An Internship Report on

National Bank of Pakistan
(Takhte Nasarti).

Internship Report submitted to the Kohat University Of Science & Technology, Kohat in partial fulfillment of the requirements for the degree of master of Business Administration & Information Technology.

Sanaullah BBA-IT
Kohat University Of Science & Technology, Kohat.

Submitted To:
Sir Aamir Saifullah


It is an academic requirement for a student of master in Business Administration to undergo an internship program of tow months week duration. This requirement provides with an opportunity to acquaint the student of BBA (IT) with practical working of an organization. I selected National Bank of Pakistan Takhte Nasarti for my internship. During my work, I was rotated in different departments of National Bank of Pakistan Main Branch Hangu and got some understanding of their operations and procedures. The Bank staff was very much cooperative with me, they have provided me with guidance and relevant material to write a report. I am very much thankful to them and to my advisor sir Aamir Saifullah for his supervision and guidance.

I dedicated my This effort to my co-operative and encouraging family.

I am very thankful to all the bank staff of NBP Takhte Nasarti who supports me on every step & guide me in routine transactions. I am also thankful to Mr. Baber Rehman, who support me in providing data about National bank. I say thanks to all those who support me in preparing this internship report & provide me assistance at crucial times. I am also very thankful to Mr. Amir Saifullah for his guidance & assistance during report preparation.




National Bank of Pakistan
Signature: _________________________ Name: Sir Aamir Saifullah________ Designation: Lecturer _________________ Organization: Institute of Management Sciences
Kohat University of science and technology. Kohat


Certified that Internship Report on “National Bank of Pakistan” submitted by Sanaullah of BBA-IT (Hons) under Registration No. 2004-KUIMS-186 fulfill the partial requirement for the award of Bachelor of business administration and information Technology.

______________ External examiner

____________ Sir Aamir Saifullah Supervisor

Kohat University of Science and Technology, KOHAT



S.NO Title Page No.
2 10 11 13 13 13 13 14 15 16 16 18 19 19 20 20 21 22 23 23 24 24 25 25 25 26 26 27 27 28 28 31 32 33 34 34 34

1. Preface 2. List of Acronyms 3. Executive Summary Section-1 Introduction to Study Chapter#1 Introduction 1.1 Background of Study 1.2 Purpose of Study 1.3 Scope of Study 1.4 Methodology of Study 1.5 Scheme of Study Section-2 Literature Review Chapter#2 History , Formation and Growth of NBP 2.1 Incorporation 2.2 History of NBP 2.3 Aggressive Style of Business 2.4 Modernization The Den 2.5 Nationalization And Cost Minimization Era (1996 Onwards) 2.6 Organizational Objectives 2.7 The Institutional Approach 2.8 Corporate Culture 2.9 2.10 2.11 2.12 Chapter#3 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 Chapter#4 4.1 The Change Programme Customer Oriented System Decentralization System and Procedures Organizational Setup General Outlook Organizational Structure Executive Committee Regional Headquarter Peshawar Main Branch Kohat Corporate Branches Overseas Operations of NBP Organizational Setup Banker Customer Relationship Rights Of Customer Towards The Bank Rights Of Bankers Towards The Customers Departmentalization Human Resource Department

4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13 4.14 4.15 4.16 4.17 4.18 4.19 4.20 Section-3 Chapter#5 5.1 5.2 5.3 5.4 5.5 5.6 5.7 Section-4 Chapter#6 6.1 6.2 6.3 6.4 Chapter#7 7.1 7.2 7.3

Selection Process Transfer Policy Criteria Training Motivation Deposit department Advance department Remittances Departments Account department Computer department Foreign exchange department Establishment department Central account department Audit and inspection department Stores and record department Marketing department Public relation department Government Receipts And Payments Department Dispatch Department Ratio Analysis Financial Ratio Analysis Trade credit Suppliers of long term debts Investor Management Financial ratio analysis Index analysis Financial performance Analysis critical analysis Strengths weaknesses Opportunities Threats Conclusion and Recommendation Conclusion Recommendations Online Banking References Bibliography

35 36 38 40 41 42 43 44 45 45 46 46 47 47 47 47 48 48 49 50 50 50 50 50 51 51 52 55 55 55 56 57 58 59 59 59 60 63 65 66


NBP HBL SEVP EVP VP OG RBC RHQ RCC ROC A&I GM OI National Bank of Pakistan Habib Bank Limited Senior Executive Vice President Executive Vice President Vice President Officer grade Regional Business Chief Regional Headquarter Regional Compliance Chief Regional Operational Chief Audit and Inspection General Manager Office Incharge


Management Policy Committee Regional Office Marketing Development Division Management Banking Division

 This report is aimed at studying and analyzing the National Bank of Pakistan NBP Takhte Nasarti. This report is based on findings of eight weeks internship. National Bank of Pakistan was established in 1949. It has 1193 branches. National Bank of Pakistan has 28 regional headquarters and 12 corporate branches.  The main purpose of the internship is to prepare and submit the report as partial fulfillment for the award of BBA (IT) degree.. I have also taken the help from the books like human resource management, marketing and accounting etc. as well as from the Internet.  Report findings are as follows. Apart from other chapters, I have done the financial analysis. some problems are: • lack of professional staff • improper management

• delegations of authorities are not according to the responsibilities • lack of computers • functional problems in departments • favoritism and nepotism • unequal distribution of work • improper counter services • ineffective marketing For the better functioning of bank, it needs to have sound system without such problems. For that I have suggested some recommendations for improvement;  report recommendations are as follows: (a) complaint of customers (b) marketing policy (c) note counting machine (d) poor quality of counter service (e) unequal distribution of work (f) computer networking Bank should make its distinctive position in such area of competition by providing more effective services.


1.1: BACKGROUND OF STUDY National Bank of Pakistan is one of the leading and first government recognized bank in Pakistan. NBP was established in November 9th, 1949, which started functioning from November 20th, 1949. The reason for development was that the NBP in addition to being a commercial bank in the public sector at a time when all other commercial banks were in private sector, also came to acquire certain characteristics which to this day set it part from other nationalized commercial banks of the country. The most important of these characteristics is that NBP acts as an agent of the central bank of the country. The NBP also acts as a trustee to the national investment trust (NIT); one of the premier financial institutions of the country charged the responsibility of mobilizing small saving. The establishment of NBP thus signaled the achievement of another milestone in the development of the banking industry in Pakistan.


1.2: PURPOSE OF STUDY National Bank of Pakistan is one of the oldest and well-established bank in the public sector. So I prefer NBP in order to set knowledge of this organization (NBP) for the students of master of Business Administration, especially for the IT students it is very important to know the all the financial activity. In finance department I know, in which method the branch issued the advances and what markup. In National Bank of Pakistan Takhte Nasrati that give short –term finance especially for the govt. employees, and the chance of default is very low because they have also a bank account, and their salary come in that branch. The weakness of the finance section is that the process are very slow, and the requirement for issuing the advances, for the govt. employees is very tough. And there is no even single case of default. 1.3: SCOPE OF WORK
The scope of my work is based on the complete observation of national bank, but due to shortage of time, I worked in special department of the branch, first of all deposit department. In deposit department, deposits are divided in to two or three types. i) current deposits


ii) iii)

PLS deposits (PLS saving A/C, PLS term deposit.) Fixed Deposits. In the above three types of deposits, I learn the entire necessary

requirements and also know the interest rate. Secondly advance department is the most important department of the bank. It deals long-term advance and Short-term advance and also consists of finance i.e. short-term finance and long term finance. Thirdly I also worked in remittance department. It consists of issuing DDS, MITS, telegraphic transfers SE (short credit). LAC (local short credit) clearing. I also worked in account department and check issuing and computer department.

During my internship in National Bank of Pakistan NBP Takhte Nasrati the most important task was to collect more quality information about the organization as much as possible that is why I used a number of techniques to collect the required material and conduct the report. The methodology, which I adopted for this research is based on both the primary data as well as secondary data regarding the overall operation of NBP.

Primary Data: -

The primary data consist of interviews with manager,

discussions coordination with the executive and officers, and other staff’s personal observation and different types of written material from Bank.


Secondary data: -

The sources of secondary data were annual report

2001, manuals, circulars, relevant books, brochures and monthly economic reports. I have also got support from available banking material & books, as well as information from human resource management and research methodology material.

Chapter #1 includes background, purpose scope, methodology and scheme of study. Chapter #2 includes formation and growth of NBP, incorporation, organizational objectives and customer oriented system Chapter #3 includes organization setup general outlook, organization structure, corporate branches and overseas operation branches. Chapter #4 departmentalization it include various department in branch. Chapter #5 includes financial Ratio Analysis Chapter #6 SWOT (Critical) Analysis Chapter #7 Conclusion and Recommendations

Chapter # 2.

The word “banking” is derived from the words Bancus, Banque or Back. The history of Banking is traced to as early as 2000BC. The origin of banking is also traced to early goldsmith. The first stage in the development of modern banking thus was the accepting of deposits of cash from these persons who had surplus money with themselves. In the second step, goldsmiths used issue receipts for the money deposits with them. These receipts began to pass from hand to hand in settlement of transaction. In the same time they thought it profitable to lend at least some of the money deposited with them to the needy persons. This proved quite a profitable business for the gold smiths. In order to create confidence among the people, different steps were taken to regulate the banking organization. A conference was held in Nuremberg, 1584. It was decided that a bank should be set up by the state, which should streamline the banking organization and technique. The first central bank was formed in Genoa in 1587. Banks of England were established in 1694. Wit the passage of time the activities of the commercial banks have greatly increased. They now deal with large number of matters such as obtaining funds, advancing loans to businesses, farmers, house holds, and making investment in stocks discount bills of exchange etc.

By the year 1700 the bank of England was not only 100 issuing notes but also conducting accounts for customers. In 1853 bank of England further impetus for cheques, currency, and they became very popular among the customers who would either pass them from hand to hand. In 1946 the labor government nationalized the Bank of England.


Banking companies ordinance 1962 section 5(b) defines bank as, “Banking means the accepting for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, an drawable by cheques, drafts order or otherwise.

The History starts from the partition of Indo-Pak subcontinent in August 1947. At that time, the area constituting Pakistan had 631 offices of 45 schedule banks out of which 487 were located in West Pakistan and 144 in East Pakistan, which was also served by 500 offices of small and non-scheduled banks. There were 19 branches of foreign banks in Pakistan but they had a very little role to play. Just after the partition the Indian bankers started migrating and shifting all the head offices of their banks and capital to India. This way great set back to the banking field in Pakistan, and resulted in a decline in the number of offices of scheduled banks from 631 to 195 by June 1948. In West Pakistan the number fell from 487 to 81, in East Pakistan from 144 to 114. Among Habib Bank limited with 25 offices and Australian Bank Limited with 19 offices were institutions run by Muslims who shifted their head offices to Pakistan. The technical and administrative difficulties of establishing a central bank just after independence compelled Pakistan to enter into an agreement with reserve Bank of India by which the bank was to perform function of central bank in this area upto 30th September 1948. The reserve bank of India started following polices against interest of Pakistan. The situation become so grave that after the consolation of two governments, the Reserve Bank of India way asked to finish the agreement from 30 th June 1948 instead of 30th September 1948. The Government of Pakistan decided to establish the State Bank of Pakistan as its Central Bank from 1st July 1948. In the same year the first Pakistani notes comes in the domination.


On 9 November 1949, the government of Pakistan issued an order, which brought into being the first public sector bank in Pakistan named as National Bank of Pakistan. According to the order, the Bank started functioning on November 20, 1949. All other earlier and subsequent commercial banks were incorporated under companies’ law but in the case of NBP; this practice was set aside, which gave NBP a sole identity than other banks. Need for this step was felt necessary because of the financial crises in September

1949, when Government interest was not secure due to absence of public sector bank. That’s why from the very beginning the board of directors of the bank, the Government duly presented the law. The new bank received a liberal advance from the State Bank of Pakistan, which help it to extend finances for Jute and Cotton trade in the beginning. National Bank of Pakistan was not only the first commercial bank of public sector but it also attained some special features over other banks like it acts as an agent of the State Bank of Pakistan where SBP does maintain its own branches. In those places it provides all facilities of clearing house and other related, to commercial banks in that area. In addition it is also an agent to the government and custodian of government treasury and government transactions. It also acts as a trusty to the National Investment Trust, a premier financial institution charged with the responsibility of mobilizing small saving in the country. In this way the establishment of State Bank of Pakistan was another milestone development of banking industry in Pakistan.

2.1 : HISTORY OF NATIONAL BANK OF PAKISTAN 2.1.1 : The Expansion (1949-1960)
National bank of Pakistan came into being, and filled a vast vacuum, left in banking as a consequence of the emergence of the independent state of Pakistan. Thus it was continued to be the largest commercial bank in the country due to its monopoly over government funds and its role as banker to the government and as an agent of the State Bank of Pakistan. This was a period of steady expansion with the growth of government funds and business.

: The Decline (1961-1972)
Privatization increased in terms of size and sophistication, as a result major private bank i.e. Habib Bank Limited (HBP) overtook National Bank of Pakistan (NBP) to become the large bank. HBL was also ahead in the deposit size. During this period, NBP expands very cautiously, from the competitive fray after the creation (1958) of the highly aggressive Habib Bank Limited (HBP) and United Bank Limited (UBP), lost continuously not only in the base of assets and size of deposits but also in profitability.

2.2.3: Commercialization (1973- 1981)
Nationalization of commercial banks occurred in the country, and the monopoly of NBP over government businesses and funds began to be eroded. As a consequence, NBP came under pressure to commercialize. This period saw the introduction of new commercial response. Mainly due to very rapid expansion, the system of internal control failed to keep pace with the requirement of a fast expanding system. The market share in the overall deposits of nationalized banks declined from 25 percent during this period. At the same time, the return on asses and on the deposits declined from Rs.0.63 percent to 0.32 percent while profits grew sluggishly from Rs.95 millions to Rs.110 millions till 1981.


Beginning from 1982-1983 period, a basis was laid for an aggressive competitive and market-orient response. It was during this period that the domestic network began to show increasingly profits. The share of NBP in the bank deposit of nationalized banks grew from 25.4 percent in 1983 to 27.7 percent in 1988. The share in the advances increased from 20.7 percent to 26.9 percent during the same period. It was during this strategic phase that NBP achieved as relatively firm position as number two in relation to Habib Bank Ltd. And left United Bank Ltd. Behind profit before tax grew from Rs.149 million in 1988, thus registering an increase of 111 percent in the seven years period comparing with only 4 percent increase in the profits during the previous seven years period.

2.2.5: MODERNIZATION (1990-1996)
The National Bank of Pakistan posed itself for a strong bank through into its next strategic phase that can be termed as the strategic phase. The main thrust of this phase was the re-organization of the bank to meet the challenges of the 21 st century and to build a sound basis for the organizational excellence through modern techniques and methods of bank management from bottom upward starting from the branch to the top.

A beautiful achievement in orientation and commercial bank basis existed in the field and Head Offices as a result success in the 1985-88 period and the revolutionary success in 1995-1996. The executive and office cadres are also conscious of the organizational business aim and are expected to respond vigorously to Excellent Through Modernization strategy. The change in the attitude of the top bosses of the NBP could be easily seen by the revolutionary reforms introduced in the organization for example, Culture Change Program and Credit Card. These two reforms portrayed that the bosses of the NBP were well aware of the market changes.

Like all businesses in Pakistan, National Bank of Pakistan was also put under a great pressure in this period when the biggest bank of the country was faced with losses. Government of Pakistan also made some reform in this time. The Pakistan banking Council was demolishes and all banks were put under Independent boards of governors. Default of loans is the big issue since that time. In 1996-97 the government of Pakistan pressurized all the institutions of the country to down-size their staff so as to Cut-down the expenses. This was the demand of I.M.F. As a result, a Golden Handshake Scheme was offered to the employees of the bank under which over 7500 employees


were removed. This decision created a lot of cost that was then amortized. In the second phase of the cost reduction program, the number of branches was reduced by a figure of 100, which included all the branches that were making loses. The decision of May 28,1998 blasts followed by a political decision of freezing of foreign currency accounts also created a hard time of NBP. But still NBP performed well in such difficult conditions and succeeded in the increase of deposits and also collects a reasonable amount of money from the defaulters. The situation became more worst by the

economic crises of East Asian countries but again National Bank of Pakistan performed well in that area and maintained its credibility in these areas. National Bank of Pakistan, as per its tradition, forwarded for revival of fifty six units with Rs. 3.5 billion in 1998 and also participated in the self employment scheme with Rs.1.9 billion. National Bank of Pakistan also introduced ATM card system and it also became a member of SWIFT in New York. It has also prepared a plane for electronic banking and E-commerce. By seeing all these improvements we can say that the officials and directors of the bank are well aware of all the necessity of modernization.

2.2: ORAGNIZATION OBJECTIVES 2.6.1 : Mission Statement:
To be recognized in the market place by institutionalizing a merit and performance culture, creating a powerful and distinctive brand, identity, achieving top-tier financial performance, and adopting and living out our core values.

2.6.2 : The Objectives:
All the objectives of the National Bank of Pakistan were compatible to the mission statement of the bank. As a business organization, its main objective was profit maximization, the only yard of performance. NBP tries to maximize its profits by its two basic functions i.e. deposits and finances.

2.6.3 : To Increase Deposits:
Due to the tough competition faced in every field, banking has no competition from this category. Whether the bank is Pakistani, Foreign, and private or nationalized, competition is there. In the competition NBP has the goal to achieve the greatest possible amounts of deposits. The tool used by the bank in order to increase its deposits was to provide the best of facilities to their customers. By the increase in profits of bank mean that bank becomes capable of lending more loans to the clients and hence earning profit from them. In simple terms, holding greater deposits results in greater income of the bank, and the profit maximization occurs and that is achievement of the banks’ this regard, the bank’s favorite account was PLS saving account because in the main city branch Hangu there were small savings with the general public. Current account was also popular in the bank because the bank does not have to pay any interest to the customers


and hence banks can save some money, although some facilities are provided to the customers.

2.6.4 : Extension of Loans:
The profitability of the bank depends upon the amount of loan sanctioned or given to the people. The credits afforded by the bank depends greatly on one factor and that is the credit along with the interest payable should be secure, and that in turn depends upon the type of people, the bank is sanctioning loans. Banking history is full of incidences where people were offered huge loans and they wrote off their loans by means of political influence. It was very important issue for NBP to secure its loans and the interest as well. Therefore NBP was very selective in sanctioning loans to the people in those days. NBP preferred loans to bigger and reliable parties, after securing the collateral. NBP also provides loans to small businesses but mostly the loans were provided to the industrial sector of Sindh and Punjab. The loans provided by the NBP constitute the major portion of the profit of the bank. The markup charged by the bank varies with the type of loan issued to the customer, the terms and the conditions of the loans were also negotiable depending upon the relationship between the customer and the bank. NBP has an extremely well organized credit section. The staff is trained and educated and competent. They carry out complete financial analysis and different ratios are also calculated. The bank specially emphasized a sound quick ratio that shows the current cashable assets and could be relied upon to provide the cover for the loan.



THE UNIQUE ROLE OF NBP IN Pakistan’s financial sectors confers on the institution a dual responsibility to be a commercial bank in its own right and at the same time, as a trustee of public finances, to act as a custodian of the public interest. The continuing validity of this role means that the kind of responsibility borne by National Bank of Pakistan is unlike any other financial institution. As the only institution of its kind, it performance an operational direction a need to be reflected in an ethos of productivity, efficiency, flexibility and quality of services both to the individual customer and the nation at large. New initiatives and new efforts have been undertaken so as to: 1) Restore institutional effectiveness with priority to customer care. 2) Improve decisions making at all level relating rewards with performance. 3) Upgrade the quality of resources available to the bank.Improve deployment of resources. 4) Diversity in to new areas of activities. 5) Build on existing strength.




National Bank of Pakistan, after its pure commercialization, focussed its eyes on the corporate sector and initiate an ambitious and farsighted Corporate Culture Change Program in collaboration with price Water House (U.K) and AF FERGUSON & Company in 1995. It commenced with an Executive Envisioning workshop in Bhurban. This two days workshop developed a comprehensive Mission Statement, vision of the bank’s future, it sets out in clear and realistic terms, the key objectives and goals of NBP based on the perceived strengths, weakness, opportunities and threats being faced by the institution. In this perspective, NBP has defined for itself a course where it will endeavor to maximize its impact commensurate with the size and scale of operations. In order to change the bank’s posture from reactive, four major area had been highlighted for concerted of actions. 1) Personal Human Resource Management plan 2) Operations and Strategic management Plan 3) Technology Information Technologies Acquisition Plan 4) Marketing.



2.9.1 : The Symbol Of Change
The Logo of national Bank of Pakistan is “the symbol of change”. This logo has led the bank to believe that “Organizations that do not change the changing environment wither away into oblivion.” This led NBP to introduce the “Cultural Change Program”. The spirit of the Culture Change Program is symbolized by the special “Change” logo. It depicts a soaring eagle clasping the NBP logo, and epitomizes our vision. The NBP logo represents the tradition of scholarly and Security, the basis for the future of the bank. The Eagle represents Dynamisms, symbolizing the new customer focus and the new products, new way of working carrying the bank to dominance.

2.9.2 : Major Improvements
In the change program, the bank is giving great importance to its employees. The bank thinks that the changing environment will bring three major improvements. First, there will be far greater recognition of an individual’s contribution to the bank. There will be an official reward and respect for the efforts and achievements. Second, the strengthening of the staff means that they can directly contribute to the shape of their future at the bank. Third, a steady improvement in working conditions both in terms of physical surroundings and relationships with the colleagues and customers.



In the past, NBP was dominated by the personalities. It is said about NBP that what certain people wanted was done and the rest was not. In the change program, NBP plan to be driven by the customers and system. The customers will make the demands from the bank and the system will tell the bank that whether the bank can meet those demands or not. The change program also proposes to shrink the role of the Head Office. The role of the Head Office is setting strategy and policy, Developing product and Monitoring Performance to ensure compliance with the policy. The Head Office is into there to make decision for the line managers. In the change program the bank plans to get the decision making down to the level where it needs to be as close to the customer as possible. The change in the shape of Head Office will mean that the line offices will have to accept the greater responsibilities. The increase in the responsibilities will also expand the line office. Change program not only wants to reduce the dependence on the Head Office for the decision but also wants to free themselves from the intermediate management layers. With this change the bank expects that it will reduce the bureaucracy, empower line offices, and free up scarce managers to deal with the customer. The upper management wants to structure the bank to align closely with the core business activity.

National Bank of Pakistan in the past was characterized by highly centralized and rigid decision making structure, which was not conductive to modern banking requirements. An elaborate process of decentralization and devolution has commenced at NBP. In doing so, the bank is in line with recommendations prepared at the national level. In pursuance of the Chattha Commission report; regional headquarters has replaced provincial headquarters. Administratively the bank is now divided into nine regions reporting to as many Regional Chiefs Executives, who report directly to the head office.

The removal of the additional provincial tier has resulted in quicker turn around. And also improved coordination between head office and branches.

Since the foundation of the bank in 1949, no effort has been made to improve the operational system and procedures. The basic book of instructions (BBI), the operational manual of the bank has its origins in the pre-independence practices, prevailing at institutions such as the imperial bank of India. The critical need of updating of management of the bank and its operations has been realized. Work is continuing under supervision of senior executives, to bring the BBI in line with the current banking conditions and system.


The new organizational structure of NBP constitutes a board of directors and an executive committee as the governing bodies. NBP branches in all over the country. The head office is operationally incharge of central affairs including the delegation of powers and authority to the Regional Headquarters all over the country. These regional headquarters direct the functions of the branches including corporate branches. The NBP has 28 regions as under.
Regional Headquarters Sindh Punjab Baluchistan NWFP and Azad Kashmir Federal Capital Total No. of Regions 5 14 2 6 1 28


Chairman and President







Secretary 23

Executive Committee consists of one president and nine members, from whom one member also performs functions of both as a member and secretary. Board of directors nominates executive committee and executive committee nominates its division heads.



Secretary/ Member





Regional headquarter is situated at D.I Khan. Mr. Shah Jehan Khan is the Regional Business chief in D.I Khan. Regional office comprises of following committee. Regional committee: - Regional Committee headed by RBC is responsible for overall operation of branches in the respective region. Regional Business Chief Chairman

Regional Operations Chief (Member)

Regional Risk Mgt. Chief (Member)

Regional Compliance Chief (Member)


Main Branch KOAT is also one of the branches of National Bank of Pakistan. In this branch the main authority is related to manager and other staff works under his supervision. Manager is the incharge of the Bank. Accountant is the second senior person in Main Branch Hangu , and then advance incharge computer and current set indulge billion pensions and cash incharge is also present in this branch. The Main branch Hangu works under Regional Headquarter D.I. Khan.

NBP Takhte Nasarty


Second Manager/Account

Foreign Exchange

Advance Incharge

PLS Saving Seating

Establishme nt Incharge

Current Incharge Dispatch Incharge.

Remittance Incharge Pension Incharge

Computer Incharge

Cash Incharge

Computer Incharge


Corporate branches play an important role. They are 12 in number in number. Corporate branches are present in the following cities. S.NO 1 2 3 4 5 6 7 8 City Karachi Lahore Islamabad Rawalpindi Quetta Mirpur (AJK) Peshawar Faisalabad Total No. of corporate Branches 3 3 1 1 1 1 1 1 12

National Bank of Pakistan HAS 1193 branches in Pakistan.The 29 overseas branches are as under.

i. ii. iii. iv.

United States of America (USA)
New York Branch (100 wall street) UN Plaza Branch Washington B.C Branch Chicago Branch

i. ii. iii. iv. v. vi. vii.

Manin Branch London (18 Finsburs Circus London) Knightsbire Branch (30 Sloame Street) Mainchter Branch Glasgow Branch Bradford Branch Sheffield Branch Edinburgh Branch



Frankfurt Branch

i. ii.

Tokyo Branch Osaka Branch


Paris Branch

i. ii.

Hong Kong
Hong Kong Main Branch Kowloan Branch


Soul Branch

i. Beijing Representative Branch

9. Bahrain
i. Bahrain Branch (Gent Avenue)

i. Dhaka Branch (Central Area)

i. Cairo Branch (Al-Dawad)

12 .Ashghabat
i. Ashghabat Branch.



Representative Office Tashkand (Uzbakistan).

13. Representative Office (Azberia…) 14.Representative Office Almatay (Kazakistan) 15.Africa Middle East Region 16.Afghanistan Kabul Branch 17.UAE 18.Abu Dubbi Branch 19.Dubai Branch

Objective of the Organization National Bank of Pakistan is a business organization and its main objective is profit maximization, which can achieve in two ways i.e. by deposit or by finance.

1. : Increase in Deposit
Every bank whether foreign or Pakistani, has an objective to increase their deposit. Therefore, the main objective of NBP is also to increase their deposit in order to achieve the profit, because there is a tough competition in the market. The deposit growth rate was over 7.3 % to 15.76 % in 2002-2003 period. Total deposit grew by over 10% to Rs. 349 billion from Rs. 316 billion. The growth in deposit portrays the bank ability to attract additional deposit, without increasing its cost.


In 2002, the total advances of a bank were Rs. 140.3 billion, while in year 2003, the total advances were Rs. 170.3 billion. Project advances had dominant share of over all advances. The emphasis of the bank has been on the trade finance; small and medium customers, agriculture and project related financing. The bank extended project loans of Rs. 3.5 billion. Specialized staff equipped with necessary skills to critically examine project financing. Deposit is being built through training and new contractual selective hiring. In keeping with the economic reality mark up rates.

2. : Recoveries
Bank cash recovery position was very good in 2002-2003. Cash recovery was Rs. 46.2 billion in 2002-2003. Classified advances as a percentage of advances of bank were brought deem from 24% in 2001 to 19% in 2002. While compare very favorably with the bank sector average.

Before examine the relationship at bank and customers it is necessary to explain the banker and customers. Bankers. A banker or a bank is a person carrying on the business of receiving money and collecting draft for customers. Accepting for the purpose of lending or investment of deposit of money from the public, repayable on demand or after wise and with strands by cheque, draft, order or otherwise. 1. The relation of a banker and customer is primarily that a debtor and creditor when the customer deposit any money with a bank, the banker from the debtor.



The relation between customer and bank is also that of a principal and agent. When a banker sells or buys securities on behalf of the customer, he then performs agency services.


The relationship between bailer and bailee is established when the customer to the bank delivers goals.

The banker issue letter of credit to the customer. 4. 5. 6. 7. Buying and selling of foreign exchange. Collecting negotiable instrument on behalf of the customer. The bank receives valuable instrument for safe custody etc. Discounting Bill of Exchange etc.

Besides these functions, there are so many function performed by bank.

In order to constitute a customer of the bank, he should have an account with the bank. By having some sort of account at the bank, the law recognize that a person becomes a customer of bank as long as his money is accepted as deposit for credit into his account. The accounts are always open with hard cash, and thereafter cheques and other instruments are accepted for collection on behalf of the Customers, for this a single transaction is sufficient. Then there is sort of relationship develops, and the parties have certain right and obligation against each other.

The customers have the following right toward the banker, which is become the obligations or duties of the banker.



To give reasonable notice to the customers before closing his account

2. To sue when the banker has not maintain the secrecy of his account 3. To collect the proceed of the cheque and other order deposited into the account. 4. One of the duty of the banker to his customers is the payment of his cheques properly drawn and in order on the branch of the bank where the account is kept. There should be sufficient funds in the customer account or arrangement for accommodation made with the bank earlier.

1. The customer should keep his cheque book under a lock and key so that no unauthorized person gets access to it. 2. The customer must present the cheque for payment and collection within the business hours of his banker. 3. Customers should responsible that the cheques are presented for payment within the reserve from the paid of their issue. 4. 5. To pay reasonable charges for services rendered by the bank. The banker has also the right to charge compared interest on many rent to his customer.


 Recruitment:There was no set rule for recruitment. Although a procedure has been given in the Staff (Service) rule, yet the same was only followed to the extent of the procedure and was not done in the true spirit. The main point in recruitment, i.e.. Merit, was seldom adhered to Political involvement that is rampant in our culture, also played havoc with NBP, resultantly every change in government saw a large number of new industries. There have been no select criteria for selection of employees to either lower-ranks or officer/executive grades. This was done at times through simple interviews; however, there have been instances, when regular tests have been conducted for recruitment to the posts of officer.

 SELECTION PROCESS Selection is divided into following steps:  SHORT LISTING OF THE APPLICATION:Candidates who were scrutinized were sent the test calls. In the first step, thousands of candidates apply for limited posts available. The Head Office sent the calls to only those candidates who fulfill the requirements of the job advertised.

 Tests:The Pakistan bank council under the supervision of the Pakistan Banking and Finance Commission conducts test. In the tests the applicants are further short-listed.

 INTERVIEW:For the interview only those candidates are called which qualify the written test. Different type of questions is asked from the candidate by the interviewing board, which include: 1 2 3 Question about the personal background, extraordinary activities during education, and about personal contacts. About the role of banking in current situation of economy. Role of foreign enterprise in public economy etc.

Apart from these questions the candidate personnel interests are also discussed and an effort is made to have the understanding of the individuals personality and after these question an evaluation is made whether the candidate will prove an asset to the organization or not.

 Merit List:After the final result, the successful candidates are sent the appointment letters and they are asked to sign the agreement with the bank person.

 Inter Transfer Policy The management of the National Bank of Pakistan transfers frequently the staff members from one station to the other. Usually managers are transferred to enhance their managerial skills. Sometimes the efficient workers are sent to those stations where the performance of the staff is not satisfactory. Appropriate facilities are provided to the transferred staff members so that they must feel comfortable and in response should work efficiently.  Inter Department Transfer:

Enter department transfer refer to the transfer from one department to another department or one section to the other section in a branch. The purpose of this transfer is to generalize the staff and to make them all rounder. In this way every body is able to perform any kind of work in the branch.

 Privilege Leave Privilege leave of 30 days is granted in a calendar year cumulative its up to a maximum of to 60 days. Privilege leaves will not be granted for a period in excess of the no. of days to the credit of an employer. Privilege leave must be taken more than time a year and must be granted less than 6 days each time.

 Casual Leave Maximum 11 days per calendar year and must be granted more than three days at a time and may be granted in combination with another leave.  Sick Leaves


Up to one-month sick leave per calendar year with full pay. The bank may grant additional half pay up to one month the same year in which five sick leaves on full pays allowed.  Pilgrimage Leave Special leave with full pay for 40 days will be granted to visit. To The holy places, a special leave will be paid for actual no. of days allowed by the government for performing HAJJ plus 7 days before departure and 7 days after arrival to the staff once in a service.

 Promotion Policy:
Promotion is a term, which covers a change, calls for greater responsibilities and usually involves higher pay and better terms and conditions of service and therefore a higher status. The purposes of promotion are: a. b. c. d. To provide satisfaction the employee who are working hard. To improve skill and experience ability. To provide an organization with a competent worker. To find out the most competent and suitable candidates.

 Seniority List National Bank of Pakistan shall maintain seniority list at different levels as follows. 1. 2. 3. For OG2, separately at RHQ level. For OG1 and above up to SVP level at Head Office For EVPS, the list on the integrated NCB`s by Broad of Director.


Annual Evaluation Performance of an Officer and executive shall be recorded in the Annual Confidential report (ACR) at the end of the year by immediate supervisor of the executive.  Sanction strength: After considering operational requirements of the Bank, the Board of Directors determine strength in each cadre.  Process of Evaluation: In order to make the evaluation objective, the following steps are taken into account. For the promotions of the Officers from grade III to Grade II, the minimum service requirement is five years. For the promotions of officers of Grade II to Grade I, the minimum requirement of service is four years. For the promotions of officers of grade I to the AVP, the minimum service requirement is three years in Grade I and eight years of banking experience. For the promotion of AVP` to VP post, the minimum service requirement is three years at the AVP post and ten years of banking experience. For the promotion of the VP`s to the SVP`s position, the minimum service requirements is three years at the VP and thirteen years of the banking experience. For the promotion of SVP`s to the EVP`s post, the minimum service requirement is three year at the SVP position and sixteen year of the banking experience. For the promotion of EVP`s to the SEVP`s post, the minimum service requirement is three years in the EVP position and nineteen years of banking experience. The evaluation of overall performance comprises of the following elements. a. b. c. d. e. f. g. Educational Qualification. Professional Qualification. Service in Grade. ACRS of three years. Operating performance. Experience in different disciplines. Positioning at for away places.


 Assessment of suitability
Committee interview the eligible candidate to assess their suitability. The marks of the interview are 20 and the total marks obtained by the candidate are added in the following manner.

a. b.

Assessment of performance 80 Interview 20 _______________________________ Total 100

 Promotion committee The promotion committees exist at the following levels. a. b. c. d. Committee at Regional Headquarter Levels. Committee No.1 for Head Office Personnel. Committee No.2 at the Head Office. Inter Banking promotion committee.

 Operational performance To lend objectivity to the promotion, the evaluating officer/executive should keep in view key elements, at the time of the evaluation of the candidates: a. b. c. For those who work in the field. For those who work in the controlling capacity. Promotion of semi technical;/specialist officers and executives. Factors to be considered by the promotion committee includes: 1. 2. 3. 4. 5. 6. 7. Administrative ability and effectiveness at supervise level. Leadership quality and initiative. The ability to create a sense of discipline among the staff. Self-confidence. Commitment and motivation to achieve the organization Goals. Ability to take prompt decisions and accept responsibility. Reputation of integrity and moral rectitude. This includes living with in known source of income and noninvolvement in any business dealings, directly or indirectly.


Staff college receive junior bank officers for further training in banking, the courses lasting from six to nine weeks with about 25 students in each course. The college is residential one and provides a measure of collegiate atmosphere that help to impart a sense of camaraderie, which in itself is of great value. It is also of interest to record that the Staff College receive trainees from abroad as well as domestic, which helps to create worthwhile reference to banking business. The staff college courses are designed not only to impart, technical instructions, but also to develop qualities of judgment decision. The college is one the most important institution set up by the bank because its students are likely to be drawn those people who may except to rise to the senior most executive positions which the bank offers. It is business of the staff college to keep in touch with all that is going on the world of banking and finance and so revise its instructions as to keep pace with developments in Pakistan and wish changes in the world outside. The training institutions are intended to train supervisory and clerical personnel and to provide basic training in banking procedure, and practice exercise in the routine work of the bank. At the end of the course, trainees are required to go through a written test and positions with respect to staff seniority are determined by the results achieved. The bank motivates the officers to attend banking seminars both in Pakistan and abroad and it attaches great importance to the exchange of ideas, information and knowledge. National Bank of Pakistan realizes its position as the premier of the Bank in Pakistan. This considers it responsibility to ensure dignified position while it representing it-self in the meetings of the bankers mostly when finance is the question at hand. Training The purpose of training is to provide the knowledge, skills, and the attitudes for individuals to undertake their current jobs more effectively. NBP fully recognizes the need for training of corporate personnel to be able to compete effectively in the increasingly competitive market environment in which they have to operate.  PRE-SERVICE TRAINING All newly recruited personnel without relevant work experience are provided with training facilities, during which an employee is rotated through different operations of the branch so that he may learn through practice and experience. The minimum probation period is 6 months. IN-SERVICE TRAINING


The in-service training programs can be arranged at anytime when the need arises for training. These training courses are of short duration, mostly for 2 to 4 weeks. These training courses are arranged at the home station or at any other station. In case of other station, the transportation and boarding charges are paid by the NBP. NBP has training institutions. These training institutions arrange seminars/courses for the NBP employees.  Grievance Handling: Dispute always arises in both large and small organizations, which change into grievance. NBP has a written procedure for grievance arise at the time of promotion, when someone is superseded. The aggrieved can appeal within 15 days. The aggrieved gives application to the branch manager. The branch manager gives that application to the Regional head, which is put forwarded to the Head Office. Head Office appoints a committee and refers the case to that committee; the committee reconsiders case of review about the aggrieved. The committee checks the number and their calculation given in their view about the aggrieved and makes decision.

The management adopts different techniques to motivate employees towards their work. They adopt techniques to attract qualified and skilled people. For the purpose of attracting qualified people, management offers attractive salary, loans allowances, fringe benefits and better working conditions. In order to increase productivity and efficiency at the branch level, the management adopts a reward system, which includes bonuses and other incentives. Streamlined systems and procedures are established and sanctioning powers are also delegated which result in enhanced efficiency and considerable reduction in the time involved in processing loan application. The branch personnel are also motivated through the policy of providing adequate incentives based on performance level.

 Performance Evaluation: A system of annual confidential reports on the line of the ones used in government departments was employed in NBP for evaluating the performance of an employee. These reports were required to be given for each employee at the end of the year, and were by their vary nature, confidential. Thus the employee never knew his rating. The

ACR`s contained such questions, like: “is he helpful in attracting deposits?” Instead Of such simple question like: “what is the amount of deposits he procured and against what target?”. Moreover, final evaluation at the end of the ACR’s, carried all the marks and whatever written apart from the evaluation, did not matter at all.

All the banking activities are aimed at deposit. Deposits are divided into two or three type.

Current Deposit

It is demand deposit. The bank has no interest on it. When a person wants to cash his money, he will be allowed.

PLS Deposit

By this, the bank gave profit to the customer. It has two types. 1. 2. PLS Saving Account PLS term Deposit.

Term deposit is from 3 months to 5 years. Each duration has separate profit rates. In this deposit there is an agreement between bank and customer and due to this agreement depositors can not cash fix deposit Amount before the fix time. Other deposits are call deposits, which were for contractors. There is no interest of Bank on it. When the call deposit made then the bank takes some commission on it. It is only for tender scheme. Other account is NIDA. Its initial deposit is 5 million. On this account banks gives the profit on daily basis. Old accounts are finished which were on interest based. Saving accounts, fixed deposits, all were finished. Now, today PLS Accounts are available which means Profit and Loss sharing account.

Advance department is one the most important department of the Bank. It deals with long-term advance and short term advance. There are two types of advances: (a) Longterm advances. (b) Short-term advances.


Long term advances:

It is for one or more years. It includes running finance and agriculture finance. Long-term finance included mortgage of properties, third party guarantee or personal guarantee, hypothecation, and pledge stock. • Short-Term Advances:

In case of short-term finances, running finance is against terms deposit certificate regular income scheme, price bonds against salary, mortgage of property etc. Agricultural finance is against personnel guarantees. In short-term, gold finance are also included which is given against pledge of gold. In case of long-term finance, there included national self-employment scheme which are for un-employed personals and its limit is 3 lack, its security is personnel guarantee and hypothecation of business asset. It is for 5 years.



NBP also provides facility of money transfer. NBP uses all the three means to transfer money. This department is also known as Bills department, which was under the Supervision of Mr. Muhammad Iqbal(Assistant). Bank or Demand draft: This is an order to pay money, drawn by one office of the bank upon another office of the same bank for the sum of money payable to order a demand purpose to be endorsed by or on behalf of the payer. The bank is discharged by the payment in due course. ♦ Mail transfer (MT): An account holder of a bank, who maintains accounts in more than one branches of the bank, may want to transfer the funds from his one account to his another account. Other than this, non-constituent wishes to remit funds in a particular account at some place with the branch of the bank to another branch can resort to the transfer by mail, described as mail transfer remittance. Bank is responsible for mailing and remittance.

♦ Telegraphic transfer (TT):


A more quick system of TT is also present to assure the requirements of fast growing business community, which have no time. If the amounts are deposited in cash, a sample cash vouchers is passed, giving credit to the main office Karachi, and a telegraphic message is sent to the bank on which the TT is drawn, specifying the TT number, date, name of the party in whose favor it is drawn and the test member. There are two types of telegraphic transfers: • In case of advice and credit, the payer has an account in the bank on which it is drawn. The amount is simply credited into his account. He can get the cash if he desires so, through his account. • In case of advice and pay, the payee has no account in the bank in which it is drawn. In such cases the bank issues a TTR. The party can get TTR after identification and present it to his bank on which he maintains an account. It is then cleared through clearing house.  This department also handles with trade bills. Therefore it is also called bills department.

Commission is charged according to specified rate of the bank on DD and MT, the rate on up-to Rs.100, 000 is 0.10 percent, up-to Rs.10,00000 is 0.50 percent, and over Rs.10,00000, the rate is 0.40 percent.



The accounts department maintains the account data record and inters branch transactions. It falls under the Treasury Management Division at the Head Office level. Generally it has main sections at the Regional Head Quarters. It is responsible for preparation of the bank statement of the accounts, weekly or monthly. This department is responsible for initial recording of the daily transactions made in the branch on routine basis. This department maintains three basic books of accounting named as Clean Cash. General Ledger, and Abstract Ledger. These Ledgers are tallied every day after the operational hours of the bank. A summary is prepared at the end of the day, called NBP scroll. This scroll is then sent to the head office and a copy is made to the zonal office.




There are two kinds of vouchers cash and transfer. Vouchers received by branch in cash are called cash receipt voucher, which are paid, is called payment in cash. All vouchers involved in cash are punched in computer and scrolled off which is called cash scroll.  Transfer Every transfer vouchers has a contra, for example a customer deposits a cheque for credit to other persons A/C, Credit voucher of the said cheque is called contra. These both debit and credit vouchers are punched in computer and scroll relating to transfer is called transfer scroll. All debit and credit entries in other heads are punched in computer and scroll of which is called general ledger. At the end for balancing, the daily account and other head is used which is called clean cash. If clean cashbook is balanced, the daily work of the branch is over.



This department deals with all overseas business, which occupies a special place in the banks operations. This is a highly technical section involving commercial credit, bills of exchange, shipping and insurance documents, foreign remittances and collections. The main function of this department is import and export. The bank has handled imports by 23.3 percent to 12.3 billion and exports went up by 12.1% to 8.9 billion. This substantial foreign exchange business handled under the direction of the foreign exchange department. All branches of the National Bank deal in foreign exchange and 55 of them are authorized to conduct foreign business independently. This enables the bank to give very prompt service to Pakistani businessmen engaged in import and export business or who are concerned with the procurement of equipment and supplies for industrial undertakings. It was worth adding that in order to give maximum help and encouragement to the export trade. The bank has set up a new department to deal exclusively with export finance. The central export finance department as it is called has sub-organization at the local principal offices at Karachi and Lahore, with the staff of field officers whose business is to promote export trade by introducing to the businessmen, the facilities offered by the bank.



Establishment department is also very important department of the bank. Establishment department consists of salary, various expenses, means personal expenses, Benevolent funds and other expenses.


The personal expenses include salaries and allowances; basic pay is the actual salary of an employee. Benevolent fund consists of pension funds, liveries and Bonuses. Pension fund is the fund given at the time of pension, Group Insurance is the whole life insurance to help life insurance, overtime is the extra time the employee spent from the normal routine work. Other expenses are the prevailing expenses, rent, taxes, residence rent, group insurance, lighting and power, telephone/ bank calls, office telephone call, and depreciation of bank property. In establishment department, other expenses are car maintenance and fuel expenses, entertainment expenses, advertisement expenses, postage and telegrams and Sunday expenses are on annually basis.



The central account department controlled inter-branch transactions and is the main accounting department of the bank. It is responsible for preparation of the banks weekly statement of accounts and for the annual balance sheet of profit and loss account. The department is fully mechanized and is now engaged in installing computers to deal, more efficiently, with the rapid growth of the bank business and activities.

Headed by the Chief Inspector of Branches. It is responsible for the periodic audit and inspection of the branches and offices of the bank.

It is managed by a controller of stores and record, and deals with the provision of stationery, furniture, registers, office equipments and similar movable and expendable store.

At head office level, there is a division, which deals with marketing. It is known as business and development division. But National Bank is a nationalized bank, the Govt. does not allow them to publicize like other banks do. Internally the bank gives their staff, the incentive like cash rewards, promotion but promotion in banking council cut down the non-development changes. That’s why nationalized bank do not print diaries, calendar or advertise.

Inspite of bank largely deserved reputation on the most formally organized bank, There are inadequacies from the point of view of a sound commercial response. Following is the list of major areas leading efforts for improving in a system.  Economic and business information system:

Economic and business information system is needed office on well as at all PHQ’s and Regional offices to provide data to support to the projected massive marketing efforts for the next strategic phase.  Marketing and customer contact system:

It is the planned regular contact with customers for business and out of the courtesy that essentially forms part of an overall marketing program.

Simplification of banking system:

Different Procedures are introduced to make them more responsive to customer and employees need. A number of new opportunities, fully at significant business potential or waiting to be seized by bank with the vigor and planning as they enter into the fifty-five year of existence.

The intensification of competition for banking business in Pakistan renders such a department very necessary, to handle publicity and also to brief advertising agents. But this is only one aspect of the duties of this department is a country where people are still inadequately informed about banking and what banks can do for them. It is not only the bank that has to be advertised, but banking relations as such, and it is the promotion of both of these that the public relations department is concerned with.

This is the only department of the bank, which distinguishes it from other commercial banks. As stated earlier, National Bank of Pakistan is the only bank, which is working as an agent to the Government of Pakistan. Hence all the receipts and payments of the government money to its (government) employees and for any transactions there on. This department passes pay bills of government officials and Government contracts. It also maintains accounts of Governments authorities, like deputy commissioners funds, funds of the Education Department, funds of works Department. It also maintains accounts of Government institutions like Government Degree College, or other schools and colleges. Due to Government Agency, the bank also enjoys the funds control of all the Local Bodies in the area.


One officer supervises this department. In 2004 this department is under the charge of Mr. Muzamil Khan (OG11). Due to Government agency, the bank maintains the treasury in its premises, which facilitates the satisfactory functions of the funds.

It consists of two mails. a. b. Inward dispatch. Outward dispatch.

Inward Dispatch
The mail, which we receive from other branches, the principal offices or head offices, is termed as inward dispatch. A separate inward mail register is maintained for this purpose. All the letters, which are receive in the branch, are properly registered in the inward mail register. It is further circulated to the concerned offices for necessary action.

Outward Dispatch
It consists of all remittances, DDS, MTS, demand draft, advises, TTS, DD advises etc. Besides this, official letter are also sent in the dispatch. For the purpose of dispatch the services of the most recognized courier services running in the country has been acquired. These courier services include TCS, LCS etc for outward dispatch, a dispatch register is maintained in the branch. The envelope was named with the branch sent. The receipt number of courier service and the dispatch number in the register were both properly checked on monthly basis by the manager. For dispatch to be used locally, the services of post office is acquired. The dispatch officer used Rs. 400 in the shape of buying the envelopes or the stamps for the dispatch.


Financial analysis is the process of identifying the financial strengths and weaknesses of the firm by properly establishing relationships between the items of balance sheet and profit and loss account. Financial analysis can be undertaken by management of the firm, or by parties outsides the firm viz., owners, creditors, investors and others. The nature of analysis depending on the purpose of the analyst. 5.1: TRADE CREDITORS Trade creditors are interested in firm’s ability to meet their claims over a very short period of time. Their analysis will, therefore, confine to the evaluation of the firms liquidity position.

Suppliers of long-term debt on the other hand are concerned with firm’s long-term solvency and survival. They analyze the firm’s profitability over time, its ability to generate cash to be able to pay interest and repay interest and repay principal, and the relationship between various sources of funds (Capital structure relationship). Long term creditors do analysis of the historical financial statements by placing more emphasis on the firms projected financial statements to make analysis about its future solvency and profitability.

Investors who have invested their money in the forms of share are most concerned about the firms that has steady growth in earnings. As such, they concentrate on the analysis of the firm’s present and future profitability. They are also interested in the firms financial structure to the extent, it influences the firms earnings ability and risk.

Management of the firm would be interested in every aspect of the financial analysis. It is their overall responsibility to see that the resources of the firm are used most effectively and efficiently and that the firm’s financial condition is sound.

Ratio analysis is powerful tool of financial analysis. A ratio is defined as “the quotient of two mathematical expression” and as “the relationship between two or more things”. In

financial ratio analysis, a ratio is used as benchmark for evaluating the financial position and performance of a firm.

Standards of Comparison
The ratio analysis involves comparison for a useful interpretation of the financial statements. A single ratio “1” itself does not indicate favorable or unfavorable condition. It should be compared with some standards. Standards of comparison of Ratio may consist of:
 

Past ratio: ratio calculated from the past financial statements of the same firm. Competitor’s ratio: Ratios of some selected firm especially the most progressive and successful competitors at the same point in time. Industry ratios: Ratio of the industry to which firm belongs. Projected ratios: ratios developed using the projected or Perform a financial statements of the same firm.

 

Current Ratio:
It shows the relationship between current assets and current liabilities. It is widely used to make the analysis for a short –term financial position or liquidity of a firm. This ratio is expressed in times.

Current Ratio =current assets / current liabilities For 2002 For 2003 For 2004

265424444 /182224697 = 1.4 times 315288622 / 174089037 = 1.8 times 425660500/ 202710020 = 2.10 times

The Current Ratio of NBP is improved from 1.4 in the year 2002 to 1.8 in the year 2003, which further improved to 2.10 in the year 2004, that means that the liquidity of the bank is improved. This comparison of current ratio for the bank signifies a strong measure of short-term debts paying ability in the year 2004 as compare to the previous year under study.


Gross Profit Margin:
Gross Profit Margin is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and net sales. Gross Profit Margin = Gross Profit / Net Sales x 100 For 2002 For 2003 For 2004 =11172207/8821045 x 100 = 126.65% =14774278/1241337 x 100 = 119.01% =16025000/11527400 x 100 = 139.01%

Analysis: The Gross Profit Margin is decreased to 119.01% in the year 2003 as compare to 126.65% in the year 2002, which increased again in 2004 up-to 139.01%, so the ratio measure of the profitability of the firm that the bank earns has more Gross Profit on sales in the year 2004 from the previous year.

This is ratio of net profit after taxes to net sales. It is also expressed as a percentage. Net Profit Margin = Net Income / Net Sales x 100 For 2002 For 2003 For 2004 = 461227 / 8821045 x 100 = 5.22% =1148529 / 1241337 x 100 = 92.5% = 11052000/11527400 x 100 = 95.87%

Analysis: Net Profit Margin in the year 2004 is 95.87%, while 92.5% in the year 2003 and 5.22% in the year 2002. Because of the low payment for administrative expenses, financial expenses and also making less provision for taxation in the year 2004 as compare to year 2003 & 2002.

Return on Capital Employed:
The primary objective of making investments in any business is to obtain satisfactory return on capital invested. Hence, the return on capital employed is used as a measure of success of a business in realizing this objective. Return on capital employed establishes the relationship between profit and capital employed. It indicates the percentage of return on the capital employed in the business and it can be used to show the overall profitability and efficiency of the business.


Return of Gross Capital Employed:
Gross Capital Employed means the Total Assets including fixed as well as current, used in the business.
Return on Gross Capital Employed=Income before taxes / Gross capital Employed x 100

For 2002 For 2003 For 2004

=1032400/371635738 x 100 = 0.27% =3015629/415088990 x 100 = 0.72% = 16015200/950000000 x 100 = 1.68%

Analysis: The Return of Gross Capital Employed is increased to 1.68% in the year 2004 as compared to 0.72 in 2003 & 0.27% in the year 2002.

Return on Net Capital Employed:
By deducting Current Liabilities from the Total Assets we will get the Net Capital employed.
Return on Net Capital Employed= Net Income before Taxes / Net Capital Employed x 100

For 2002 For 2003 For 2004

=1032400 / 16982917 x 100 = 6.07% =3015629 / 117510437 x 100=17.22% = 16015200/80200000 x 100 = 19.96%

Analysis: Return on Capital employed shows that how well the management has used the investment made by inside sources and outside sources. Higher the return on capital employed, the more efficient the firm is using the funds. This ratio for bank is increased to 19.96% in the year 2004 from 17.22% in the year 2003 & 6.07% in the year 2002.

Debt to Equity Ratio:
It indicates the extent to which debt financing is used relative to equity financing.


Debt to Equity Ratio = Total Debts / Owners equity For 2002 For 2003 For 2004 =354652821 / 11192679 = 31.6 times =397578553 / 11206447 = 35.5 times = 456500000/ 11540000 = 39.55 times

Analysis: from this analysis we came to know that the bank rely more on equity financing rather than on debt financing.

Debt to Assets Ratio:
It shows the relationship between total debts and total asset Debt of Assets = Total Debts / Total Assets. For 2002 For 2003 For 2004 =354652821 / 371635738 = 0.95 times =397578553 / 415088990 = 0.96 times = 456500000/ 950000000 = 0.48 times

Analysis: This analysis shows that the firm is not relying on borrowed money because the ratio is consistently decreasing.



National Bank of Pakistan maintained its position as a Pakistan’s largest bank in 2003. A 31% increase in total revenue was achieved in the year, while operating profit (before provision and amortization) increased by 69% to Rs.8.1 billion from Rs. 4.8 billion and pre tax profit went up 193% to Rs.3.02 billion from Rs.1.03 billion. Total assets increased to Rs.415 billion from Rs.372 billion, while deposit grew by over 10% to Rs.349 billion from Rs.316 billion. As a consequence all financial and operating ratios improved. Cost to income ratio was 0.52, the pre tax return on equity was 25% and capital adequacy ratio was around 11%.


The non-performing loan (NPL) portfolio of the bank is adequately covered through a combination of cash provision (60%) and forced sale value (FSV) of securities. The cash provisioning is the highest in our peer group. The focus on managing the NPL is on restructuring as opposed to litigation.

Besides the very large over subscription for the public issue, NBP was also recognized as the best bank in Pakistan for 2004 by the prestigious periodical, “The banker” UK (a subsidiary of Financial Times group.) The bank was also awarded “AAA” rating by JCR-VIS Credit Rating Co. Limited, an affiliate of Japan Credit Rating Agency.


Chapter-6 SWOT Analysis.
It has been observed that it is quite difficult for a bank to maintain a balance between providing service on one hand and achieving growth in assets and profit on the other hand. Many important factors contribute in this regard. Although, NBP has the ability to coup with these challenges through its biggest networking in the country by a reasonable representation in the international community, but still due to the changing environment, it is necessary for the bank to innovate accordingly.

6.1 Strengths
It defines the positive aspects, which goes with the bank. Due to these points, the bank is running its trend towards growth. The points followed are as: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. In a short span period, the bank has entered the line of largest operating bank in the country. Rapid spreading of branches all over Pakistan. Having large International Correspondent Network. Offering latest technology in Banking, as SWIFT, on-line banking, ATM services, Web Site Service. Gained the confidence of both army officials and civilian. Having more deposits in comparison to other commercial banks in Pakistan. Having qualified and trained staff. Offering modern banking tools as the Retail Banking and Corporate Banking. Well equipped computerized system, through out the country and abroad. Branches available at the facility of customers all over the country.

11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27.

The ban operates under experienced and high class management. Offering product innovation day by day. Encourages female staff. NBP, has the ability to work under stress and tough completion and under conditions sneaked out with success. It has a large base of employees. Offers handsome salary and benefits to satisfy its employees. Offer its employee modern and upto date training experience time and again to facilitate its customers. Serving the locals as well as people abroad with all banking services. To enhance deposits, offers attractive mark up rates. To benefit the lower class offer schemes to generate profits for both customer and bank. Gives prior value to its customers. NBP, deals in credit cards, offers traveler cheques of all types to facilitate its local and foreigner customers. Also provide on-lease facilities especially in automobiles. NBP, with its modern techniques also facilities its employees to serve on modern lines. Offers a range of products to enhance banking. Also offers ATM cards. Making investments to be incurred on staff, pertaining credit cards business to new branches, new retail banking products and management training programme to enhance the income generating capacity of the Bank.


Having a credit division responsible for efficient and effective identification, control and management of credit risk, through sound and prudent lending policies.


Having a leadership position in Trade Finance area.


6.2 Weakness
Weakness in any organization don’t mean that the organization lack administrative and operational functioning. It simply indicates the loopholes. This needs to be filled in and covering their up for effective and efficient future. NBP, also has some weak sights as: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. Major influence of army officials. No advertising campaign for promotion.3. Fault in ATM machine. Negligence on part of merit as criteria towards selection and promotion of employees. Still the products offered are in a narrow range, alternatives are easily found by the customer. High mark up rates thus discourages the middle class investor. No advertising for new posts. Though equipped with latest technology, still most of the branches lack the facilities. With top class management, most of the branches internal environments don’t reflect the situation. Present appraisal system found to be quite ineffective, as most of the employees are not satisfied. Lengthy process of issuing credit cards. Most of the branches lack marketing department. NBP, major accounts benefit the army people. Having the upper hand of influential and authorities.15. Promotion for products is limited to big cities. Big difference in theory and practice. A great amount is being spent on the computer system purchased from Union Bank. Even in the presence of its competent computer experts.


6.3 Opportunities
There are the means and ways, provident to any organization, in order to straighten out it loopholes. These are to be recognized and matched with the circumstance prevailing. 1. To facilitate the customers, if the banking hours are to be increased. 2. Products with attractive packages and incentives are providing along. 3. A Champaign with marketing background people are taken in and set to make local and international promotion. 4. Fresh graduates having administrative, commerce and computer technology backgrounds are to be taken in the banking employees. 5. NBP, with Habib Bank at every branch low install and ATM machine. 6. Investments packages for Pakistani’s living abroad to attract their investments in Pakistan. 7. Boosting its research and development specialist’s abroad for a broader viewpoint. 8. Launching the telephoning Banking Services through local telephone exchange. 9. Motivating its employees a free say in the management, so to retain their turnover rate. 10. Reducing the clerical staff in order to provide them with reasonable salary and allowances. 11. Lowering the credit cards rates income groups to enhance the sale rate. 12. Lowering the installment rates on automobiles and land, as to attract the middle class to take benefit. 13. Internal audit is to be conducted two times a mouth, as to reduce errors and mishaps in banking operations. 14. At the branch level, the manager, subordinate direct communication system, to avoid any misconception and also to have efficient output. 15. The bank can go towards providing loan to Agriculture sector. Thus boosting the economy and also paving towards new banking sites.


16. Being a private bank, NBP can avail more opportunities than any other bank, it can support the army families on commercial bosses. 17. With the available competent and specialized computer technocrats, the present system can be regenerated. 18. Experienced technocrats in respective banking practice are to be invited and seek their advice for better operations. 19. At many branch areas, the local markets are quite weak to support the importers and exporters. So it trade facilities, at nominal change are providing as compare to other banks it can help boost the foreign trade business for the bank. 20. Providing Merchant-banking facilities in other important cities as in Lahore, Faisalabad, Peshawar, Quetta like cities. 21. Giving incentives in areas of oil and gas, textile modernization and information Technology can increase foreign and domestic investments.

6.4 Threats
These indicate the pinch points, the edges after which the production and profitability margin of any organization hampers. These are the obstacles in external environment. Also provide opportunity to set back certain future strategies to face the threats. Similar obsteals are found against the banking practice of ACBL. 1. Increase in growth of other private and foreign banks in the country. 2. Uncertainty in economy, a draw back for investors. 3. Political influence and their vested interest. 4. Due to inflation reduction is saving accounts. 5. High rate of turnover due to employees leaving for foreign services. 6. Rapid downsizing, reducing people confidence in private banks. 7. Rapid rate of global technology and slow pace of acquiring them. Low trend of new generation towards banking, as being a stringent and non-dynamic profession



A detailed study of the organization made it to conclude that in era of decomposition and de-formalization, the survival of an organization is now multidimensional. Today’s organization is not related to managing things but now it is moving towards the creation if opportunities is the main purpose of the manger. Every manger can be seen in the roll of a leader. The era of restricted and bureaucratic environment has gone. Now the manager is more realistic for problem & the use of computerized network is necessary to survive. It is observed that National bank of Pakistan, as a purely financial institution has its own cultural environment and the functions of the bank run according to this environment but the changing environment demands for a change, a change which is unique in nature. No doubt the National bank of Pakistan is one of the successful banks in the Pakistan, but still some alternatives are required for a pace to the change. As advance use of information technology and informational change will bring a roll of performance to bank. The executive class and the upper management of the bank are highly trained and well experienced as for as the operational area of the bank are concerned. But unfortunately they are operational where existence of regulation is stresses. This is era of deregulation, but they simply ignore the reality. The management should change them with the changing environment. The awareness of staff from the goals of the organization is extremely important and they require a roll in the setting of regulation and implementation of rules. For the purpose, a creative leadership is also required. The leaders and managers of the bank have operational and administrative skills required to run the organization but now they need some additional skills, which are important for survival in the competitive market. Today everyone needs to differentiate himself from other to capture the market. In short, National bank of Pakistan in not only one of the leading banks, but it is also the agent to the Government and state bank of Pakistan. The situation, which is facing by the National bank of Pakistan, was never before. Considering all these things and to meet the demands of the new millennium, the bank must shift its attitude from ordinary commercial banking to the attitude of a specialized financial institution. National bank of Pakistan has too much strength, which are not available to the other commercial banks in Pakistan. It has the largest market for improvement as it has branches all over the country’s rural and urban areas. So it has the best access to the public capital. The only thing remains is that the strengths and opportunities should be capitalized in a scientific way to generate more of it. All the activities of the bank are Best but the bank needs to solve the problem of online banking activities, which should help the bank operations and will ease its way to become number one in banking sector.


Problems never exist without remedies. National bank of Pakistan is not exception. Understanding its complexities and the requirements of new millennium can solve the problems faced by the bank in the era of modernization. Following are the remedial measures suggested for the bank, which may bring it to success. 7.1: Market Driven Strategies Keeping in view the long term goals and objectives of any financial institutions, NBP will has to focus on the achievement of the market driven strategies. It has to focus the challenges and avail the opportunities to get the maximization of goals. And then the people working in the organization in order to make the process of achieving the objectives easier must understand these goals of the organization. For the purpose a written copy of goals should be provided to the bank employees in which each and every aspect of strategies, consequences, responsibilities, and ultimate objectives are explained in a comprehensive and clear wording. The understanding of goals of the organization, the achievement of these goals within prescribed budget, the knowledge about the today’s employee, and introducing new productive programs with time to time will expand the area of operations of the bank and maintain the stability in the competitive market. 7.2: Modernization Of The Technology Although national bank of Pakistan is one of the leading banks of the country still it requires some way to modernize the bank’s operations. The installation of computerized information system is necessity of the bank to compete the private banks of the country. Communication means among the branches should be modified with installation of computerized networking all over the network of branches in the world. This will save time of the organization but also money of the bank. All private banks have networking of this type, which makes available the records of all the customers through out the country, hence the customer incase his cheque from any branch of the bank with out any inconvenience. If national bank of Pakistan will provide this facility, it will play a roll of milestone to the up heights. The culture of ATM cards has already been established in the major cities but still lacks in the other areas. This system should be given wide ranges that will not only help in minimizing the main staff of the bank but it will also generate a customer satisfaction. 7.3: Implementation Of Personal Policies As far as the personal problems of enrollment, promotion, transfer, and training etc are concerned; the only bone of connection is violation of rules, Nepotism, favoritism, and barbarism are the catalysts of the evil, which is now-a-days common in all government controlled organizations with out any exception. This is only possible if all


the employees joint their hands for eradication of these evils. There should be a proper checking system in the organization to avoid the embazerment of other. The bank needs to adopt the scientific tools of the personal management like job description and job analysis which will help in the justified promotion and reward system. This will also prevent the exploitation of the staff.

Salary is the most important thing for staff. The salary packages of the bank should be make compatible with the packages offered by private banks otherwise bank will loose its highly qualified staff and creative minds as they may accept the other offer of other banks for better package. All employee of the bank should be channalized in a systematic way for training courses so as to make sure that every person is getting necessary training and skills on regular basis. If the required result of the training could not be achieved it will simply mean the wastage of NBP resources and no organization can afford wastage of its resources in this era of competition. 7.4: Liberalization The age of bureaucracy has gone. Every organization in this modern world is looking for free and liberal management system where workers and staff members are given their due part in the decision making of the organization regarding strategies, goals, and functions of the organization. National bank of Pakistan, if want to meet the challenges of the modern world must decentralized and deregulate its system and let the staff to participate in the affairs of the bank. This will produce the environment of the friendship in the bank and will bring loyalty to the organization. The unnecessary rule other Head Quarter should be minimized as much as possible. The branch manager and working staff should be given the authority, which is necessary for their successful performance, which will bring innovation in the functional area, as many minds can think more. 7.5: Better Communication Communication is the backbone of any organization to run. For satisfactory function it is necessary that the orders and demands should be properly communicated to the concerned subordinates. National bank of Pakistan is very weak in communication skills. Although it is now preparing itself information technology and video conferencing but still it is too late. It should be implementing immediately. 7.6: Regular Market Research It has been suggested that the bank should establish a systematic research system in the research centers of the bank. Research is required to meet the challenges of newly emerging environment of competition in the financial market. There is a lot of


uncertainty of future in the world market that can only be handled with efficiency of the bank continues research of its market. 7.7: Marketing Strategies National bank of Pakistan has failed to propagate its services property. It is suggested that it should apply the strategies where every staff member of the bank is part of the marketing activities. The same strategy is used in Union Bank where every person is given the advantage of the bank is part of the marketing activities. The same strategy is used in Union Bank where is given the advantage of the deposits he introduced. In this way every person tries his best to elaborate the bank in front of customers and they also courteous to the customer. The staff should also be given proper training for the purpose. Another weak point is that does not have any broacher or pamphlet. Marketing material like this should be kept at a very branch of the bank including the introductory notes of the new offers and investment packages. The bank should also involve itself in different schemes.

Societal marketing is also the most popular and result oriented style of marketing. Every business organization seems to be the part of this type of marketing but National Bank of Pakistan does not have any such activities. It is suggested that NBP should perform society factor in its marketing. National bank of Pakistan has the advantage of being as government controlled bank and the common people trust in more than any other private or multinational bank but the only grievance is that of customer service which if eliminated can do a lot for the bank in terms of its reputation as well as in terms of money. National bank of Pakistan is successful in maintaining of its present status but the achievement not lies in the staying as a place but there should be innovation and growth. The officials of national bank of Pakistan are aware of the need and have started a change program but the pace of the program is very slow which needs improvement. 7.8: Minimization Of Losses The branches running in losses have been closed but still there are few branches still running in losses. These branches are mostly in the remote areas of the country and should be closed down. As a business concern the main objective of the bank is to minimize the losses and maximize the profits if the bank is successful in doing so it will be a liability to the bank. The staff working in the braches where the workload is greater than the staff strength, the staff should be well utilized. The bank should also emphasize on the establishment of newly emerging industrial areas.


7.9: Need To Be Specialized Up-till now the bank is working in the environment of general banking which limited the scope of operation of the bank. Now it is needed to be converted into a specialized financial institution. It should deal with the various moods if financial matters. It should offer special scheme of investment for public and it should apply now means of operation

As mentioned before it is very important for National bank of Pakistan to start online banking facility to attract more & more potential customers. For this purpose WAN (Wide Area Network) or dedicated lines can be used. If full online banking cannot be started only Local Area Network (LAN) should be introduced.  Credit Cards Credit cards are demolished from bank but can see easily that all the good banks are emphasizing on his facility and they are using it as a marketing tool. National bank of Pakistan should consider the opportunities and reopen the facility, the facility that will mark it a first class bank.  Non-Customer Services Non-customer services like remittances, preparing of draft, safe custody holders, traveler’s cheque and bond owners are the most important for the bank. The people seeking these facilities are the potential customers of the bank. These people should be welcomed and treated with due courtesy to pursue them to make the customer of the bank.  Staff Relationship Staff relationship in the branches should be cordial. The senior staff must guide the juniors should cooperate and listen to the senior. It has been seen that senior and junior staff does not enjoy cordial relationship. Due to this reason tension and conflicts prevails in the branch environment. It totally depends on the staff of the bank and how they maintain a friendly atmosphere in the bank. Like any other organization in the requirement of the Creative Leadership is also present in the bank. The leaders and manager of the bank have operational and administrative skills that are considered as important t survive in the competitive market. Today everyone needs to differentiate himself from other to attract the market opportunities. So the bankers of national bank of Pakistan should realize the fact and move according to the new approach. The staff of the national bank of Pakistan is not aware of the strategies of the bank and they are not provided the required information. They should be provided with the copies of the objectives and strategies. The feedback of the performance i.e. the manual report of the bank should also be provide to the staff member separately which will help them in

the location of the bank in the business community and they would able to elaborate the actual position of the bank before the customers. In this regard the achievements should be highlighted and the deficiencies should be removed.  ATM Facility
This is very helpful service for the customer but no ATM is provided in most of the branches of NBP. So this facility should be availed to attract more & more potential customers.

1. Uma Sekaran “Research method for business” john Wiley & sons, Inc. New York. p.p 220222. 2. 3. 4. 5. 6. 7. 8. 9. shahnaz Arifullah, “Research Process Simplified” Shaheen Books Peshawar, p.p 9-11 NBP BBI, 1999-2000, National banking and Finance, RHQ, Peshawar, p. 1. Ibid, p.p, 1-2. AM. Ghani “Principal of Accounting” publishers Chaudhry Book Depot, 1996. p.p 81-86. Griffin “Management” 5th Addition, AITBS, publisher (India) p.p 202-205. Deceuzo & Robins, “Human Resource Management” 5th edition 1996, p.p, 1, 56, 157, 240, 295. Koontz, Harold & Weihrich, Heinz. “Management” 10th Edition, Singapore, McGraw Hill, 355-357.


1. Avashti, Shriran, (1983), Public Administration; sixth Ed, New York: MC Graw Hill Book Company 2. Asrar, H. SIddique, (1983), Practice and Law in Banking in Pakistan: 3 rd Ed, Royal Book Co. Karachi. 3. 4. Chhabra, T.N (1985), Principles and Management; Delhi, D.R. Printing Services. Chruder Sherman, (1983) Managing Human Resources; 7th Ed. South Western pub. co, Dallas, N.D. 5. 6. 7. 8. Dewitt, K.K. (1984), Modern economic theory; 3rd Ed, Bombary: Move Publishing Company. Edwin, B. Flippo, (1976), Principles of Personnel Management: McGraw Hill Co. Tokyo. Fred Luthens, (1985), Organizational Behaviour; Ed. N.r McGraw Hill Book Co. Grant Smith, “ Personnel Administration and Industrial relations”, 3 rd Edition, Lung King Tong Co. Ltd, Hong Kong, 1984, p. 349. 9. Kennedy, Ralph dale, (1973), Financial Statement Analysis amnd Interpretation: 6th Ed, Homewood; Richard d. Irwin. 10. 11. 12. King, David, (1987), Banking and Money; London; Edward Arnold press.


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