Virtual University of Pakistan

Evaluation Sheet for Internship Report Fall 2009
FINI619: Internship Report (Finance) Hours: 3 Credit

Name of Student: Student’s ID: Supervisor:

Humayoun Ahmad Farooqi Evaluation Criteria Result Pass Report writing Presentation & Viva voce Final Result

MC080203376

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SWOT analysis and recommendations are copied from internet Mistakes in calculations are highlighted Ratios are not interpreted.

INTERNSHIP REPORT Name of Organization:
NATIONAL BANK OF PAKISTAN

Submitted By:
Humayoun Ahmad Farooqi MC080203376 (Student ID) Session 2008-2010

Submitted To:
Instructor FIN619

Date of Submission:
04-02-2010

VIRTUAL UNIVERSITY OF PAKISTAN
An I n t e r n s h i p R e p o r t

Dedications
I dedicate this Internship Report to My family and friends

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UNDERTAKING

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INTERNSHIP REPORT

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Acknowledgement
Thanks to almighty Allah, the most merciful, beneficent, and the source of all knowledge and wisdom. All reverence to the Holy Prophet Mohammad (S.A.W.), who is forever guidance and knowledge for all human beings on this earth. Special thanks to Mr. Muhammad Ali Khan campus manager Virtual University Campus (Faisal Town), Lahore - 939, Block-C, Moulana Shaukat Ali Road, Lahore (VLHR01) - for providing information, support and guidance at every level of my studies. Without his co-operation it would not be possible for me to complete my MBA degree. I am very thankful to my family specially my mothers whose kind prayers and cooperation helped me at every step of my work. I am really very grateful to Anwaar Ali Assistant vice President and Nauman Dilawar Operations Manager (Internship supervisor), National Bank of Pakistan, Model Town Branch Lahore for their accommodating attitude during the completion of my internship. They helped and supported me during gathering and analyzing information. And at the end, I am really very thankful to Mr. Mohsin Ali, a friend of mine, for his help in every step during the completion of my internship report.

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Executive summary
In this report, I have discussed about every major aspect of the bank, which I observed during my internship. Along with it, the processes, policies and procedures of the bank have also been discussed in detail. The main purpose of internship is to learn, by working in practical environment and to apply the knowledge acquired, during the studies, in a real world scenario in order to tackle the problems. My intentions were to know how to work in financial institutions, to know about the office environment and to know how to deal with different kind of people. In this report the analysis of the organization has been done and the financial aspects have been evaluated to analyze the current position of the organization. Along with it, the background analysis, the business process analysis, and the internal environment and external environment of the organization have been discussed and the recommendations for the improvement have been made. During my internship program, I mainly worked with the departments GENERAL BANKING and ADVANCES. These departments have been discussed in along with the policies and procedures therein. I have concluded my report with my experience at the National Bank of the Pakistan along with my overall insight of the organization The recommendation section contains my perception of the ways of improving this organization. In the end I have listed the references used during the preparation of my internship report

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Table of Contents

Introduction of Organization Business Sector..................................................................1 Overview of the organization.............................................................................................4
Brief History of the Organization............................................................................................4 Nature of the Organization......................................................................................................7 Business Volume of the organization.......................................................................................9 Product Lines..........................................................................................................................10
National Bank of Pakistan Saiban Scheme............................................................................................10 NBP Advance Salary Scheme................................................................................................................10 National Bank Cash Gold Scheme.........................................................................................................11 National Bank Kisan Dost Scheme........................................................................................................11 National Bank Premium Aamdani Certificate Scheme.........................................................................12 NBP Karobar Scheme............................................................................................................................12 International Baking...............................................................................................................................13 PAY ORDER:........................................................................................................................................13 TRAVELER'S CHEQUES:...................................................................................................................14 LETTER OF CREDIT:..........................................................................................................................14 COMMERCIAL FINANCE:.................................................................................................................14 FOREIGN REMITTANCES:................................................................................................................14 SWIFT SYSTEM:..................................................................................................................................15 AGRICULTURAL FINANCE:.........................................................................................................15 Agricultural Credit:...........................................................................................................................16 Farm Credit:.......................................................................................................................................16 Production Loans:..............................................................................................................................17 CORPORATE FINANCE:....................................................................................................................17 Working Capital and Short Term Loans:..........................................................................................17 Loan Structuring and Syndication:....................................................................................................17 SHORT TERM INVESTMENTS:....................................................................................................18 EQUITY INVESTMENTS:..............................................................................................................18

Competitors.............................................................................................................................18

Organizational structure..................................................................................................19
Organizational Hierarchy Chart...........................................................................................19 Number of employees.............................................................................................................21 Main Offices............................................................................................................................22 Introduction of all the departments.......................................................................................23
Deposit Department..............................................................................................................................23 Advances Department...........................................................................................................................24 Government Receipts and Payments Department.................................................................................24 FBR Collection Department..................................................................................................................24 Remittances Department.......................................................................................................................24 Bills Department...................................................................................................................................24 Cash Department...................................................................................................................................24

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Compliance Department.......................................................................................................................25 Agriculture Department........................................................................................................................25 Human Resources Management Depatrment........................................................................................25 Information Technology Department....................................................................................................25 Online Banking Department.................................................................................................................26 Islamic Banking Department................................................................................................................26

Comments on Organizational Structure...............................................................................26

Plan of your internship program.....................................................................................27
Introduction of Branch...........................................................................................................27
Name of Branch ....................................................................................................................................27 Branch Code ..........................................................................................................................................27 Region ...................................................................................................................................................28 Address .................................................................................................................................................28 Phone Nos..............................................................................................................................................28 Fax No....................................................................................................................................................28 Name of Manager .................................................................................................................................28 Name of My Operation Manager (Supervisor) .....................................................................................28 Number of employees............................................................................................................................28

Starting and ending dates of internship................................................................................29 Departments of Training........................................................................................................29
The General Banking Department.........................................................................................................29 Advances Department............................................................................................................................29

Training program.............................................................................................................29
Introduction of the departments I worked in.......................................................................29
General Banking....................................................................................................................................30 2. Advances (Credit department)...........................................................................................................31

Detailed description of tasks Assigned to me........................................................................32
a. Qualification of Customer.............................................................................................................33 b. Types of Accounts.........................................................................................................................33 c. Issuing of cheque book:.................................................................................................................33 2. Accepting deposits............................................................................................................................34 Making payment....................................................................................................................................35 Current account.................................................................................................................................35 b. Saving account...............................................................................................................................35 c. Cheque Payments...........................................................................................................................35 d. Cheque cancellation:.....................................................................................................................36 4. Government receipt and Payment.....................................................................................................36 Advances Department............................................................................................................................37 Principles of Advances......................................................................................................................38

Structure of Finance Department....................................................................................43
Departmental Hierarchy........................................................................................................43 Numbers of Employee.............................................................................................................44 Finance and Accounting Operations.....................................................................................44
Functions of the Finance Department....................................................................................................44

Functions of Finance Department...................................................................................44
Accounting system of the organization..................................................................................44 viii

Finance system of the organization........................................................................................45 Use of electronic data in decision making.............................................................................45 Sources of funds......................................................................................................................45 Allocation of funds..................................................................................................................46

Critical Analysis................................................................................................................47
Financial Analysis...................................................................................................................47
Ratio Analysis........................................................................................................................................47 Liquidity Ratios.................................................................................................................................47 Leverage Ratios................................................................................................................................48 Profitability Ratios.............................................................................................................................50 Activity Ratios...................................................................................................................................52 Market Ratios....................................................................................................................................54 a.Statement of Cash Flow..................................................................................................................55 Other Ratios.......................................................................................................................................56 HORIZONTAL ANALYSIS.................................................................................................................57 VERTICAL ANALYSIS.......................................................................................................................60 INDUSTRY ANALYSIS......................................................................................................................61

FUTURE PROSPECTS OF THE ORGANIZATION.........................................................62

SWOT Analysis of the organization.................................................................................63
Strength...................................................................................................................................63 Weakness.................................................................................................................................64 Opportunities..........................................................................................................................65 Threats.....................................................................................................................................65

Conclusion........................................................................................................................66
Customer Satisfaction.............................................................................................................66 Poor record management and filing system..........................................................................66 Unequal distribution of work.................................................................................................67 Marketing visits.......................................................................................................................67 Formal Organization..............................................................................................................67 Difference between theory and practice................................................................................67 More accounts fewer deposits................................................................................................68 Delegation of authority...........................................................................................................68 Lack of specialized training....................................................................................................68 Poor job rotation.....................................................................................................................68 Lack of appreciation...............................................................................................................68 Promotions...............................................................................................................................69 Marketing at desk...................................................................................................................69 Lack of business communication...........................................................................................69

Recommendations for Improvements..............................................................................70
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Professional training...............................................................................................................70 Delegation of authority...........................................................................................................70 Performance Appraisal...........................................................................................................71 To Over Come Problem of Space and Furniture..................................................................71 Job Rotation............................................................................................................................71 Changes in Policies..................................................................................................................71 Link with the Head Quarter...................................................................................................71 Credit Card.............................................................................................................................71 Installing Validator ................................................................................................................72 Interest on Overdraft:............................................................................................................72 Cash Financing........................................................................................................................72 Decreasing Administrative Expenses.....................................................................................72 Needs to be Flexible in credit Policy......................................................................................72 Technological Advancement..................................................................................................72 Staff Relationship....................................................................................................................73 Improper Distribution of Work.............................................................................................73 Favoritism and nepotism........................................................................................................73 Marketing Policy.....................................................................................................................74 Complaints of Customer.........................................................................................................74 Organizational Commitment.................................................................................................74 Credit Monitoring...................................................................................................................74 Avoiding Bad Debts................................................................................................................75

References.........................................................................................................................75

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Introduction of Organization Business Sector
National bank of Pakistan is providing banking/financial services in Pakistan. The Banking/Financial service sector is often described as a nation's economic engine because they provide financial intermediation functions between savers/investors that are looking for safety and growth and consumers/businesses who are looking for access to credit and capital. Banks also play a major role as instruments of the government's monetary policy aimed at regulating interest rates and money supply in the economy. The current economic crisis in the United States and Europe is because of the ongoing weakness of major banks and the resulting credit and capital crunch. It is evident form history that the banking sector is critically important in national and global economies. In Pakistan, the total banking sector serves around 6 million borrowers and 25 million depositors, implying a penetration rate of 3.6 percent and 15 percent respectively. In terms of access to microfinance, which means the availability of small loans, micro deposits and micro-insurance services to low income households, the current penetration rate is only 10 percent. In other words, 85 percent of Pakistan's population does not have access to any financial services at all, which inherently creates an uneven and an inequitable economic world, where the majority of people are financially marginalized. Between 2002 and 2007, Pakistan's accelerated economic growth was underpinned by a strong banking sector. Classified as Pakistan’s and region’s best performing sector, the banking industry’s assets rose to over $60 billion, its profitability remains high, non-performing loans (NPLs) are low, credit is fairly diversified and bankwide system risks are well-contained. Almost 81% of banking assets are in private hands. Likewise, the present foreign stake comes to 47% of total paid-up capital of all the financial institutions regulated by Pakistan's central bank, the State Bank of Pakistan. At present there are 41 scheduled banks, 6 Development Finance Institutes, and 2 Micro Finance Banks operating in Pakistan whose activities are regulated and supervised
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by State Bank of Pakistan. The commercial banks comprise of 3 nationalized banks, 3 privatized banks, 15 private sector banks, 14 foreign banks, 2 provincial scheduled banks, and 4 specialized banks. Under the Banking Companies Ordinance, 1962 the State Bank of Pakistan is fully authorized to regulate and supervise banks and development finance institutions. State Bank of Pakistan can prohibit the bank from giving loans, advances & credits. It can prohibit the bank from accepting deposits, Can cancel license of a bank, Can give directions to the bank as it deem fit ,Can remove chairman, directors, chief executive or other managerial persons from the office and appoint a person as chairman, director or chief executive. In general, there are primarily two types of banks in Pakistan: Commercial Banks and Investment Banks. Both types of banks provide financial services essential for Pakistan's economy to function and grow. Commercial Banks are privately-owned institutions that, generally, accept deposits and make loans. Deposits are money people entrust to an institution with the understanding that they can get it back at any time or at an agreed-upon future date. A loan is money let out to a borrower to be generally paid back with interest. This action of taking deposits and making loans is called financial intermediation. A bank's business, however, does not end there. Most people and businesses pay their bills with bank checking accounts, placing banks at the center of our payments system. Banks are the major source of consumer loans -- loans for cars, houses, education -- as well as main lenders to businesses, especially small businesses. When banks are strong and the credit flows, it helps the overall economic growth. When banks are in crisis, the impact on business and consumers increases the weakness in the economy. Investment banks provide four primary types of services: raising capital (private equity or public offerings of shares), advising in mergers and acquisitions, executing securities sales and trading, and performing general advisory services. Most of the major
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Wall Street firms are active in each of these categories. Smaller investment banks may specialize in two or three of these categories.

In spite of the international economic crisis, continuing political turmoil and rising militancy in Pakistan, the financial services sector has held up fairly well in the last year. Its future, however, remains tied to a measure political stability in the country that allows economic activity to occur unhindered. Let's hope the nation's political and ruling elites can find a way to find a peaceful way forward.

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Overview of the organization
Vision To be recognized as a leader and a brand synonymous with trust, highest standards of service quality, international best practices and social responsibility. Mission NBP will aspire to the values that make NBP truly the Nation’s Bank, by:
• •

Institutionalizing a merit and performance culture Creating a distinctive brand identity by providing the highest standards of services Adopting the best international management practices Maximizing stake-holders value Discharging our responsibility as a good corporate citizen of Pakistan and in countries where we operate


• •

Brief History of the Organization
National Bank of Pakistan was established vide NBP Ordinance No. XIX of November 9. 1949. Initially the Bank’s objective was to extend credit to the agriculture sector. The Bank commenced its operations from November 20, 1949 at six important jute centers in the then East Pakistan and directed its resources in financing of jute crop. The Bank’s Karachi and Lahore offices were subsequently opened in December 1949. The Bank in 1950 had one subsidiary ‘The Bank of Bahawalpur’ established on December4, 1947 by the former Bahawalpur State. NBP was undertaking Treasury Operations and Managing Currency Chests or Sub Chests at 57 of its offices where the turnover of the business under the head amounted to Rs.2460 million.
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Deposits held by NBP constituted about 3.1% of total deposits of all Pakistani Banks in 1949, which rose to 38% in 1952. NBP advances reached Rs.554.4 million by December 1959, which was one third of the total schedule bank credit. In 2002 the Bank signed an agreement with Western Union for expanding the base for documented remittances. In November 2002 NBP launched its advance salary scheme The Best in the Emerging Markets: World’s leading financial journal, “Global Finance” after a worldwide survey declared NBP in its issue of May 2003 as one of the Best in the Emerging Markets. The “Bankers Magazine” in July 2003 recognized NBP as the bank with the highest return on capital in Asia and No.8 in the world. NBP in the only Pakistani bank which has been ranked among the Top 100 banks of Asia for it performance in the fiscal year 2003 and then among the Top 1000 banks of the world by the prestigious “Banker magazine” in its issue of July 2005. In January 2004 NBP launched its NBP Saibaan scheme. In May 2004, NBP’s standard long-term rating was upgraded by M/S JCR-VIS Credit Rating Agency to AA (double A) from AA- (double A minus) with “stable outlook” while standalone shortterm rating was maintained at A-1+ (A one plus). This is now the best rating for a local commercial bank in Pakistan. WEBCOP-AASHA, an alliance against gender discrimination at workplace, presented a recognition Award to NBP on December 18, 2004 for having a Gender Sensitive Management.

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World’s leading financial journal, “Global Finance” in an exclusive survey has named NBP as the Best Emerging Market Bank from Pakistan for the year 2005. On an all Pakistan basis NBP was awarded the “Kisan Times Award” for the year 2005 by the Prime Minister of Pakistan Mr. Shaukat Aziz, for its services in the Agriculture Sector. The “Banker Magazine” in July 2005 recognized NBP as the 10th Best Bank in terms of “Profit on Capital” in the world. “Best Bank-Pakistan” award for the year 2005 by world’s leading financial journal “Global Finance”. NBP launched its ATM + Debit Card in 2005 World’s leading financial journal, “Global Finance” has named NBP as the Best Emerging Market Bank from Pakistan for the year 2006. NBP launched the schemes of NBP helpline, NBP Islamic banking and NBP protection shield. Best return on Capital for 2006 amongst all banks in Asia “Banker magazine” in July 2007. NBP enjoys the highest rating of ‘AAA’ in the industry assigned by M/s JCR-VIS Credit Rating Company (July 2007) limited on a standalone basis. NBP launched premium Aamdani and Premium saver schemes in 2007 National of Pakistan was awarded The Bank of The Year for the year 2001, 2002, 2004, 2005 and 2008 by “The Banker magazine” owned by the Financial Times Group, London. National Bank of Pakistan was awarded “The Best Foreign Exchange Bank in Pakistan” for the year 2004, 2005, 2006 and 2008 by the world’s leading financial journal “Global Finance”

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Year 2008 has been a historic year for NBP’s I.T infrastructure point as the bank started its implementation program of ‘Core Banking Application (CBA) Software’. At the end of 2008 the Bank has a branch network of 1276 branches with 1254 domestic and 22 overseas branches.

Nature of the Organization
National Bank of Pakistan is naturally a Financial Organization, which deals with lending, and borrowing and investing activities. The nature of responsibilities of the Bank is different and unique from other Banks/financial institutions. It is the largest commercial bank operating in Pakistan. Its balance sheet size surpasses that of any of the other banks functioning locally. It has redefined its role and has moved from a public sector organization into a modern commercial bank. The Bank's services are available to individuals, corporate entities and government. While it continues to act as trustee of public funds and as the agent to the State Bank of Pakistan (in places where SBP does not have a presence) it has diversified its business portfolio and is today a major lead player in the debt equity market, corporate investment banking, retail and consumer banking, agricultural financing, treasury services and is showing growing interest in promoting and developing the country's small and medium enterprises and at the same time fulfilling its social responsibilities, as a corporate citizen. National Bank of Pakistan is a Governmental Organization. As an agent of State Bank of Pakistan, it implements the policies of SBP. Its basic objective was to extend credit to the agriculture sector. The Bank has expanded its range of products and services to include Shariah Compliant Islamic Banking products.

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It deals all Government Revenue, collection and payments of salaries, pensions and Govt. Treasury. It is a complete commercial, retail and corporate bank as well. The National Bank of Pakistan as a commercial bank generally makes advances for a period not exceeding one year, except in case of small and medium industries for which advance may be made for a maximum period of five years. The bank makes not only against the security of stocks and goods hypothecated or pledged to the bank, but also against documents of goods and propriety, shares are various joint stock companies, Government securities, Insurance policies deposits receipts, etc. The margin and rate of interest are determined by several factors including the type of security, the size of loan and the integrity of the party.

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Business Volume of the organization

The business volume of National Bank of Pakistan is growing day by day. The key features of financial statements of the National Bank of Pakistan for the last three years and half year ending June 2009 have been discussed in the table given below

Half-year ending Year Million) Share Capital Reserves Deposit Investment-Net Interest-Earned Advances Net Assets- Total Pre Tax Profit After tax Profit Lending financial institutions Balances other (Receivables) with 28,102.4 banks 38,344.6 10,763.7 20,887.12 692,721.06 208,622.87 37,268.4 452,131.3 901,089.8 9,689.8 6,281.2 to 12,234.1

ending Year

ending Year

ending

June 2009 (Rs. In December 2008 December 2007 December 2006 (Rs. In Million) (Rs. In Million 8,969.7 19,941 624,939 170,822.49 60,942.79 412,986.86 817,758 23,000.99 15,458.59 17,128 8,154.3 15,772 591,907.4 211,146 50,569.48 340,318.93 762,193.59 28,060.5 19,033.77 21,464.6 (Rs. In Million) 7,090.7 13,879.2 501,872 139,946.99 43,788.6 316,110.4 635,132.7 26,310.57 17,022.34 23,012.7

37,472.8

40,641.67

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Product Lines
National Bank of Pakistan serving following product lines:

National Bank of Pakistan Saiban Scheme
Product items under Saiban scheme: 1. Home Purchase: Financing Amount Financing Period Debt to Equity 2. Home Construction Financing Amount Financing Period Debt to Equity 3. Home Renovation Financing Amount Financing Period Debt to Equity 4. Purchase of Land + Construction Financing Amount Financing Period Debt to Equity 5. Balance Transfer Facility (BTF) Upto 35 Million 3 to 20 Years 85:15 (Maximum) Upto 35 Million 3 to 20 Years 85:15 (Maximum) Upto 35 Million 3 to 20 Years 85:15 (Maximum) Upto 35 Million 3 to 20 Years 80:20 (Maximum)

If you have a Home Finance Facility outstanding with another bank you can have it transferred to NBP through a hassle-free process.

NBP Advance Salary Scheme
NBP Advance Salary, the leading personal loan product of the country, is maintaining its inimitability ever since it was launched. This was only possible due to its swift growth and remarkable loan disbursement of over 138 billion.

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You can avail up to 20 net take home salaries with easy repayment installments. Hassle free acquisition without any prior formalities along with easy availability in a short turn is attributed as the most distinguishing feature of the product. The product is offered countrywide.

National Bank Cash Gold Scheme

With NBP's Cash n Gold, you can meet your need for ready cash against your idle gold jewelry. Rate of mark-up 13% p.a. Facility of Rs. 10,000 against each 10 grams of net contents of gold No maximum limits of cash Repayment after one year Roll over facility Only gold ornaments acceptable Weight and quality of gold to be determined by NBP's appointed schroffs No penalty for early repayment

National Bank Kisan Dost Scheme
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Competitive mark-up rate around 14.5% per annum Quick & easy processing Delivery at the farmer’s doorstep Technical guidance to farmers Wide range of financing schemes for farmers Finance facility up to Rs. 500,000/- for landless farmers against personal guarantee Financing available against pass book, residential/commercial property, gold ornaments and paper security Loan facility on revolving basis for three years (renewable on yearly basis without documentation and approval)

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National Bank Premium Aamdani Certificate Scheme
Monthly Income Scheme introduced for investors as well as for general public.

Amount of investment required from Rs. 20,000/- to Rs. 5,000,000 Investment period is 5 years Free Demand Draft, Pay Order and NBP Online Aasan Banking Free Cheque Book / NBP Cash Card (ATM + Debit) Profit paid every month as follows: Period Profit Rates 1st year 7.50% 2nd year 8.50% 3rd year 9.50% 4th year 10.50% 5th year 11% Financing facility available upto 90% of the deposit value Premature encashment will attract penalties Zakat and withholding tax will be deducted as per rules

NBP Karobar Scheme
Mera Apna Karobar • • • • • •
• •

Minimum down payment, 10% of asset price (5% for PCO & Telecaster) Tenure 1 to 5 years (for PCO 2 years) Grace period 3 months Maximum loan amount Rs. 200,000/Age 18-45 years Mark-up (variable) 1 year KIBOR + 2.00% p.a. The customer will pay markup @ 6% p.a., rest will be borne by GOP Life & disability insurance paid by GOP (subject to the availability of subsidy from GOP)
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International Baking
International strategy of National Bank of Pakistan is focused on capturing trade business and increasing bi-lateral investment flows. NBP has 22 overseas branches in all the major financial capitals of the world and is planning to open more branches in near future. NBP offers the lowest rates on exports and other international banking products. The Bank also provides access to different local commercial banks in international banking. NBP has a Financial Institution Wing to effectively manage NBP’s exposure to foreign and domestic correspondence.

DEMAND DRAFTS:
If you are looking for a safe, speedy and reliable way to transfer money, you can now purchase NBP’s Demand Drafts at very reasonable rates. Any person whether an account holder of the bank or not, can purchase a Demand Draft from a bank branch.

MAIL TRANSFERS:
Move your money safely and quickly using NBP Mail Transfer service. And we also offer the most competitive rates in the market.

PAY ORDER:

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NBP provides another reason to transfer your money using our facilities. Our pay orders are a secure and easy way to move your money from one place to another. And, as usual, our charges for this service are extremely competitive.

TRAVELER'S CHEQUES:
Negotiability: Validity: Availability: Encashment: Limitation: Safety: Pak Rupees Traveler’s Cheques are a negotiable instrument. There is no restriction on the period of validity. At 700 branches of NBP all over the country. At all 400 branches of NBP. No limit on purchase. NBP Traveler’s Cheques are the safest way to carry our money.

LETTER OF CREDIT:
NBP is committed to offering its business customers the widest range of options in the area of money transfer. With competitive rates, security, and ease of transaction, NBP Letters of Credit are the best way to do your business transactions.

COMMERCIAL FINANCE:
The Bank’s dedicated team of professionals truly understands the needs of professionals, agriculturists, large and small business and other segments of the economy.

FOREIGN REMITTANCES:
To facilitate its customers in the area of Home Remittances, National Bank of Pakistan has taken a number of measures to increase home remittances through the

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banking system and to meet the SBP directives/instructions for timely and prompt delivery of remittances to the beneficiaries 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 22 overseas branches of the Bank. NBP is providing home remittance services without any charges. Strict monitoring of the system is done to ensure the highest possible security. Special courier services are hired for expeditious delivery of home remittances to the beneficiaries.

SWIFT SYSTEM:
The SWIFT system (Society for Worldwide Inter bank Financial

Telecommunication) has been introduced for speedy services in the area of home remittances. The system has built-in features of computerized test keys, which eliminates the manual application of tests that often cause delay in the payment of home remittances. The SWIFT Center is operational at National Bank of Pakistan with a universal access number NBP-PKKA. All NBP overseas branches and overseas correspondents (over 450) are drawing remittances through SWIFT. Using the NBP network of branches, you can safely and speedily transfer money for our business and personal needs.

TRADE FINANCES OTHER BUSINESS LOANS:

AGRICULTURAL FINANCE:
NBP provides Agricultural Finance to solidify faith, commitment and pride of farmers who produce some of the best agricultural products in the World. Agricultural Finance Services: “I Feed the World” program, a new product, is introduced by NBP with the aim to help farmers maximize the per acre production with minimum of required input. Select

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farms will be made role models for other farms and farmers to follow, thus helping farmers across Pakistan to increase production.

Agricultural Credit:
The agricultural financing strategy of NBP is aimed at three main objectives:1. Providing reliable infrastructure for agricultural customers
2. Help farmers utilize funds efficiently to further develop and achieve better

production Provide farmers an integrated package of credit with supplies of essential inputs, technical knowledge, and supervision of farming. 3. Agricultural Credit (Medium Term):

Production and development:
Watercourse improvement Wells Farm power Development loans for tea plantation Fencing Solar energy Equipment for sprinklers

Farm Credit:
NBP also provides the following subsidized with ranges of 3 months to 1 year on a renewal basis. • • • • Operating loans Land improvement loans Equipment loans for purchase of tractors, farm implements or any other equipment Livestock loans for the purchase, care, and feeding of livestock

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Production Loans:
Production loans are meant for basic inputs of the farm and are short term in nature. Seeds, fertilizers, sprayers, etc are all covered under this scheme.

CORPORATE FINANCE:

Working Capital and Short Term Loans:
NBP specializes in providing Project Finance, Export Refinance to exporters, Preshipment and Post-shipment financing to exporters, Running finance, Cash Finance, Small Finance, Discounting & Bills Purchased, Export Bills Purchased / Pre-shipment / Post-Shipment, Medium term loans and Capital Expenditure Financing: NBP provides financing for its clients’ capital expenditure and other long-term investment needs. By sharing the risk associated with such long-term investments, NBP expedites clients’ attempt to upgrade and expand their operation thereby making possible the fulfillment of our clients’ vision. This type of long term financing proves the bank’s belief in its client's capabilities, and its commitment to the country.

Loan Structuring and Syndication:
National Bank’s leadership in loan syndicating stems from ability to forge strong relationships not only with borrowers but also with bank investors. Because we understand our syndicate partners’ asset criteria, we help borrowers meet substantial financing needs by enabling them to reach the banks most interested in lending to their particular industry, geographic location and structure through syndicated debt offerings. Our syndication capabilities are complemented by our own capital strength and by industry teams, who bring specialized knowledge to the structure of a transaction.

Cash Management Services:
With National Bank’s Cash Management Services (in process of being set up), the customer’s sales collection will be channeled through vast network of NBP branched spread across the country. This will enable the customer to manage their company’s total
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financial position right from your desktop computer. They will also be able to take advantage of our outstanding range of payment, ejection, liquidity and investment services. In fact, with NBP, you’ll be provided everything, which takes to manage your cash flow more accurately.

SHORT TERM INVESTMENTS:
NBP now offers excellent rates of profit on all it’s short term investment accounts. Whether you are looking to invest for 3 months or 1 year, NBP’s rates of profit are extremely attractive, along with the security and service only NBP can provide.

EQUITY INVESTMENTS:
NBP has accelerated its activities in the stock market to improve its economic base and restore investor confidence. The bank is now regarded as the most active and dominant player in the development of the stock market. NBP is involved in the following: • •

Investment into the capital market Introduction of capital market accounts (under process) NBP’s involvement in capital markets is expected to increase its earnings, which would result in better returns offered to account holders.

Competitors
Competitors of National Bank of Pakistan are all scheduled banks, which are listed/trading under Banking Companies Ordinance 1962. Competitive Banks are as under: • • • • Habib Bank Limited United Bank Limited Muslim Commercial Bank Limited Allied Bank Limited
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• • • • •

Askari Commercial Bank Limited Soneri Bank Limited Bank Al-Habib Limited Bank Al-Falah Limited. Standard Chartered Bank Limited & The Bank of Punjab

Organizational structure
Organizational Hierarchy Chart
PRESIDENT

DIRECTORS / Senior Executive Vice President

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Provisional Chiefs / Executive Vice President

Regional Chiefs / Executive Vice President

Zonal Chiefs / Senior Vice President

Voice President

Assistant Voice President

Officer Grade I

Office Grade II

Officer Grade III

Clerical / Non-Clerical Staff

Syed Ali Raza is currently the President and Chairman of National Bank of Pakistan Board of Directors consists of followings • • • • • • Muhammad ayub Khan Tarin Sikandar Hayat Jamali Mian Kausar Hameed Ibrar A. Mumtaz Tariq Kirmani Muhammad Arshad Chaudhry
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Number of employees

Year

2003

2004

2005

2006

2007

2008

No. of employees

13272

13745

13824

14019

14079

15204

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Main Offices
Registered & Head Office NBP Building I.I. Chundrigar Road, Karachi, Pakistan Registrars & Share Registration Office THK Associates (Pvt.) Limited Shares Department, Ground Floor, State Life Building # 3 Dr. Ziauddin Ahmed Road, Karachi, Pakistan Website www.nbp.com.pk Audit Committee Chairman Auditor Auditor Auditor Muhammad Auditors Chartered Accountants Chartered Accountants Legal Advisors
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Ibrar A. Mumtaz Tariq Kirmani Mian Kausar Hameed Arshad Chaudhry

Ford Rhodes Sidat Hyder & Co. M. Yousaf Adil Saleem & Co.

Advocates & Legal Consultants

Mandviwala & Zafar

Branch Network National Level Year No. of branches 2003 1199 2004 1226 2005 1242 2006 1250 2007 1261 2008 1276

International Level 22 Branches

Introduction of all the departments
There are many different departments in National Bank of Pakistan:

Deposit Department
There are two major types of accounts i.e Saving Account and Current Account. Customers keep their savings in PLS Saving Accounts and businessmen save their money in bank Current Accounts. NBP gives profit on saving accounts and special saving accounts i.e. Premium Saving Accounts and NBP Premium Amadni Certificates for one to five year’s period.

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Advances Department
NBP provides loans to different types of borrowers for different purposes. These loans are given for various sectors for different periods. Small Finance, Cash Finance, Agriculture Finance, Cash & Gold Loan, Personal Loans, Demand Finance, Running Finance, Corporate Finance, Export Import Financing, House Building Finance (Saiban) and NBP Karobar Scheme etc.

Government Receipts and Payments Department
National Bank of Pakistan is functioning as an agent of SBP for many types of government payments and receipts. Payments like Pension, Salaries, Grants, Zakat, Benevolent Fund, Treasury Refund and Taxes Refund proceed through the National Bank of Pakistan. Almost all kind of government receipts i.e. Traffic Challans, Revenue receipts; Taxes, Abyana, Agriculture Tax, Public Service Commission Fees, EOBI Funds and Utility Bills are deposited.

FBR Collection Department
NBP is playing great role for collection of FBR (CBR) taxes/revenue. A separate counter is established at branch level to facilitate the taxpayers

Remittances Department
Another important department in the bank is remittances. People send and receive their money to the other persons and organizations through various way i.e. Bank draft, Telegraphic Transfer, Mail Transfer, Coupons, Govt. Draft and Western Union Money Transfer etc. The money is transferred to both inland and abroad.

Bills Department
Customers collect their money/amount through bills. They present their cheques, drafts and other bills for collection within the city and out of the city through mail. Now a days Online Banking is becoming more popular for this purpose but the branch where I got training is still not have this facility.

Cash Department
National bank deals Government treasury on behalf of State Bank of Pakistan. There are Chest, Sub-chest and Non-chest branches in the bank. SBP supplies currency
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notes to the bank and monitors its cash flow. Cash In charge and other cashiers deal with cash receipt and payment in the bank.

Compliance Department
Role of branch compliance department is to reconcile the prescribed frequencies, investigate long pending reconciliation item, and ensure correct treatment every half-year and clearing system service branch-in major cities. Internal control is the integration of the activities, plans, attitudes, policies and efforts of the people of the bank working together to provide reasonable assurance that the organization will achieve its objectives and mission.

Agriculture Department
Agriculture Credit Department is playing a vital role in development the economy of Pakistan. Commercial banks being the greatest mobilizer of savings in the country with their large network of branches play important role in financing agriculture. The National Bank of Pakistan has also been trying to ensure that loans are disbursed to genuine agriculturists within a reasonable time and that the bank turns down no viable loan request.

Human Resources Management Depatrment
Human Resources Management Department works for the betterment of the employees. Enhances skills, training management, service benefits, wages, medical facilities, staff loans are basic functions of this department.

Information Technology Department
Year 2008 has been a historic year for NBP’s I.T. infrastructure point as the bank started its implementation program of ‘Core Banking Application (CBA) Software’. This is state of the art software providing a complete banking solution covering all areas. This will be a transformation which will greatly improve operational efficiency and controls, customer service and facilitate launching of new banking products. The implementation process has been started and is planned to be completed within next 18-20 months in 250 branches covering about 80%

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Online Banking Department
This department is functioning only in online branches in the bank. This is a fast track banking system in modern banking. NBP is also trying to enhance this facility for their customers. .

Islamic Banking Department
NBP’s Islamic banking operations have gathered momentum and have registered impressive growth in Deposits (75%), Advances (237%) and total Assets (84%). In 2008 we further opened two more branches in Faisalabad and Rawalpindi. With the increase in the popularity of Islamic banking both in Pakistan and overseas, NBP’s Islamic banking operations have good potential for growth in future.

Comments on Organizational Structure
The National Bank of Pakistan is one of the oldest banks of Pakistan. The bank has seen a lot of changed during last 60 years. However the organizational structure is not so professionally developed and implemented. Organizational structure has not been changed so much since many years. Although the departmentalization exists but in branches there is no rigid concept of departmentalization present. Sometimes the chain of command is surpassed and no care is taken on authority and responsibility fixation. However, overall situation is not so disappointing. System needs improvements but currently serving its purposes in a very suitable way.
You were required to comment or give your opinion on the structure of the organization as a whole that whether the adopted structure and practices fulfill the requirements of the organization or not like span of control, centralization/decentralization, etc.

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Plan of your internship program
Introduction of Branch

Name of Branch
National Bank of Pakistan, Model Town Branch Model Town Lahore

Branch Code
0372

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Region
Lahore

Address
Bank Square C-Block Model Town Lahore.

Phone Nos.
042-99230237 042-99230935 042-99230895

Fax No.
042-99230928

Name of Manager
Qadir Hussain

Name of My Operation Manager (Supervisor)
Numan Dilawar

Number of employees
24 The branch has been performing on-line business since 2003. It is using EBS (Electronic Banking System), banking software for its banking function. This bank has following four departments in it. 1. Foreign Exchange Department 2. General Banking Department 3. Compliance Department
4. Advanced Department

First three departments work under the supervision of Operations Manager and Advances department works under direct supervision of branch Manager.

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There were total 3 staff members working in advance department, 2 in Foreign Exchange Department, 1 in compliance Department and 16 in the General Banking Department.

Starting and ending dates of internship
The starting Date of my internship program was 01.12.2009 and my internship continued for almost 6 weeks and the ending Date of my internship program was 16.01.2010

Departments of Training
During the internship period of 6 weeks that I spent at the National Bank of Pakistan Model Town Lahore I got practical exposure to the following departments.

The General Banking Department
Where I worked for 4 Weeks i.e. from 01-12-2009 to 31-12-2009

Advances Department
Where I worked for 2 Weeks i.e from 01-01-2010 to 16-12-2009

Training program

Introduction of the departments I worked in
I worked in Two Departments of National Bank of Pakistan.

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General Banking
General Banking is the core of all departments; Deposits from customers are accepted and cheques are cashed for customers. This department works under direct supervision of Operation Manager. Two basic kinds of accounts are dealt here i.e. Current Account and Saving Account. Current Accounts are payable to the customer whenever they are demanded. When a banker accepts a demand deposit, he incurs the obligation of paying all cheques etc. drawn against him to the extent of the balance in the account. Because of their nature, these deposits are treated as current liabilities by the banks. Bankers in Pakistan do not allow any profit on these deposits, and customers are required to maintain a minimum balance, failing which incidental charges are deducted from such accounts. This is because the depositors may withdraw Current Account at any time, and as such the bank is not entirely free to employ such deposits. Savings Deposits account can be opened with very small amount of money, and the depositor is issued a cheque book for withdrawals. Profit is paid at a flexible rate calculated on six-month basis under the Interest-Free Banking System. There is no restriction on the withdrawals from the deposit accounts but the amount of money withdrawn is deleted from the amount to be taken for calculation of products for assessment of profit to be paid to the account holder. It discourages unnecessary withdrawals from the deposits. The Account opening is the first step in making a customer with bank. In account opening the formalities are fulfilled in very easy steps and it takes no time for a person to have an account at the Bank. Another important function here is remittances and Bills for Collection. People send their money to the other persons and organizations through various way i.e. Bank draft, Telegraphic Transfer, Mail Transfer, Coupons, Govt. Draft and Western Union Money Transfer etc. It works both inward and outward.

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Customers collect their money/amount through bills. They present their cheques, drafts and other bills for collection within the city and out of the city through mail. NIFT is the organization responsible for collecting and delivering these instruments for clearance form State Bank of Pakistan. National Bank of Pakistan is functioning as an agent of SBP. Many government Payments like Pension, Salaries, Grants, Zakat, Benevolent Fund, Treasury Refund and Taxes Refunds are carried out by the bank. Pension payment is only done through National Bank of Pakistan. Pension payment and salary payments are the most frequent activities in this department during the first two weeks of the month. Similarly most of the government receipts i.e. Taxes, Revenues receipts, Taxes, Traffic Challans, Abyana, Agriculture Tax, Public service commission Fees and Utility Bills are deposited. The NBP is doing a great job in revenue collection of both Government of Pakistan and Government of Punjab. Utility Bills collection is one of the heaviest workload around the due dates of these bills National bank deals Government treasury on behalf of State Bank of Pakistan. There are Chest, Sub-chest and Non-chest branches in the bank. SBP supplies currency notes to the bank and monitors its cash flow. Cash In charge and other cashiers deal with cash receipt and payment in the bank.

2. Advances (Credit department)
To give loan to Businessmen and individuals is the medium to convert customer deposits into own money. As bank receives deposits at lower rates and lend them at higher rate. Basically, this department deals with the activities of various types of credits, nature of advance creation of charge, monitoring of classified advances etc. Advances consists of retail and commercial advances. NBP give loans to the borrowers for different purposes. These loans are given for various sectors for different periods. Small Finance, Cash Finance, Agriculture Finance,
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Cash & Gold Loan, Personal Loans, Demand Finance, Running Finance, Corporate Finance, Export Import Financing, House Building Finance (Saiban) and NBP Karobar Scheme etc.

Detailed description of tasks Assigned to me
1. Account Opening: Account opening is very vital now a day in banking system due to KYC (Know your customer), AML (Anti Money Laundering) and ATF (Anti terrorist financing) I got training in this department for one week and after understanding the basic concepts I practically opened account of some walk-in-customers. Detail description of how you opened the account was required. The opening of an account is the establishment of banker customer relationship. Before opening a new account, the banker should determine the prospective customer’s integrity, credibility, occupation and the nature of business by the introductory references given at the time of account opening. Preliminary investigation is necessary because of the following reasons.
• • • •

To avoid frauds To safe guard against unintended over draft To avoid Negligence To make Inquiries about clients There are certain formalities, which are to be observed for opening an account

with a bank. The accounting opening application should be received on the prescribed account opening form. Copy of CNIC along with the original CNIC is collected and checked at the time of account opening. The Necessary details in the form should be filled in and all the detail should be in legible and clear writing. Specimen signatures of

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applicant must be carefully tested and collected. The minimum initial deposit is ensured before handing over the Cheque book to the customer.

a. Qualification of Customer
The relation of the banker and the customer is purely a contractual person; however, he must have the following basic qualifications. • • • • • He must be of the age of majority. He must be of sound mind. Law must not disqualify him. The agreement should be made for lawful object, which create legal relationship Not expressly declared void.

b. Types of Accounts
Following are the main types of accounts according to nature of customer • • • Individual Account Joint Account Accounts of Special Types         Partnership account Joint stock company account Accounts of clubs, societies and associations Agents account Trust account Executors and administrators accounts Pak rupee non-resident accounts Foreign currency accounts

c. Issuing of cheque book:

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After the application processing and the initial minimum deposit were made, I told customer to approach the account opening officer, who after checking the form and deposit slip issued cheque book to account holders. I practically issued some cheque books also under the supervision of my officer. Requirements for issuing cheque book a) The account holder must sign the requisition slip b) Entry should be made in the cheque book issuing book c) three rupees per cheque should be recovered from a/c holder if not then debit his/her account. d) He must have submitted a copy of CNIC and have shown his original CNIC for verification.

2. Accepting deposits
The money, which comes in the bank, its record should be kept. Cash department performs this function. The deposits of all customers of the bank are controlled by means of ledger accounts. Every customer has its own ledger account and has separate ledger cards. I worked and observed the procedure for accepting deposits. I practically accepted the deposits of some customers also. The process is as follows Deposits are accepted along with the deposit slips. Different colored deposit slips are used for general deposit and clearing. Deposit slips are filled and are handed over to cashier along with cash. I after checking the particulars of the deposit slip verified that the amount is in accordance with the written amount. Then I made a credit entry in the ledger account of customer. I stamped the deposit slip, Keeps one portion with me and other was given to the customer for future ready reference. The deposit slip for clearance is used for the purpose of the cheques that not going to paid on counter but the amount is to be transferred to the ledger account of the customer. The cheques pertain to other banks or other branches of NBP. Or it might even be from another customer of the same bank (this kind of cheque is not sent for clearance at SBP). All other cheques are sent to State Bank of Pakistan for clearance at their
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clearance house. Although the amount is credited to the customer account as soon as the cheque is presented but this amount contains a control in system that restrict withdrawal of this amount. When cheque is cleared from SBP and advice of SBP is received in the branch about payment, the control is uplifted and the amount can be withdrawn now. This process usually takes place about two to three working days.

Making payment.

Current account
These are payable to the customer whenever they are demanded. When a banker accepts a demand deposit, he incurs the obligation of paying all cheques etc. drawn against him to the extent of the balance in the account. Because of their nature, these deposits are treated as current liabilities by the banks. Bankers in Pakistan do not allow any profit on these deposits, and customers are required to maintain a minimum balance, failing which incidental charges are deducted from such accounts. This is because the depositors may withdraw Current Account at any time, and as such the bank is not entirely free to employ such deposits.

b. Saving account
Savings Deposits account can be opened with very small amount of money, and the depositor is issued a cheque book for withdrawals. Profit is paid at a flexible rate calculated on six-month basis under the Interest-Free Banking System. There is no restriction on the withdrawals from the deposit accounts but the amount of money withdrawn is deleted from the amount to be taken for calculation of products for assessment of profit to be paid to the account holder. It discourages unnecessary withdrawals from the deposits.

c. Cheque Payments
The customer gives check at the counter and check is carefully examined. I was told by the junior officer there that the first thing to observe name of the bank and the branch name of the bank. Only cheques which are of National Bank of Pakistan Model
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Town branch are considered for payment at counter. If cheque is drawn on another bank, it can be deposited along with deposit slip only if customer has an account with NBP Model Town Branch. This cheque is sent to SBP through NIFT for clearance. After verifying the bank and branch name Date is observed. The cheque should not be a post dated cheque neither it should be more than six months old. Then I was told to check the amount written in words and in figures. Both should be in accordance with each other. Any cutting or overwriting must be singed in full by the customer. Then through computer information system the account number is checked and balance is observed. Then I was told to check the Payee’s Account Stamp (if stamped) bearer and non-bearer crossings etc. after that balance of amount is checked if amount is present then check will be sent to CD in charge who is on the duty of verifying the checks’ signatures with given cards’ signatures and then pass it to the cash section where I was told to watch the verification sign of in charge and then I was to pay the amount written in the Cheques. Then I have to write the denomination of currency notes paid along with their respective quantity at the back of cheque. In this way Cheques clears and payment is made to customer.

d. Cheque cancellation:
The cheque can be cancelled for any of the following reasons; • • • • Post dated cheque Stale cheque (validity of cheque is for six months from the date written on cheque) Warn out cheque Wrong signatures etc

4. Government receipt and Payment
Almost all types of Government receipts i.e. Taxes, Traffic Challans, Revenue receipts, Abyana, Agriculture Tax, public service commission fees, EOBI Funds and
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Utility Bills are deposited. The amounts received along with the name of depositor are written on a scroll. In utility bills the customer number is written. Every scroll is carbon copied. I worked there for about a week. Different scrolls are maintained for different categories of receipts. Some of these categories are Central government receipts. Provincial government receipts, Traffic challans, Property tax, electricity bills, gas bills, phone bills etc. Every scroll page is totaled at the end and this total is carried forward to the next page. Then at the end of the day all the scrolls are totaled and tallied with the cash. The challans and slips along with the original scroll are sent to National Bank of Pakistan Main Brach Lahore. National Bank of Pakistan is earning 0.015% of the amount received as commission from the government so it is not only helping in revenue earning of government but also earning a handsome amount of commission on amounts deposited. Similarly many kinds of government payments are also made through National Bank of Pakistan. Most significant payment is pension payment. Other payments includes salary payments to government servants, zakat payment, grants, Treasury pay orders in favor of bank’s account holder, treasury refunds and tax refunds etc. Pension payment is made at appearance of original pensioner. In order to get payment the pensioner has to fill pension payment form. His/her Original pension book and original CNIC should be presented before the officer who will check the pension record registered. He will verify that the pensioner is original and will tally his/her signs with record after verification the officer will sign on the filled form that will act as cheque and cash payment is made to the pensioner. I assisted in verification process of pensioner for a few days.

Advances Department

Advances department is one of the most sensitive and important departments of the bank. The major portion of the profit is earned through this department. The job of this department is to make proposals about the loans. The Credit Management Division of Head Office directly controls all the advances. As we known bank is a profit seeking
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institution. It attracts surplus balances from the customers at low rate of interest and makes advances at a higher rate of interest to the individuals and business firms. Credit extensions are the most important activity of all financial institutions, because it is the main source of earning. However, at the same time, it is a very risky task and the risk cannot be completely eliminated but could be minimized largely with certain techniques. I worked there as assistant for two weeks. It is a very vast field and a lot is there to learn. As it is a very sensitive issue so I was mostly assisting others in the work. Most of the work done was under strict observation of my superiors. I was assigned different tasks like checking form and documents for their accuracy and completion, verifying the CNIC of the borrower, maintaining records and corresponding with the borrowers. My observations at this department are given in the following paragraphs. The advances department at NBP Model town branch consists of two main subdepartments i.e. Retail and Commercial. Any individual or company, who wants loan from NBP, first of all has to undergo the filling of a prescribed form, which provides the following information to the banker. • • • • • Name and address of the borrower Existing financial position of a borrower at a particular branch Accounts details of other banks (if any) Security against loan Exiting financial position of the company (Balance Sheet & Income Statement)

Signing a promissory note is also a requirement of lending, through this note borrower promise that he will be responsible to pay the certain amount of money with interest.

Principles of Advances
There are five principles, which must be duly observed while advancing money to the borrowers. a. Safety
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b. Character c. Capacity d. Capital e. Liquidity f. Dispersal g. Remuneration h. Suitability a. Safety Banker’s funds comprise mainly of money borrowed from numerous customers on various accounts such as Current Account, Savings Bank Account, Call Deposit Account, Special Notice Account and Fixed Deposit Account. It indicates that whatever money the banker holds is that of his customers who have entrusted the banker with it only because they have full confidence in the expert handling of money by their banker. Therefore, the banker must be very careful and ensure that his depositor’s money is advanced to safe hands where the risk of loss does not exist. The elements of character, capacity and capital can help a banker in arriving at a conclusion regarding the safety of advances allowed by him. b. Character It is the most important factor in determining the safety of advance, for there is no substitute for character. A borrower’s character can indicate his intention to repay the advance since his honesty and integrity is of primary importance. If the past record of the borrower shows that his integrity has been questionable, the banker should avoid him, especially when the securities offered by him are inadequate in covering the full amount of advance. It is obligation on the banker to ensure that his borrower is a person of character and has capacity enough to repay the money borrowed including the interest thereon. c. Capacity
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This is the management ability factor, which tells how successful a business has been in the past and what the future possibilities are. A businessman may not have vast financial resources, but with sound management abilities, including the insight into a specific business, he may make his business very profitable. On the other hand if a person has no insight into the particular business for which he wants to borrow funds from the banker, there are more chances of loss to the banker. d. Capital This is the monetary base because the money invested by the proprietors represents their faith in the business and its future. The role of commercial banks is to provide short-term capital for commerce and industry, yet some borrowers would insist that their bankers provide most of the capital required. This makes the banker a partner. As such the banker must consider whether the amount requested for is reasonable to the borrowers own resources or investment. e. Liquidity Liquidity means the possibilities of recovering the advances in emergency, because all the money borrowed by the customer is repayable in lump sum on demand. Generally the borrowers repay their loans steadily, and the funds thus released can be used to allow fresh loans to other borrowers. Nevertheless, the banker must ensure that the money he is lending is not blocked for an undue long time, and that the borrowers are in such a financial position as to pay back the entire amount outstanding against them on a short notice. In such a situation, it is very important for a banker to study his borrower’s assets to liquidity, because he would prefer to lend only for a short period in order to meet the shortfalls in the wording capital. If the borrower asks for an advance for the purchase of fixed assets the banker should refuse because it shall not be possible for him to repay when the banker wants his customer to repay the amount. Hence, the baker must adhere to the consideration of the principles of liquidity very careful. f. Dispersal

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The dispersal of the amount of advance should be broadly based so that large number of borrowing customer may benefit from the banker’s funds. The banker must ensure that his funds are not invested in specific sectors like textile industry, heavy engineering or agriculture. He must see that from his available funds he advances them to a wide range of sector like commerce, industry, farming, agriculture, small business, housing projects and various other financial concerns in order of priorities. Dispersal of advances is very necessary from the point of security as well, because it reduces the risk of recovery when something goes wrong in one particular sector or in one field. g. Remuneration A major portion of the banker’s earning come form the interest charged on the money borrowed by the customers. The banker needs sufficient earnings to meet the following: Interest payable to the money deposited with him.
• • • • •

Salaries and fringe benefits payable to the staff members Overhead expense and depreciation and maintenance of the fixed assets of the bank An adequate sum to meet possible losses Provisions for a reserve fund to meet unforeseen contingencies Payment of dividends to the shareholders

h.

Suitability The word “suitability’ is not to be taken in its usual literary sense but in the

broader sense of purport. It means that advance should be allowed not only to the carefully selected and suitable borrowers but also in keeping with the overall national development plans chalked out by the authorities concerned. Before accommodating a borrower the banker should ensure that the lending is for a purpose in conformity with the current national credit policy laid down by the central bank of the country.
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Forms of Loans In addition to purchase and discounting of bills, bankers in Pakistan generally lend in the form of cash finance, overdrafts and loans. NBP provides advances to different people in different ways as the case demand. 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, produce or merchandise. In cash finance a borrower is allowed to borrow money from the banker up to a certain limit, either at once or as and when required. The borrower prefers this form of lending due to the facility of paying markup/services charges only on the amount he actually utilizes. If the borrower does not utilize the full limit, the banker has to lose return on the un-utilized amount. In order to offset this loss, the banker may provide for a suitable clause in the cash finance agreement, 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. b) Overdraft/Running Finance This is the most common form of bank lending. 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, and an overdraft thus occurs. This accommodation is generally allowed against collateral securities. 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 accommodation is called a “Clean Overdraft”. The borrowing customer is in an advantageous position in an overdraft, because he has to pay service charges only on the balance outstanding against him. 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, while an overdraft is a temporary accommodation occasionally resorted to.
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c) Demand Financing/Loans When a customer borrows from a banker a fixed amount repayable either in periodic installments or in lump sum at a fixed future time, it is called a “loan”. When bankers allow loans to their customers against collateral securities they are called “secured loans” and when no collateral security is taken they are called “clean loans”. The amount of loan is placed at the borrower’s disposal in lump sum for the period agreed upon, and the borrowing customer has to pay interest on the entire amount. Thus the borrower gets a fixed amount of money for his use, while the banker feels satisfied in lending money in fixed amounts for definite short periods against a satisfactory security

Structure of Finance Department
Departmental Hierarchy
Branch Manager

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Retail Officer

Credit Officer

Numbers of Employee
Total No. of Employees is 03 in Finance Department. There is one Retail Officer at branch and there are two Credit Officers.

Finance and Accounting Operations
Finance and Accounting operations are operated with the help of subordinate staff. Bank is financing in multiple sectors.

Functions of the Finance Department
Finance Department performs following functions. • • • • Borrowing from State Bank of Pakistan. Lending to Commercial Banks Lending to Investors. Lending to General Public for multi-business.

Functions of Finance Department
Accounting system of the organization
Accounting system of the bank through specialized banking software was well equipped with Information Technology. The staff was sufficiently trained to perform functions on their own using the computers. The staff was very happy to have this system
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as they told that it has made the things lot easier than the before manual accounting system. Thus through this integrated software the finance department was able to carry out their operations in a very smooth way. Cash or accrual system of accounting? Single entry or double entry?

Finance system of the organization
Financial system of the bank where I done my internship is mixed and complicated because being government bank, bank deals with all kind of lending and investing activities and also hold down the cash position of others financial institutions i.e. banks like MCB, UBL, ABL etc.

Use of electronic data in decision making
The branch where I have got training was using very good Information Technology environment. With all data integration the management was in a position to sit and generate reports of various kinds. The decisions were made based on these reports and the electronic data was analytically used to see the progress of employees and also the overall branch. Which software was used by this organization? Use of IT along with proper training can help the management a great deal in their decision making process. In this branch although the management was not trained enough to use the computers and the software but they were getting benefits from electronic data and were using them in decision making process.

Sources of funds

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Fund generation of the branch is depositing, receiving interest on lending money to various sectors, advances from other financial institutions. What about internal and external sources?

Allocation of funds
Bank allocates funds according to the instructions of the senior management or main branch. In which proportion?

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Critical Analysis

Financial Analysis
Ratio Analysis

Liquidity Ratios
Current Ratio 2006 142279638/ 524181985 *100 27.14% 2007 153810681/ 609784513 *100 25.22% 2008 161976396/ 675617003 *100 23.97 %

=Current assets / current liabilities *100

Where Current assets= Cash and balance with treasury banks + Balances with other banks + Lending to financial institutions And Current Liabilities = Bills payable + Borrowing + Deposits and other accounts Acid Test Ratio 2006 (142279638 – 23012732)/ 524181985 *100 22.7 % 2007 (153810681 – 21464600) / 609784513 *100 21.7 % 2008 (1611976396 – 17128032)/ 675617003 *100 21.4%

=(current assets – inventoriesprepaid expenses)/ current liabilities *100

Where inventories in this case means the lending to financial institutions

Sales to Working Capital

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2006 (43788628/ =Sales/ Working Capital 38190234700) * 100 0.11%

2007 (50569481/ 4559783200) * 100 1.10 %

2008 (60942798/ 9440939300) *100 0.64 %

Where working capital is calculated in the table given below Working Capital 2006 =Current Assets – current liabilities 142279638 524181985 38190234700 2007 153810681 609784513 4559783200 2008 161976396 675617003 9440939300

Leverage Ratios

Debt Ratio 2006 = (Total Debt/ total assets) *100 (553178593/ 635132711) * 100 87.09% 2007 (645855939/ 762193593)* 100 84.73% 2008 (715299108/ 817758326) * 100 87.47%

Debt/Equity Ratio

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= (Total debt/ Total shareholder’s equity) *100

2006 553178593/ 79090712 78.01%

2007 (645855939/ 8154319) * 100 79.20 %

2008 (715299108/ 8969751) * 100 79.74%

Debt to Tangible Net Worth Ratio = (Total debt/ total net assets) *100 2006 (553178593/ 81954118) * 100 674.98% 2007 (645855939/ 116337654) *100 555.15% 2008 (715299108/ 102459218) * 100 698.13%

Current Worth/ Net Worth Ratio 2006 = (Current assets/ net assets) *100 (142279638/ 81954118) *100 173.6% 2007 (153810681/ 116337654) * 100 132.21% 2008 (161976369/ 102459218) *100 158.08 %

Total Capitalization Ratio Working of long term debt? = Long term debt/ (long term debt + shareholder equity) * 100 2006 (492853073/ 5458977220) *100 9.02% Fixed Asset Ratio/ Equity Ratio qw 2007 (608382912/ 677653543) * 100 89.77% 2008 (655781930/ 737148932) *100 88.96%

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2006 =(Fixed Asset/ equity) * 100 (492853073/ 53044649) *100 929.12%

2007 (608382912/ 69270631) * 100 878.26%

2008 (655781930/ 81367002) * 100 805.95%

Long term assets versus Long term Debt = (long term assets/ long term debt) * 100 2006 (492853073/ 28996608) * 100 16.99% 2007 (608382912/ 36071426) * 100 16.86% 2008 (655781930/ 39682105) * 100 16.52%

Profitability Ratios
Net Profit Margin 2006 Profit available for = (Net profit after taxation/ interest earned) * 100 appropriation should be taken (170223346 / 43788628) *100 88.88% 2007 2008

(19033773/ 50569481) *100 37.63%

(15458590/ 60942798) * 100 25.36%

Return on Assets = (Net Profit or net income/ total assets) * 100 2006 (17022346/ 635132711) * 100 2.68% 2007 (19033773/ 762193593) * 100 2.49% 2008 (15458590/ 817758326) * 100 1.89%

DuPont Return on Assets
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= (net income/ sale) * (sale / total assets)

2006 (0.3887 * 0.0689) * 100 2.67%

2007 (0.3763*.0663) * 100 2.49%

2008 (0.2536 * 0.0745) * 100 1.88%

Operating Income Margin = (Operating Income/ interest earned) * 100 2006 (26310577/ 43788628) * 100 60.08% Operating income amount is incorrect Operating Assets Turnover Operating assets working???? = (Interest earned / operating assets) * 100 2006 (43788628/ 36795672) * 100 119% 2007 (50569481/ 56917944) * 100 88.84% 2008 (60942798/ 71972574) * 100 84.67% 2007 (28060501/ 50569481) * 100 55.48% 2008 (2300098/ 60942798) * 100 37.74%

Return on Operating Assets 2006 (17022346/ 36795672) * 100 46.26% 2007 (19033773/ 56917944) * 100 33.44% 2008 (15458590/ 71972574) * 100 21.47%

= (Interest earned/ operating assets) * 100

Sales to Fixed Assets

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2006 =(Sales/ Fixed Assets) * 100 (43788628/ 492853073) *100 8.88%

2007 (50569481/ 608382912) * 100 8.31%

2008 (60942798/ 655781930) *100 9.29%

Return on Investment (ROI) 2006 = (Net income/ total assets)*100 (17022346/ 635132711) * 100 2.68% 2007 (19033773/ 762193593) * 100 2.49% 2008 (15458590/ 817758326) *100 1.89%

Return on Total Equity 2006 = (net profit after tax/ total equity) * 100 (17022346/ 53044649) * 100 32.09% 2007 (19033773/ 69270631) * 100 27.47% 2008 (15458590/ 81367002) * 100 18.99%

Gross Profit Margin = (Net mark-up/ interest income) *100 2006 (42316608/ 43788628) * 100 96.63% 2007 (47174315/ 50569481) * 100 93.28% 2008 (53473892/ 60942798) * 100 87.74%

Activity Ratios
Accounts Receivable Turnover

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= (Annual credit sales/average Account receivable) * 100

2006 (43788628/ 23012732) * 100 190.28%

2007 (50569481/ 21464600) * 100 235.59%

2008 (60942798/ 17128032) * 100 355%

Average Collection Period 2006 365/ 1.9 190 days 2007 365/ 2.35 155 days 2008 365/ 3.55 102 days

= 365/ Account receivable turnover

Accounts Payable Turnover = (Annual credit purchases/ average account payable) * 100 2006 (13634912/ 10605663) * 100 156% 2007 (16940011/ 7061902) * 100 239.8% 2008 (23884768/ 10219061) * 100 233.7%

Average Payment Period 2006 365/1.56 233 days 2007 365/2.398 152 days 2008 365/2.337 156 days

= (365/ account payable) * 100

Total Assets Turnover

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= (Interest earned/ total assets) * 100

2006 (43788628/ 635132711) * 100 6.89%

2007 (50569481/ 762193593) * 100 6.63%

2008 (60942798/ 817758326) * 100 7.45%

Market Ratios
Dividend per Share = Total dividend/ No. of share outstanding 2006 1474605/ 590000 2.5 2007 2831895/ 708970 4 2008 6104894/ 814000 7.5

Earning per Share = Net Income/ Avg. No. of shares issued 2006 17022349/ 708970 24.01 2007 19033733/ 896975 21.22 2008 15458590/ 896975 17.23

Price/ Earning Ratio = Avg. market price per share/ earning per share 2006 249.05/24.01 Rs. =10.37/2007 259.9/23.34 Rs. =11.13/2008 162.54/17.23 Rs. =9.43/-

Dividend Payout

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= (Dividend per share/ earning per share) * 100

2006 (2.5/ 24.01) * 100 10.41%

2007 (4/ 21.22) * 100 18.85%

2008 (7.5/17.23) * 100 43.53%

Dividend Yield 2006 (2.5/249.05) *100 1.01% 2007 (4/259.9) *100 1.54% 2008 (7.5/162.54) *100 4.61%

= (Dividend per share/ Avg. market value per share) * 100

a. Statement of Cash Flow
Operating Case Flow/Current Maturities of Long Term Debt and Current Noted Payable = operating Cash flows/ current maturities of long term debt and current notes payable 2006 10176913/ 28996608 0.35 2007 78804419/ 36071426 2.18 2008 2532681/ 39682105 0.06

Operating Cash Flow/ Total Debt =(Operating Cash Flow/ Total Debt) * 100 2006 (10176913/ 553178593) * 100 1.83% 2007 (78804419/ 645855939) * 100 12.20% 2008 (2532681/ 715299108) * 100 0.35%

Operating Cash Flow per Share

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= Operating Cash Flow/ No. of equity Shares

2006 10176913/708970 14.35

2007 78804419/896975 87.86

2008 2532681/896975 2.82

Operating Cash Flow / Cash Dividend 2006 (10176913/ 2891755) * 100 3.51% 2007 (78804419/ 3263249) * 100 24.14% 2008 (2532681/ 28789320) * 100 0.87%

=(Operating Cash Flow / Cash Dividend) * 100

Other Ratios
Net income per employee

2006 = Net Income / No. of employees 635132711/ 14019 45305.1

2007 19033773/ 14079 1351.93

2008 15458590/ 15204 1016.74

Asset per employee 2006 635132711/ 14019 45305.1 2007 762193593/ 14079 54136.9 2008 817758326/ 15204 53785.7

= Asset/ No. of employee

Growth of Income

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=(Change in Income/ Income for last year) * 100

2006 (3575143/ 19033773) * 100 33.93%

2007 (2011427/ 17022346) * 100 11.81%

2008 (2532681/ 28789320) * 100 18.78%

HORIZONTAL ANALYSIS
Horizontal analysis is done by subtracting the current year amount from previous year amount and then. The resulting amount is then divided by previous year amount and then multiplying the result with 100. This is used to compare whether a particular item has increased or decreased.

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• •

During 2008 NBP’s top line (operating revenue) increased by 13% from Rs. 47.2 billion in 2007 to Rs. 53.5 billion in 2008. Pre-tax profit has reduced to Rs. 23.0 billion, a decrease of 18.9% over last year mainly on account of higher provision charge which increased due to the bank’s policy of prudently providing for against non-performing loans.

• •

Earnings per share reduced by 18.9% to Rs. 17.23 in 2008 Pre-tax return on equity stood at 30.5%, whereas pre-tax return on assets stands at 3.0% while cost to income ratio at 0.35 remained one of the highest amongst the Pakistani banks.

• •

Net interest income increased by 10.2 % to Rs. 37.1 billion from the corresponding period last year owing mainly to volume growth The increase in lending and assets yield was partially offset by increase in deposit rates mainly on account of a 4% mandatory increase in the rate on saving deposits and an overall increase in bank’s funding cost.

Non-interest income shows growth of 21.2 % mainly due to increase in fee, commission, exchange and other income. This growth is impressive since the contribution of capital gains on sale of securities declined from Rs. 2.3 billion in 2007 to Rs. 0.4 billion in 2008.


• •

Fee income increased by 17% Income from dealing in foreign currencies increased mainly on account of revaluation gains due to volatility of Pak Rupee. During the year the bank succeeded in getting compensation on delayed refunds for various years from the taxation authorities to the tune of Rs. 988 million which increased other income by Rs. 1.1 billion.

Administrative expenses increased due to increase in staff cost and other administrative expenses by 20.0 %. Staff cost increased on account of inflation linked increase in salaries and promotions announced in 2008. Record inflation also increased our other administrative expenses.

Provision charge against advances & other assets increased by Rs. 6.8 billion from Rs. 4.9 billion in 2007 to Rs.11.7 billion in 2008 reflecting the greater stress on some sectors in our portfolio.
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Record inflation, high interest rates, power shortages coupled with political environment were the factors for increase in NPLs which occurred across the banking system as evident from the increase in NPLs in the system by 47 %. Net NPL’s were at 3.3 % and provision coverage stood at 76%, one of the highest in the banking system.

The bank’s revaluation surplus on securities including Bank Al- Jazira and mutual funds was hit by this abnormal decline in equity prices and showed reduction of Rs. 22.7 billion or 86 %. This decline was mainly led by Bank Al-Jazira and NIT units; however the market value of these shares still exceeds the bank’s cost. As of the balance sheet date, the impairment loss on listed equity securities and mutual fund investments held under 'Available-for-sale' category amounted to Rs. 2.4 billion. SBP has allowed banks that the impairment loss resulting from the valuation of listed equity securities / mutual funds held under ‘Available-for-sale’ category of investments as of December 31, 2008 may be held under ‘surplus on revaluation of asset’ account as shown on the balance sheet. The impairment loss is required to be taken to the profit and loss account in the year 2009 on quarterly basis. The bank on a prudent basis decided to recognize Rs. 0.4 billion in P & L in the current year representing 25% of impairment loss on the shares portfolio.

During the year, the bank, on a prudent basis carried out a desktop revaluation of major properties to ascertain the current market value and to adjust revaluation surplus accordingly. This resulted in reduction of Rs.2.7 billion from previously assessed values of 2007.

Despite the difficult environment, NBP managed to pose an appreciable growth in deposits and advances. Advances increased by Rs. 72.7 billion or 21.3% mainly in corporate sector on account of financing related to energy and power.

2008 was a very difficult year in terms of liquidity and deposit mobilization. By year end, the deposits increased by 6% or Rs.33 billion. Bank’s current and saving accounts ratio stands at 58% and remains one of the highest in the banking sector.

Our corporate banking has strong relationships with the country’s top business houses. Corporate loans showed an impressive increase of more then 28% in 2008.
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During 2008 due to higher commodity support prices, financing under government operations increased by 118%. These loans are fully backed by GoP guarantees.


NBP’s Islamic banking operations have gathered momentum and have registered impressive growth in Deposits (75%), Advances (237%) and total Assets (84%) We expanded our operations in 2008 and 11 more branches across Pakistan were opened in 2008 taking the branch network to 1254. In 2008 NBP increased its number of overseas branches from 18 to 22.

VERTICAL ANALYSIS

Balance Sheet of NBP as at December 31, 2008
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Assets Cash and Balances with treasury Balances with other banks Lending to financial institutions – net Investments – net Advances – net Operating Fixed Assets Deferred tax assets – net Other Assets Total Liabilities Bills payable Borrowings Deposits and other accounts Liabilities against assets subject to lease Other liabilities Capital Share Capital Reserves Un-appropriated profit Surplus on revaluation of assets – net Total

Amount (Rs. ‘000’ 106503756 38344608 17128032 170822491 412986865 24217655 3204572 44550347 817758326 10219061 40458926 624939016 25274 39656831 8969751 19941047 52456204 21092216 817758326

Percentage 13.02% 4.69% 2.09% 20.89% 50.50% 2.96% 0.39% 5.44% 100% 1.25% 4.95% 76.42% .003% 4.85% 1.7% 2.44% 6.04% 2.5% 100%

INDUSTRY ANALYSIS
Comparison between National Bank of Pakistan, Bank al- Alfalah, Allied Bank of Pakistan and United Bank of Pakistan for the year ended 2008. Ca; Ratio Net Profit Margin Ratio Gross Profit Margin Ratio Return on total Equity Return on National Bank Bank Al- Allied Bank of United Bank of of Pakistan Falah Pakistan Pakistan 25.36% 10% 27% 27% 87.74% 15% 1.89% 57% 7% .372% 72% 18% 1.1% 65% 18% 1.37%
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Assets (After tax) Total Assets to shareholders fund Earning per share (pre-tax) Earning per share (aftertax) Payout Ratio Book Value Net Interest Income Growth

7.98 25.64 17.23 49.33 90.71 9.75%

20.47 2.24 1.63 76.69 18.27 5.68%

16.40 9.47 6.43 54.43 32.19 1.98%

13.79 10.8 8.24 56.9 35 .83%

FUTURE PROSPECTS OF THE ORGANIZATION
NBP remains committed to the interest of all stake holders including its employees, owners, regulators and Pakistani nation. We have well defined strategy on where and how we want to proceed in the years to come. With the implementation of the new ‘Core Banking Package’, NBP will completely automate its functions which in turn will appreciably enhance work efficiency. The Bank will continue to diversify its customer segments thereby increasing our product offering. Its commitment towards the employee’s empowerment /
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development will continue as The Bank believes that a motivated and well trained work force is necessary to ensure sustenance and growth. On the business side it main focus would be to reduce non-performing loans and increase deposits. The Bank remain committed to our Vision, Mission & core values and our strategy for the future includes recovery efforts and revival of non-performing loans, deposit mobilization, consolidation of loans, expense management and tapping into untapped markets by increasing our network both domestically and internationally. Customer service will remain its main focus of Operations management.

SWOT Analysis of the organization
Strength
• • • •
• •

NBP in one of the oldest bank of Pakistan and first nationalized bank Declared World’s best Foreign Exchange bank in 2008 Stable AAA/A-1+ (Tipple A/a-One Plus) rated bank Best Return on Capital Bank for 2006 amongst all the banks in Asia Highest Profit making bank of Pakistan Having Highest Assets and Capital compared to any bank in Pakistan Functioning as an agent of State Bank of Pakistan Dealing Government Treasury where SBP has not its own branch Having unshakable trust of the public and its stakeholders
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• • •

• •

Giving Loans alone in the market against Gold Ornaments Performing social responsibilities and claiming “The Nation’s Bank” Disbursing Salaries and Pensions to the Government employees and earning high profit on NBP-Advance Salary Loan Scheme Earning commission from SBP on Government transaction Facing no problem of cash/currency being its Chest and Sub-chest Branches all over the country NBP have presence in the countries having sizeable trade volumes with Pakistan by its overseas operations Holds largest deposit base in the market share in terms of number of accounts Leading bank in agriculture financing amongst commercial banks with the market share of 15% Helping in earning of foreign exchange, remittances and leading agent of Western Union Money Transfer




• •

Weakness

The bank falls far behind as far as the innovative schemes are concerned The strong political hold of some parties and government and their dominance is affecting the bank in a negative way Lowest Internal Control and Compliance System, SBP rated “Marginal” which is alarming for the Bank Unsatisfactory corporate culture of the Bank Physical environment and atmosphere compare to other banks does not meet the standard Less number of Online Branches Ineffective use of technologies i.e. Information technology Shortage of staff (employee per customer is very low as compared to its competitors) Inefficient training and technical education of staff.
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• • •

Opportunities
• • • • • • •

Being a Government Bank NBP having wide scope in economic market Trust and reliability that NBP enjoy, creates chances to enhance deposit and profitability Its vast network of domestic and overseas branches can help to expand business more and more. Bank’s deposit is increasing rapidly so there is a great opportunity to enhance its investment and financing. Being an agent of State Bank of Pakistan it can play vital role in local economy. Earning commission/exchange on Government transactions NBP can utilize the electronic banking opportunity to ensure on line banking 24 hours a day seven days a week

Threats
• •

SBP penalties due to low internal control and compliance Government, SBP and Prudential Rules and Regulations The emergence of new competitors especially in terms of foreign banks Its staff switching over to other private banks due to more facilities Other bank’s charming atmosphere and relaxation in documentation SBP rated just “Marginal” in respect of System & Control which is alarming for the Bank to survive its license. NBP staff code of ethics and practices. High number of complaints regarding staff behavior Government Schemes, Government Revenue Collection, Government Payments and FBR Collections create heavy workload.


• • •


• •

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Conclusion
Being a student of MBA Finance it became compulsory for me to do an internship for which I got an opportunity at National Bank of Pakistan Model Town Branch Lahore. I worked there for almost 6 weeks. I have concluded my report with my findings as given below

Customer Satisfaction
In NBP customer dealing is well, but during rush hour the customer has to wait for a long time for their turn. It’s quite hard for a new customer or potential customer to get the required information.

Poor record management and filing system
During my internship I observed that filing system of branch is not good. When certain record is needed the staff has to struggle to find it out and a lot of time is wasted.

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Unequal distribution of work
Work is not equally distributed. On one hand some employee have to work all day without relaxing while some others have nothing to do at all. This not only creates confusion among employees but also hurting and disturbing for overall setup of the bank. And above all it results in dissatisfaction among customers as well.

Marketing visits
A useful mode of contact is through personal marketing visits. Such visits are important in informing and perusing the existing and potential customers about the products and creating a sense of belongingness with them.

Formal Organization
Formal organization includes the activities of two or more person, which are cautiously determined groups and coordinated towards a given objective. It provides base when people are able to communicate with other, when they have common purpose and they are willing to work. In NBP, we find a formal organization. Bernard referred to an organization as a formal when the activities of two or more persons are coordinated towards a given objective. The formal organization comes into being when people are able to communicate with one another or willing to act and share a purpose. In this formal organization of NBP the activities are carried out in a more formal way. In theoretical terms it provides basis for communication with one another but in practice it is not exercised because an employee at high level cannot get straight away to manager or SVP and ask him about of his problem faced by him, because first he has to talk to his immediate superior and follow a proper channel of communication.

Difference between theory and practice
A vast difference exists between theory and practice and NBP has written procedure but practical work done by employees is a bit different from written procedures.

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More accounts fewer deposits.
Efficient banking is one, which does not emphasize on number of accounts but on greater amount of deposits. NBP is more interested in increasing its number of account irrespective to its deposit. The main reason behind it is that bank does not provide personalize service to all the account holders and does not improve its quality and services

Delegation of authority
Manager has very limited authority; he has to take the approval from his management authority i-e. In case of advance he has to take the approval of general and regional manager. The other problem is created, when the manager is not present in his office, the customer having to wait for hours. This discourages both customer and officers because they have to suffer a lot

Lack of specialized training
NBP does not provide adequate facility of specialized training to their staff. Training is generalized rather than specialized. As the worker finishes his training, he is inducted into a specific field without having great deal of knowledge about the field.

Poor job rotation
There is absence of job rotation in NBP Model Town. A person placed in onedepartment remains their forever. It reduces career opportunities as well boredom and in the end results in career plaguing. Job rotation is very important for employee especially for those who are newly recruited. The newly recruit should be rated in all department of the banking in order to get familiar with working of different departments so that when they get a responsible position they have know how of the whole system.

Lack of appreciation
Another very important thing which is ignored in the bank is appreciation if the employee on their good performance. If hard work and performance of employees is not recognized and appreciated they become dishearten which results in decline in performance.

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Promotions
Promotions in NBP are purely on the basis of seniority, so the new young person having high qualification remains behind for quite a lot of time. Top management and staff union put pressure for the promotion of their favorites, which gives a sense of deprivation to the deserving employee and their efficiency is affected.

Marketing at desk
Bank employee come in daily contact with many people who happen to deal with the casual remittance, travelers cheques, safe custody, pensioners, depositing license fee and variety of other functions and variety of other people with whom the Bank has no account or regular business relationship. The Bank employees are doing very little on their own to explore the possibilities of selling banking services to them as a marketing contributor. The entire Bank community should make a conscious effort in addition to their normal work to explore the possibilities of selling banking services to them. The market opportunities are hidden in every dealing a banker handles; the question is that if he has the art and urge to seize such opportunities.

Lack of business communication
There is no proper way to give information to their customer. To avoid this minor dissatisfaction and tension in the mind of customer, and deficiency of the service, it is recommended that the bank should provide brochures etc containing information in details. Some general information should be placed in information notice board on the entrance where customer can see it easily or it should be self-attractive

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Recommendations for Improvements
The recommendations are as follows:

Professional training
NBP staff lacks professionalism. They lack the necessary training to do the job efficiently and properly. Although staff colleges in all major cities but they are not performing well. For this purpose these staff colleges should be reorganized and their syllabus should be made in such a way to help the employee understand the everchanging global economic scenario. Banking council of Pakistan should also initiate some programs to equip the staff with much needed professional training.

Delegation of authority
Employees of the bank should be given a task and authority and they should be asked for their responsibility.

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Performance Appraisal
The manager should strictly monitor the performance of every staff member. All of them should be awarded according to their performance and result in the shape of bonuses to motivated and incite them to work more efficiently.

To Over Come Problem of Space and Furniture
In the critical analysis this, problem is discussed. To overcome this problem it is suggested that a special section should be made inside the branch. Which should only handle the treasury function, salaries and pensions of federal personnel or the bank should do these functions in the evening time. Also management should purchase more furniture and arrange them in such a way which provides maximum space and convenient especially in deposit department and there should also be convenient sitting place for customers.

Job Rotation
Job Rotation is not properly carried out. Some of the employees are continually serving at the same post. They are simply rotated at the same branch. Therefore it is recommended that evenly rotation of every employee should take place after every three years in different braches of the bank.

Changes in Policies
There should not be any abrupt policies change by the upper management, as this practice hurts the customer confidences in the bank. Government should make long-term policies

Link with the Head Quarter
Most of the branches of NBP should established a direct link with the, head quarter In Karachi, through Internet or Intranet. This will make the functions and decision making of the management easier and convenient.

Credit Card
National bank of Pakistan should start its operation in credit card. These cards are very helpful for the ordinary customer in general and the business people in particular. To

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make it mores secure and to eliminate the misuse of it, the management is required to keep proper security against the card.

Installing Validator
Validator machine is used to count the currency notes and its installation will help to eliminate to counting errors and will save time.

Interest on Overdraft:
Overdraft is a short-term credit facility provided by the bank to its trustworthy customers free of interest. Only bank commission is charge small amount of mark-up on the overdraft, which will help the bank to improve its revenue position.

Cash Financing
In this mode of financing the amount of credit not utilized by the borrower is remained tax-free. It is recommended that a small amount of interest should be charge on this amount as well because the bank gas kept-aside the amount for that borrower and can not advance it anywhere.

Decreasing Administrative Expenses
Bank should their administrative expenses. That can be done by downsizing the surplus pool of employees. The branches that are not much used could also be closed. Management should be equipped with new ways to control the bank expenses. That will give positive results in the future.

Needs to be Flexible in credit Policy
As mentioned earlier, NBP is very conservative in advances and loans policy. It reduces the investment opportunities. Also loans should be given to the small businessmen and the agriculture sector at the low markup rate. It should adopt flexible credit policy while giving credit to the agriculture sector.

Technological Advancement
I would like to suggest that at least all the main branches of NBP should be fully computerized in order to expedite the dealing process among bankers and their customers. Every department should be provided a computer with adequate training
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(especially Advances, Deposits and Foreign Exchange departments).Daily records should be entered directly into these computers, (instead entering the overall daily transactions after the banking hours). It will not only reduce transaction time, will increase accuracy but will also be efficient as well. Not only it will be economical but will also reduce the extra burden of work of the bank. It will also help in reducing the use of excessive paper work.

Staff Relationship
Good relationship among staff member leads to the peak performances in any organization. I observed that the staff relationship was normal other wise but some time I noticed that there exists a little conformity among the staff members. Another syndrome from which the staff suffered was that all of them considered themselves more important than others. Some of the officers used to say that if I am absent for a day the bank would stop working. So this sort of attitude is not good because it mars bank image and juniors’ willingness learn and work hard and in the end will hurt the whole team.

Improper Distribution of Work
Proper distribution work leads to success in every organization. Proper distribution of work prevents the employee from over and under work situation. So for a smooth running of an organization proper distribution of work is the hint to be followed. During my internship I observed that there was no proper distribution of work in the bank. I saw that some of the employee worked like ants other sat idle starting here and there. So this created a lot of over work situation for while relaxation for other.

Favoritism and nepotism
In the branch during my internship I saw that when some of the employees are transfer to other places, due to their relation with influential people and with top management they can cancel their transfer in few weeks, when they are unsatisfied at that place. So I suggest that in the organization there should be no favoritism, nepotism and politics and their transfer and promotion should be made on merit and according to the rules and regulations of the bank and provided favorable environment to the employee to show their performances.
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Marketing Policy
The branch should adopt various marketing strategy and promotion strategy to promote the bank and its product. The most important in my opinion is personal marketing; it is the most effective of all when you think in term of branch level. But on the whole organization level, they should arrange the seminar with in the bank and outside the bank. They should introduce various prizing schemes. They should do more advertising through newspaper and media and through channel of personal contacts.

Complaints of Customer
There should be an information desk to provide the information and to receive the complaints of the customer in the bank. There is no complaint box available in the branch and not any person appointed to hear the complaints. Every person cannot go to the manager for the complaint because most of the people are hesitant. So I suggest management to install a compliant box in the branch, and recruit a special person for that guidance of the customer when they are unable to manage some difficulties in banking matters.

Organizational Commitment
It is suggested that employees working on daily wages basis should be given some benefits, which the other employees are getting. Their salaries must increase according to efficiency, performance and service which would enhance organizational commitment of the employees working in the organization.

Credit Monitoring
The credit department of the bank should carries out vigilant credit monitoring. They should ensure the proper payment of installments and the mark-up by the borrower. The staff members who have done all the paper work of the loan extension should perform the monitoring, as he/she will be having more information about the borrower.

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Avoiding Bad Debts
Policies should be crafted in a way to ensure that no loan is extended on political pressure. SBP regulation for loan approval should be strictly followed. According to which the current ration of borrower’s business must be 1:1 and the debt to equity ratio should be 60:40, means the liquidity position of business should be healthy.

References
Website of the National Bank of Pakistan http://www.nbp.com.pk http://www.nbp.com.pk/publications/AnReport2008.aspx http://www.nbp.com.pk/publications/AnReport2007.aspx http://www.nbp.com.pk/publications/AnnualReport2006.pdf www.abl.com/thebank/pdf/annual_report08/abl-annual-report-2008.pdf www.ubl.com.pk/aboutus/financial_report/report_2008/annual_doc08/ http://bankalfalah.com/about/download/Annualreport2008.pdf http://www.kse.com.pk/listing-companies/analysisreport.php?id=38idsid=3.07 Economic Bulletin September-October 2009 Internship Supervisor Staff members at NBP Model Town Lahore

Annual Report 2006, published by NBP, Head Office Karachi Annual Report 2007, published by NBP, Head Office Karachi Annual Report 2008, published by NBP, Head Office Karachi

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