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TABLE OF CONTENTS
Objectives of Studying the Organization ........................................................................................ 6 Brief History of National Bank of Pakistan .................................................................................... 7 Nature of National Bank of Pakistan ............................................................................................ 10 Business volume of National Bank of Pakistan ............................................................................ 12 Branch Network of National Bank of Pakistan............................................................................. 16 Number of Employees of National Bank of Pakistan ................................................................... 18 Product Lines ................................................................................................................................ 19 1. a) b) c) d) e) g) 2. a) b) c) d) e) 3. a) b) c) 4. a) b) c) Deposits.............................................................................................................................. 19 Current Deposits ............................................................................................................. 20 PLS Saving Deposits ...................................................................................................... 20 Fixed Deposit Account (Time Deposits) ........................................................................ 21 Foreign Currency Account ............................................................................................. 22 NBP Premium Aamdani ................................................................................................. 22 National Income Daily Account (NIDA) ....................................................................... 23 Advances ............................................................................................................................ 25 NBP Saibaan .................................................................................................................. 25 NBP Advance Salary...................................................................................................... 25 NBP Cash & Gold .......................................................................................................... 27 Students Loan Scheme ................................................................................................... 27 NBP Karobar- President‟s Rozgar Scheme .................................................................... 27 Corporate Advances ........................................................................................................... 30 Cash Finance .................................................................................................................. 30 Running Finance/ Overdraft ........................................................................................... 30 Demand Finance ............................................................................................................. 30 Remittances ........................................................................................................................ 31 Demand Drafts ............................................................................................................... 31 Travelers Cheques .......................................................................................................... 32 Letter Of Credit .............................................................................................................. 32
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d) e) f) g) h) 5. a) b) c)
Foreign Remittances ....................................................................................................... 33 Swift System .................................................................................................................. 33 Mail Transfer .................................................................................................................. 33 Telegraphic Transfer ...................................................................................................... 34 Pay Order........................................................................................................................ 34 Miscellaneous .................................................................................................................... 35 Lockers ........................................................................................................................... 35 NBP Cash Card .............................................................................................................. 35 International Banking ..................................................................................................... 36
Organizational Structure of National Bank of Pakistan ................................................................ 37 Board of Directors ..................................................................................................................... 37 Senior Management ................................................................................................................... 40 1. 2. 3. 4. 5. 6. 7. 8. 9. Corporate & Investment Banking Group ....................................................................... 41 Compliance Group ......................................................................................................... 43 Islamic Banking Group .................................................................................................. 44 Treasury Management Group......................................................................................... 45 Credit Management Group ............................................................................................. 47 Audit & Inspection Group .............................................................................................. 48 Human Resource Management & Administration Group .............................................. 50 Information technology group ........................................................................................ 51 Financial control Division .............................................................................................. 52
10. Overseas Coordination & Management Group .............................................................. 53 11. Commercial & Retail Banking Group ............................................................................ 54 12. Special Assets Management Group................................................................................ 55 13. Employee Benefits, Disbursements & Trustee Division ................................................ 55 14. Core Banking Application .............................................................................................. 58 15. Operations Group ........................................................................................................... 59 Provincial & Regional Management ......................................................................................... 60 Branch Management .................................................................................................................. 60
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Organizational (Management) levels at NBP ............................................................................... 61 Top Managers ............................................................................................................................ 62 Middle Managers ....................................................................................................................... 62 First Line Managers or Lower Level Management ................................................................... 62 Non Managerial Employees ...................................................................................................... 62 Hierarchy of National Bank of Pakistan ....................................................................................... 63 Organization Structure of the Branch ........................................................................................... 64 a) b) c) d) e) Centralized Decision Making ............................................................................................ 64 Downward Communication ............................................................................................... 65 Chain of Command ............................................................................................................ 65 Authority and Responsibility ............................................................................................. 66 Delegation .......................................................................................................................... 66
Departments of the Branch ........................................................................................................... 67 1. 2. 3. 4. 5. 6. 7. a) b) c) 8. 9. Clearing House Department ............................................................................................... 67 Remittance Department ..................................................................................................... 71 Account Opening Department ........................................................................................... 73 Cash Department ................................................................................................................ 74 Deposits Department .......................................................................................................... 76 Advances Department ........................................................................................................ 77 Computer Department ........................................................................................................ 78 Online branches .............................................................................................................. 78 Batch Branches ............................................................................................................... 79 Manual Branches ............................................................................................................ 79 Pension Disbursement Department .................................................................................... 80 Accounts Department......................................................................................................... 80
Structure of Branch‟s Accounts Department ................................................................................ 83 Bank Accounting Operations ........................................................................................................ 86 Role Of CFO (Chief Financial Officer) ........................................................................................ 88 Use of Electronic Data in Decision Making ................................................................................. 92
.............................................................................................................................................................................. 110 Ratio Analysis............ 129 Horizontal Analysis of Income Statement ............................................................................ 147 Vertical Analysis of Balance Sheet ........ 165 Future prospects of National Bank of Pakistan.......................................... 106 Balance Sheet ..................................... 148 Vertical Analysis of Income Statement ............................................................................................................................................... 94 Software Resources ..................................................................................................................................... 93 a) b) c) d) e) People Resources......................................................................................... 128 Horizontal Analysis of Balance Sheet .......................................... 95 Generation of funds....................................................................................................................................................................................................................... 170 Conclusions ................................................................................. 94 Network Resources .......................... 157 Bank Analysis with refernce to commercial Banks listed on stock exchange ................................................................................. 111 a) b) c) d) e) Profitability Ratios ....................................................................... 125 Horizontal Analysis ............................................................................................................................................................................................................ 124 Operating Performance Ratios ................................................................................................................... 111 Liquidity Ratios .......................................... 138 Vertical Analysis ................................................................................................................................................................................................................ 93 Hardware Resources ......... 98 Allocation of Funds.................................................. 108 Income Statement................................... 172 BILAL AHMAD ....................................................................................................................................................................... 94 Data Resources ..................... 94 Sources of Funds .................................................................................... 121 Capital Adequacy Ratios ............................................................................................................................................................................................P a g e |4 Information System Resources of NBP ....................................................................................................................................................................................................... 100 Critical Analysis (Theory vs Practical) .............................. 108 Financial Statements Analysis ...................................................................................................................................................... 168 Short falls/ Weaknesses of National Bank of Pakistan ................................................................................................................. 117 Debt Ratios ...................................................
.............................. 173 References .................................................................................................................................................P a g e |5 Recommendations ......................... 175 BILAL AHMAD ...................................................
analyze and interpret the relevant data competently and in a useful manner. 3. 4. To familiarize with the different departments in the organization and their functioning. 8. To understand how information is used in an organization for decision making at various levels. To acquire good work habits and sense of responsibility. 12. To develop my attitude conducive to effective interpersonal relationships. I want to enhance my knowledge of the discipline of banking administration. 13. 6. 11. To relate theory with practice.For this connection each student of this particular course is required to undertake training in a relevant organization selected by them. To observe. 10. BILAL AHMAD . 9. To enhance my learning experience by application of fundamental concepts previously learned. 2. 7. I was also keen to gain professional experience in an actual testing environment. for a period of 6-8 weeks. To enable myself to understand how the key business process are carried out in organization. I want to develop my skills in the application of theory to practical work situations. This internship is also very necessary to gain confidence and become aware of the mechanism of an organization.P a g e |6 OBJECTIVES OF STUDYING THE ORGANIZATION The primary purpose of this study is to fulfillment of the requirements for the degree of MBA (Banking & Finance). To develop my interpersonal communication. To familiarize with a business organization. As an internee I want to achieve following objectives during my internship and organization study: 1. 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. 5.
P a g e |7 BRIEF HISTORY OF NATIONAL BANK OF PAKISTAN The history of National Bank of Pakistan is part of Pakistan‟s struggle for economic independence. which has expanded through the years as diversification took place. and customer focused institution. The Bank‟s Karachi and Lahore offices were subsequently opened in December 1949. Initially the Bank was established with the objective to extend credit to the agriculture sector. the bank also provides services as trustee to National Investment Trust (NIT) including safe custody of securities on behalf of NIT.1 The National Bank of Pakistan has its headquarters in Karachi. In 1951. Under a trust Deed. The nature of responsibilities of the Bank is different and unique from other banks/financial institutions. to enhance business and cater to the different segments of society. The bank operates 1249(2008) branches in Pakistan and 22(2008) overseas branches. National Bank of Pakistan was established on November 9. The Bank has also played an important role in financing the country‟s growing trade. 1949 at six important jute centers in the then. The National Bank of Pakistan has assets worth Rupees 737976. efficient. 2008.44 million on September 30. 1949 in order to cope with the crisis conditions which were developed after trade deadlock with India and devaluation of Indian Rupee in 1949. The Bank commenced its operations from November 20. Some schemes have been specifically designed for the low to middle BILAL AHMAD . East Pakistan and directed its resources in financing of jute crop. Pakistan. 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. due to the crisis situation that had developed with regard to financing of jute trade. 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. It has developed a wide range of consumer products.2 National Bank of Pakistan is today a progressive. 1949 under the National Bank of Pakistan Ordinance. The bank in collaboration with the cotton board provided the necessary Credit facilities to the trade and the crisis was tided over. The Bank acts as the agent to the State Bank of Pakistan for handling Provincial/Federal Government Receipts and Payments on their behalf.
Global Finance. The National Bank of Pakistan has implemented special credit schemes like small finance for agriculture. in the up gradation of the IT infrastructure and developing the human resources. It has provided generously to philanthropic causes whenever the need arose. Global Finance. in policies and procedures. It has been the recipient of The Bank of the Year 2001. NBP recently initiated the Annual Awards for Excellence in Literature. by ensuring that the Bank's branches keep a track of the remittance received from abroad till its final receipt. These include NBP Karobar. 2004 and 2005 Award by The Banker Magazine. This project introduces technology based system to handle inward remittances efficiently. 2005. business and industries. The Bank has expanded its range of products and services to include Shariah Compliant Islamic Banking products. Best Emerging Market Bank from Pakistan for the year 2005. in terms of institutional restructuring. the Best Foreign Exchange Bank –– Pakistan for 2004. NBP Kisan Dost. National Bank has earned recognition and numerous awards internationally. in internal control systems with special emphasis on corporate governance. and NBP Cash n Gold. In 2002 the Bank signed an agreement with Western Union for expanding the base for documented remittances. 2006 and 2007. Kisan Time Awards – 2005 for NBP's services in the agriculture field. changes in the field structure. It is listed amongst the Region's largest banks and also amongst the largest banks in South Asia 2005. For the promotion of literature. self employment scheme for unemployed persons. Patronage from NBP would help creative work in the field of literature. A number of initiatives have been taken. It has also been presented a Recognition Award –– 2004 for having a Gender Sensitive Management by WEBCOP AASHA besides other awards. NBP Advance Salary. 2002.3 BILAL AHMAD . NBP will confer annual awards to the best books in Urdu and in all prominent regional languages published during the defined period. More recently it has started Electronic Home Remittances Project. adoption of Capital Adequacy Standards under Basel II framework. NBP Saibaan. The Bank is also the largest sponsor of sports in Pakistan. administrator to Qarz-e-Hasna loans to students. It has taken various measures to facilitate overseas Pakistanis to send their remittances in a convenient and efficient manner. public transport scheme. The Asian Banker.P a g e |8 income segments of the population.
Tanganyika. As part of the concomitant consolidation of the banking sector. NBP acted as an agent of the Central Bank wherever the State Bank did not have its own Branch. NBP merged with Eastern Mercantile Bank and with Eastern Bank Corporation. Turkmenistan commenced operations. 1947 by the former Bahawalpur State 1955 By this time NBP had branches in London and Calcutta. of which NBP would own 45% and United Bank 55%. 2000 NBP opened a representative office in Almaty. Kazakhstan. 1957 NBP established a branch in Baghdad. one in Karachi and one at Chittagong. 2003 NBP received permission to open a branch in Afghanistan. 1967 The Tanzanian government nationalized the Dar-Es-Salaam branch. Offices in Karachi and Lahore followed. 2001 State Bank of Pakistan and Bank of England agree to allow only 2 Pakistani banks to operate in the UK.P a g e |9 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. 1971 NBP acquired Bank of China's two branches. 1991). 1964 The Iraqi government nationalized NBP's Baghdad branch. 1962 NBP established a branch in Dar-es-Salaam.-owned. NBP acquired Bank of Bahawalpur (est. 1950 NBP established a branch in Jeddah. Saudi Arabia. At separation of East Pakistan NBP lost its branches there. Its first branches were in jute growing areas in East Pakistan. 1994 NBP amalgamated Mehran Bank (est. 1977 NBP opened an offshore brain Cairo. The Bank in 1950 had one subsidiary „The Bank of Bahawalpur‟ on December4. 1965 The Indian government seized the Calcutta branch on the outbreak of hostilities between India and Pakistan. 1974 The government of Pakistan nationalized NBP. NBP and United Bank agreed to merge their operations to form Pakistan International Bank. It also undertook Government Treasury operations. 1947). 1997 NBP's branch in Ashgabat. 2005 NBP closed its offshore branch in Cairo. BILAL AHMAD . Iraq.
Financing of projects. dealing. rice. for safe custody. Under a Trust Deed. undertaking. which include: Accepting of deposits of money on current. promoting. etc. The bank operates 1.4 The nature of responsibilities of the Bank is different and unique from other banks/financial institutions. 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. which has expanded through the years as diversification took place. BILAL AHMAD . project appraisal through long term/ short term loans. valuables. sugar cane. 1949 and is listed on all the stock exchanges in Pakistan. Transacting guarantee and indemnity business. the bank also provides services as trustee to National investment Trust (NIT) including safe custody of securities on behalf of NIT. Undertaking and executing trusts. The bank is providing all banking services of mercantile and commercial banking permissible in the country. Carrying on agency business for any description other than managing agent. Borrowing money and arranging finance from other banks. including entering into forward contracts of foreign exchange. The National Bank of Pakistan has also played an important role in financing the country‟s growing trade. term deposit and profit and loss sharing accounts.P a g e | 10 NATURE OF NATIONAL BANK OF PAKISTAN National Bank of Pakistan was incorporated in Pakistan under the National Bank of Pakistan Ordinance. including technical assistance. Karachi). bonds etc. etc. Receiving of bonds. wheat. etc.232) branches in Pakistan and 22 (2007:18) overseas branches (including the Export Processing Zone branch. etc. on behalf of clients including Government and local authorities. fixed. Buying. selling. term finance and musharika certificates. Advancing and lending money to its clients.249 (2007:1. Generating. tobacco. of issue of shares and. Financing of seasonal crops like cotton. The bank is engaged in providing commercial banking and related services in Pakistan and overseas. saving.
Participating in “World Bank” and “Asian Development Bank‟s” lines of credit. Providing personalized Hajj services to intending Hajjis. agents and companies for its representation abroad. BILAL AHMAD .P a g e | 11 Joint venturing with foreign dealers.
985.868 2008 817.096 2005 577.939.779 13.711 501.132.838.124 210.758.114 463.719.491 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.787.571.772.231.872.907. BILAL AHMAD .P a g e | 12 BUSINESS VOLUME OF NATIONAL BANK OF PAKISTAN Rupees in Millions Year Total Assets Deposits Advances Reserves Investments 2004 553.467 465.435 340. To analyze the trend in these items the Horizontal analysis of each item is calculated.879. deposits. reserves and investments.406 13.986.047 170.865 19.243 316. advances.260 139.946.677.914 149.536.813.593 591.075 10.193.717 220.794.041 156.686 2006 645.426.016 412.995 2007 762.822.941.326 624.100 15.350.602 268.110.
There was an increase of 48 % in 2008 as compare to base year and 10% as compare to 2007. In the year 2005.P a g e | 13 A NALYSIS The Total Assets of National Bank of Pakistan fluctuates during all years as they show an increasing trend. The total assets are increased 4 % in 2005 and 17 % in 2006. the deposits were increased very marginally. with the year 2006 represents an increase of 8%. The deposits are increased 27% & 34% in the years 2007 and 2008 respectively. The year 2007 represents second highest percentage on account of total assets as it was increased to 38%. A NALYSIS The deposits and other accounts of National Bank of Pakistan show a mixed trend during all years. BILAL AHMAD .
This implies that National Bank of Pakistan is keener to advance money to lenders. 28 % & 46 % in the years 2005. The reserves are increased 25 %. 2006 & 2007 respectively. The year 2008 represents highest increasing percentage of 84% as compare to base and previous years. The year 2007 represents an increase of 54 % and 2008 represents highest percentage among all years that is 87 % as compare to base year.P a g e | 14 A NALYSIS The advances made by National Bank of Pakistan shows an increasing trend in all years as compare to base year. The reserves of National Bank of Pakistan fluctuate during all years as they show an increasing trend. The advances were increased 22 % in the year 2005 and 43 % in 2006 as compare to base year. BILAL AHMAD . 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).
There was an increase of 5 % in 2005. The year 2007 represents an increase of 41 %. highest among all years. The investments are increased 14 % in 2008 as compare to base year. however investments are decreased 27 % as compare to the year 2007.P a g e | 15 A NALYSIS The investments made by National Bank of Pakistan fluctuate during all years. The year 2006 indicates a decrease of 6% in investments. BILAL AHMAD .
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. Of these. Presently the National Bank of Pakistan is divided into various Groups headed by SEVPs/EVPs. the National Bank of Pakistan has been able to extend its services to a much larger number of Pakistanis all over the country. It has acquired leased telephone lines for on-line banking. The National Bank BILAL AHMAD . Bank is at the forefront in the acquisition and application of new technologies in every aspect of its banking facilities. Bank is at the forefront in the acquisition and application of new technologies in every aspect of its banking facilities. Today the Bank has more than 8. Baku (Azerbaijan) and Almaty (Kazakhstan) to take advantage of the emerging opportunities in CIS countries. Bank has also a presence on the internet. It has acquired leased telephone lines for on-line banking. Apart from having a vast branch network.P a g e | 16 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 Bank has 12 Regional Computer Centers to cover various on-line and batch system requirements of branches and controlling offices. 12 corporate branches and 1249 domestic branches headed by Branch Managers. Its field operations are controlled by 29 regions ( Annexed II) reporting to as many Regional chiefs. The bank has 12 SWIFT local centers. who control 40 zones and 15 single Branch zones headed by Zonal Chiefs. three representative offices have recently been set up at Tashkent (Uzbekistan).
payment system services. national and local. The branches' activities relate to the State treasury service. currency circulation. It has agency arrangements with more than 3000 correspondent banks worldwide. First Investment Bank and NAFA.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) Agriculture branches ( 825 Branches) BILAL AHMAD . and CJSC Bank. an Asset Management Company (a joint venture with NIB Bank & Fullerton Fund Management of Singapore). banking and financial supervision. Kazakhstan. in London. New York and Tokyo. a number of officers are seconded as financial experts to Italian embassies and consulates. NBP Exchange Company Ltd. NBP Capital Ltd. The Bank has representative offices in Beijing. The Bank has representative offices abroad. management and operational policies. It has modernized its services by installing Automated Teller Machines (ATMs) called “CASH LINK” at selected branches. United National Bank (UK). and the analysis of economic and financial developments at the local level.P a g e | 17 of Pakistan has 156 online branches throughout the country. The Bank's organizational structure reflects the three levels at which it operates: international. Tashkent. Almaty. Its subsidiaries are Taurus Securities Ltd. The Head Office formulates and implements the strategic. Chicago and Toronto. The Bank's geographical organization consists of branches located in the regional capitals and in some provincial capitals. NBP Modaraba Management Company Ltd. The Bank's joint ventures are.
which differs from those of customer.P a g e | 18 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. or any grievances that employee may have. an employee is any person hired by an employer to do a specific "job". Employees perform the discrete activity of economic production." 6An employee contributes labor and expertise to an endeavor. or client. oral or written. There are differing classifications of workers within National Bank of Pakistan. Specifically. 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. In most modern economies. employees usually provide the labour. and the disbursement of any benefits which the employee may be entitled. Of the three factors of production. express or implied. these are: Permanent BILAL AHMAD . These groups handle the incorporation of new hires. the term employee refers to a specific defined relationship between an individual and a corporation. 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.
the word has referred to "thing or things produced”. with his meager BILAL AHMAD . In general usage. a grouping of goods or services. are sold to the same customer groups. credit cards. or fall within the given price ranges”. loans. including tangible items. Even a poor farmer in a remote village. The consumer banking products include personal accounts. the word "product" has referred to anything produced. 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. a group of equivalent products. The economic or commercial meaning of product was first used by political economist Adam Smith. are marketed through same types of outlets. services and ideas. Since 1695. investment products. A product line is defined as “A group of products that are closely related because they function in a similar manner.P a g e | 19 Temporary / On Contractual Outsourced The Employees of National Bank of Pakistan are organizing into trade unions. 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. Any Pakistani citizen can open his/her account for any deposit scheme at any of its Branches strategically located throughout Pakistan. In marketing. or an industrial classification for the goods or services. treasury products and many more. a product is anything that can be offered to a market that might satisfy a want or need.7 Since 1575. which is commonly known as product lining. DEPOSITS The National Bank of Pakistan offers to their clients a variety of Deposit Schemes with personalized services at competitive rates of interest.8 The followings are the main consumer banking products of NBP. product may refer to a single item or unit. The National Bank of Pakistan offering for sale several related products individually. 1. which represent most of the available work force in National Bank of Pakistan. PRODUCT LINES The most precise definition of product is anything capable of satisfying needs.
and the depositor is issued a cheque book for withdrawals. drawn against him to the extent of the balance in the account. he incurs the obligation of paying all cheques etc. Bankers in Pakistan do not allow nay profit on these deposits. 9 Current Accounts/ Basic Banking accounts are opened. and customers are required to maintain a minimum balance. The purpose of these accounts is to inculcate the habit of savings in the constituents. companies. Because National Bank of Pakistan has a long heritage of trust and professional commitment. associations. and in all other cases where the accounts are to opened under the order of a competent court of law. Basic banking accounts are opened for an individuals (single or joint) only whereas current accounts are opened for individuals (single or joint) Charitable institution. autonomous corporations. educational institutions. on proper introduction and submission of required documents along with initial deposit prescribed from time to time. Profit is paid at a flexible rate calculated on six monthly basis under the Interest Free Banking System. firms etc. in case the average balance falls below the minimum balance as prescribed by the bank. No profit is paid on the balances of current/basic banking accounts.P a g e | 20 annual income. and as such the bank is not entirely free to employ such deposits. This is because Current Deposits may be withdrawn by the depositors at any time. No balance maintenance condition is applied on basic banking account. these deposits are treated as current liabilities by the banks. The bank is authorized to deduct service charges (incidental charges) on current accounts levied through its half yearly schedule of charges. provident and other funds of benevolent nature of local bodies. feels secure to safe keep his minuscule savings in National Bank of Pakistan. failing which incidental charges are deducted from such accounts. a) CURRENT DEPOSITS These are payable to the customer when ever they are demanded. 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. Because of their nature. When a banker accepts a demand deposit. b) PLS SAVING DEPOSITS In Pakistan a Savings Deposits Account can be opened with a very small amount of money. BILAL AHMAD . 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.
the initial deposits required for opening these accounts are very nominal. Profit/Return is paid to the depositors on all fixed or Time deposits. 2. and the rate of profit/Return varies with the duration for which the amount is kept with the banker. The profits will be calculated on the basis of monthly minimum balance for the periods of six months i.only 3.P a g e | 21 As such.5% will be deducted from these deposits on the balance of that day. On the first day of Ramzan each year the Zakat at the rate of 2.e.500 for opening of PLS Savings deposits. Fixed deposit accounts have higher rate of interest as compare to other accounts.10NBP charge Rs. The PLS savings account can also be opened for provident fund or other benevolent funds of companies. 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.must be maintained in the account. firms. 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. 6. no Zakat will be deducted from his account. The minimum balance on sixth and last of month will qualify for the profits.500/. 5. from January to June and July to December 4. organizations. the bank earns more than the Profit/Return that it has to pay on them to the depositors. There shall be no restrictions on maintaining the maximum balance in PLS saving account. These accounts can be opened by individuals in their own single or joint name. By lending out or investing these funds. The silent features of profit and loss sharing and saving accounts of NBP are as fallows 1. To share in the profit a minimum balance of Rs. c) 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 rate of interest rises with the length of period and the amount of BILAL AHMAD . NGO‟s and educational institutions.11 By giving an advance notice to the bank the deposit can be withdraw from the bank before the expiry of the period.500/. But if depositors affix an affidavit of Zakat deduction along with account opening form or he is a non-Muslim. PLS saving account can be opened with a minimum amount of Rs.
Euro and Japanese Yen in any of the authorized branches of commercial banks throughout the country. for the purpose of strengthening the Foreign Exchange Reserves. 4. companies firms and other organizations. The silent features of fixed deposit account of NBP are as fallows 1. the account holders have benefit of free demand draft. free cheque book and NBP cash card BILAL AHMAD . 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.000. In NBP premium aamdani. 2. Pound Sterling.000/-to Rs. 5. 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.000. The amount of investment required for this account is Rs. e) NBP PREMIUM AAMDANI NBP Premium aamdani is a retail product of the bank. after the respective maturity date. pay order. after making “Lien” on the relevant receipt and subject to recovery of service charges. Under term deposit scheme the depositors not cease to earn the profit immediately. The PLS term deposit receipt are issued for any amount. The bank grants to the depositor a fix deposit (FDR) which is not transferable to any other person. One of these reforms relates to foreign currency accounts.P a g e | 22 deposit. 20. There is minimum or maximum limit or deposits in a single term deposit account. Zakat and withholding tax will be deducted as per rules. 3. 1990. which can be opened in United States Dollars.The investment period is 5 years. on proper introduction and submission of required documents along with an initial deposit prescribed from time to time. The PLS term deposit are opened for individuals in their own single or joint names. PLS term depositors may be allowed some facilities against the security of these receipt credits.12 Foreign currency accounts are opened. d) FOREIGN CURRENCY ACCOUNT Government of Pakistan has introduced many important reforms in Foreign Exchange Control in the country since February.
14 g) NATIONAL INCOME DAILY ACCOUNT (NIDA) The scheme of National income daily account was launched in December 1995 to attract corporate customers.50% 10.13 Profit paid every period as follows: Period 1st year 2nd years 3rd years 4th years 5th years Profit Rates 7. BILAL AHMAD .million to Rs 50/.the rate is 1. From Rs 1000/.000 are required for opening a premium saver account. 300. From Rs50/.50% 8. In the event however. The profit is calculated monthly and Paid on half yearly basis.P a g e | 23 (ATM+Debit).001 and a maximum balance of Rs. that any depositor wishes to withdraw the amount and the balance in his account is less than the required amount. 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.75%.the rate is 1. The minimum saving balance of Rs. It is a current account scheme and is part of the profit and loss system of accounts in operation throughout the country.million but less than Rs 500/-million. 20. Free NBP Cash Card (ATM + Debit) facility is available to account holder. The Financing facility is available up to 90% of the deposit value. Two debit withdrawals allowed in a month and no limit on number of deposit transactions.50% 11% f) NBP Premium Saver NBP Premium saver is a retail product of the bank.50% 9. R ATES ON N ATIONAL INCOME DAILY ACCOUNT From Rs 2/.4%.and above the rate is 1. the account will be converted to the ordinary PLS SB account for the purpose of calculating profit.6%.million but below Rs 1000/. From Rs 500/. the rate is 1.5%. An example of how the NIDA accounts are maintained is shown on the next page.
600.000 163.870.510.000 500.000 78.000.000 160.000.000 84. Profit is paid on half yearly basis on monthly balances.009.000.000 4 3 3 4 3 2 2 1 2 2 4 1 5 4 38000000 28800000 253800000 326400000 480600000 318400000 328400000 163500000 327020000 327019400 656038800 161909700 989548500 752158800 75.200.4 to 1.200.000 159.000 5.500.600.000 10.000 81.700 161.000 million.700 188.000 1.600.700 BILAL AHMAD .000 163. On Deposits of Rs.000 9.000 100. NIDA 1 Date Description of Transaction C Debit (-) Credit (+) Balance Days Products 01/05/2008 05/05/2008 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 Balance Cash Cash Transfer Cash Cash Cash Cash Cash Cash Cash Transfer Cash Transfer Cash 9.000.2 million to 2.000.509.000 163. The rates of profit vary according to the slabs of deposit.700 36.000 164.000 10.500.000 197.000 300 700.000 10.909.000 164.039.75 It is a checking account and there is no limit of withdrawals.000 9.909.000.600.200.000 3.700 500.000.000 2.100. the rate fluctuates from 1.P a g e | 24 S ALIENT F EATURES Rs 2-million is required to open an account and there is no maximum limit.
16 You can avail up to 20 net take home salaries with easy repayment installments. Accordingly the Bank has formulated its Credit Policy under the guidelines of SBP-the Central Bank of Pakistan. a) NBP SAIBAAN The NBP Saibaan is retail product of the bank. This was only possible due to its swift growth and remarkable loan disbursement of over 118 billion. commercial and agricultural sectors in Pakistan. 15 Million Rs. 35 Million Rs. It has different product items which are home purchase.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) b) NBP ADVANCE SALARY The NBP Advance salary has been the flag-ship product for NBP. home construction. 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. the leading personal loan product of the country. The product is offered countrywide. home renovation and purchase of land plus construction.P a g e | 25 2. is maintaining its inimitability ever since it was launched. ADVANCES National Bank of Pakistan plays a pivotal role in translating the government's development plans in terms of growth in industrial. The terms and conditions of NBP Advance salary is shown on next page: BILAL AHMAD . If anyone has a Home Finance Facility outstanding with another bank he can have it transferred to NBP through a hassle-free process. 35 Million Rs. 15 A brief description of these products is as fallows TYPE OF ADVANCE Home Purchase (House or Apartment) Home Construction Home Renovation Purchase of land Plus Construction Financing Amount Rs. NBP Advance Salary.
P a g e | 26 T ERMS & C ONDITIONS Eligibility Permanent Employees of Govt. Semi-Govt. Semi Autonomous.. 490. Direct deduction from Salary A/C Rs. Hypothecation of Consumer durables owned by the borrower. Local & other bodies who are maintaining their Salary A/Cs at NBP. 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 15 % (Based on diminishing balance method) 1% of Loan Amount Rs 500/No Insurance of any kind.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.. at actual Your Salary disbursing NBP Branch. Three (3) Undated Cheques 5 years (60 months) Up to 20 net take home salaries Repayment Maximum Loan Amount Security Max. 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 BILAL AHMAD . Autonomous.
The scheme will be offered to eligible young and literate citizens of Pakistan. NBP has developed a full range of Products under the President‟s Rozgar Scheme with a brand name of “NBP KAROBAR”. The Scheme is being administered by a high powered committee comprising Deputy Governor. 7. 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 rate of mark up is 13% p. UBL. financial assistance is provided by way of Interest Free Loans to the meritorious students who have financial constraints for pursuing their studies in Scientific. HBL.PRESIDENT‟S ROZGAR SCHEME The solution of Pakistan‟s major socio-economic problems primarily lies in the development and growth of small & micro businesses. MCB and ABL). a Student Loan Scheme (SLS) for Education was launched by the Government of Pakistan in collaboration with major commercial banks of Pakistan (NBP. The eligible borrowers will be required to make a down payment of 15%. Presidents of the commercial banks and representative of Ministry of Finance. State Bank of Pakistan. This product has following features17 Facility of Rs.a. Government of Pakistan.P a g e | 27 c) NBP CASH & GOLD With NBP‟s Cash & Gold. Technical and Professional education within Pakistan. the customers meet their need for ready cash against their idle gold jewelry.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 d) STUDENTS LOAN SCHEME Pursuant to the announcement made by the Federal Finance Minister in his 2001-2002 budget speech. 18 e) NBP KAROBAR. 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. Asset and Life & BILAL AHMAD . Under the Scheme.
The USC will give its franchise to qualifying Pakistani citizens. stocks will be purchased by the customer. However. This is available to all eligible citizens of Pakistan for setting-up small-scale Retail Outlet or Mobile Utility Store. Fifty percent (50%) of this rate will be paid by the customer i. Initially.100.e. under the President‟s Rozgar scheme. However.for a maximum period of five years with grace period of three months. The mark-up rate for the 1st year will be 12% and for the subsequent years it will be 1 year KIBOR + 2%. The 15% down payment will include 1st year‟s asset insurance premium. BILAL AHMAD . Additionally. NBP KAROBAR Mobile Utility Store Financing facility available to purchase a 2/3 wheeler.P a g e | 28 Disability insurances will be mandatory under this scheme. 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. 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. 000/. This is also applicable on payment of security deposit / advance rent under franchise from the USC. 2. 6% and the balance of 6% will be borne by GOP. 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 a) 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. first 10% of the losses under the scheme will be taken-up by GOP. the cost of life and disability insurance will be borne by GOP.
BILAL AHMAD .will be provided for a maximum period of five years with a grace period of three months. Under this product the average loan size of Rs. The average amount of financing under this product will be Rs. 000/. The average amount of financing under this product will be Rs.for a maximum period of two years with a grace period of three months. d) NBP K AROBAR PCO This product is designed to finance setting-up a PCO. e) NBP K AROBAR T ELE . Printer and Fax machine cum Photocopier etc.CENTER This product is specially designed to finance setting-up a Tele-center.will be given for a maximum period of five years with a grace period of three months.for a maximum period of two years with a grace period of three months.100. Computer. 000/. c) NBP K AROBAR T RANSPORT The NBP Karobar Transport is designed to finance 2/3 wheeler.100. Under this product average loan size of Rs. NBP will be providing financing for the purchase of Mobile/Wireless Telephone Set with connection. The only difference is that the borrower will have the liberty of procuring stock/supplies/grocery items from open market.5. 4 stroke Petrol/CNG/LPG Vehicle (Auto Scooter / Motorcycle Rickshaw) to the eligible citizens of Pakistan for providing less expensive environment friendly transport facility. NBP will be providing financing for the purchase of Mobile/Wireless Telephone Set with connection. 000/. to establish tele-center on a rented shop or owned premises.50. Credit Balance.P a g e | 29 b) 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. 000/.
c) DEMAND FINANCE 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. the banker has to lose return on the un-utilized amount. 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. If the borrower does not utilize the full limit. 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. the banker may provide for a suitable clause in the cash finance agreement. either at once or as and when required. a borrower is allowed to borrow money from the banker up to a certain limit. When bankers allow loans to their BILAL AHMAD . b) RUNNING FINANCE/ OVERDRAFT This is the most common form of bank lending. In order to offset this loss. CORPORATE ADVANCES a) CASH FINANCE 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 accommodation is called a “Clean Overdraft”. 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. The borrowing customer is in an advantageous position in an overdraft. it is called a “loan”. 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. produce or merchandise. This accommodation is generally allowed against collateral securities. The borrower prefers this form of lending due to the facility of paying markup/services charges only on the amount he actually utilizes. while an overdraft is a temporary accommodation occasionally resorted to. and an overdraft thus occurs.P a g e | 30 3. In cash finance.
This application form should be signed by the purchaser or by those persons who have been duly authorized to act on his behalf. Thus the borrower gets a fixed amount of money for his use. and the borrowing customer has to pay interest on the entire amount. 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. However. The amount of loan is placed at the borrower‟s disposal in lump sum for the period agreed upon. When a customer requests his banker to provide him with a banker‟s draft. an order to pay money. that is. Section 85-A reads: “ Where any draft. drawn by one office of bank upon another office of the same bank for a sum of money payable to order on demand. if a demand draft drawn on a bank by its own branch bears a forged endorsement. while the banker feels satisfied in lending money in fixed amounts for definite short periods against a satisfactory security. 4. the name of the payee. payable to banker.P a g e | 31 customers against collateral securities they are called “secured loans” and when no collateral security is taken they are called “clean loans”. REMITTANCES a) DEMAND DRAFTS Drafts drawn by one branch on another branch or on the Head Office of same bank or vice versa. and the place of payment. purports to be issued by or on behalf of the payee. he should enclose with his written request a cheque covering the amount of the required draft and other charges etc. as these have no distinct drawer and drawee.19 BILAL AHMAD . the bank is discharged by payment in due course”. are not cheques or bills. As far as possible the banker‟s draft should be crossed and it should never be drawn payable to bearer. the amount of which is to be debited to his account. 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.
can purchase a Demand Draft form a bank. but they are neither negotiable nor transferable. Any person whether an account holder of the bank or not. Letter of credit state the limit of the credit and the time during which it is held at the disposal of the grantee.P a g e | 32 The National Bank of Pakistan provides demand drafts at very reasonable rates with safety. If you are a commercial BILAL AHMAD . Foreign currency travelers cheques are issued and encashed in accordance with the provisions of the Exchange Control Regulation Act. 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 c) LETTER OF CREDIT Letters of credit are very useful instruments in facilitating commercial relations between businessmen at various places. but some Pakistani banks issue them in Pakistan currency also for use within the country as well. Back to Back credit. There are many kinds of letter of credit such as Revolving credit. 1947. Before issuing. 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. Claused credit etc.20 The National Bank of Pakistan provides their services for traveler‟s cheque at very reasonable and competitive rates. the bankers receive an amount equal to the face value of the cheques. speedy and reliable way to transfer money. the paying banker must insist that the holder signs in his presence. While making payment. Letter of credit may be revocable.21 NBP is committed to offering its business customers the widest range of options in the area of money transfer. b) TRAVELERS CHEQUES They are generally issued for the convenience of person travelling abroad.
With competitive rates. The SWIFT Center is operational at National Bank of Pakistan with a universal access number NBP-PKKA. 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).. e) SWIFT SYSTEM The SWIFT system (Society for Worldwide Inter bank Financial Telecommunication) has been introduced for speedy services in the area of home remittances. which eliminates the manual application of tests that often cause delay in the payment of home remittances. National Bank of Pakistan has taken a number of measures to: Increase home remittances through the banking system. security. and Bank AlJazira. Zero Tariffs: NBP is providing home remittance services without any charges. d) FOREIGN REMITTANCES To facilitate its customers in the area of Home Remittances. 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. Strict monitoring of the system is done to ensure the highest possible security. NBP Letters of Credit are the best way to do your business transactions. All NBP overseas branches and overseas BILAL AHMAD .P a g e | 33 enterprise then our Letter of Credit service is just what you are looking for. Saudi Arabia. Special courier services are hired for expeditious delivery of home remittances to the beneficiaries. and ease of transaction.
if sent by registered post inland on party‟s request. The fundamental principles of such transfer are otherwise identical with the Mail Transfer. It is one of the quickest means to transfer fund through the use of telex/fax/internet or cable. It is the message. When the money is not required immediately.for NBP non-account holders on issuing one payment order. 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. It charges Rs 25/. and charges Rs 100/. as usual. And. Move your money safely and quickly using NBP Mail Transfer service. the remittances can also be made by mail transfer (MT).postage charges on issuing mail transfer. They charges Rs 50/. h) PAY ORDER NBP provides another reason to transfer your money using our facilities. we can safely and speedily transfer money for our business and personal needs. which is sent from one branch to another on the order of payer to payee through wire. which is advised by telegram.P a g e | 34 correspondents (over 450) are drawing remittances through SWIFT. NBP pay orders are a secure and easy way to move your money from one place to another.40/. 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. g) TELEGRAPHIC TRANSFER Telegraphic Transfer is a form of remittance. It charges Rs 50/. As such remitting office is not required to issue any instrument payment to the remitter for delivery to the beneficiary.if sent by registered post locally Rs.exchange rate and RS 75/. Using the NBP network of branches. telex or fax machines. 40/. f) MAIL TRANSFER 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.for BILAL AHMAD . And NBP also offer the most competitive rates in the market. The charges of NBP are very low all over the Pakistan. Postage charges on mail transfer are actual minimum Rs. NBP charges for this service are extremely competitive.for NBP account holders on issuing one payment order. Payment to the beneficiary is affected directly by the drawee office upon identification or through credit into beneficiary‟s bank account. NBP taxes mail charges from the applicant where no excise duty is charged.
for non account holders.for NBP account holders and Rs 150/. If some one want a duplicate of payment order they charges Rs 100/. 5. 1Link & M-NET ATM‟s across the country. 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. The officer has master key to apply on the locker but he cannot open the locker of any person. The lockers issued only to the depositors. The transaction is authorized and processed by entering PIN. Whenever the locker holders come to open the locker. his signatures are verified by the officer and then will be able to open his locker. 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.P a g e | 35 students on payment of fees of educational institutions. which lets you pay directly from your account as an alternative payment method to cash. 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. b) NBP CASH CARD NBP Cash Card is a 24-hour direct access ATM/Debit card to your bank account. Secure and Safe transaction. The locker holder provides the bank has specimen signature. In case the locker holder dies. 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. The dual control system is used for lockers. No lockers are issued to any unknown person. BILAL AHMAD . MISCELLANEOUS a) LOCKERS National of Pakistan also provides lockers facility in the country.
Balance Inquiry. No Card Issuance Fee for first 12 Months c) INTERNATIONAL BANKING 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. Enable to Make Purchases from Around 4000 POS (Merchants) Countrywide including 2500+ POS in Karachi. treasury and other key business areas. which is placed under the Risk Management Group. Additionally. the Bank has recently set up the Financial Institution Wing. 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. thereby contributing to the bank's profitability Generation of incremental trade-finance business and revenues BILAL AHMAD . Utility Bill Payment etc.) Enable To Withdraw Cash From 1-Link ATMs / MNET ATMs.P a g e | 36 Account Information on tips (like: Mini Statement.
and communication of these decisions. There exists a properly defined financial and administrative power of various committees and key management personnel. The Federal BILAL AHMAD . excluding the President. which supports delegations of authority and accountability. It provides the basic framework within which functions and procedures are performed. which supports clear lines of communications and reporting relationships. which provides a framework for successful operations. 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. Any organization needs a structure. The organizational structure of National Bank of Pakistan is centralized because all the decisions of the bank are taken by the top Management. These activities must be well coordinated so that the goals of the organization are achieved successfully.P a g e | 37 ORGANIZATIONAL STRUCTURE OF NATIONAL BANK OF PAKISTAN A well-developed and properly coordinate structure is an important requirement for the success of any organization. 1974. which are related to decision making. The bank has clearly defined organizational structure. The Organization Structure (Annexed I) shows the internal operations and reporting lines of the National Bank of Pakistan. The operation of an organization involves a number of activities. the number of Directors of the Bank shall not be less than 5 and not more than 7. The National Bank of Pakistan‟s Departmental key roles and functions are as follows: BOARD OF DIRECTORS Pursuant to Section 11 of The Banks‟ (Nationalization) Act.
As regards Internal Audit or Internal Control. 7. is required to ensure existence of an effective „Management Information system‟ to remain fully informed of the activities. The Board shall approve and monitor the objectives. IT Security. 4. 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. as that is the role of the Management. in areas of Risk Management. Accounting & Disclosure. 2. a separate department shall be created which shall be manned preferably by professionals responsible to conduct audit of the Bank. 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. Offices. 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. including but not limited to. operating performance BILAL AHMAD . oversight and supervision of the affairs and business of the Bank and does not play any role in the day-to-day operations. Various Divisions. The business conditions and markets are ever changing and so are their requirements. 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. The Board. The Board shall also be responsible to review and update policies periodically and whenever circumstances justify. it should be ensured that the Board of Directors focus on policy making and general direction. and Units Branches etc. therefore. 6. 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. Credit. appoint a Chairman of the Board in respect of the Bank. Treasury & Investment. Internal Control System and Audit. The Board shall approve and ensure implementation of policies. Human Resource.P a g e | 38 Government may. The Head of this department will report directly to the BOD or Board Committee on Internal Audit. 5. The responsibilities of Directors include the followings:22 1. if deems necessary. Expenditure. and any other operational area which the Board may deem appropriate from time to time. 3.
risk management. These committees. 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. Sikandar Hayat Jamali Mian Kausar Hameed Designation Chairman & President Director Director BILAL AHMAD . A copy of that letter should be submitted to the State Bank of Pakistan so that it can monitor follow-up actions. recruitment. 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. 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. 8. The Board should ensure that it receives management letter from the external auditors without delay. 9. shall oversee areas like audit. 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 various risks it is exposed to and to evaluate performance of the Management at regular intervals. preferably comprising of „Non. 11. The Board should meet frequently (preferably on monthly basis. 10. the Board may form specialized committees with welldefined objectives.Executive‟ Board members. To share the load of activities. compensation etc. authorities and tenure. The Following table mentioned the names & designation of Board of Directors of National Bank of Pakistan: Name Syed Ali Raza Mr.P a g e | 39 and financial condition of the institution. credit. These committees should apprise the Board of their activities and achievements on regular basis. 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. but in any event. the environment in which it operates.
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 Employees benefit & Disbursements Group Overseas & Coordination Group Islamic Banking Core Banking Application.P a g e | 40 Mr. Mohammad Ayub Khan Tarin Mr. Muhammad Arshad Chaudhry Mr. who report directly to the Directors of Bank. Ibrar A. The whole functions of National Bank of Pakistan are performed under these Groups. Mumtaz Mr. Tariq Kirmani Mr. Ekhlaq Ahmed Director Director Director Director Secretary Board of Directors SENIOR MANAGEMENT The senior management of National Bank of Pakistan is consists of Group chiefs. PMO Financial Control Division Information Technology Group Name Group Name & Designation BILAL AHMAD .
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. Khurshid Maqsood Ali Tahir Yaqoob Anwar Ahmed Meenai Naeem Syed Aamir Sattar Atif Hassan Khan SEVP & Group Chief. Mirza Abrar Baig Amer Siddiqui Muhammad Nusrat Vohra Amim Akhtar Ekhlaq Ahmed Tajammal Hussain Bokharee Mrs. 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. Overseas Coordination & Management Group EVP & Divisional Head. Asif A. The Corporate Banking Group achieved excellent results in 2007 with a number of landmark transactions in cement. Treasury Management Group EVP & PSO to the President EVP & Secretary Board of Directors EVP/Divisional Head. Audit & Inspection Group SEVP & Group Chief. Operations Group SEVP & Group Chief. Credit Management Group SEVP & Group Chief. Financial Control Division Group Chief (A). In addition to the funded income. Commercial & Retail Banking Group SEVP & Group Chief.P a g e | 41 Masood Karim Shaikh Shahid Anwar Khan Dr. Information Technology Group 1. Human Resources Management & Administration Group SEVP & Group Chief. energy. Compliance Group SEVP & Group Chief. 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. Special Assets Management Group EVP & Divisional Head Employee Benefits. In addition the BILAL AHMAD . Disbursements & Trustee Division EVP & Group Chief. CORPORATE & INVESTMENT BANKING GROUP The corporate & investment banking group is headed by Mr. Masood Karim Shaikh. communication and fertilizer sectors. Core Banking Application. Islamic Banking EVP & Head. Corporate & Investment Banking Group SEVP & Group Chief. The increasing pressure on the textile industry reduced the lending to this sector. Brohi Imam Bakhsh Baloch Ziaullah Khan Dr.
Foreign currency financing. Despite these threats and challenges at NBP. issuance of debt instruments like TFCs and Bonds and the Capital markets. 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.8 billion in 2008. which resulted in capital gain of Rs. NBP has the largest equity portfolio in the banking sector primarily due to 27% holding in NIT units. NBP during the year also participated in a number of TFC issues and mutual funds subscriptions thereby increasing the overall yield on investment portfolio. Corporate Banking offers tailor made products / solutions as required by corporate customers which includes: The key features of corporate Banking includes: Funded facilities. During the year 2008 the bank redeemed 10% of its NIT holding covered under LoC. mutual funds. The National Bank o Pakistan have special focus on Corporate Banking with a presence in all major locations through out the country.P a g e | 42 bank's corporate loans yields also faced pressure as substitute form of funding sources are available in the market in form of Islamic financing. 1. 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. new Relationship Managers as well as team leaders has been inducted to expedite this process. The National Bank of Pakistan has initiated a structured approach to corporate banking by introducing a single point of contact through Relationship Managers. ranging from short to medium and long term lending Trade related financing. BILAL AHMAD . the largest mutual fund in Pakistan. 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. offering full range of Banking products / services and one window interface through designated Relationship Managers. For this purpose.
guarantees. Timely submission of accurate data / returns to regulator and other agencies. This group is responsible for monitoring compliance of various administrative / operative instructions. letter of credit etc. The Compliance Officers will serve as a contact point between President /Chief executive officers and senior management. rules. Collections. Anti money laundering laws and regulations. and act as liaison with State Bank of Pakistan concerning the issues related to compliance. Remittances. Monitor and report suspicious transactions to President / Chief Executive Officer of the bank and other related agencies. The Compliance officers will primarily be responsible for Bank‟s effective compliance relating to: Relevant provisions of existing laws and regulations. In order to keep the working of Audit Department aligned with the best international practices 'Compliance Group‟ has been created. and regulations by constantly reviewing and reporting status of compliance and non-compliance. The Compliance Group of NBP is set to ensure that all relevant laws are complied with. COMPLIANCE GROUP The Compliance Group of National Bank of Pakistan is headed by Mr. Monitor compliance of Administrative/Operational Instructions. BILAL AHMAD . Regulations issued from time to time by the Management.P a g e | 43 All sorts of non-funded facilities / services which include Cash receipts / payments. Guidelines for KYC. 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. minimize legal and regulatory risks. with regard to functioning of compliance program provide assistance in this area to branches and other departments of the bank. Ziaullah Khan and is report directly to the President/ Chief executive of NBP. and. in letter and spirit. Review over the compliance carried out by the audit departments. thus. Rules. Customized products / solutions 2. 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.
Islamic Banking is one of the emerging field in global financial market. The year 2007 marked the first year of Islamic Banking operations. Anwar Ahmed Meenai. in addition to active participation in various Sukuk transactions. 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. Government Collections Utility Bills Collection BILAL AHMAD .P a g e | 44 3. two more Islamic Banking branches at Lahore and Peshawar started operations. the progress of Islamic Banking in Pakistan has also been commendable during the last Five years. 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. Collection of Export Bills. ISLAMIC BANKING GROUP The divisional head of Islamic Banking group is Mr. utilizing NBP's existing branch network of 1.200 plus conventional branches and looking into strategic acquisitions for expansion in this field. 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. Al-Hamdulillah. During the year under review. Collection of Local Bills. 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.
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. Its ability to offer tight prices. TREASURY MANAGEMENT GROUP The group chief of Treasury management group of National Bank of Pakistan is Mr. Furthermore. Muhammad Nusrat Vohra. b) 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. National bank has one of the largest FX book in the country. retail sector. Currently the National Bank of Pakistan offer following Treasury Products:24 a) 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.P a g e | 45 4. PIBs are highly secured and risk free as they are guaranteed by the government of Pakistan. Local presence across the nation as well as internationally. local conglomerates as well as individuals. coupled with timely and accurate research making it a bank of choice for clients seeking to favorably position their currency risk As a result. multinationals. BILAL AHMAD . The client base does not consist of only blue chips ones but encompasses public sector clients. 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. This way they are able to lock a higher yield for a relatively long term rather than take the risk of repricing after relatively shorter time periods. corporate and retail clients.
P a g e | 46 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. The first ever Derivative transaction of the Pakistani banking sector was done by NBP. Some of the more common derivative structures being offered include: 1) 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. While most foreign / private banks would have to go to the secondary market in order to satisfy a large order from an institutional investor. c) 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. if the borrower feels that the interest rate might go up in the future. This means that it can offer tight prices for large amounts even under volatile market conditions. The functions of Treasury management group include: BILAL AHMAD . than he may choose to enter into a Pay Fixed – Received Floating swap with its bank to effectively hedge its floating rate loans. The client‟s exposure is shifted from PKR KIBOR to USD LIBOR. For example. NBP can execute such large orders through its own book. So the upside profit potential is unlimited whereas the downside loss is protected at a pre determined level. Various structures of currency options are available including Knock-ins / Knock outs Participating Forwards 2) INTEREST R ATE S WAPS AND FRA S A client can convert a fix rate loan into floating rate one or vice versa by using these derivative instruments. 3) C ROSS C URRENCY S WAPS This product allows a client to convert its rupee based loans into a dollar based loan. This allows the clients to develop and implement their views about the evolving interest rate scenario.
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. internal fund movements. banking. truthfulness and objectivity. the effective control of the risks associated with those activities. currencies. 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. Presentations of information on which treasury-management decisions are to be taken reflect the principles of trustworthiness. This group usually deals with Bank‟s allocations of payments or cash application. payment systems and the associated financial risk management. screening of customers and only those who is credit worthy are allowed to do business. and credit rules of the bank Framing credit policies and regulations. reconciliations and also maintaining positive working relationships with customer during the debt collection or credit review and approval process. options and derivatives. CREDIT MANAGEMENT GROUP The group chief of Credit Management Group is Mr. 5. honesty. and the pursuit of optimum performance consistent with those risks. Employing National Bank of Pakistan‟s treasury-management policies and practices accurately reflect the legal and regulatory regimes under which the Bank operates. guiding and supervising the branch-banks to deal with credit business Managing the authorized business. financial regulations. money-market and capital-market transactions. Shahid Anwar Khan. supervising the staff to execute orders Putting forward the proposal of credit management and development. The management of cash flows. financial futures. dealing with the legal affairs consulted and coordinated BILAL AHMAD .P a g e | 47 The Management of National Bank of Pakistan‟s holdings in and trading in government and corporate bonds.
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 6.P a g e | 48 Establishing development rules on credit. Bank's management has established and is managing an adequate and effective system of internal control which encompasses the policies. In order to assess the branches. dealing with the acceptance draft. reviewing existing procedures and policies and ensuing that control procedure and policies are amended for time to time wherever required. The management and the employees at all levels within the Bank are required to perform as per these approved Internal Control System components. compatible with best international practices. maintenance of proper records and processes. The management ensures that an efficient and effective Internal Control System is in place by identifying control objectives. However. AUDIT & INSPECTION GROUP The group chief of National Bank of Pakistan‟s Audit & inspection group is Mr. Its mission is to strive for soundness & stability of the financial system and safeguard interest of stakeholders through proactive inspection. Internal Control System is designed to manage rather than eliminate the risk of failure to achieve objectives and provide reasonable but not absolute assurance against material misstatement or loss. procedures. Audit & inspection group conducts regular audit & inspection of branches. thereby ensuring public confidence in the system. It is one of the core departments at NBP. 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.25 The audit system of National Bank of Pakistan consists of following: a) Internal Audit b) External Audit c) Statutory Audit BILAL AHMAD . Imam Bakhsh Baloch. processes and tasks as approved by the Board of Directors that facilitate effective and efficient operations. compliance with applicable laws and regulations and internal policies with respect to conduct of business. The Internal Control System ensures quality of external and internal reporting.
Liquidity. The scope and audit programs are set by the State Bank of Pakistan. Sensitivity and System & Controls) rating is a criteria to determine the frequency of inspection of banks as weak institutions are given greater attention. 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. c) S TATUTORY A UDIT The statutory audit of National Bank of Pakistan is conducted to meet the particular requirements of State Bank of Pakistan. Asset Quality. Special investigations (targeted inspections) are also conducted as and when circumstances so warrant on the basis of complaints or market reports about specific institution. as auditors of National Bank of Pakistan. Regions and Groups at Head Office on an on-going basis to evaluate the efficiency and effectiveness of Internal Control System.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. Management. Chartered Accountants and Yousaf Adil Saleem & Co.P a g e | 49 a) I NTERNAL A UDIT The Bank has an independent Internal Audit Group that conducts audit of all Branches. Ibrar. however. Inspections are conducted on regular basis in the branches. Earnings.26 For the purpose of inspection the National Bank of Pakistan inspects its branches through inspectors. The current chairmen of audit committee of NBP are Azam Faruque. The functions of Audit & inspection group of National Bank of Pakistan are as fallows: BILAL AHMAD . A. The CAMELS (Capital. Mumtaz & Mian Kausar Hameed. flexibility exists in policy for frequency of inspections depending upon the need to maintain safety & soundness. b) 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. In addition to that. The State Bank of Pakistan conducts the regular full scope examination of banks pursuant to an inspection schedule. The National Bank of Pakistan has to pay a penalty of Rs.
used efficiently and safeguarded adequately. The other functions of this group include attracting. procedures and give recommendations for improvements. BILAL AHMAD . Examining those resources are acquired economically.P a g e | 50 Examine and evaluate adequacy and effectiveness of the internal control systems in the Bank. automation technology and MIS. Review various reports of Bank‟s subsidiaries. Following units and areas of work are the part of this division. Evaluate and ensure that approved policies and procedures meet legal and regulatory requirements. operational and Corporate Governance aspects of the Bank‟s activities. Review and ensure accuracy and reliability of accounting records and financial reports. and conduct job evaluation process. HUMAN RESOURCE MANAGEMENT & ADMINISTRATION GROUP The group chief of Human resource management & administration group is Mr. conduct job analysis. selecting and recruiting the right people from the market. prepare job descriptions. The group firmly works on adopting latest organizational theories & change management processes to bring in efficiency. This group also performs following functions: Deals from placing job advertisements to timely recruitment of competent personnel by using modern selection techniques. Examine and evaluate effectiveness of existing policies. Dr. This group is responsible to develop annual manpower plan for National Bank of Pakistan. 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 7. Mirza Abrar Baig. Perform testing of both transactions and functioning of specific internal control procedures. Review financial. Review the applications and effectiveness of risk management procedures and risk assessment methodologies in financial. Identify opportunities for cost savings in Bank operations and make recommendations.
The National Bank of Pakistan with its capabilities. Conducting motivation surveys and developing market based employee satisfaction & retention strategies. critical to NBP. focusing on solutions that intend to reduce operating costs. This group is formed to implement latest technology to keep National Bank of Pakistan online with the domestic and international financial industry. The information technology group has following divisions: In-house Development Software development BILAL AHMAD . and other stakeholders in order to promote efficiency and stability in the financial market. The group provides services and solutions to improve and strengthen NBP‟s technology portfolio and identify future requirements. Lahore and Peshawar. INFORMATION TECHNOLOGY GROUP The group chief of Information technology group is Mr. Atif Hassan Khan. at Karachi. 8. and meet overall business goal. methodologies and experience aims at technological advancement in bank. Conduction of evaluation of positions and grades to ascertain employees‟ position in the grade structure. 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. 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. Encourages employees to seek promotion/transfers to fill internal openings and meet employees‟ personal objectives. Foster a culture of acknowledgement and appreciation amongst employees for introducing innovative business practices. selection and promotions. Islamabad.P a g e | 51 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. improves end user performance. IT group focuses on safeguarding the information assets and relevant systems. Besides providing these useful resources. through its Security plans and policies. This Group supervises all the staff colleges.
Atif Hassan Khan. 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. Checking and verifying the selected financial transactions to ensure accuracy and compliance to respective rules and regulations. Monthly Abstract. Preparation of Annual Financial Statements Accounting Policies for the bank. 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. FINANCIAL CONTROL DIVISION This division is headed by Mr. as adopted by the Bank. Coordination and facilitation for Business planning and budgeting function in the Bank and periodic reporting to the management and to the Board. Maintenance of Federal & Provincial Government Account on the basis of receipt and payments. Consolidation of Departmental Budgets. BILAL AHMAD . Short/Medium term investment and Swap deposits and maintenance of Foreign Currency accounts and revaluation of Foreign Currency Assets & Liabilities. Daily Reserves and Weekly review reporting. who is also financial controller of National Bank of Pakistan.P a g e | 52 Web development Central Server System Admin – UNIX System Admin – Windows Customer Support Database Management Network Management Production Support Administration Director Section 9. Quarterly profit updates to the Board of Directors.
P a g e | 53 Assets capitalization. documentary credit. international non-financing guarantee and so on) . training managers of customer-service for foreign exchange business. stand-by L/C. publicizing foreign exchange business. The functions of this group are as follows: Establishing marketing strategy. Examining and approving international business financing(import & export bill purchase. 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. keeping track of physical location of assets. and is the governing department of foreign exchange. OVERSEAS COORDINATION & MANAGEMENT GROUP The group chief of NBP‟s overseas coordination & management group is Mr. To deal with various administrative matters arising in the Finance Department. Showing business requirement of costumers and development of new products. BILAL AHMAD . assets transfers and overall responsibility to manage and maintain assets physical inventory. To record all the expenses regarding repair/ maintenance and rent taxes for NBP buildings and equipments. Making annual operating and working plan. Tahir Yaqoob. and establishing and harmonizing the business among agent banks. 10. acceptance. To respond to various queries rose from various internal and external sources. foreign exchange bill discount. Corresponding and dealing with foreign exchange business among branches. 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. Managing and operating foreign fund of the whole bank. policy and management system of foreign exchange. To ensure the smooth and unhampered running of the Fixed Assets Management function. Auditing foreign exchange business. Selecting and opening overseas account under supervision.
customs. lending. Retail banking includes retail lending and deposits. private lending and deposits. trade finance. This group is engaged in BILAL AHMAD . Managing turnover position of exchange settlement and sales. merchant / commercial / corporate cards and private labels and retail. The National Bank of Pakistan is shifting focusing on expanding its market share in trade finance. Contacting and corresponding with National foreign trade department.T service to large domestic and international branches. Examining and approving the branches launching foreign exchange business.P a g e | 54 Management and operation of researching credit. factoring. making accounting report forms and business report forms. applying for new foreign business category to the People‟s Bank of China according to current foreign exchange policy. bills of exchange and deposits. and consult and testimony business. banking services. guarantees. provision of value added services based on modern technology and undertaking the centralized marketing and advertising for the Bank. register foreign loans and manage foreign exchange account. This group is responsible for developing and managing brands which serve the investment needs of the consumer market. and focuses on deposit mobilization.IF. COMMERCIAL & RETAIL BANKING GROUP The group chief of National Bank of Pakistan‟s commercial & retail Banking group is Mr.27 Commercial banking includes project finance. Regularly examining the executive results of all system of foreign exchange and renovate all the problems. trust and estates. Amer Siddiqui. Supervising wholesale foreign exchange deposit and payment to defend money laundering and bank swindle. Organizing international business research and statistic. Managing and operating SWIFT system and foreign exchange system. industry governing department and foreign exchange department. home remittance and foreign investments.W. Declaring international balance. export finance. focusing on individual consumers and small and medium size enterprises. real estate. The Bank is setting high-speed satellite link along with the extension of S. 11. This group is responsible for serving the needs of the retail and commercial market. trust and estates investment advice. establishing and improving foreign exchange files. banking service.
merger & acquisition strategies. 12. The main purpose of these centers is to generate ancillary business in addition to funded and non-funded facilities. SPECIAL ASSETS MANAGEMENT GROUP The group chief of Special assets management group is Mr. DISBURSEMENTS & TRUSTEE DIVISION BILAL AHMAD . The Special Asset Management Group (SAMG) is a group of people with specialized skills in managing the "stressed" assets of National Bank of Pakistan. The consumer market in Pakistan has not only grows exponentially over the last decade or so. Further this customer friendly and dedicated set up at convenient locations would help in improving the image of the Bank as well. with quick turn around time in decisions for customer satisfaction. EMPLOYEE BENEFITS.P a g e | 55 the development and management of retail credit schemes. Tajammal Hussain Bokharee. These Centers would work in conjunction with the existing set–up of Commercial Lending done throughout the NBP branch network. size of the branch and its capabilities to deliver the desired service in order to attract quality customers. through one window operations and Relationship Managers stationed at those centers. The group was created with a view to enable restructuring and recoveries through various initiatives like innovative work-outs. asset stripping. it is but imperative to continue offering innovative consumer credit schemes. In order to sustain competition. 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. The objective is to target the untapped sectors and provide them professional quality service. 13. We expect and hope to reduce the turn around time and become more competitive and market oriented. but the needs of this segment have become extremely diverse. security enhancements and structured selldowns. The National Bank of Pakistan plan to establish commercial centers across the country looking at the business potential in the area. 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. We have revamped our special assets management business and have coordinated our efforts to expedite recoveries and settlements.
The function of the National Bank of Pakistan‟s Employee benefits. P ENSION S CHEME The bank operates defined benefit approved funded pension scheme for its eligible employees. Along with estate settlement. 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. or administering trusts that have been set up for the survivors of a major depositor. the bank reduces the resulting asset to an amount equal to the total of present BILAL AHMAD . As a means of ensuring that the resources of the bank safely protect the investments involved. 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. and in some cases see to the disposition of the estate of a deceased customer. 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. EMPLOYEE BENEFITS OF NATIONAL B ANK OF P AKISTAN D EFINED B ENEFIT P LANS 1. This means that this department is likely to take time to evaluate all options when involved in settling estates. this department also provides a number of other agency services. Khurshid Maqsood Ali. even after a parent or significant other has died. establishing guardianships. which was to provide a source of financial support for loved ones. Mrs.P a g e | 56 The divisional head of this division is Mr. The bank‟s costs are determined based on actuarial valuation carried out using Projected Unit Credit Method. such as functioning as the trustee of record for corporate bonds or administering a pension or profit sharing plan. the department makes it relatively easy for the client to deal with other matters. 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. disbursement & trustee division is to handle the administration of trust funds. Thus. and be less involved in the task of protecting assets that are already established and set on a path of consistent growth. provide estate planning support.
the bank provides services. O THER EMPLOYEE BENEFITS 1. Actuarial gains/losses are accounted for in a manner similar to pension scheme. Provision is made in the financial statements for the benefit based on actuarial valuation carried out using the Projected Unit Credit Method. safe custody and maintaining unit holder‟s accounts. 2. E MPLOYEES ' COMPENSATED ABSENCES The bank accounts for all accumulating compensated absences when employees render service that increases their entitlement to future compensated absences. as a trustee to NIT and is performing functions of sale/purchase of NIT units. G RATUITY SCHEME The bank also operates an un-funded defined benefit gratuity scheme for its eligible contractual employees. B ENEVOLENT SCHEME The bank also operates an un-funded defined benefit benevolent scheme for its eligible employees. Provision is made in the financial statements based on the actuarial valuation using the Projected Unit Credit Method. T RUST ACTIVITIES OF N ATIONAL B ANK OF P AKISTAN a) N ATIONAL INVESTMENT T RUST (NIT) Under a trust deed. The liability is determined based on actuarial valuation carried out using the Projected Unit Credit Method. P OST RETIREMENT MEDICAL BENEFITS The bank operates an un-funded defined post retirement medical benefits scheme for all of its employees. BILAL AHMAD . Actuarial gains/losses are recognized in the period in which they arise. 4.P a g e | 57 value of any economic benefit in the form of reduction in future contributions to the plan and unrecognized actuarial losses and past service costs. 3. Actuarial gains/losses are accounted for in a manner similar to the pension scheme. Provision is made in the financial statements based on the actuarial valuation using the Projected Unit Credit Method.
The transactions are performed using multiple channels such as ATMs. The core banking application is an integrated application that supports real time. Naeem Syed. Anywhere Banking BILAL AHMAD .E -H ASNA F UND The work relating to Qarz-e-Hasna Scheme was attended by Pakistan Banking Council (PBC) since inception. Business processes in all the branches of National Bank of Pakistan update a common database in a central server located at data centre. Phone Banking and Mobile Banking. multi banking and multi channel strategies. 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. Key features of the Core banking application of NBP 24X7 Banking As a result of implementing Core Banking. This is possible as the entire Customer Database is centrally located at the central Data Centre and can be accessed throughout the network of branches. LTCF established from the proceeds of loans disbursed by various international funding agencies for financing private sector energy development projects. The National Bank of Pakistan is in process of negotiating the charge of fee in consideration of administrative services to the LTCF. 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. most of the facilities being offered by bank are available to Customers 24 hours a day. In order to fill the void created by the dissolution of PBC and in order to continue the scheme. 7 days a week. PBC was dissolved in January 1997. 14. c) Q ARZ . where his/her account is maintained. Internet Banking. CORE BANKING APPLICATION The head of core banking application is Mr.TERM C REDIT F UND (LTCF) Consequent upon the NDFC amalgamation. The customer can go to a branch anywhere in the country and perform a transaction. which gives a consolidated view of bank‟s operations. the bank manages on behalf of the Government of Pakistan.P a g e | 58 b) LONG .
AssetLiability Management and Corporate Balance Sheet. The operations group is in the process of introducing E-Commerce initiatives based on customer friendly technologies. 15. utility and government collections. Dr. The National Bank of Pakistan is currently improving the service orientation at its branches. Treasury. 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. DSS and EIS Core banking application is more than just a transaction processing system. Strengthening MIS. It provides updated data for generating various reports for Management information system (MIS). Branches would do less and less back office work and would be able to focus on marketing. Business Process Re-engineering Core Banking would enable implementation of BPR initiatives of a Bank and facilitate centralized handling of various processes. OPERATIONS GROUP The group chief of National Bank of Pakistan‟s Operation group is Mr. As a result. Brohi. and will facilitate Decision Support System (DSS) and Executive Information System (EIS). We are transforming our branches to give a modern look and convenience. as these constitute the “front line” of the Bank in terms of contact with its customers. the information related to these areas is centrally available for use or reference. Asif A. A number of branches have been shifted to prominent and spacious locations.” We made concerted efforts and took a number of initiatives. Workshops and seminars were conducted to disseminate the very important message of “Excellent Customer Service”. The group creates products to utilize the benefits of E-Commerce for its customers. We also have established specialized customer facilitation centers to exclusively cater to pension payments. customer relationship management and cross selling. 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. branches and administrative offices can concurrently avail updated data when required. These are expected to reduce counter traffic at our branches and will increase our distribution channels for better and BILAL AHMAD . As data is located on CDC. Integration with strategic sectors Core Banking integrates all strategic sectors of Banking such as Trade Finance.P a g e | 59 Customers can avail of banking services across the branch and Channel network irrespective of location where their account is maintained.
Far East. These regions are sub divided into Zones. 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: Overseas Countrywide The overseas regions include Middle East. The BILAL AHMAD . in order to facilitate its functions on branch level appoints Branch Managers & other staff according to branch‟s activities and volume of business. Europe & USA. BRANCH MANAGEMENT The National Bank of Pakistan. and Central Asia. PROVINCIAL & REGIONAL MANAGEMENT There are four executives of National Bank of Pakistan to supervise the Bank‟s maters of every province. Business hours have been extended with establishment of customer facilitation offices at the regional levels to help on the spot resolution of customer complaints.FP & Kashmir These provinces are sub-divided into regions. which are responsible for the supervision in their circles and deal with the problems of their respective Regions. These provincial chiefs are responsible for the entire banking operations in their respective provinces.W. as they are called Provincial Chiefs.P a g e | 60 convenient services. the in charge of a Zone is called Zonal Chief. The detail about National Bank of Pakistan‟s regions is shown as Annexed-II at the end of the report. The country has been divided into 29 regions by National Bank of Pakistan to facilitate its functions. the regions are controlled and manage by Regional heads.
ORGANIZATIONAL (MANAGEMENT) LEVELS AT NBP Successful and profitable banking management deepens upon two principal factors: a) The manner in which the function of banking. and the servicing of each deposits. Management is a distinct process consisting of activities of planning. 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.. assuring that proper procedures are followed.28 The management has two types i. 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 other functions involves scheduling of employee work hours.e. and reporting to upper management any problems or providing reports and updates as required by bank‟s protocol. hiring and firing. organizing. the investing or converting such deposits into earning assets.P a g e | 61 branch managers are responsible for all functions and staff within the branch office. making sure that everything runs smoothly. The National Bank of Pakistan has four types of management levels which are as fallows: BILAL AHMAD . actuating and controlling performed to determine and accomplish stated objectives with the use of human being and other resources.. The job of branch managers is to take charge of the entire operation of his branch. overseeing training. the acquiring of deposits. that is. are performed.
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. chief operating officer. organizing. leading and controlling the staff and all affairs of the branch. chief executive officer or chairman of the board. These individuals typically have titles such as executive vice president. The nature of their job is repetitive & clerical as they do same work again & again.P a g e | 62 TOP MANAGERS Top managers are responsible for making organization-wide decisions and establishing the plans and goals that affect the entire organization. In NBP. The NBP have its top management in their head office at Karachi. BILAL AHMAD . They are responsible for the planning. managing director. leading and controlling of the resources and staff of the whole region. They are responsible for making the plans and establishing goals the run their business smoothly all over Pakistan & around the globe. regional management falls under this category. Gujranwala region etc.29 NBP divided his management into various regions such as Rawalpindi region. These members are also responsible for making the policy of the bank. The bank has directors for superintendence and direction of its business. They are normally specialized in their work. organizing. project leader. president. These managers are responsible for planning. plant manager or division manager. The Government appoints six directors as members and one president. Among seven member of group Chief Executive is called the president. MIDDLE MANAGERS Middle managers include all levels of management between the first line level and the top level of the organization. NON MANAGERIAL EMPLOYEES Non managerial employees are not concerned with any decision making. These managers manage the work of first line managers and may have titles such as department head. OG III and clerical staff. The non managerial employees of NBP consist of OG-II. The branch managers of NBP fall under this category.
elements. The Officers Grade I. a body of ecclesiastical rulers. The vice President & assistant vice Presidents of National Bank of Pakistan are ranked 6th & 7th respectively. values. 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. Regional & Zonal chiefs are ranked 3rd.P a g e | 63 HIERARCHY OF NATIONAL BANK OF PAKISTAN The Hierarchy (An arrangement of objects.clerical staff. A series in which each element is graded or ranked A body of officials disposed organically in ranks and orders each subordinate to the one above it.. A body of clergy organized into successive ranks or grades with each level subordinate to the one above. The Provisional. II & III are ranked 8th at the hierarchy of National Bank of Pakistan. at the top and with several things below each other thing. The other six directors of National Bank of Pakistan are ranked second in the hierarchy. 4th & 5th respectively. An organization with few things. or one thing. The President of National Bank of Pakistan is ranked Top at the hierarchy. grades. The lower level of National Bank of Pakistan is consist of Clerical & non. The hierarchy may include: Categorization of a group of people according to ability or status. orders. classes etc. people. BILAL AHMAD .
By analyzing the organization structure of the branch following elements can be found in the structure. The branch has two operation Managers. The organization chart & Organogram of National Bank of Pakistan Rawat Branch is shown on Annexed IV & Annexed V at the end of this report.P a g e | 64 ORGANIZATION STRUCTURE OF THE BRANCH A well-developed and properly coordinate structure is an important requirement for the success of any organization. which are related to decision making. It is a sort of visual presentation of the organizational structure. which provides a framework for successful operations. Operation Manager I controls Clearing house & Remittance BILAL AHMAD . All the decisions relating to Branch are made by him and the subordinates have to obey these decisions. the rules so established must also be designed in the light of abilities and motivation of the human recourse available. The operation of an organization involves a number of activities. and communication of these decisions. It specifies the duties and responsibilities of the personnel or staff of the branch. These activities must be well coordinated so that the goals of the organization are achieved successfully. This chart defines the line of authority in the branch and its departments. It provides the basic framework within which functions and procedures are performed. a) CENTRALIZED DECISION MAKING The Branch Manager of National Bank of Pakistan is responsible for all the affairs of the Bank. Any organization needs a structure. All the employees of the Bank are report directly to the Branch Manager. The purpose of an organizational structure is to help in creating an environment for human performance. 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.P a g e | 65 Department and Operation Manager II controls Deposits. 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 c) CHAIN OF COMMAND BILAL AHMAD . Downward communication is the message and information sent from top management to subordinates in a downward direction. The same pattern is followed at National Bank of Pakistan Rawat branch. usually with the interest to motivate or influence the behavior of others in the organization. b) DOWNWARD COMMUNICATION Communication is the process by which information is exchanged and understood by two or more people. the Manager of the branch sent orders. The branch also has two cashiers responsible for cash & Pension disbursement department reports directly to branch Manger. The Chief Accountant controls Accounts department & is report directly to branch Manager. Both of them are report directly to the Manager regarding affairs of their departments. Advance & Branch accounts department.
as there is scalar pattern followed at the organizational setup of NBP. BILAL AHMAD . The authority and responsibility for different tasks and duties are different. By analyzing the chain of command of NBP. issues orders and allocates resources to achieve organizational desired outcomes. as well as every one knows the successive levels of management all the way to the top. d) AUTHORITY AND RESPONSIBILITY The chain of command illustrates the authority structure of National Bank of Pakistan Rawat Branch. one can come to the conclusion that. which managers use to transfer the authority and responsibility to position below in the hierarchy. e) DELEGATION Delegation is the process. At National Bank of Pakistan Rawat branch Operation Managers have some authority & responsibility relating to affairs of the Branch. 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. 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.P a g e | 66 The chain of command is an unbroken line of authority that links all persons in an organization and shows who reports to whom. Authority is the formal and legitimate right of the manger to make decisions. 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.
The departments working within National Bank of Pakistan Rawat branch are as under: 1. Head of department manages each department & officials of the branch follow procedures. Similarly. Account Opening Department 7. Pension Disbursement Department 1. Clearing House Department 2. banks receive cheques and other financial instruments from their customers drawn on other banks. Computer Department 4. to be collected and credited to their accounts. Advances Department 6.P a g e | 67 DEPARTMENTS OF THE BRANCH Banking procedures are divided between various departments. Deposits Department 5. CLEARING HOUSE DEPARTMENT As part of their daily business activity. banks receive cheques/instruments from other banks. Different departments do their jobs in occurrence with the bank policies. In National Bank of Pakistan each branch is divided into various departments depending on their size and volume of business. deposited by customers of the BILAL AHMAD . Cash Department 9. Remittance Department 3. Accounts Department 8.
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banks drawn on the customers of the drawee banks. Therefore, the banks act as Collecting Banks when they send cheques/instruments for collection and as paying Banks, when they receive cheques/instruments for collection from other banks. Since each bank receive and sends cheques/instruments for collection to and from an number of banks, 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, 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. The SBP co-ordinates clearing activity through its offices, called the Clearing Houses, set up in big cities and towns. Where SBP does not maintain its own office, some other bank, usually National Bank of Pakistan (NBP) performs this function. But the clearing house facility is available only for cheques/instruments drawn on banks situated within the same city/clearing house area.
W ORKING OF THE C LEARING P ROCESS
Under the clearing arrangements, the State Bank of Pakistan (SBP) offers a Clearing House or a centralized exchange facility, 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. Every day representatives of all the banks in every city meet the Clearing House, first meeting in the morning, at an appointed time, for the purpose of depositing their own customers , cheques/instruments to be collected from other banks and receiving cheques/instrument drawn on their account holders from the others banks. 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, as per the list of cheques submitted by each bank.
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The cheques/instruments received, also called Inward Clearing, and are taking back by each bank to its bank/branch. The amounts of each cheques/instrument is debited or recovered from each drawee customers‟ account and credited to the Clearing House account. Similarly, against the amount credited by the Clearing House as Outward Clearing, the appropriate customers‟ accounts are credited and clearing House account is debited. Any cheques/instruments received by a bank that cannot be paid, due to insufficient balance in its customer‟s account or for any other reason, are returned back to the Clearing House and a credit is claimed and obtained there against.
R ULES & R EGULATIONS OF C LEARING H OUSE
Timing:(Monday to Saturday) i. ii. 1st Clearing at 10:00 a.m. 2nd Clearing at 2.30 p.m.
Each bank will send competent representative to exchange the cheques. Each bank is required to insure that all cheques and other negotiable instruments are properly stamped and suitably discharged An objection memo must accompany each and every cheque when return unpaid duly initialed. Each bank is required to maintain sufficient funds in the principal account with SBP to meet the payment obligations. 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. These expenses are very nominal.
O UTWARD C LEARING AT THE B RANCH
The following points are to be taken into consideration while an instrument is accepted at the counter to be presented in outward clearing:
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The name of the branch appears on its face where it is drawn o. It should not stale or post dated or without date. Amount in words and figures does not differ. Signature of the drawer appears on the face of the instrument. Instrument is not mutilated. There should be no material alteration, if so, it should be properly authenticated. If order instrument suitably indorsed and the last endorsee‟s account being credited. Endorsement is in accordance with the crossing if any. The amount of the instrument is same as mentioned on the paying-in-slip and counterfoil. The title of the account on the paying-in-slip is that of payee or endorsee (with the exception of bearer cheque). If an instrument received other than National Bank of Pakistan then special crossing stamp is affixed across the face of the instrument. 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 instrument is suitably discharged, where a bearer cheque does not require any discharge and also an instrument in favor a bank not need be discharged. The instrument along with pay-in-slip is retained while the counterfoil is given to the customer duly signed. Then the following steps are to be taken: 1. The particulars of the instrument and the pay-in-slip or credit voucher are entered in the outward clearing register. 2. Serial no is given to each voucher. 3. The register is balanced; the credit vouchers are balanced from the instruments and are released to the respective departments against acknowledgement in the register. 4. The instruments are arranged bank wise. 5. The schedules are prepared in triplicate, two copies which are attached with the relevant instrument and the third is kept as office copy.
The entry is made in the inward clearing register (serial no. every year. The entry of the instrument returned unpaid is made in Cheques returned Register. The instruments are detached and sort out department wise.e. The particulars of the instruments are compared with the list. I NWARD C LEARING OF THE B RANCH 1. Instrument no. The covering memo along with returned instrument and objection memo is sent to the customer who sent the same to his account. The house page is prepared from schedules in triplicate. costs less and eliminate the risks involved in BILAL AHMAD . more Holidays declared by the Central Govt. 7. 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. 2. The instruments are scrutinized in each respect before honoring the same. Account No) 4. 2. 3. 30th June and 31st Dec. at a time. The instruments are sent top the respective departments 5. 10. 9. Remittances through banking channels save time. The instrument along with duplicate schedule and house page are sent to the main office. The grand total of the house page is taken and agreed with that of the outward clearing register. The schedules and house pages are signed by the house in charge with branch stamp.P a g e | 71 6. but normally special clearing is held on last working day of half yearly and yearly closing i. REMITTANCE DEPARTMENT The Remittance department deals with the transfer of money from one place to another. 8. If the instrument is not to be presented again in clearing then a covering memo is prepared. Funds transfer facility or remittance of funds is on of the key functions of the banks all over the world.
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physical transportation of money from one place to another. National Bank of Pakistan transfers money in the following ways. 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: Responsible for money transfers, issuance of pay-orders & drafts, collection items, 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, and SBP/Compliance guidelines Responsible for Cash, 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, local remittances, and other related activities at branch level
P ARTIES INVOLVED IN R EMITTANCES
There are four parties involved in Remittance, which are Remitter Remittee Issuing Bank paying Bank
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One who initiates, or requests for a remittance. The remitter comes to the issuing or originating branch, asks for a remittance to be made, and deposits the money to be remitted. The bank charges him a commission for this service. He may or may not be the branch‟s customer.
A Remittee is also called the beneficiary, or the payee. The person in whose name the remittance is made. A Remittee is also the one who receive the payment.
I SSUING B ANK
The bank that sends or affects the remittance through demand drafts, telegraphic transfers, Mail Transfers, Pay order etc
P AYING B ANK
Paying Bank also knows as the drawee branch, the branch on which the instrument is drawn. It has to make the payment (usually located in a different city or country).
K INDS OF R EMITTANCES
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.
3. ACCOUNT OPENING DEPARTMENT
The opening of an account is the establishment of banker-customer relationship. This department performs the duty of opening accounts for customers. It also issues checkbooks to customers. 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. The bank officer tactfully obtains information about character, integrity, responsibility, occupation and the nature of business of
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the perspective customer. Any individual, who has attained the age of majority and is of sound mind can open and maintain his/her account. Two or more individuals may open an account jointly. Similarly, business organizations such as sole proprietary concerns, partnership firms, and limited liability companies as well as non-profit organizations like clubs, trusts, societies, associations and NGO‟s etc, may open their accounts. The documents required for National Bank of Pakistan‟s Account opening are showed as Annexed VII at the end of this report. The following requirements are necessary for opening an account. Identification of the new customer. Ascertaining the genuineness of the stated occupation business of the customer. Determining the correct residential and permanent address. Completion of all relevant columns of the Account opening form. Proper completion of documentation.
F UNCTIONS OF A CCOUNT O PENING D EPARTMENT
Providing account opening form according to the customer's requirements, Guide the customer about the requirements of the account opening and form filling, Check the forms whether they are correctly completed or not, Preparing checklist, Stamping on the form, Maintaining account opening register, Pasting of forms in register after release from general banking in charge, Issuance of cheque books, Issuance of accounts maintenance certificate, Closure of account Verification of signature in case of cheque presented before releasing of account opening from SS card is not yet scanned
4. CASH DEPARTMENT
All physical movement of cash in the bank is made through the cash department. As bank is borrowing and lending institution, therefore cash is the top most priority of Bank. Another aspect
P a g e | 75 is that cash department is for the security purpose. BILAL AHMAD . the bank‟s most valued relationships. security in a sense that there should be no embezzlement of funds or in money leaded to bank by any party or person. Cash department perform following functions Cash department owes its important to the fact that it is a major point of contract between the bank and the customer. 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. 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 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. Then teller will receive amount and credit the customer‟s account that shows increase in customer‟s bank account. The efficiency of bank is also related to this department the more efficient the bank is the stronger and busy is the cash department.
The following points are important. Like all other Banks. The BBO operator also sees the stop payment instructions. V ERIFICATION OF S IGNATURE After receiving the cheques the cheques the operation manager verify the signature of the account holder and the signature on the cheques. If the signature is not same it is returned back otherwise forward to BBO Operator for posting. Amount in words and figure are same. whether received from account holder or not. After considering these points BBO Operator post the cheque in BBO (Branch back office system) and forward to operation manager.P a g e | 76 C HEQUE ENCASHMENT PROCEDURE R ECEIVING O F C HEQUES The cash is paid against the cheques of the client. where BBO operator checks the balance of the account holder. BILAL AHMAD . which they willingly deposit with the Bank. The deposit department accepts/collects deposit from accountholders. National Bank of Pakistan also take incitation to attract as much depositor‟s as it can. It should be bearer cheques so the word bearer should not cross. The cashier enters the cheque in cash paid registered and pays against the second signature of receiver on the back of the cheque. 5. DEPOSITS DEPARTMENT The primary function of National Bank of Pakistan is to accept and receive surplus money from the people. C OMPUTER T ERMINAL P ROCESS The cheque is received in computer terminal. P AYMENT O F C ASH After posting the cheque the operation manager cancelled the cheque and returned back to cashier. Cheque is drawn on same branch Cheque is not post dated.
Credit extensions are the most important activity of all the financial institutions. Some advances are of the following nature Loan against Gold Agriculture advance to farmers Medium term advance for working capital Long term advance for setting industry Short term advance to businessman BILAL AHMAD . they decide whether to approve the loan or not. while some loan applications are submit to higher authorities for their approval. the credit management division of head office directly controls all the advances. ADVANCES DEPARTMENT The bank is profit seeking institution. Some loan approvals are made by the Manager of the branch within his powers as prescribed by the bank‟s higher authorities. Advances department is one of the most sensitive and important department of the bank. The job of this department is to make proposals about the loans.P a g e | 77 The National Bank of Pakistan offer different deposit schemes to its customers. The advances Department receive application from intending borrowers. because it is the main source of earnings. After analyzing and detailed investigation. The major portion of the profit is usually earned through this department. 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. After receiving application the advance department processes it further. 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) 6.
5. PO.P a g e | 78 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 posting of vouchering of all type of finance. 3. 7. monthly & quarterly. Cash finance. 4. Export finance. Transfer of funds from one account to another account of the party taking the authority letter. Demand finance. Approval of transfer of funds through DD-TT. 6. Timely submission of returns/reports. 9. 10. Checking of computer outputs of the department on daily basis. monthly. these included a) ONLINE BRANCHES BILAL AHMAD . IBCO etc to various branches by debiting the limits. COMPUTER DEPARTMENT 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. daily. The National Bank of Pakistan has three types of branches in all over Pakistan. weekly. Balancing of all financing heads. quarterly. and annually statement to the hire authority. 8. 7. Preparation of advances record. Preparation of weekly. Accruals & recovering of Markup on finances on periodical basis. Finance against imported merchandise etc for sanction of finance limit from the hire authority. Staff finance. MT. Preparation and submission of proposals of Running finance. 2.
Except for branches those are On Line as they transfer there daily data directly through there own terminal. Data comprises of transactions in profit loss account. These branches have dumb terminal directly linked with central computer. link with central computer AS-400. through wide area networking through fiber optics. 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. Branch Automated System based (BAS) on UNIX. Manual branches reports Regional head office regarding their daily transactions. current account. There are fourteen riders in total who bring information form all branches located in Karachi region. b) BATCH BRANCHES 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. Branch Integrated System (BIS) based on FoxPro in Karachi mostly branches are facing this problem. E VENING 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. The database in head office is also based on this system. Batch branches are using three type of system. activities of all branches are recorded in a central computer. These floppies and manual are bring in by riders. As day-to-day.P a g e | 79 The branches. terminal data goes to head office central computer. In Regional head office through On Line. advances etc termed as “Daily Transaction Report”. c) MANUAL BRANCHES The branches where all transactions are carried out manually and records are maintained on registers usually stored in big wardrobes. D ATA ENTRY D EPARTMENT BILAL AHMAD . which are directly. Clerk in charge register all diskettes and manual in registers called “job booking register” one for each of two type of data. Branch Back Office (BBO) based on FoxPro.
8. Date in Valid. Any Incomplete information for any branch and any information require by that particular branch is sent to that branch. This computer is attached with the terminal of central computer. other than used in HO (EBS) also caused errors. 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.P a g e | 80 The next task after receiving the data is to enter that data in to a computer. Sometime retrieving data from the system (BAS. The pension disbursement department is responsible for making pension payments to Government Pensioners. 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. duplicate cheques (this error occur when the last objection is not removed). The floppy disk is directly inserted in the computer. 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. D EFECTS AND E RROR H ANDLING Errors of different origin occur when the data goes to central computer. These and other such errors are seen by the person in charge. This department performs following functions: Making Pension Payments Opening of Account of Pensioner Entry of amount paid to pensioner in Government Pensioners Register BILAL AHMAD . PENSION DISBURSEMENT DEPARTMENT The National Bank of Pakistan was Pakistan‟s leading institution which performs the function of pension payments or disbursements to pensioners. BBO. no master (when opening of new account is not mentioned). The program in used is based on “COBOL” language. and BIS). Other errors include Unmatched (This error occurs when document no matched with the previous one exists). In the end of day print out of the data enter in central computer is taken. More over material is used to make a WST which is sent to State Bank of Pakistan. The bank performs this function through Demand Draft Purchase or simply called DD Purchase.
where Accounts Department starts performing its function.P a g e | 81 Verifications of Signatures of Pensioners Making Demand Draft Purchase Register 9.F48 General Ledger General Ledger. these are posted into respective computer terminals by the relevant departments. When these vouchers are prepared. ACCOUNTS DEPARTMENT Accounts Department of the bank can be considered the most important department. The account department prepare following vouchers and reports Monthly Profit & Loss account. merging stage comes. This department is basically concerned with processes and activities of recovering. This is the stage. Proof list is checked by the Accounts Department.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 BILAL AHMAD . Before merging. Actually the process of this activity starts from the preparation of all the required vouchers by different related departments.F21 General Ledger. a batch list is printed out by Computer Department and duly checked by the respective departments. sorting.Abstract Check Book Issue Register Western Union payments Register Demand Notices Miscellaneous Book Bank Transfer scroll Posting NBP Advance Salary Daily Statement. After this. after which a proof list is printed out. summarizing and reporting data resulting from the whole day transactions of all the departments.
P a g e | 82 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 BILAL AHMAD .
BBO Operator and clerical employees of the branch engaged in the maintenance of a variety of accounting records. and coordinate branch activities with those of other departments. Directs and participates in the development and revision of procedures in order to meet requirements of law. improve efficiency in branch activities. reports. The head of branch‟s Accounts department is called Chief Accountant. on which important administrative decisions are based. The Branch has one cashier & two clerks for assistance and help of Chief Accountant. The other responsibilities of Chief Accountant include: Plans and directs the activities of Cashier. and recommendations. Directs and reviews the preparation of periodic and special financial statements. provide services to Branch Manager.P a g e | 83 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. He also directs a wide variety of accounting activities and meets important deadlines & analyzes and interprets accounting data of the branch. The BBO (Branch Back Office system) Operator has also assist Chief Accountant in various tasks. The Chief Accountant is responsible for the central accounting records and controls over all financial transactions of the Branch. BILAL AHMAD . who performs his functions under direct supervision of Branch Manager. projections.
control.F15 o Cash Remittance In o Cash Remittance Out BILAL AHMAD . Ensuring the integrity and reliability of the information system.F48 o Daily Statement. and programs affecting the central accounting system and records and installs or recommends changes as appropriate. and preventing fraud from inside and outside the branch.P a g e | 84 Directs and reviews the study of new and revised laws. and decision-making needs. Preparing financial statements and accounting reports for distribution to the branch Manager for their planning. The Chief Accountant with the help of branch‟s clerical staff is preparing following reports: o Monthly Profit & Loss account. process. Preparing financial statements that are reported to Regional Management of National Bank of Pakistan. and store all relevant documents and information about the financial activities of the branch. Designing and operating a system to capture.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. record. rules.
Commission from utility services 4. Rent taxes insurance lighting 6. Salaries allowances & provident fund 5. Discount 2.P a g e | 85 o NBP General Account o Clearing register o 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. Auditor‟s fee & legal charges BILAL AHMAD . Profit paid on deposits and borrowings 7. Service charges 3.
the balance of each depositor would appear opposite his name. The statement of the bank shows the general. as in all other BILAL AHMAD . The most important record keeping and report generated by Bank‟s Accounts Department is Statement of the Bank. and a third for showing the balance after each entry or the day's entries are made in the account. and they should be frequently balanced to verify their correctness. They are kept so that the balance of each depositor's account may at any time be readily seen. but it would be entirely impractical. or control. there would be an itemized list of the loans with the names of the borrowers. BBO enable Bank to record a variety of transactions. Instead of total deposits. accounts of the bank. one for deposits or other items credited. instead of loans and discounts. Individual Ledgers are the accounts in which accounts with depositors are kept. to enter every figure directly on the statement of condition. written and permanent records of every transaction. All the Remittances of the bank are recorded managed and control through BBO. The first principle in bank accounting. The most common part of BBO which is operating by the BBO Operator is Individual Ledgers. It would not be impossible. and the various books of the bank show the detail of these items. The BBO enlist Chart of Accounts of the Bank shown in Annexed VIII. The three column form of individual ledger is used because it has a column for checks paid or other debit entries. For Computerized recording of transactions the bank used software called BBO (Branch Back Office).P a g e | 86 BANK ACCOUNTING OPERATIONS The National Bank of Pakistan‟s accounting consists in making computerized. All the accounts shown in Annexed are opened and managed through BBO. The “End of the Day” report is also generated through BBO. On the other side.
" 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. Often they become embittered at what seems to them a tyranny when the small sum of money involved is considered. For instance. and vice-versa. The debit postings of the individual bookkeeper would agree with the teller's figures. All other books. every Rupee of liabilities is accounted for by another Rupee of resources. consisting of Rs. With respect to the statement. Another important book which is used by the National Bank of Pakistan is journal. at the same time having a check on all figures to guard against either error or fraud. At the end of the day (assuming this to be the only deposit).200 on the bank itself and Rs." while the collection scratcher is the "black book. A ledger is a book used to keep a record of balances. For instance. "Accuracy first" is a motto that should be framed. 600 payable in another city. To "post" means to enter in the proper columns either the debits or credits on the ledger. Often they become known among the clerks by some other name descriptive of their general appearance. figuratively at least. Every transaction ultimately affects the bank's statement of condition by debit or credit. the paying teller and the receiving teller will each keep a record of checks cashed or deposited payable within the bank.1000 is made. Similarly each accounts at the end of the day for each item of cash is balanced.P a g e | 87 bookkeeping. however. The reason they must settle. and the total debit or credit is then posted on the ledgers.200 cash and checks as follows: Rs. the general ledger scratcher in one bank is known as the "red book. and the difference between them represents the balance either due by or to the bank. on the liabilities side there is an increase of Rs 800 all of which appears in the BILAL AHMAD . is that for every debit there must be a credit. cards and sheets used by bank of whatever nature is a part or subdivisions of these books. is not on account of the possible loss of ten cents. a book in which daily transactions are listed in regular order as to accounts. upon the wall of every banking room. 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. but because the most important principle in bank accounting is involved. For example. The books used by National Bank of Pakistan are of various kinds and their purpose is indicated by name. In accordance with this fundamental theory the books are maintained. a deposit of Rs. Skillful accounting lies in making the fullest possible use of original entries.
any ambiguity if remains there.P a g e | 88 item "deposits" being the total Rs. the role of CFO becomes very important as he controls the reflection of performance. The bank has sold Rs. preparing budgets.00 of the bonds it owns. preparing income tax returns.1000. so that the financial statements give credible information to its users. The code of corporate governance provides the guidelines and opportunity to do this. a corresponding increase of Rs. evaluating operating results. operational reporting and interpreting. The Chief Financial Officers of National Bank of Pakistan used to perform several tasks which were preparing accounts. ROLE OF CFO (CHIEF FINANCIAL OFFICER) The performance of any organization is reflected by the financial statements.800 and this is made up by an increase in the cash of Rs 200 and an increase of Rs. With the new role. There comes the code of corporate governance. less the check for Rs 200 which is charged to the account of the drawer. and they must perform their job with professional competency and integrity. Therefore. which is reported to different authorities and the organization is assessed by them. Q UALIFICATION R EQUIREMENT BILAL AHMAD . which makes the chief accountant powerful and more responsible. Chief Accountant becomes Chief Financial Officer (CFO). establishing internal control procedures to safeguard the companies assets. makes the reflection of the performance doubtful. 000.600 in the item "due from banks. The appointment." Or a transaction may appear on one side of the statement only.5. On the resource side. 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. 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. then.
consideration and decision of the boards of directors by the CFO. Details of joint ventures or collaboration agreements or agreements with distributors. agents. BILAL AHMAD . having at least 5 years experience in handling financial and corporate affairs of a listed company. In order to strengthen and formalize corporate decision-making process. R ESPONSIBILITIES OF CFO The new responsibilities apply to all Chief Financial Officers of Listed Companies. Insurance Companies. where the organization will be. forecasts and long term planes. etc. any issue with financial implications is being discussed. the person likely to be most in command of these implication is on the spot and immediately available for questions. Banks and DFIs. Quarterly operating results of the company as a whole and in terms of its operating divisions or business segments. manpower and overhead budgets along with variance analyses. These are: Annual business planes. significant issues are required to be placed for the information.P a g e | 89 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.e. cash flow projection. and the period which has to come that is the financial position attained and the financial projection i. R ESPONSIBILITIES TOWARDS B OARD OF D IRECTORS 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. Mostly the CFO presents the financial position relating to the period which has been over. Budgets include capital.
and deposits made by the company. as applicable in Pakistan. There has been no material departure from the best practice of corporate governance as detailed in the listing regulations. R ESPONSIBILITIES TOWARDS S HAREHOLDERS The Chief Financial Officer is required to provide all the necessary data to be presented in the “Director‟s Report”. cash flows and changes in equities. including trade debts and inter-corporate finances.P a g e | 90 Default in payment of principal and/or interest. the results of its operation. There are no significant doubts upon the companies‟ ability to continue as going concern. or default in payment of public deposit. advances. 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. For this purpose Chief Financial Officer must ensure the following. International accounting standards. Significant public or product liability claims likely to be made against the company. including penalties on late payments and other dues. The system of internal control is sound in design and has been effectively implemented and monitored. The financial statement. Apart from this. including any adverse judgment or order made on the conduct of the company. present fairly its states of affairs. prepared by the management of company. to a creditor. external reporting BILAL AHMAD . I NTERNAL AND 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. bank or financial institution. Failure to recover material amounts of loans. have been followed in preparation of financial statements and any departure there from has been adequately disclosed.
It has recently imposed penalties on Directors of nine listed companies who failed to prepare and circulate the quarterly accounts. fines have been imposed on chief executives.P a g e | 91 requirement is fulfilled by Chief Financial Officer. Furthermore. Here we can refer to section 245 of companies‟ ordinance 1984 for this purpose. the accounts and financial statements are signed by the Chief Financial Officer before they are sent to concerned authorities. BILAL AHMAD . which requires half yearly accounts to be submitted within two months of the close of first half. Annual audited accounts are now required to be submitted within four months of the close of financial year. The CCG requires a limited review of half yearly accounts by external auditor. The CCG does not prescribe the time for submitting half yearly accounts to the shareholders.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. 1984 and timely submission of accounts by companies. The Securities and Exchange Commission of Pakistan is exercising strict vigilance to ensure compliance of 4th and 5th schedule of the Companies Ordinance.
30 The output can be an action or an opinion of choice. business professionals. Before proceeds it‟s important to discuss precisely about decision making. enterprise collaboration and management. Information systems play a vital role in the e-business and e-commerce operations. Decision making can be regarded as an outcome of mental processes leading to the selection of a course of action among several alternatives. the field of information systems has become a major functional area of business administration. What factors does the problem involve? BILAL AHMAD . The management of a business can use information systems in their decision making process. Every decision making process produces a final choice. One of the most practical decision making techniques can be summarized in following simple decision making steps: 1. and other knowledge workers in today‟s internetworked enterprises. and strategic success of businesses that must operate in an internetworked global environment. An understanding of the effective and responsible use and management of information systems and technologies is important for managers. What is exactly the problem to be solved? Why it should be solved? 2. A significant part of decision making skills is in knowing and practicing good decision making techniques. Thus. Identify the purpose of your decision.P a g e | 92 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. Gather information.
These people resources include end users and Information system Specialists. and communications network technologies as resources to collect. Determine the best alternative. 8. These are the employees of the Bank who spend most of their time communicating and collaborating in teams and workgroups and creating. The system analysts of National Bank of Pakistan design information systems of the Bank based on the information requirements of the end users. 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.P a g e | 93 3. 7. They include System analysts. 5. Use your standards and judgment criteria to determine the cons and pros of each alternative. and other managerial. This is much easier after you go through the above preparation steps. technical. and clerical IS personnel of National Bank of Pakistan. Put the decision into action. Identify the principles to judge the alternatives. What standards and judgment criteria should the solution meet? 4. What lessons can be learnt? This is an important step for further development of your decision making skills and judgment. INFORMATION SYSTEM RESOURCES OF NBP a) PEOPLE RESOURCES People are required for the operation of all information systems. BILAL AHMAD . system operators. using and distributing information. Generate ideas for possible solutions. Brainstorm and list different possible choices. Evaluate each choice in terms of its consequences. Evaluate the outcome of your decision and action steps. Execute your plan. software. The software developers create computer programs based on the specification of system analysts of National Bank of Pakistan. The Information systems Specialist are people who develop and operate information systems. The Management and employees of National Bank of Pakistan are end users and Knowledge workers of information system. and disseminate information in Bank. software developers. 6. data. Transform your decision into specific plan of action steps. transform.
Microsoft Office suit as application software. but also all data media. It also includes sets of operating instructions called programs. software. processed. such as computers and other equipments. The data about Branch transactions is accumulated. tangible objects on which data are recorded. it includes not only machines. d) DATA RESOURCES The data resources of National Bank of Pakistan are typically organized.P a g e | 94 b) HARDWARE RESOURCES The Hardware resources of National Bank of Pakistan include all physical devices and materials used in information processing. from sheets of paper to magnetic or optical disks. that is. The Bank uses BILAL AHMAD . stored. and stored in a BBO system that can be accessed by Manager for an analysis and decision making. c) SOFTWARE RESOURCES The software resources of National Bank of Pakistan include all sets of information processing instructions. 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. Application Software: These are the programs that direct processing for a particular use of computers by employees of the Bank. Specifically. e) NETWORK RESOURCES The network resources of National Bank of Pakistan include: Communication Media: The Bank‟s communication media include cellular and landline. and accessed by a variety of data resource management technologies. Network Support: The Bank uses hardware. and data technologies which are needed to support the operation and use of a communication network. which direct and control computer hardware. Bank uses BBO system.
243 591.079 10.124 19.426.879.314 24.656.435 624.260 15.969.772.106 5.927 7.084.908.712 8.924.939.047 11.016 23.300 30.704.458. and communication control software such as network operating systems and Internet Browser packages (Opera).847 11.571.756.P a g e | 95 communication processers such as Modems and internetwork processors.869.154. BILAL AHMAD .974. Horizontal analysis of each item is calculated.886.717 463.941.872. To analyze trend.154 39.813.450 26.536. reserves.926 465. deposits and other liabilities etc.090.914 13.063 40.831 Horizontal Analysis (%) 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. borrowings. SOURCES OF FUNDS Rupees in Millions Year Share Capital Reserves Borrowings Deposits Other Liabilities Share Capital Reserves Borrowings Deposits Other Liabilities 2004 2005 2006 2007 2008 4.068.790 8.751 10.602 501.319 8.596.907.041 13.
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). 2006 & 2007 respectively. The year 2008 represents highest increasing percentage of 84% as compare to base and previous years. The reserves are increased 25 %. The reserves of National Bank of Pakistan fluctuate during all years as they show an increasing trend. The share capital of National Bank of Pakistan shows an increasing trend in all years as compare to base year. BILAL AHMAD .P a g e | 96 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. 28 % & 46 % in the years 2005. The increase in share capital during all years indicates share holder‟s concern toward National Bank of Pakistan and efficient bank‟s Management policies.
There was a marginal decrease of 2% in bank‟s borrowings in the year 2007. with the year 2006 represents an increase of 8% as compare to base year. The year 2007 represents second highest percentage as deposits are increased to 27%.P a g e | 97 A NALYSIS The National Bank of Pakistan‟s borrowings fluctuates during all years and shows a mixed trend. In the year 2005 the deposits were increased very marginally. however same are increased 6 % in 2006 as compare to base year. The borrowings were decreased 21 % in 2005. highest among all years. A NALYSIS The deposits and other accounts of National Bank of Pakistan show a mixed trend during all years. BILAL AHMAD . 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. The year 2008 indicates an increase of 34%.
162.935 12.100.601 100 100 100 100 100 100 2005 33.862 42.580 28.351 30.998 291 258 206 198 203 192 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.665 23.716 27.897 21.333 14.501 241 234 229 163 203 234 2008 60.058.577 211 210 220 146 191 220 2007 50.481 33.782.087.947.415.692.304.153.170 12.970 9.735 13. 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 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 2004 20.977.Interest) Profit before Taxation BILAL AHMAD .030 26.503.146.000.062 26.544.370.539.216 16.078 23.892 39.387.451.056.028 161 162 167 113 146 159 2006 44.944.470 28. The year 2005 indicates an increase of 8 % and 2006 indicates an increase of 15%.569.321 19. The other liabilities were on their peak percentage in 2008 as the shows an increase of 72%.486 11.639.310.392.P a g e | 98 A NALYSIS The other liabilities of National Bank of Pakistan are fluctuating during all years and show an increasing trend.798 37.945.629.716 20.942.906.060.934 30. The other liabilities in the year 2007 represent an increase of 34%.770 8.845 42.
as it was increased during all years 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%. A NALYSIS The net markup/ Interest income of National Bank of Pakistan fluctuates during all years as it shows an increasing trend. BILAL AHMAD . comparing with base year. The year 2008 represents peak percentage of 191 % as compare to all years. The percentage is increased 158 % in 2008. The interest earned is increased 61% in 2005 and 111% in 2006. 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 interest earned as it was increase 141 %. highest among all years.P a g e | 99 A NALYSIS The interest earned by National Bank of Pakistan fluctuates during all years.
It was increased 67% (2005). highest among all years. There was an increase of 98% in 2008.markup/ Interest income of National Bank of Pakistan shows an increasing trend during all years. The income is increased 63 % in 2007. BILAL AHMAD . The income is increased 106 % as compare to base year but the same was decreased by 23% as compare to 2007. It was increased 13% in 2005 and 46% in 2006. 120% (2006) and 129% in 2007. second highest among all years.P a g e | 100 A NALYSIS The net markup/ interest income after provisions fluctuates and shows a mixed trend during all years. A NALYSIS The Total non.
The year 2007 represents highest percentage on account of profit before taxation as it was increased to 134%. The year BILAL AHMAD . The total income is increased 103% in 2007 and also increase very marginally in 2008. It was increased 46% in 2005 and 91% in 2006. It was increased 59% in 2005 and 120% in 2006.P a g e | 101 A NALYSIS The total income of National Bank of Pakistan shows an increasing trend. A NALYSIS The profit before taxation of National Bank of Pakistan fluctuates and shows a mixed trend during all years.
282.979 24. The National Bank of Pakistan allocate its funds in Lending‟s to financial BILAL AHMAD .491 220.096 156.075 268.969 9.946.569 23.838.974 25.056 37.865 9.994.677. The Bank seeks the best way for making investment to get more profit with the maximum security.032 149.681.9126.96.36.1992 23.822.732 21.365 9.787.995 210.550.217.600 17.655 19.779 316.686 139.350.985.965 44.012.406 340.202. The Bank has an investment portfolio in which it allocate its funds for crediting to borrowers.P a g e | 102 2008 indicates an increase of 92% as compare with base year but it was decreased in 2008 by 42% as compare to 2007. 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. investment in the stock market etc.941.347 Horizontal Analysis (%) 100 100 100 100 100 155 105 122 103 125 219 94 143 105 194 204 141 154 282 162 163 114 187 263 233 After the acquisition of the funds their allocation becomes necessary.128.464.868 170.698 30.794.454.100 412.511.322 16.110.922.
To analyze trend in these items. Horizontal analysis of each item is calculated. investments. The year 2006 represents highest percentage of 119 % among all years on account of lending‟s to financial institutions. A NALYSIS The lending‟s to financial institutions by National Bank of Pakistan fluctuates during all years. A NALYSIS BILAL AHMAD . The year 2007 also shows an increase of 104 % as compare to base year.P a g e | 103 institutions. The lending‟s increased by 55 % in 2005. operating fixed assets and other assets etc. advances. 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 indicates a decrease of 6% in investments. A NALYSIS The advances made by National Bank of Pakistan shows an increasing trend in all years as compare to base year. A NALYSIS BILAL AHMAD . however investments are decreased 27 % as compare to the year 2007.P a g e | 104 The investments made by National Bank of Pakistan fluctuate during all years. The year 2007 represents an increase of 41 %. highest among all years. The advances were increased 22 % in the year 2005 and 43 % in 2006 as compare to base year. The investments are increased 14 % in 2008 as compare to base year. This implies that National Bank of Pakistan is keener to advance money to lenders. 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 5 % in 2005.
A NALYSIS The other assets of National Bank of Pakistan are fluctuating during all years. 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 3 % in 2005 & 5 % in 2006. The other assets of National Bank of Pakistan are on their peak percentage of 133 % in 2008 as compare with base year.P a g e | 105 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. There was an increase of 163% in 2008 as compare to base year but the same was decreased by 19% as compare to 2007. BILAL AHMAD . The year 2007 indicates an increase of 62% as compare to base year.
In accounting. The securities for the loans are handled in the same way as theory says like mortgage. The theory written in the books in cases is not implemented as it is.P a g e | 106 CRITICAL ANALYSIS (THEORY VS PRACTICAL) During Internship it was my prime objective to furnish my knowledge (Theory) to various practical situations. 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. bills. hypothecation. BILAL AHMAD . loans etc. demand finance etc. All other concepts of remittances. advances against insurance policies or liquidation procedure is the same. but in practice there are some more types used by bank like running 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.. This part of report is the essence of the internship. but part of worksheet is prepared like trial balance. overdraft. The practical work presents an analytical problem while relating theory with practice. pledge. banks don‟t prepare worksheet. analysis of practical versus theory requires a distinct approach. 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.
you'll see mostly loans and investments. enclosed in a jar. and on the liabilities side. You won't find inventory. Instead. A bank's balance sheet is different from that of a typical company. accounts receivable. letters of credit are in accordance with theory almost. BILAL AHMAD . On the contrary practical life is specific. under assets.P a g e | 107 foreign exchange deposits. C ONCLUSION To me. you'll see deposits and borrowings. 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. or accounts payable.
202.300 30.641.032 149.350.345.686 139.506 36.954.822.926 Deposits and other accounts 465.330 40.106 10.732 21.097.367.719.188 69.886.154 39.939 715.946.340.784.061.084.956 78.704.402 553.096 156.193.994.914 9.909.681.907.552 71.243 591.779 316.813.767 21.605.299.365 9.450 26.995 210.061 Borrowings from financial institutions 11.979 24.758.023 8.711 762.347 9.204 81.216 Surplus BILAL AHMAD .474 38.772.378.245.654 102.249 106.002 21.831 _ 506.204.741.196.908.942 23.058 16.600 17.219.406 340.671 1.596.464.569 23.536.625.608 10.751 19.974 25.985.426.344.182.319 15.554 25.832 38.593 817.047 52.235 33.986.041 16.884 31.503.016 _ Sub-ordinated loans _ _ _ _ Liabilities against assets subject to finance lease 17.472.075 268.467 577.079 10.593 645.019.965 5.794.787.969.260 32.337.227 94.965 44.074.132.550.113.274 Other liabilities 23.790 8.154.663 7.282.974.855.717 463.270.314 24.679 37.873.178.446.491 220.712 13.068.158.511.185 4.869.124 45.128.732 74.458.387.459.941.922.631 47.735 503.231.629 13.238 7.090.454.899.067.044.847 11.677.326 LIABILITIES Bills payable 7.073 5.718 2.649 28.435 624.108 NET ASSETS 46.712 81.713.902 10.927 13.924.941.218 REPRESENTED BY Share capital Reserves Unappropriated Profit 4.879.012.698 30.602 501.655 _ _ _ _ 3.656.985.322 16.469 8.865 19.114 635.110.100 412.939.214.572 553.677 53.756 49.969 9.092.831 Deferred tax liabilities net 29.P a g e | 108 BALANCE SHEET 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 94.118 116.056 27.571.063 40.217.156 10.756.161.838.344.868 170.872.747 24.462.141.456.
084 10.363 1.712 81.935 23.022.408 6.748.654 102.881 -709.577 28.011 23.762.365.218 16.970.768 13.370.221.069 5.284 63.391.919.789 13.500 11.007 130.328 11.781.188 45.169.722.716 4.933.205.729 291.457 60.113 8.947.884.964 1.478 2.223.435.945.814 12.840 1.273.195 1.807 23.899 Nil 1.371.665 44.728 7.497 Nil -15.723 4.947.650 847.546 4.242 5.441 14.863 1.695.845 16.446.370 1.942. Commission & brokerage income Dividend income Income form dealing in foreign currencies Gain on sale & redemption of securities-net 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 Taxation Current Prior years Deferred PROFIT AFTER TAXATION Unappropriated Profit brought forward Transfer from surplus on revaluation of fixed assets on account of incremental depreciation Profit available for appropriation 20.707 -245.801 11.481 60.628 6.584 9.298 -17.934 50.502.768 14.056.755 3.747 19.950.565 185.075.731 -4.716 33.344.231 188.8.131.52 5.074.026.604 6.458.195.198 32.351 12.878.773 15.542.981 323.496 43.958 -1.503.940.970 27.707 177.030 1.677 45.444 17.944.827 3.782.346.798 6.539.692.372.341.723.451.456 12.392.297 Nil Nil Nil 4.118 116.321.333 33.100.311.087.927 2.998 4.969.770 21.770 21.782.771 1.709.911 18.246 2.590 5.027 747.569.133.321 39.601 19.580 42.369 9.263.598 8.000 7.544.283 168.443.057 1.284 39.412 36.099.147.002 8.988 47.161.058.732 74.735 26.977.291 61.337.464 -31.033.387.515 2.154.557 Nil 875.249 14.683 7.060 39.925.634.593.206 208.862 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.638 1.245.914.098.144.739 3.288.079 19.221 41.954.878.515.060.906.146.932 1.243 198.459.618 147.000 32.398 10.629.521 8.559.718.042.372 12.892.897 30.162.008.709 530.218 INCOME STATEMENT Rupees in Millions 2004 2005 2006 2007 2008 20.979 -4.141 583.415.902 9.245.652 391.470 37.735 10.304.340.327 17.078 8.028 26.248 373.P a g e | 109 46.354 2.501 23.000.080 11.333.892 13.229 6.891.062 42.205.461 -40.234 BILAL AHMAD .165 2.486 30.639.690 395.170 28.293 13.483.427 -1.346 19.310.171.485 14.361 8.926.929 51.523 32.839 627.
routinely assess the profitability. Three primary types of financial statement analysis are commonly known as horizontal analysis. who frequently specialize in following certain industries. 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. are more interested in liquidity and solvency: the company's short-and long-run ability to pay its debts.P a g e | 110 FINANCIAL STATEMENTS ANALYSIS Financial analysis is a process which involves reclassification and summarization of information through the establishment of ratios and trends. The users of the financial information often find analysis desirable for the interpretation of the firm‟s activities. bonds. The overall objective of financial statement analysis is the examination of a firm‟s financial position and returns in relation to risk. liquidity. 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. such as stocks and bonds. and ratio analysis. BILAL AHMAD . Financial analysts. It is a valuable tool used by investors and creditors. and other financial instruments. This must be done with a view to forecasting the firm‟s future prospective. 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. and others in their decision-making processes related to stocks. Creditors and investors who buy debt securities. 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. vertical analysis. such as bonds. and solvency of companies in order to make recommendations about the purchase or sale of securities. Financial statement analysis is the process of examining relationships among financial statement elements and making comparisons with relevant information. financial analysts.
BILAL AHMAD . G ROSS P ROFIT M ARGIN R ATIO Gross profit margin ratio is used to assess the profitability of a Bank's core activities. Gross profit margin indicates the relationship between gross profit and interest earned. 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. A high gross profit margin indicates that a Bank can make a reasonable profit. using this analytical tool facilitates intercompany as well as intercompany comparisons. Good earning performance enables a bank to fund its operations. Solvency ratios indicate the ability of the company to meet its long-term obligations on a continuing basis and thus to survive over a long period of time. 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.P a g e | 111 RATIO ANALYSIS Ratio analysis enables the analyst to compare items on a single financial statement or to examine the relationships between items on two financial statements. Ratios are often classified using the following terms: profitability ratios (also known as operating ratios). remain competitive in the market and increase or decrease in market funds. Financial ratios allow for comparison: Between companies Between industries Between different time periods for one company Between a single company and its industry average a) PROFITABILITY RATIOS The continued viability of any bank depends on its ability to earn an appropriate return on its assets and capital. liquidity ratios. Since ratios adjust for size. Profitability ratios relate profit to sales and investments. the analyst can then examine trends for the company across years. Profitability ratios are gauges of the company's operating success for a given period of time. After calculating ratios for each year's financial data. and solvency ratios.
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 | 112 Formula = Gross Profit / Interest earned (Revenue) 2004 2005 2006 2007 2008 Year Ratio % 57.48 37.55 59.65 %. The gross profit is 37.63 25.74 A NALYSIS The Year 2006 has been an outstanding year with the bank recording the highest profit in its history i. The lowest percentage among all years.65 55.59 37.36 BILAL AHMAD .74% in 2008.72 38.17 56. N ET P ROFIT M ARGIN R ATIO Net profit margin measures the percentage of revenue remaining after all cost and expenses.e.57 37. Formula = Net Profit after Taxes / Interest earned 2004 2005 2006 2007 2008 Year Ratio % 29. 59.. including interest and taxes have been deducted..
05 0.05 0. A SSETS T URNOVER This ratio is useful to determine the amount of revenue that is generated from each Rupee of assets.59%. those with high profit margins have low asset turnover. The Banks with low profit margins tend to have high asset turnover.63%. the percentage is decreased in 2007 as it was 37. The primary reason of this decline is current global economic conditions and current political crisis in Pakistan.06 0. Formula = Revenue/ Total Assets Year 2004 2005 2006 2007 2008 Ratio 0.P a g e | 113 A NALYSIS Net profit margin shows positive trend till 2006 and was the highest in the same year as it was 38.63%.03 0. The net profit margin is on its lowest level at the end of 2008 as it indicates a percentage of 25.05 BILAL AHMAD .
2007 and 2008 indicates almost same percentage of 0.95) shows an increasing trend.95 4.92 3. It was decreased in the year 2007 (4.92).13. Formula = Net markup received / Capital Funds Year Ratio 2004 2005 2006 2007 2.95).25 4.13 A NALYSIS The above given ratios suggest that the profitability of the bank has a mixed trend during five years.P a g e | 114 A NALYSIS The year 2004 represents a ratio of 0. The years 2005.05% on account of bank‟s assets turnover. peak ratio among all years. indicating more profitable operations of the bank. The National Bank of Pakistan‟s assets turnover in 2006 is 0.06. R ETURN ON C APITAL F UND This ratio relates the net profits to the amount of capital funds that have been employed in making that profit. 2006 (4.12) and has increased in 2008 as the ratio was 4. R ETURN ON I NVESTMENT This ratio indicates the profit earned by the bank on the resources employed. lowest among all years. 2005 (3.12 2008 4.03. Formula = Net income after taxes / Total Assets BILAL AHMAD . The first three years 2004 (2.
P a g e | 115 Year 2004 2005 2006 2007 Ratio 0.021 0.024 (2007) and 0.011 0.024 2008 0.011(2004).026 (2007).018 A NALYSIS There was an increase in the utilization of the resources till 2006 i.025 0..036 BILAL AHMAD .021 (2005) and 0.026 0. R ETURN ON D EPOSITS This ratio indicates to what extent deposits which represent funds mobilization on the part of the bank contribute towards income generation.041 0. 0.. Formula = Net income before taxes / Total Deposits Year 2004 2005 2006 2007 Ratio 0.e.047 2008 0. The ratio was decreased to 0.018 (2008). 0.052 0.
48 0.32 0.48%).32 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. The year 2006 (0. BILAL AHMAD .052) was the best year for bank in terms of its funds mobilization. including foreign exchange provisions.036). A relatively stable effective tax rate percentage. However bank is able to reduce its tax burden because the Bank is able to adopt Tax management techniques to lessen the tax burden.P a g e | 116 A NALYSIS During all five years the return on deposits ratio of National Bank of Pakistan shows a mix trend. This effective tax rate gives a good understanding of the tax rate the company faces. This amount will often differ from the company's stated jurisdictional rate due to many accounting factors.35 0. Although the ratio was decreasing in 2008 (0. and resulting net profit margin. would seem to indicate that the Bank's operational managers are more responsible for a company's profitability than the company's tax accountants. which is calculated by comparing its income tax expense to its pretax income.33 0. indicating Bank is more keen to kept deposits and a change in policy of the Bank regarding its funds mobilization. Formula = Income Tax expense/ Pretax Income 2004 2005 2006 2007 2008 Year Ratio % 0.
It must be greater than 1. although nearly depleted. The concept behind this ratio is to ascertain whether a company's short-term assets (cash. For every Rs.96 1. cash equivalents. marketable securities. the higher the current ratio.00 2008 1. accrued expenses and taxes). liabilities exceed current assets. just before the start of the rainy season. payables.02 1. It may be adequate.1 of liabilities. current portion of term debt. the better.12 BILAL AHMAD . In theory. receivables and inventory) are readily available to pay off its short-term liabilities (notes payable. Or it may be inadequate. 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. If it is less than 1. although three quarters full just before the summer drought. the company has a ratio amount of current assets available.83 0.P a g e | 117 b) LIQUIDITY RATIOS The liquidity position of a bank is like a reservoir. Formula = Current Assets / Current Liabilities Year Ratio 2004 2005 2006 2007 0.
07 2. During all years. A DVANCES TO D EPOSIT R ATIO It demonstrate the degree to which bank has already used up its available resources to accommodate the credit needs of its customers. representing highest and 2005 (2. The year 2007 (1.02) the management of National Bank of Pakistan is able to overcome this problem.12) the management of bank is able to increase its current ratio.96) were not satisfied for bank as current assets are less than current liabilities.96 3.85) & 2008 (2. This ratio is obtained by dividing cash by current liabilities.09 2. in 2006 (1. Formula = Advances / Total Deposits BILAL AHMAD . The year 2004 (4.P a g e | 118 A NALYSIS The year 2004 (0. C ASH R ATIO This ratio shows that the cash is enough for payment of current liabilities or not.85 2.00) is also good for bank as per standards of this ratio. representing lowest ratio in all five years.69).69 A NALYSIS The cash ratio of National Bank of Pakistan shows a mixed trend during five years of operations.09). Formula = Cash / Current Liabilities Year Ratio 2004 2005 2006 2007 2008 4. Again in the year 2008 (1. However. For a bank this is the cash held by the bank as a proportion of deposits in the bank. the ratio is satisfactory as per standards of this ratio.83) and 2005 (0.
021 BILAL AHMAD . This shows that the bank has greater potential to advance additional loans. a comparison of funds generation and its funds mobilization. Formula = Due from banks / Total Assets Year Ratio 2004 2005 2006 2007 0. D UE FROM B ANKS TO T OTAL A SSETS It is an indication of Bank‟s funds management policies.P a g e | 119 Year Ratio% 2004 2005 2006 2007 47. stands highest in 2008 ( 66.99 57.56 2008 66. During all other years the ratio is quiet satisfactory representing National Bank of Pakistan‟s credit management decisions.028 2008 0. indicates the total loans sanctioned by the bank in relation to total amount of money deposited with the bank.01 62.42 58.08%) as compared with the previous year figures.019 0.028 0.08 A NALYSIS This ratio.036 0.
83 185. The year 2006 represents highest ratio of 0.95 196.036 among all years.P a g e | 120 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. The year 2008 represents a decrease in ratio (0.18 2008 42.021) on account of due from banks to total assets.019 in 2004 and 0. Formula = Due from banks / Due to banks 2004 2005 2006 2007 Year Ratio% 94. The ratio is 0.62 197.33 BILAL AHMAD .028 in the year 2005. There was a decrease in ratio at the end of financial year 2007 that is 0. D UE FROM B ANKS TO D UE TO B ANKS It shows the relationship between what the bank owes from other banks and what is due to it.028.
Debt ratios can be used to determine the overall level of financial risk a BILAL AHMAD .019 in 2005.018 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.065.024 0.019 0. The year 2007 represents the lowest percentage of 0.33 on account of due from banks to due to banks. 185.95 (2005). The ratio is increased in 2006 as the ratio is 0.018 and the year 2008 represents the peak percentage of 0. c) DEBT RATIOS These ratios give users a general idea of the company's overall debt load as well as its mix of equity and debt.62 (2006) and 197. The ratio is 0.065 Ratio 0.023.P a g e | 121 A NALYSIS The ratio indicates an increasing trend till 2007 that is 94.83 (2004).023 0. Formula = Due to banks / Total Deposits Year 2004 2005 2006 2007 2008 0. The year 2008 represents the lowest percentage of 42.024 in 2004 and decreased to 0.18 in 2007. D UE TO B ANKS TO 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. 196.
77 89. in this case. the greater the amount of debt held by a company the greater the financial risk of bankruptcy.35 % in 2004. Similar to the debt ratio. as opposed to total assets in the debt ratio. Formula = Total Liabilities/ Total Shareholder‟s equity 2004 2005 2006 2007 2008 Year Ratio 112. BILAL AHMAD . lenders. a lower the percentage means that a company is using less leverage and has a stronger equity position. There was an increase in the ratio as it shows a percentage of 93. comparing total liabilities to shareholders' equity. creditors and obligors have committed to the company versus what the shareholders have committed.35 97. To a large degree. The year 2008 represents the ratio of 91. In general.47%.17 A NALYSIS The debt to equity ratio of National Bank of Pakistan shows a ratio of 112.57 93. The ratio is further decreased in 2006 as it shows a percentage of 89.17% .57%. the debt-equity ratio provides another vantage point on a company's leverage position. This is a measurement of how much suppliers.P a g e | 122 company and its shareholders face. The ratio is decreased to 97.77% in the year 2005. T HE D EBT TO E QUITY R ATIO The debt-equity ratio compares a company's total liabilities to its total shareholders' equity.47 91.
P a g e | 123 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. The lower the ratio. The ratio is further decrease to 0.83 times in the year 2005. representing the lowest ratio among all years.5 or lower. When a company's interest coverage ratio is only 1.89 times 2007 1.66 times is observed in 2007. There sudden decrease of 1.89 times respectively.97 times A NALYSIS The amount of interest a Bank pays in relation to its revenue and earnings is tremendously important.85 times & 1. The National Bank of Pakistan‟s interest coverage ratio is 1.66 times 2008 0. its ability to meet interest expenses may be questionable. The ratio was increased in the years 2005 and 2006 as it was 1.85 times 2006 1. BILAL AHMAD . the more the company is burdened by debt expense. The interest coverage ratio is used to determine how easily a company can pay interest expenses on outstanding debt.97 times in 2008.83 times 2005 1. Formula = Earnings before interest & Taxes / Interest expense Year Ratio 2004 1. 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.
47 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 0.12 in 2006. There was a slight decrease in this ratio as it was 0. as compare to all years.47 on account of loan loss coverage.13 0. the better the bank is handling itself in regards to loans.17 0.17.P a g e | 124 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. Formula = Capital Funds / Total Assets 2004 2005 2006 2007 Year Ratio% 0.07 2008 1.10 1.89 1.12 0.13 in both years. d) CAPITAL ADEQUACY RATIOS C APITAL F UNDS TO 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.09 BILAL AHMAD .02 1. The year 2008 represents highest ratio of 0.13 0. Formula = Provision against non-performance loans & advances/ Profit or loss before taxation Year 2004 2005 2006 2007 2008 Ratio 0. The higher this ratio is.
In general. 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. e) OPERATING PERFORMANCE RATIOS Each of these ratios have differing inputs and measure different segments of a company's overall operational performance. This annual turnover ratio is designed to reflect a company's efficiency in managing these significant assets.02. BILAL AHMAD . but the ratios do give users insight into the company's performance and management during the period being measured. The ratio is keeping its trend and also increases in the year 2008 as it was 1.P a g e | 125 A NALYSIS The National Bank of Pakistan‟s Capital funds to Total Assets ratio is increased during all years.89 in 2004. In this section.09. their investment in fixed assets represents the single largest component of their total assets. the better it is for shareholders.10 & 1. we'll look at the fixed-asset turnover ratio and the sales/revenue per employee ratio. The ratio is increased in 2005. which look at how well the company uses its fixed assets and employees to generate sales. plant and equipment etc) with respect to generating revenue. 2006 and 2007 as the graph shows ratios of 1. F IXED A SSETS T URNOVER This ratio is a rough measure of the productivity of a company's fixed assets (property. 1. these ratios look at how efficiently and effectively a company is using its resources to generate sales and increase shareholder value. For most companies. representing lowest ratio in all years.07 respectively. The ratio is 0. Basically.
generated per employee.64 1.e.76 A NALYSIS The fixed assets turnover ratio of National Bank of Pakistan has an increasing trend till 2006.08 BILAL AHMAD . 4. this indicator simply measures the amount of Rupees sales or revenue. The year 2006 represents highest fixed assets turnover ratio for National Bank of Pakistan i. The ratio increases 2. Formula = Revenue/ Number of Employees 2004 2005 2006 2007 2008 Year Ratio 1274. The bank‟s efficiency to utilize these assets has been decreased to 1.76.64 in the year 2007 however it was increased in 2008 as the ratio is 1. The higher the Rupee figures the better.38 2583.87 2431.13 1. S ALES OR R EVENUE P ER E MPLOYEE As a gauge of personnel productivity.28 (2004) to 3.P a g e | 126 Formula = Revenue/ Operating Fixed Assets 2004 2005 2006 2007 2008 Year Ratio % 2.94 2587.13.23 (2005).28 3.23 4.85 1858...
85 (2004).38 (2006) and 2583. 2431.e.94 (2007)..P a g e | 127 A NALYSIS The ratio has been showing an increasing trend till 2007 i.. 1858. 2587. 1274.87 (2005). BILAL AHMAD . There was a marginal increase in the year in the year 2008 i.08.. representing the peak percentage in all years..e.
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This technique is also known as comparative analysis. It is conducted by setting consecutive balance sheet, income statement or statement of cash flow side-by-side and reviewing changes in individual categories on a year-to-year or multiyear basis. The most important item revealed by comparative financial statement analysis is trend. A comparison of statements over several years reveals direction, speed and extent of a trend(s). The horizontal financial statements analysis is done by restating amount of each item or group of items as a percentage. 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. Thereafter, 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. The resulting figures are called index numbers or trend ratios. Formula = Current Year amount / Base Year amount * 100 Horizontal analysis, whilst simple to execute and useful to a certain extent, has its limitations. These limitations include: Being highly dependent on the selection of base year and the period under examination in the financial model. Horizontal analysis provides little insight into why the trend occurred in a financial model. Horizontal analysis does not provide insight into whether the trend in the financial model results was superior/inferior to some benchmark. Horizontal analysis does not address the challenge of negative numbers.
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HORIZONTAL ANALYSIS OF BALANCE SHEET
Horizontal Analysis (%)
ASSETS Cash Balances with other banks Lending‟s to fin. institutions Investments Advances Operating fixed assets Other assets Total Assets LIABILITIES Share Capital Reserves Unappropriated profit Surplus On Reval. 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
P a g e | 130
A NALYSIS The National Bank of Pakistan‟s Cash & balance with treasury banks shows a mixed trend during all years. It was decreased by 25% in 2005 and 17% in 2006. There was a marginal increase in the year 2007. In 2008 the percentage is increased by 13% as compare to base year.
A NALYSIS The Balances of National Bank of Pakistan with other banks shows a decreasing trend as compare to base year. The year 2005 represents lower percentage (38%), while the year 2006 represents highest percentage of 18%.
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.P a g e | 131 A NALYSIS The lending‟s to financial institutions by National Bank of Pakistan fluctuates during all years. highest among all years. BILAL AHMAD . There was an increase of 5 % in 2005. The investments are increased 14 % in 2008 as compare to base year. The year 2007 represents an increase of 41 %. The year 2007 also shows an increase of 104 % as compare to base year. A NALYSIS The investments made by National Bank of Pakistan fluctuate during all years. The year 2006 indicates a decrease of 6% in investments. The year 2006 represents highest percentage of 119 % among all years on account of lending‟s to financial institutions. however investments are decreased 27 % as compare to the year 2007.
There was an increase of 163% in 2008 as compare to base year but the same was decreased by 19% as compare to 2007. BILAL AHMAD . The advances were increased 22 % in the year 2005 and 43 % in 2006 as compare to base year. A NALYSIS The operating fixed assets of National Bank of Pakistan shows a mixed trend during all years.P a g e | 132 A NALYSIS The advances made by National Bank of Pakistan shows an increasing trend in all years as compare to base year. This implies that National Bank of Pakistan is keener to advance money to lenders. There was an increase of 3 % in 2005 & 5 % in 2006. 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.
The increase in share capital during all years indicates share holder‟s concern toward National Bank of Pakistan and efficient bank‟s Management policies.P a g e | 133 A NALYSIS The other assets of National Bank of Pakistan are fluctuating during all years. The other assets of National Bank of Pakistan are on their peak percentage of 133 % in 2008 as compare with base year. 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 2007 indicates an increase of 62% as compare to base year. BILAL AHMAD . The other assets are increased 25 % in 2005 and 94 % in 2006.
The reserves of National Bank of Pakistan fluctuate during all years as they show an increasing trend. 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.P a g e | 134 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). 2006 & 2007 respectively. BILAL AHMAD . The year 2008 represents highest increasing percentage of 84% as compare to base and previous years. indicated bank‟s strict dividend payout policy and concern towards reinvestment options. The reserves are increased 25 %. Unappropriated profit is part of shareholder equity. The bank‟s Unappropriated profit is increasing very sharply during all years as compare to base year.
A NALYSIS The National Bank of Pakistan‟s bills payable is showing a mix trend during all years. BILAL AHMAD . The year 2006 represents a higher percentage of bank‟s liability as it increase 47% as compare to base year. The year 2007 represents highest percentage of 121%. The year 2005 is best for bank in terms of reduction in bills payable. The percentage is decreased by 1% in 2008 as compare to base year and 122% as compare to 2007. The year 2008 also shows an increase in bank‟s bills payable as it increases to 42% as compare to base year. It was increased 79% in 2005 and 35% in 2006.P a g e | 135 A NALYSIS The National Bank of Pakistan‟s surplus on revaluation of assets fluctuates and shows a mixed trend during all years.
There was a marginal decrease of 2% in bank‟s borrowings in the year 2007. The borrowings were decreased 21 % in 2005. the deposits were increased very marginally. however same are increased 6 % in 2006 as compare to base year. In the year 2005. A NALYSIS The deposits and other accounts of National Bank of Pakistan show a mixed trend during all years. 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.P a g e | 136 A NALYSIS The National Bank of Pakistan‟s borrowings fluctuates during all years and shows a mixed trend. with the year 2006 represents an increase of 8%. The deposits are increased 27% & 34% in the years 2007 and 2008 respectively BILAL AHMAD .
highest among all years. There was a sharp increase in 2008 as it indicates a percentage of 72%. The other liabilities in the year 2007 represent an increase of 34%.P a g e | 137 A NALYSIS The National Bank of Pakistan‟s Liabilities against assets subject to finance lease were fluctuate during all years. BILAL AHMAD . The year 2005 indicates an increase of 8 % and 2006 indicates an increase of 15%. 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. A NALYSIS The other liabilities of National Bank of Pakistan are fluctuating during all years and show an increasing trend.
318 7.924 831 Nil Nil Nil Nil Nil 100 20 72 17 142 100 113 146 163 198 100 100 100 100 100 100 100 100 100 100 100 100 100 100 146 126 615 763 129 159 145 -130 -1.459 4.831 156 130 307 544 86 422 250 769 287 502 BILAL AHMAD .P a g e | 138 HORIZONTAL ANALYSIS OF INCOME STATEMENT Rupees in Millions 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 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.042 219 100 100 100 100 234 192 168 238 46 Nil -2. Commission & brokerage income Dividend income Income form dealing in foreign currencies Gain on sale & redemption of securities-net 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 Taxation Current Prior years Deferred 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 -132 -382 -22 201 100 Nil Nil Nil 28 100 70 16 122 Nil 100 127 136 270 628 100 167 220 229 206 97 121 133 155 135 227 256 226 119 132 103 393 2.058 26.872 2.515 153 220 176 63 -394 161 275 329 90 300 203 160 521 207 161 203 205 2.852 110 205 155 95 181 191 151 -54 2.
BILAL AHMAD .P a g e | 139 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 %. 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 interest expense of National Bank of Pakistan shows an increasing trend in all years. as it was increased during all years as compare to base year. The interest earned is increased 61% in 2005 and 111% in 2006. highest among all years. The year 2008 represents peak percentage of 191 % as compare to all years. as it was increased 57 % (2005) and 113 % (2006). The year 2008 shows an increase of 264 %.
BILAL AHMAD .P a g e | 140 A NALYSIS The net markup/ Interest income of National Bank of Pakistan fluctuates during all years as it shows an increasing trend. A NALYSIS The net markup/ interest income after provisions fluctuates and shows a mixed trend during all years. It was increased 62 % in 2005 and 110% in 2006 as compare to base year. comparing with base year. It was increased 67% (2005). The percentage is increased 158 % in 2008. The income is increased 106 % as compare to base year but the same was decreased by 23% as compare to 2007. The year 2007 represents second highest percentage on account of Net markup/ Interest income as it was increased to 134%. highest among all years. 120% (2006) and 129% in 2007.
as it shows a mixed trend during all years. A NALYSIS The dividend income of National Bank of Pakistan fluctuates during all years. represents higher percentage among all years. The year 2008 represents an increase of 126 % as compare to base year and a decrease of 30% as compare to 2007. The year 2007 represents an increase of 33%. It was decreased 3% in the year 2005 and increases 21 % in the year 2006. The dividend income is increasing 35 % in the year 2005 and 127 % in 2006.P a g e | 141 A NALYSIS The Fee. BILAL AHMAD . The year 2008 represents peak percentage of 55%. It was increased 156% in 2007. Commission and brokerage income of National Bank of Pakistan fluctuates during all years.
but it was decreased 11% as compare to 2007. A NALYSIS The other income of National Bank of Pakistan fluctuates during all years as it shows a mixed trend. 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.P a g e | 142 A NALYSIS The National Bank of Pakistan‟s income from dealing in foreign securities fluctuates during all years as it shows an increasing trend. The year 2007 represents the lowest decreasing trend of 83%. BILAL AHMAD . comparing with base year. to 63%. 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. The income has its lowest percentage in 2007 as it was increased 3 %. The percentage is increased 52 % in 2008 as compare to base year. It was increased 19 % in 2005 and 32 % in 2006. It was decreased 80 % in 2005 and 28% in 2006 as compare to base year.
It was increased 13% in 2005 and 46% in 2006.P a g e | 143 A NALYSIS The Total non. The income is increased 63 % in 2007. highest among all years. There was an increase of 98% in 2008. The total income is increased 103% in 2007 and also increase very marginally in 2008.markup/ Interest income of National Bank of Pakistan shows an increasing trend during all years. second highest among all years. It was increased 46% in 2005 and 91% in 2006. A NALYSIS The total income of National Bank of Pakistan shows an increasing trend. BILAL AHMAD .
BILAL AHMAD . 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 29%. 53% and 61% in the years 2005. highest among all years.P a g e | 144 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 percentage is increased 105 % in 2008. The year 2007 represents an increase of 60%. 2006 and 2007 respectively. The year 2008 represents peak percentage of 119% in 2008.
BILAL AHMAD .P a g e | 145 A NALYSIS The profit before taxation of National Bank of Pakistan fluctuates and shows a mixed trend during all years. 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. The year 2007 and 2008 indicates an increase of 68 % & 138 % respectively. It was increased 45 % in 2005 and 76 % in 2006. 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. The year 2007 represents highest percentage on account of profit before taxation as it was increased to 134%.
The year 2008 indicates an increase of 150 % as compare to base year and a decrease of 57 % as compare to 2007. BILAL AHMAD . The profit after taxation is increased 105% in 2005 and 175 % in 2006 as compare to base year.P a g e | 146 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 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.
Common-size balance sheets and income statements can be more easily compared. This approach to financial statement analysis. each expense is shown as a percentage of the sales revenue. cash and other assets are shown as a percentage of the total assets and. whether across the years for a single company or across different companies. while on the balance sheet it is total assets. 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. 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. also known as component percentages. various components of the financial statements are standardized by expressing them as a percentage of some bases.P a g e | 147 VERTICAL ANALYSIS When using vertical analysis. in an income statement. 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 BILAL AHMAD . In a balance sheet. The term vertical analysis applies because each year's figures are listed vertically on a financial statement. for example. In Vertical analysis. produces common-size financial statements.
32 100 2006 1.00 1. of assets Bills payable Borrowings Deposits and other accounts Liabilities against assets subject to finance lease Deferred tax liabilities net Other liabilities Total 2004 17.25 4.P a g e | 148 VERTICAL ANALYSIS OF BALANCE SHEET Vertical Analysis (%) 2005 2006 2007 12.50 2.66 0.57 1.41 2.17 46.66 44.92 2.30 2.00 1.82 27.19 6.17 100 2005 1.64 4.95 6.69 49.48 1.79 0.45 4.89 6.09 2.43 77.85 100 BILAL AHMAD .09 20.52 80.45 100 2004 0.15 0.05 100 2008 1.07 100 ASSETS Cash Balances with other banks Lending‟s to fin.81 77.66 3.91 1.82 27.69 2.14 100 12.46 100 2008 13.0031 0.37 4.02 4.77 4.50 5.89 1.0044 0.96 5.34 2.22 0.94 76.90 27.30 3.75 100 12.57 21.15 4.97 4.86 1.0030 Nil 4.18 0.93 1.40 4.07 5.30 1.0021 0.07 2.42 0.53 1.10 2.70 3.95 1.0029 0.00 39.01 4.07 9.61 0.12 100 2007 1.66 3.64 1.00 84.37 2. institutions Investments Advances Operating fixed assets Other assets Total LIABILITIES Share Capital Reserves Unappropriated profit Surplus On Reval.32 5.43 6.02 2.88 50.67 4.
92 % and a percentage of 4.45%.37% in 2005 and has increased slightly in 2006.69% in 2008. The percentage is decreased to 5.3%. BILAL AHMAD . The year 2008 indicates second highest level of National bank of Pakistan‟s cash balance as it was 13. A NALYSIS The National Bank of Pakistan‟s balances with other banks has its peak percentage of 9% in the year 2004. The cash balance percentage is decreasing in 2005 (12.P a g e | 149 A NALYSIS The cash balance of National Bank of Pakistan fluctuates during all years.19%). of 12. The percentage is again decreased in 2007 with a percentage of 4.32 %) and 2006 (12. indicates 6.07%. There was a slight increase in the year 2007 as compare to the years 2005 & 2006.02%. The year 2004 representing highest percentage of cash balance among all years that is 17.
The percentage is again decreased to 20. The year 2006 represents peak percentage of 3.09%. representing peak percentage among all years. The year 2005 along with the year 2007 indicates the same percentage of 2.57% for National Bank of Pakistan regarding its lending‟s to financial institutions. BILAL AHMAD . second lowest among all years.69% in 2006.66 %. The year 2004 shows a percentage of 27% and the year 2005 show 27.P a g e | 150 A NALYSIS The lending‟s to financial institutions by National Bank of Pakistan shows a mixed trend. A NALYSIS The investments made by National Bank of Pakistan are fluctuating and showing a mixed trend. however it was increased in 2007 to 27.17%.82%. The percentage is decreased to 21.90%.88% in the year 2008. In the year 2004 percentage is 1. The percentage is decreased in 2008 indicating a percentage of 2.
The operating fixed assets are increased to 3.53% (2005) and 49% in the year 2006. There was a slight decrease of 1. There was a decrease in bank‟s advances to 44. The first three years of analysis shows an increasing trend that is 39.91% (2004). representing peak rate among all previous years.64% in 2005 and 1.66% in the year 2004.50% in 2006. The year 2008 indicates a decrease in bank‟s operating fixed assets as it reduces to 2. A NALYSIS The operating fixed assets of National Bank of Pakistan shows a percentage of 1.5%.P a g e | 151 A NALYSIS The advances made by National Bank of Pakistan are fluctuating and indicates mixed trend in all years. 46. BILAL AHMAD .7% in 2007. however in 2008 the percentage is increased to 50.96%.40% in 2007.
14% (2005) and 5. The year 2004 has a percentage of 3. The percentage of other assets is decreased to 4.P a g e | 152 A NALYSIS The other assets of National Bank of Pakistan fluctuate during all years.10%.89% in 2005 and shows an increasing trend of 1. The year 2008 represents highest percentage of 1. It was 0. which is increased till 2006 that is 4. A NALYSIS The share capital of National Bank of Pakistan shows a mixed trend in all years. The percentage of share capital is further increased in 2006 and shows 1.46%.45% in the year 2008. however it was increased to 5. BILAL AHMAD .09% among all years.75% (2006). There was a slight decrease in 2007 as percentage was 1.07%.07% in the year 2007.02% in 2005.
95% in 2007 and a peak percentage of 6.P a g e | 153 A NALYSIS The reserves of National Bank of Pakistan fluctuate and indicate a mixed trend.97% in 2006. It shows a percentage of 1.34% in the year 2005. 2. 4. Despite the decreasing trend in previous two years. 5. A NALYSIS The Unappropriated profit of National Bank of Pakistan is increased during all years. the National Bank of Pakistan is being able opt achieve highest percentage of reserves in 2008 as the percentage increased to 2.95% in 2004 with an increasing trend of 2. The reserves of the bank are decreasing in 2006 & 2007. shows a percentage of 2.43%.15% and 2.89% in 2005.66% in 2004.41% in 2008.07% respectively. BILAL AHMAD . The above graph shows a percentage of 1.
48%. The percentage is decline in 2005 as it shows a decrease of 0.64% with a decline of 0. BILAL AHMAD .3%.P a g e | 154 A NALYSIS The surplus on revaluation of assets is fluctuating and shows a mix trend.57%.93% in 2007. however surplus is again decline in 2008 and shows a percentage of 2.25%.3% in 2004. lowest among all years.61%. The year 2005 represents highest percentage of 6. but it was decreased in 2006 as percentage is decline to 4. A NALYSIS The bills payable by National Bank of Pakistan indicates a percentage of 1. There was a sharp increase in 2006 of 1.18%.86% in 2004. There was a sharp increase in 2007 of 6. The percentage is again increased in 2008 as it shows a percentage of 1. lowest percentage in all years. It shows a percentage of 3.
42 % in 2008.43% of bank‟s borrowing among all years.66% in 2007 and 76. 77. BILAL AHMAD . The percentage is 2% in 2004 with a decline in 2005 shows a percentage of 1. The year 2004 represents peak percentage of 84.22% in 2005.79% in 2006.52%. The deposits are decline to 80. A NALYSIS The deposits and other accounts of National Bank of Pakistan decreased during all years.15%.81%. The year 2007 represents lowest percentage of 1.94%.P a g e | 155 A NALYSIS The Borrowings of National Bank of Pakistan shows a mixed trend in all years. The borrowings are increased in 2006 shows a percentage of 1. 77. There was a sharp increase in bank‟s borrowing in the year 2008 as it shows a percentage of 4.
P a g e | 156
A NALYSIS The other liabilities of National Bank of Pakistan fluctuate and show a mix trend in all years. The percentage of other liabilities in 2004 is 4.17%. The year 2005 represents percentage (4.32%) of bank‟s other liabilities. The other liabilities were decline in 2006 and 2007 shows a percentage of 4.12% and 4.05% respectively. The National Bank of Pakistan is not being able to reduce its other liabilities in 2008 as the graph shows a percentage of 4.85%, highest percentage among all years.
P a g e | 157
VERTICAL ANALYSIS OF INCOME STATEMENT
2004 100 31 69 7 1 0 Nil 0 8 60 24 6 5 0 Nil 4 40 100 42 0 0 43 57 24 4 0 28 30 28 0 58 2005 110 34 77 8 -1 Nil 0 7 69 16 6 4 4 0 1 31 100 37 2 0 38 62 23 -4 1 21 42 30 0 72 0 6 70 15 7 3 3 0 2 30 100 34 0 1 34 66 22 1 0 23 43 48 0 91 2006 110 35 75 8 -2 Nil 0 Nil 11 68 16 8 2 6 0 0 32 100 33 1 0 34 2007 119 40 79 11 0 2008 143 56 87 25 1 0 26 61 19 7 9 1 0 3 39 100 43 5 1 46
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, Commission & brokerage income Dividend income Income form dealing in foreign currencies Gain on sale & redemption of securities-net 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 Taxation Current Prior years Deferred PROFIT AFTER TAXATION Unappropriated Profit brought forward Transfer from surplus on revaluation of fixed assets on account of incremental depreciation Profit available for appropriation
66 54 20 28 1 Nil 1 -10 21 18 45 76 0 120 36 107 0 143
P a g e | 158
The interest earned by National Bank of Pakistan fluctuates and shows an increasing trend during all years. The year 2008 is unique in terms of bank‟s interest earned. The bank earned 143% interest in this year. All other years shows an increasing trend that is 100% in 2004, 110% in 2005, 110% in 2006 and 119% in 2007.
The interest expense of National Bank of Pakistan shows an increasing trend during all years. In the year 2004, the interest expensed is 31%. The interest expense is increase in 2005 as it shows a percentage of 34%. There was a marginal increase in 2006, as interest expanse shows a percentage of 35%. The year 2007 also shows an increase of 40%. The year 2008 represents a percentage of 56%, highest among all years.
P a g e | 159 A NALYSIS The net markup/ interest income of National Bank of Pakistan fluctuates and shows a mixed trend during all years. The banks income is decreasing in 2007 & 2008 as the percentage is 68% and 61% respectively. The percentage is 69% in 2004 and shows an increasing trend in 2005 as percentage is 77%. The percentage is 60% in 2004. A NALYSIS The net markup/ Interest income after provisions fluctuates and shows a mixed trend. There was an increase in income in 2007. The year 2005 represents an increasing trend as percentage is 69%. There was a slight decrease in net markup/ Interest income as the percentage is 75%. as the graph indicating a percentage of 79%. lowest among all years. There was a marginal increase in 2006 as the percentage is 70%. The year 2008 represents peak percentage of 87% of net markup/ Interest income. BILAL AHMAD .
The year 2004 and 2006 indicates almost same percentage of 6%. The year 2004 represents highest percentage of 24% on account of fee. The year 2006 & 2008 shows a percentage of 7% each. A NALYSIS The dividend income of National Bank of Pakistan is showing a mixed trend during all years. The percentage is decreased in 2005 & 2006 as percentage is 16% & 15% respectively. commission & brokerage income. Commission & brokerage income of National Bank of Pakistan fluctuate and show a mixed trend during all years. The year 2007 represents a peak percentage of 8% on account of dividend income.P a g e | 160 A NALYSIS The Fee. There was a slight increase in 2007 & 2008 as percentage is 16% & 19% respectively. BILAL AHMAD .
The percentage is decreased in 2005 as it was 31%. BILAL AHMAD . The year 2008 represents highest percentage of 9% on account of income from dealing in foreign securities. 3% and 2% respectively. The year 2004 represents highest percentage of 40% among all years.P a g e | 161 A NALYSIS The National Bank of Pakistan‟s income from dealing in foreign securities shows a percentage of 5% in 2004. The percentage is decreased in 2005. 2006 and 2007 as the percentage in these years is 4%. 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%. A NALYSIS The Total non markup/ Interest income of National Bank of Pakistan fluctuates and indicates a mixed trend during all years.
representing second highest percentage among all years. highest among all years. The year 2006 and 2007 also shows a decreasing trend as percentage is 34% & 33% respectively. The expenses are decreased in 2005 as percentage is 37%. highest among all years. A NALYSIS The total non markup/ Interest expenses of National Bank of Pakistan are 43% in 2004. representing second highest percentage among all years. The year 2006 and 2007 also shows a decreasing trend as percentage is 34% in each year.P a g e | 162 A NALYSIS The administrative and operating expenses of National Bank of Pakistan are 42% in 2004. 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 expense is decreased in 2005 as percentage is 38%. BILAL AHMAD .
lowest among all years. 22% and 20% respectively. 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%.P a g e | 163 A NALYSIS The National Bank of Pakistan‟s current taxation fluctuates and shows a mixed trend in all years.The percentage is increased in 2005 as it shows a percentage of 62%. A NALYSIS The National Bank of Pakistan‟s Profit before taxation is 57% in the year 2004. The percentage is 23% in the year 2004. There was a decrease in bank‟s Profit before taxation as percentage is reduces to 54%. The years 2005. BILAL AHMAD . 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 42%.P a g e | 164 A NALYSIS The National Bank of Pakistan‟s Profit after taxation is 30% in the year 2004. There was a decrease in bank‟s Profit before taxation as percentage is reduces to 36%. The year 2006 and 2007 shows a slight increasing trend as percentage is 43% & 45% respectively. representing the lowest percentage among all years. BILAL AHMAD .
46 6.71 788.81 14. Bn) Bn) (Rs.79 4 8 5 5.33 57.44 -0.04 93.68 5.11 1.51 7.28 5.61 44.01 6. Bn) (Rs.22 7.42 168.59 2.7 735.16 1.43 -0.6 (Nos) AA+ 1249 AAA 757 AA 1400 1038 1100 38 272 90 Habib Bank NBP Allied Bank MCB United Bank First Women Bank of Punjab Soneri Bank Askari Bank Bank Al.69 -0.02 50. Bn) 584.65 38.96 22.39 0.88 7.55 3.52 1. Capital (Rs.01 2.85 621.7 276.11 6.81 0.22 7.41 0.01 38.84 112.03 17.08 128.57 101.02 -0.98 45.13 1. Bn) Tax (Rs.5 8.43 1.53 1.25 0.73 153.12 344.12 -1.08 0.05 -2.2 1.83 137.88 12.14 180.5 126.97 6.88 12.25 11.66 71.6 18.09 142.24 5.98 328.34 576.48 35.95 0.35 99.74 177.47 30.75 9.59 8.85 81.7 450.02 4.28 10.59 0.Falah Saudi Pak Faysal Bank KASB Bank Meezan Bank NIB Bank Mybank Atlas Bank Standard Chartered JS Bank Habib Metropolitan AA+ AA+ BBB+ AA- AA155 AA 203 AA BBB+ 231 AA 55 A 111 AA 41 A 111 A+ 34 240 AA69 A 31 AAA+ AAA+ 176 11 100 BILAL AHMAD .02 23.3 4.43 23.02 27.77 42.8 1.32 136.31 53.72 5.47 0.44 4.1 2.11 4.54 28.54 5.85 45.18 173.46 0.67 -4.82 64. Bn) 7.05 1.34 2.75 24.06 4.36 173.23 1.17 0.97 350.73 0.Habib Bank of Khyber Bank Al.22 3.29 4.63 0.02 8.45 As of June 2008 Deposits Advances Profit After (Rs.97 411.4 180.81 8.31 2.82 0.97 1.54 1.21 167.72 465.12 0.3 85.39 0.45 228.22 5.54 6.36 34.27 9.03 3.61 0.31 0.61 32.41 0.61 194.57 0.53 293.95 0.57 Earnings Branch Credit Per share Network Rating (Rs) 9.43 333.04 217.38 24.83 114.75 0.16 192.4 287.62 87.P a g e | 165 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.27 2.98 0.12 31.34 -0.
The financial position of commercial banks registered on stock exchanges in Pakistan. to trade stocks and other securities. To be able to trade a security on a certain stock exchange. In this regard the management has entered into BILAL AHMAD . The National Bank of Pakistan enjoys the highest credit rating amongst Pakistani banks. Limited awarded highest standalone credit rating of AAA to NBP. JCR.P a g e | 166 A stock exchange is a corporation or mutual organization which provides "trading" facilities for stock brokers and traders. The JCRVIS Credit rating Co. 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. a substantial balance sheet of sound asset quality. The securities traded on a stock exchange include: shares issued by companies. Lahore stock exchange and Islamabad stock exchange. In Pakistan securities are traded on three stock exchanges which are Karachi stock exchange.VIS Credit rating Co. 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. unit trusts and other pooled investment products and bonds. There have also been significant improvements in the management practices of the bank and a focus on enhancement of systems and controls. Deposits are also guaranteed by the Government of Pakistan under the Banking Nationalization Act. and strong liquidity and capitalization levels” NBP‟s key strength remains its extensive outreach and a low cost. 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. stable deposit base. 1974.
32 The JCR-VIS Rating Process include following steps:33 1. Therefore. Conducts a preliminary study 4. Rating Committee decides the preliminary/initial rating 12. Consents to release of preliminary/initial rating to the public in case of non-mandatory ratings 15. Submits preliminary information materials 3. in terms of maintaining growth. Brief for internal rating committee meetings is prepared 10. the second half of 2008 and 2009 are likely to be challenging for the banking sector as a whole. Conducts pre due diligence meeting analysis 7. Provides detailed information in response to detailed questionnaire 6.P a g e | 167 an agreement for the acquisition of a core banking software which is likely to be implemented over the next few years. Signs agreement for an initial rating 2. Conducts due diligence meetings 8. asset quality and profitability. Discusses the rating rationales and rating issues with client 13. Conducts post due diligence analysis 9. Submits a detailed questionnaire to the issuer/client 5. Notifies issuer of the preliminary/initial rating. JCR-VIS believes that the current economic situation puts certain leading industrial sectors and the general consumer under financial stress. Releases the preliminary/initial rating to the press BILAL AHMAD . Sub Committee recommends preliminary/initial rating 11. if any 14. deliberates on appeals by client.
through customer focus of bank‟s commercial and corporate branches. the bank is committed to serving small savers and the general public of the country. 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. from our northern borders to the Arabian Sea. The bank renders these services across the country reaching as far as the remotest regions. internationally and representative offices.P a g e | 168 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. and by enhanced efforts towards the development of human capital. To extending and targeting research to improve bank earnings. 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. These services do not contribute towards the earnings of the bank. 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. rather they put pressure on bank‟s resources. which is the consequence of globalization. and competitive bank. National Bank of Pakistan is distinct from other banks in that it has a nonprofit and service oriented motive. which will enable it to achieve even better results. 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. In conclusion. technologically oriented products and services offered through its large network of branches locally. 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. 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. modern. which has manifested itself in the area of salary deposits of government employees and payment of utility bills. BILAL AHMAD . safeguard the interest of their customers and to assist them in their march towards progress and prosperity in future. Nevertheless.
Closing of all those branches. 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. Management to offer specialized services to major corporate including advisory and debt syndication introduces the concept of relationship manager. Setting of target for of making at least 300 branches country wide on line. The bank is endeavoring to further refine its internal control design and assessment process as per guidelines issued by the State Bank of Pakistan Accordingly. 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. which are burden on NBP. They have taken steps to improve customer services. BILAL AHMAD . Reorganizing efforts going on in the NBP has open many opportunities for NBP to grow. Through overhauling the manpower recruitment preservation and performance appraisal system. 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. streamline internal procedure and creating a delectating climate for technology initiative. For instance to achieve objectives NBP have taken following measures. creative and dynamic institution responding to the changing needs of the internal and external environment NBP‟s current management has boarder vision. 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.P a g e | 169 An innovative.
Development required for serving major sectors of the economy. default and inefficiency. The NBP product. Due to poor planning the bank had book losses of over 1. despite boasting a sizeable portfolio built around some reckless selling. The National Bank of Pakistan‟s huge number of borrowers is untraceable or correct whereabouts are not known. Infrastructure to support planned growth and vision. 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. The housing finance product of NBP lacks proper infrastructure including database support even after five years of post launch history. is mostly infected. The NBP Karobar scheme is designed around President‟s Rozgar scheme. 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. Inducting and leveraging specialized human capital. BILAL AHMAD . 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 scheme which had all the potential to become a landmark was so badly mishandled by National Bank of Pakistan.2 billion rupees in the Karobar Scheme. Bringing the institution on international banking landscape in the coming five years.P a g e | 170 SHORT FALLS/ WEAKNESSES OF NATIONAL BANK OF PAKISTAN The National Bank of Pakistan‟s Advance salary. is replete with charges of corruption. 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. which has long been the flag-ship product for NBP.
The up gradation of human resource is very slow in NBP.P a g e | 171 The National Bank of Pakistan‟s outsourced employees (2350) was obtained from a single source. The concept of “One Man Show” is adopted in many branches to save salary expenditure. The pension‟s distribution service or payments to EOBI beneficiaries. The one reason for this is that the senior management is able to decrease salary expenditure of the bank. But in long run it has a negative effect on bank‟s productivity. BILAL AHMAD . which are not producing any income. even most of the branches use their security guards for various tasks. which result an increase in the net profit. For their performance they received handsome amounts of bonus. Most of these are performing the core function of the bank outside their assigned duties without any training and supervision. In NBP Karobar scheme the product selected by the NBP is of inferior quality and develops faults in the first few months of delivery. The National Bank of Pakistan is incurred large expenses in running those branches. utility payments. The branches of NBP have less number of employees as their requirements. workers remittances are occupied lowest priority level.
Internal audit and Compliance approved by the Board. healthcare. It is critical too as all other banks and NBFIs in public sector have been closed down or merged with NBP. 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 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. Finance. The National Bank of Pakistan has a comprehensive framework of written policies and procedures on all major areas of operations such as Credit. The current management of National Bank of Pakistan was hired purely for their international experience. The National Bank of Pakistan has effective budgeting system in place. shipping. 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.P a g e | 172 CONCLUSIONS The National Bank of Pakistan plays a key role in the strategic national development. Research & development. transport. BILAL AHMAD . In contract to other banks populating the FSI sector. 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. education. Treasury Operations. The National Bank of Pakistan provides sustainable financing for growth of industries of critical national importance such as energy. NBP is mandated to uphold public interest.
The NBP should strengthen incentives and accelerate a results-oriented training and communications programs for management and staff. controls and efficiency of its systems. The bank should develop software for pension disbursement. processes and financial reporting. 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. The Bank should improve IT capability in the analytical areas and to develop a medium term strategy for banking and market operations. and should work with others to strengthen national crises management preparations. retention and development and to reform the Bank‟s pension scheme. investment in IT infrastructure and human resource development. The NBP should adopt modern banking tools and techniques. The bank should improve the quality of training of its employees and the integrity. being the only lending arm to the government for public sector development should design.P a g e | 173 RECOMMENDATIONS The National bank of Pakistan should be fully prepared in its management of financial crises and its business continuity planning. The National bank of Pakistan should monitor the impact of its operations on the environment. The branches should reduce its large expenses in order to increase the value of the bank. Small and Medium enterprises thereby reducing unemployment and helping to create a more equitable distribution of wealth. which is mainly through the use of power and the generation of waste. The bank should renegotiate the Bank‟s long term financial framework and to overhaul the Bank‟s financial system. clear vision. The bank should provide support to the Micro. The bank should improve its recruitment. BILAL AHMAD . developing theories or concepts for the better direction of their own business environment according to Quran & Sunnah. Quality leadership. develop and deliver product and services for economic growth. NBP. within the standing committee framework.
BILAL AHMAD . housing.P a g e | 174 The National Bank of Pakistan should implement a financial inclusion program to meet the needs of underserved economic subsectors. including outreach programs to meet the requirements of the agriculture. 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. SME and microfinance sectors.
pk/nbp/Treasury_Products. Asrar H.htm http://www.pk/StudentLoan/index..pk/Premium/index.nbp.nbp.com. Asrar H.jsp Black's Law Dictionary page 471 (5th ed) Kotler.htm http://www.jsp http://www.com. Asrar H.com.com.nbp. Asrar H. 7th Ed. S. Siddiqui 7th ed page no 221 Practice & Law of Banking in Pakistan by Dr.com. Principles of marketing 8 ED by Kotler & Armstrong G7 Practice & Law of Banking in Pakistan by Dr.nbp.pk/nbp/NBP_Treasury.nbp.com.nbp.pk/EcomomicBulletin/FS-Complete-31-12-2007.htm http://www. Siddiqui 7th ed page no 91 Practice & Law of Banking in Pakistan by Dr..pk/advancesalary/index.nbp.jsp NBP Annual Report 2007 Terry and Franklin Principles of Management Management 7 Ed Robbins & coulter 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 BILAL AHMAD .com. L.nbp. Asrar H.htm http://www.jsp http://www..P a g e | 175 REFERENCES 1 2 3 4 5 6 7 8 9 http://www.jsp NBP Quarterly Report September 2008 http://www.nbp. Siddiqui 7th ed page no 228 SBP Prudential Regulations http://www. and Adam. Asrar H.com.pk/Saibaan/index.com.com.com. G.pk/Aamdani/index.jsp http://www. Siddiqui 7th ed page no 228 Practice & Law of Banking in Pakistan by Dr. Siddiqui 7th ed page no 88 Practice & Law of Banking in Pakistan by Dr.nbp. Siddiqui 7th ed http://www. Asrar H.pk/nbp/About_Us/DReport3. (2006) Marketing. Armstrong. Brown.htm Practice & Law of Banking in Pakistan by Dr.htm http://www.pk/nbp/About_Us/About_US.nbp. P. Siddiqui 7th ed page no 87 Practice & Law of Banking in Pakistan by Dr.pdf NBP Quarterly Report September 2008 http://www.pk/nbp/About_Us/DReport3.com.nbp.nbp.com.pk/CashnGold/index.pk/nbp/About_Us/About_US.
jcrvis.pk http://www.jcrvis.P a g e | 176 30 31 32 33 Human error by James Reason NBP Annual Report 2007 http://www.com.com.pk/ratingscale/rating_process.htm BILAL AHMAD .
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