13.32 The JCR-VIS Rating Process include following steps:33 1. Conducts pre due diligence meeting analysis 7. Notifies issuer of the preliminary/initial rating. Brief for internal rating committee meetings is prepared 10. Conducts due diligence meetings 8. if any 14.
internationally and representative offices. The bank wishes to effectively utilize the financial assistance being extended by the Government of Pakistan for banking sector reforms aimed at reducing operating costs and improving profitability. technologically oriented products and services offered through its large network of branches locally.P a g e | 175
15. National Bank of Pakistan is gearing up to the challenges faced by the domestic banking industry due to innovations and advances in the international banking world. through customer focus of bank’s commercial and corporate branches. The bank renders these services across the country reaching as far as the remotest regions. National Bank of Pakistan is distinct from other banks in that it has a nonprofit and service oriented motive. The forwardlooking management of NBP is a firm believer in focusing on niches where there is critical mass and to create products that meet that demand. These services do not contribute towards the earnings of the bank. which is the consequence of globalization. the bank is committed to serving small savers and the general public of the country. rather they put pressure on bank’s resources. which has manifested itself in the area of salary deposits of government employees and payment of utility bills. To extending and targeting research to improve bank earnings. and by enhanced efforts towards
. from our northern borders to the Arabian Sea. It is the major business partner for the Government of Pakistan with special emphasis on fostering Pakistan's economic growth through aggressive and balanced lending policies. Releases the preliminary/initial rating to the press
FUTURE PROSPECTS OF NATIONAL BANK OF PAKISTAN
National Bank of Pakistan maintains its position as Pakistan's premier bank determined to set higher standards of achievements. Nevertheless. National Bank of Pakistan is everyone’s bank and does not only serve corporate customers.
the bank shall very soon transform from a bureaucratic organization to a fast paced. which will enable it to achieve even better results. Comprehensive training programs has been develop to up grade the core banking skills of the existing staff as well as integrate high quality hiring. To improve the motivation of staff a merit-based culture is being promoted. safeguard the interest of their customers and to assist them in their march towards progress and prosperity in future. Closing of all those branches. The Management of NBP assess that the Internal Control environment is showing signs of improvement as compared to previous years in all areas of the bank. Reorganizing efforts going on in the NBP has open many opportunities for NBP to grow. • • • • • Setting of target for of making at least 300 branches country wide on line. which are burden on NBP. and competitive bank. the National Bank of Pakistan have the vision. The National Bank of Pakistan is confidence that tomorrow we will be… • • • Leaders in our industry An organization maintaining the trust of stakeholders. The actions taken by current management provide a great opportunity for NBP for making it future prosper and can make NBP not less than any modern commercialize bank in Pakistan. creative and dynamic institution responding to the changing needs of the internal and external environment NBP’s current management has boarder vision. The bank is endeavoring to
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the development of human capital. Through overhauling the manpower recruitment preservation and performance appraisal system. streamline internal procedure and creating a delectating climate for technology initiative. For instance to achieve objectives NBP have taken following measures. An innovative. They have taken steps to improve customer services. In conclusion. Management to offer specialized services to major corporate including advisory and debt syndication introduces the concept of relationship manager. modern.
The Quality of infrastructure added by National Bank of Pakistan during the last few years is quite substandard as compared to that of peer banks. Development required for serving major sectors of the economy. default and inefficiency.
SHORT FALLS/ WEAKNESSES OF NATIONAL BANK OF PAKISTAN
The National Bank of Pakistan’s Advance salary. despite boasting a sizeable portfolio built around some reckless selling. The housing finance product of NBP lacks proper infrastructure including database support even after five years of post launch history. is mostly infected. is replete with charges of corruption.
The NBP Karobar scheme is designed around President’s Rozgar scheme. which has long been the flag-ship product for NBP. The scheme which had all the potential to become a landmark was so badly mishandled by National Bank of Pakistan. The similar products launched by other commercial banks are much smaller in size are running on well-articulated systems and are backed by proper policies and guidelines. The NBP product.P a g e | 177
further refine its internal control design and assessment process as per guidelines issued by the State Bank of Pakistan Accordingly.
. The National Bank of Pakistan’s huge number of borrowers is untraceable or correct whereabouts are not known. In NBP’s five year strategic plan 2007-2011 approved by board of directors does not address any serious thinking on • • Productivity improvement and benchmarking with the competition. Bank is making all possible effort to improve the professional skills and competency level of the staff through need based training programs and our valued customers for their support and continued confidence in NBP.
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• • •
Infrastructure to support planned growth and vision. Inducting and leveraging specialized human capital. Bringing the institution on international banking landscape in the coming five years, not to speak of the seven years which the current management has already served.
As for as public interest is concerned there were no service standards benchmarks and guidelines available in NBP. There were only old documents that were crafted at least a decade or more back.
Due to poor planning the bank had book losses of over 1.2 billion rupees in the Karobar Scheme.
The National Bank of Pakistan’s outsourced employees (2350) was obtained from a single source. Most of these are performing the core function of the bank outside their assigned duties without any training and supervision.
The National Bank of Pakistan is incurred large expenses in running those branches, which are not producing any income. The up gradation of human resource is very slow in NBP. The branches of NBP have less number of employees as their requirements. The concept of “One Man Show” is adopted in many branches to save salary expenditure; even most of the branches use their security guards for various tasks. The one reason for this is that the senior management is able to decrease salary expenditure of the bank, which result an increase in the net profit. For their performance they received handsome amounts of bonus. But in long run it has a negative effect on bank’s productivity.
The pension’s distribution service or payments to EOBI beneficiaries, utility payments; workers remittances are occupied lowest priority level.
In NBP Karobar scheme the product selected by the NBP is of inferior quality and develops faults in the first few months of delivery.
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• The National Bank of Pakistan plays a key role in the strategic national development. The bank has historically been the financial arm of the government and has enjoyed the blessings of state support in the form of huge public sector funds and deposits. • In contract to other banks populating the FSI sector, NBP is mandated to uphold public interest. It is critical too as all other banks and NBFIs in public sector have been closed down or merged with NBP. • In contract to other banks populating the FSI sector, NBP is mandated to uphold public interest. It is critical too as all other banks and NBFIs in public sector have been closed down or merged with NBP. • The current management of National Bank of Pakistan was hired purely for their international experience, business orientation to turn around a purely public institution into a sustainable and commercially viable bank serving public interest along the lines of a large modern commercial bank.
The National Bank of Pakistan has effective budgeting system in place. Annual budget of the bank is approved by the Board and monthly comparisons of actual results with the budget are prepared and reviewed by the senior management.
The National Bank of Pakistan has a comprehensive framework of written policies and procedures on all major areas of operations such as Credit, Treasury Operations, Finance, Internal audit and Compliance approved by the Board.
The National Bank of Pakistan provides sustainable financing for growth of industries of critical national importance such as energy, education, healthcare, transport, shipping, Research & development.
being the only lending arm to the government for public sector development should design. which is mainly through the use of power and the generation of waste.
. retention and development and to reform the Bank’s pension scheme. • The bank should improve its recruitment.
NBP. • The National bank of Pakistan should monitor the impact of its operations on the environment. • The bank should improve the quality of training of its employees and the integrity.
The bank should provide support to the Micro. and should work with others to strengthen national crises management preparations. controls and efficiency of its systems.P a g e | 181
• The National bank of Pakistan should be fully prepared in its management of financial crises and its business continuity planning. processes and financial reporting. • The Bank should improve IT capability in the analytical areas and to develop a medium term strategy for banking and market operations. • The bank should renegotiate the Bank’s long term financial framework and to overhaul the Bank’s financial system. develop and deliver product and services for economic growth. within the standing committee framework. Small and Medium enterprises thereby reducing unemployment and helping to create a more equitable distribution of wealth.
. clear vision. Quality leadership.
The National Bank of Pakistan should implement a financial inclusion program to meet the needs of underserved economic subsectors. The NBP should strengthen incentives and accelerate a results-oriented training and communications programs for management and staff. developing theories or concepts for the better direction of their own business environment according to Quran & Sunnah. investment in IT infrastructure and human resource development. As for as Islamic Banking environment is concerned the management and employees of NBP should work together for basic research for discovering their own laws.P a g e | 182
The NBP should adopt modern banking tools and techniques.
The branches should reduce its large expenses in order to increase the value of the bank. including outreach programs to meet the requirements of the agriculture. SME and microfinance sectors.
The bank should develop software for pension disbursement. housing.
The National Bank of Pakistan should introduce a framework for consolidated supervision and reorganize the regulatory architecture to allow better regulation and supervision of financial control division of bank.
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