Internship Report

on
National Bank Of Pakistan

Presented by
Miss Gul Nasheen Akhtar

B.COM (IT)

Roll # 1526

LEADERSHIP COLLEGE MULTAN

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“In the name of ALLAH who is most

gracious and merciful.”

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 Contents

 Preface

 Executive summery

 Management of the National Bank of Pakistan

 Copy of college permission letter for Internship

 Internship certificate issued by the National Bank of

Pakistan

 History of the National Bank of Pakistan

 Field of Activities

 Work done

 Financial Analysis

 Concluding remarks

 Observation about Dilemmas faced by of the National Bank

of Pakistan

 Brief recommendations for improvement

 Conclusion

 Reference

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PREFACE

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Hailey College of Commerce, University of The Punjab, Lahore is making valuable
contribution in generating such business executives who are serving in various fields in
Pakistan as well as in abroad. To familiarize the students with practical difficulties and to
apply their knowledge in practical field, it had been made compulsory to have exposure
through internship programs in different organizations. These internship programs enable
students to equip themselves with management tolls and technique. Keeping all that in
mind and being a specialized student of banking me also preferred to join banking
industry. Banking sector owes a pivotal importance in the economy of any country
through its vibrant function. Moreover the practice and familiarity learned during this
tenure would also attest very help full

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EXECUTIVE SUMMARY

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The aim of an internship was to have the practical knowledge about the organizational
working. The organization assigned to me for an internship was NBP Main Branch,
Lahore. NBP Main branch, Lahore & the Regional Office of NBP are in same building
located at Mall road, Lahore. Departments working in this building are General Banking,
Foreign Exchange Department, Accounts department, Credit & Administration
department. I accepted this task as a challenge and tried my best to explore & cover each
and every aspect of NBP with in my 6 weeks internship.

This internship report covers many important aspects which are basically related with the
operations and financial aspects of the bank.

National Bank of Pakistan since its establishment in 1949 is working as a commercial

bank and also providing specialized services to the government and State Bank of
Pakistan. The bank was nationalized with other major banks in early seventies and since
then being a government owned organization it has not been able to give a remarkable
performance. Further, the privatization of other banks has also created a stiff environment
in the banking industry.

National Bank of Pakistan, besides providing the general banking services is also acting
as an agent to State Bank of Pakistan, in areas where State Bank of Pakistan does not has
its own branches. National bank of Pakistan is working with the State Bank of Pakistan in
effective implementation of the credit policies that have been formulated from time to
time by the government and State Bank of Pakistan to control and monitor the fiscal and
monetary situation in the country. National Bank of Pakistan currently has a wide
network of branches inside the country and in all commercial centers of the world as
well. Through this huge network of branches the Bank is providing all sort of services
that have become part of the modern banking. National Bank of Pakistan successfully
adopts new innovations and new products, which are rapidly adding up in the product
mix of banking industry.

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The Bank is providing deposits facilities to more than five hundred thousand customers
in the country and which is increasing by the time. The bank has been providing a service
to the government of making salary payments to all government

The Bank is providing deposits facilities to more than five hundred thousand customers
in the country and which is increasing by the time. The bank has been providing a service
to the government of making salary payments to all government employees on behalf of
the government These payments are sent to the bank for distribution from the provincial
divisions of all concerning departments.
In the deposits area the bank is providing special accounts such as PLS Term
Deposit (Monthly Income account), which provides a monthly withdraw able return on
the account And there is a National Income Daily account, carrying hybrid characteristics
of saving and current accounts, distributes all profits on daily product basis to the account
holders. The bank is trying to revolutionize the services that are provided over the
counter and is working for an early change in all the branches of the bank. In the
advances side the bank has been successful in deploying its resources in the best way in
all commercial, industrial and agricultural sectors of the country. These advances have
been increasing with the Increasing trade and commerce, and bank has been able to meet
the requirements up to the maximum extent.
The introduction of a new set of services in shape of foreign currency accounts has
further given a sharp rise in the banking field. This has made easy for the foreigners
residing in Pakistan to be encouraged and make the inflow of foreign exchange. In the
country more stable. This new service, though shaken its importance after undo freezing
of all accounts in 1998 have spread a situation of non-confidence among the masses, still
these accounts are increasing in number.

The financing process of all international trade, which modern banking made less
complicated and more secure, have increased with the global-village concept in the
world. For banks it is an opportunity to grasp the maximum share as possible through
being more efficient to reach the customer. National Bank of Pakistan has been providing

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these financing services with great esteem and devotion to public and private enterprises.
Nation Bank of Pakistan up till 1995 has shown good performance in the banking field
with earning good profits and financing bigger projects. But after that year with the
privatization of three nationalized commercial banks, the bank has not been able to
sustain its good ranking in the industry. Further due to being under the political influence
the bank has been forced to make unprofitable commitments too.

The management is considering the fact and doing planning for the sake of getting it
through these unjustified pressures but still not been able to implement them in good
manner. This is further disturbed by the de-motivated and unqualified staff that is
working with the bank.

To be able to regain the level of performance and profitability the bank has to take
serious measures to escape from the political influence, build a competent and qualified
pool of employees, make all possible efforts to introduce the modern technology that is
serving the banks in the world and to enhance the confidence of the customer, are
necessary steps be taken by the bank.

Introduction
National Bank of Pakistan maintains its position as Pakistan's premier bank determined
to set higher standards of achievements. It is the major business partner for the
Government of Pakistan with special emphasis on fostering Pakistan's economic growth
through aggressive and balanced lending policies, technologically oriented products and
services offered through its large network of branches locally, internationally and
representative offices.

We aim to be an organization that is founded on…

• Growth through creation of sustainable relationships with our customers.

• Prudence to guide our business conduct.
• A national presence with a history of contribution to our communities.

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We shall work to…

• Meet expectations through Market-based solutions and products.

• Reward entrepreneurial efforts.
• Create value for all stakeholders.

We aim to be peopling who…

• Care about relationships.

• Lead through the strength of our commitment and willingness to excel.
• Practice integrity, honesty and hard work. We believe that these are measures of
true success.

We have confidence that tomorrow we will be…

• Leaders in our industry.

• An organization maintaining the trust of stakeholders.
• An innovative, creative and dynamic institution responding to the changing needs
of the internal and external environment.

President's Message

It gives me great pleasure to announce that National Bank of Pakistan is gearing up to the
challenges faced by the domestic banking industry due to innovations and advances in the
international banking world, which is the consequence of globalization. The bank wishes
to effectively utilize the financial assistance being extended by the Government of
Pakistan for banking sector reforms aimed at reducing operating costs and improving
profitability.
National Bank of Pakistan is distinct from other banks in that it has a nonprofit and
service oriented motive, which has manifested itself in the area of salary deposits of
government employees and payment of utility bills. The bank renders both of these
services across the country reaching as far as the remotest regions; from our northern
borders to the Arabian Sea. These services do not contribute towards the earnings of the
bank; rather they put pressure on our resources. Nevertheless, we are committed to
serving small savers and the general public of the country. National Bank is everyone’s
and does not only serve corporate customers.

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By extending and targeting our research to improve bank earnings, through customer
focus of our commercial and corporate branches, and by enhanced efforts towards the
development of human capital, we shall very soon transform the bank from a bureaucratic
organization to a fast paced, modern, and competitive bank.
In conclusion, I firmly believe that we have the vision, which will enable us to achieve
even better results, safeguard the interest of our customers and to assist us in our march
towards progress and prosperity in future.
S.Ali Raza
Chairman & President

Mission Statement

To be recognized in the market place by Institutionalizing a merit & performance

culture, Creating a powerful & distinctive brand identity, Achieving top-tier financial
performance, and Adopting & living out our core values

Vision & Goals

To be the pre-eminent financial institution in Pakistan and achieve market recognition

both in the quality and delivery of service as well as the range of product offering

Banking Sector in Pakistan

Before 1962, there was no separate law for banking companies in Pakistan. The
companies’ act 1913 governed these like other corporations. Since the provisions,
contained in the, companies act 1913 for controlling banking companies were found in
adequate, the enactment of a separate banking companies law, therefore was felt badly.
On 14th august 1947, Only 487 branches of various banks were operating in Pakistan. By
30th June 1948, 292 branches wound-up their business in Pakistan and the remaining 195
branches restricted their banking operation to minimum level. The only bank that shifted
its head office from Bombay to Karachi was the Habib Bank Limited. Imperial Bank of
India was working as the agent of Government of Pakistan until 30th June 1948. the State
Bank of Pakistan was establish as the central bank of Pakistan and declared on 1 st July
1948 by the father of the Nation, Quaid-i-Azam Mohammed Ali Jinnah. An act was
passed in December 1948, which empowered the State Bank to control the operations of

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banks in Pakistan. The State Bank of Pakistan was given extensive powers for performing
its functions as the central banking authority.

Accordingly, in the month of June 1962, the President of Pakistan promulgated banking
ordinance. This ordinance came into force from the day of its promulgation and extends
the whole of Pakistan. Now according to Sec.8 of the Banking Companies Ordinance no
company, other than a banking company shall use in its name any words bank, bankers or
banking and no company shall carry on the business of banking in Pakistan unless it use
the word “bank” or any of its derivatives as part of its name.

Pakistan has indeed a unique banking history, commencing, as it were, from scratch, at
the time of partition of the sub-continent.

Commercial Banking in
Pakistan

At the time of partition total number of Banks was 38 only. Out of these Banks the
Pakistani Banks were only 2, Indian Banks 29 & Exchange Banks were 7. The total of
deposits of Pakistani Banks was Rs.880 Million. & advances were Rs: 198 Million..
According to banking companies ordinance Banks are the companies, which transacts the
business of Banking in Pakistan. Commercial Banks have constituted the most important
[part of the intuitional credit in the economy of Pakistan. Being the largest source of

Credits, Banking Industry is a pivot of whole the economic activities in Pakistan. Section
37(2A) of State Bank of Pakistan Act 1965 lays down that the Banks must have paid-up
capital & reserve of not less then Rs: 5 Lac & fulfilling certain other requirements for
declaring as “Scheduled Bank”.
At the time of independence Bank services was badly affected. But with the passage of
time these are improving. The government of Pakistan nationalized all Banks in early
1974. This act was done to minimize control of few hands over banking. But this step
was proved futile for the Banking in Pakistan. So the Govt. had to revise its decision
in1990. Two Banks (Allied Bank of Pakistan Limited & Muslim commercial Bank Of
Pakistan Limited has been denationalized. Since then Banks were working well. Now
slogan of the Banks is to serve their customers in the best possible manner

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History of National Bank of
Pakistan

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It was decided that Reserve Bank of India would act as the common monetary authority
of both countries up to September 1948. But this arrangement did not prove well. In
August 1947, we were given a first installment of Rs.200 million (20 crore) as our share,
leaving a balance of Rs.550 million (55 crore) but it was not paid when asked for.
In October 1947 there was fighting in Kashmir, when India refused to give us the amount
of Rs.55 crore if we did not give up all interest in Kashmir, which we refused. In
response, Reserve Bank of India refused to make even an advance for ways and means.
Despite that India had to pay our 50 crore, (the remaining 5 crore still remains unpaid).
There was a controversy on establishment of our central bank because we had no
experience & expertise but it was resolved and SBP was created, 3 months ahead of
schedule, on July 1,1948, which was the last public appearance of the Quaid-e-Azam.
SBP claimed its share of Assets of Reserve bank of India against the Indian currency
retired from Pakistan, but this 50 crore India disputed and virtually refused to settle this
dispute up till now.
In 1949 (September) U.K. devalued its currency, India followed suit but we did not. India
said we had contravened the agreement of keeping both currencies at par. We said we had
not done that, India had done it arbitrarily without consulting us. On October 3, 1949, the
two central banks were to announce the new par value of both currencies but India denied
a day earlier. India also froze our trade - balance surplus that is still an unsettled dispute.
India also withdraws the Marwari merchants who were employed annually for movement
of jute crop by financing it. There being no jute industry, prices fell sharply, foreign
banks and foreign merchants stood aside and an agrarian unrest was threatening.

Two Ordinances were, therefore, issued.

1. Jute Board Establishment Ordinance &
2. NBP Ordinance dated 08.11.1949

NBP was established on 20.11.1949

Authorised capiatl Rs.60 millon

Paid up Capital was Rs.30 million

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NBP was eastablished to provide finance to suitable parties. NBP stood behind jute trade,
SBP stood behind NBP and the government stood behind SPB. Speedy
it was such that 6 branches came into being at once and the doubts on our ability to
handle this situation were dispelled for ever Now, as the Jute Board and NBP were in the
field, the foreign merchants and bankers also rushed in to get their share in the business
and consequently NBP had to lay out much less finance than it could. Mr.Ghulam Farooq
was chairman Jute Board & Mr. Mumtaz Hassan was chairman NBP. Until June, 1950,
NBP remained exclusively in jute operations, thereafter-other commodities were also
taken-up. After that Mr. Zahid Hussain, Governor SBP assumed additional charge also as
chairman NBP's Board of Directors, & Mr. M.A. Muhajir became its first M.D.
In 1952 NBP replaced Imperial Bank of India. This arrangement was negotiated by Mr.
Mumtaz Hassan as Acting Governor of SBP.
In 1962 when Mr. Mumtaz Hassan became MD (He had already served NBP for 10 years
as its Chairman of government Director), the number of branches had increased from 6 to
239 and deposits from Rs.5 crore (50 million) to 106 crore (one bn & 60 mln) , profit,
from 3 million (3 Lac) to 21 million (2.1. crore) and the staff increased from 380 to 7091,
as compared to 1949-50. In Dec. 1966 its 600th branch was opened raising the deposits to
2.31 billion. And staff to 14,963. Up to 1965, the shareholders had received 225% of their
original investment. Now it has more than 21549 employees 1537 branches and
Rs.208283 million deposits.

Corporate Philosophy at National Bank:

 We at NBP believe that our customers are our most important and 1st
responsibility, we must, therefore, serve our present customers and promise to
serve our potential customers to the best possible on-counter and behind-counter
services. We should try to provide a total and integrate package of services to
create satisfied clients. Our branches, regional offices and head office should
regard the customer as their most priority, serving them with maximum possible
helpfulness and courtesy.

 Our 2nd most important responsibility is the employees who work for our great
institution; they must have their security, stability and fair treatment in their jobs
in recruitments and assignment, in training and development, in promotion and
placement till separation. They should be treated with dignity and should be made

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  To rise to their highest potential working condition should be attended. Supervisor
should be tough minded but fair in the pursuit of bank objectives.

 Our 3rd most important responsibility is our executives and officers. They should
have talent, education, experience and ability with a premium, place on
commitment, knowledge, leadership and orientation towards action,
implementation, improvement and achievement of goals.

 Our 4th responsibility is to the communities that are served by our great institution.
Our 1st community is the Pakistani nation whose service is the reason for our
existence.

 Our 5th responsibly is to our owners and stockholders. We must make a sound
profit and protect our business by creating financial services.

Branch Network:

With the geographical development of its branches, the Bank has been able to extend its
services to a much larger number of Pakistanis all over the country. Today it has more
than 8.5 million accounts. Bank maintains its presence in all the major financial centers
of the world through its 15 overseas branches and 5 representative offices. Of these, three
representative offices have recently been set up at Tashkent (Uzbekistan), Baku
(Azerbaijan) and Almaty (Kazakhstan) to take advantage of the emerging opportunities in
CIS countries. Bank’s role globally is well assisted by its network of correspondent banks
located strategically in Asia, America, Europe and Africa.
Apart from having a vast branch network, Bank is at the forefront in the acquisition and
application of new technologies in every aspect of its banking facilities. It has acquired
leased telephone lines for on-line banking. The Bank has 12 Regional Computer Centers
to cover various on-line and batch system requirements of branches and controlling.

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Oversea Branches Domestic Branches

16 Overseas Branches
29 Regional Offices
4 Depreciative Offices
1,189 Branches
1 Subsidiary
4 Subsidiaries
1 Joint Venture

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Branches All Over the Country:

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Field of Activities of NBP

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The National Bank of Pakistan performs two types of function. It acts as an ordinary
commercial bank, and at places where there are no branches of State Bank of Pakistan it
represents Pakistan, that is why it cannot be privatized.

As a commercial bank it performs the following functions:

 Accepting of deposits of money on current account, saving, term deposit and
other profit and loss sharing accounts
 Borrowing money and arranging finance from other banks
 Advancing and lending money to its clients
 Financing of projects including technical assistance, project appraisal through
long term/short term loans
 Buying, selling, dealing and discounting of bills of exchange, promissory notes,
drafts, bill of lading, other instruments of securities etc
 Foreign exchange business
 Financing of seasonal crops like cotton, wheat, rice
 Receiving of bonds, scrip, valuable etc. for safe custody
 Carrying on agency business of any description other than managing agent on
behalf of clients, including government and local authorities
 Generating, undertaking & promoting of issue of shares, bonds & other securities
 Transacting guarantees and indemnity business
 Undertaking and executing trusts
 Making investments in other banking companies
 Joint venturing with foreign dealers, agents and companies for its representation
abroad

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 Participating in World Bank's and Asian Development bank's lines of credit

 Utility services
 Providing Hajj services to intending Hajjis
 Agent to State Bank of Pakistan for collection of funds for SBP
 Payment of pension on behalf of provincial and central governments
 Treasury business.

Functions of NBP as Representative of SBP

 Collection of cheque and bill of exchange for its customers
 Paying insurance premiums, rents or other obligations of the customers
 Collecting due interests, dividend pensions and other sums due on customers
 Transferring of money from one place to another
 Acting as an executor & trustee of customers
 Providing safe custody to jewelry, documents & securities
 Issuing of Travelers Cheque and letter of credit
 Purchasing shares for the customers
 Accepting bills of exchange on behalf of customers
 Undertaking foreign exchange business
 Furnishing trade information and tendering advice to customers
 Formulating operation policy guidelines for the banks
 Laying down performance criteria for banks and taking steps for ensuring their
observance
 Evaluating the performance of the banks in the context of operational guidelines
issued to the banks
 Determining the areas of coordination of the banks
 Formulating schemes under section of the act
 Making recommendations to the Federal Government for the appointment of the
president and members of the executive board

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 Analyzing and appraising financial statement including balance sheets and profit
and loss accounts of banks and appointment of auditors of the bank

 Conducting such surveys, inquiries and appraisals as may be necessary for the
purpose of this act
 Exercising and performing such powers and functions of the federal government
under the act and such other functions as the federal government may assign to it
 Establishing a research department or conduct banking research and in particular,
study overseas banking operation and problems of the agricultural financing

 Establishing a Central Training Institution for improving bank services

 Coordinating the planning of the operations of nationalized commercial banks,
and exercising general overall checks on the cost of their operations
 Appointing lead banks and to apportion share of advance among the banks in
respect of consortium loans financed by the nationalized commercial banks only,
in accordance with resource availability of each bank
 Watching the progress of the implementation of the rulings made in State Bank
Annual Inspection Reports and the remedial and corrective measures taken by the
banks with a view of removing imbalances.

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 Work Done By student:

During the period of my internship in the NBP, I learned a lot of new things which helps
me to enhance me my knowledge and skills. According to sequence in my training
schedule and availability of time I worked in the following areas and tried my best to
have practical exposure. Following are some material written which I learned in the
training process:-

GENERAL BANKING DEPARTMENT:

National Bank Main Branch, Mall road is an extra ordinary building as compared to its
other small branches. Main branch has a number of departments; each department has its
separate responsibility. The general banking department has common work to do as the
other branches. This block includes:

Account Opening:
It is the most important area of bank’s operations. This section is termed in bank as
enquiry, as the person willing to open an account is verified here. Following procedure is

adopted for this purpose:

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Procedure of Account Opening
It is a very simple and quick procedure. A person who wants to open an account must
have the introduction of bank’s staff or an already existing account holder of bank. The
customer is required to fill an account opening form. Then signatures of the Introducer
are verified before opening account.
Documents Enclosed
I- Individuals
 Copy of CNIC
 Copy of service card/ evidence of employment in case of salaried person
 Photograph in case of illiterate person
 Copy of CNIC of next of kin
 Zakat exemption declaration / certificate
 Evidence for exemption of account from levy of service charges
 Proof of age in case of opening of account with a minor
 Declaration on prescribed format for opening of account of blind & visually
impaired person

II- Partnership
 CNIC of all partners
 Partnership deed (certified copy)
 Attested copy of Registration Certificate (Form- C)
 Original authority letter favoring person authorize to operate the account
 In case the partnership is unregistered, this fact should be clearly mentioned on
the Account Opening Form

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  Undertaking from partners involved for responsibility of conduct of account
individually & jointly

III- Private/ Public Limited Companies

 Certified copies of Certificate of Incorporation, Certificate of Commencement of
Business, Memorandum & Article of Association, List of Directors, Board of
Director’s Resolution, CNIC of Directors
 Power of Attorney/ mandate (if required)
IV- Trust Account
 Attested copy of Certificate of Registration
 CNIC of all trustees
 Certified copy of instrument of Trust
V- Agent Account
 Certified copy of “Power Of Attorney”
 Attested photocopy of CNIC of the agent
VI- Club, Societies & Associations
 Certified copies of Certificate of Registration, By-Laws/ rules & regulations,
constitution
 Resolution of Governing body for account opening
 An undertaking signed by all authorized persons when any change takes place in
the persons authorized to operate on the account, the bankers will be informed
immediately

VII- Executors & Administrators

 Attested photocopy of CNIC of Executor/ Administrators

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  Certified copy of Letter of Administration or probate

Following Factors Prior To Opening of Account should be considered:

1. The suitability of the perspective customers
2. Verification of customer credentials
3. The perspective possibility of profitability of the relationship

4. The proposed relationship does not violate:

a. SBP Rules And Regulations
b. Applicable Local Laws
c. Bank’s Internal Policies
Types of Accounts
 Current A/c
 Basic Banking A/c (BBA)
 Call Deposit
 PLS SNTDR
 PLS Saving
 National Income Daily Account (NIDA)
 PLS Term
 Premium Saver
 Premium Amdani
 FC Current
 FC Saving
 FC term
Nature of Accounts
 Individual (Single/ Joint)
 Sole Proprietorship
 Limited company (Public/ Private)

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  Partnership (Registered/ Unregistered)
 Govt. Institution (Federal/ Provincial)
 Corporate Body (Incorporated/ Unincorporated)
 Trust
 Association/ Club/ Society

Currency
 Pak rupee
 Dollar
 Pound
 Euro
 Yen
Operating Instructions
 Singly
 Jointly
 Either/ Survivor
Current Account/Basic Banking Account
 No profit payable
 Bank is authorized to deduct service charges
 In case of BBA, maximum two deposit and two withdrawals are allowed in a
month
 In case of Current Account, no limitation on frequency or amount transaction
 Bank statement facility

PLS Saving Account:

 Profit is payable

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  No of withdraw restricted
 Large amount of withdraws requires 10 days.
PLS SNTDR:
 SNTDR stands for sort notice term deposit receipt
 Such notice can be from 7 days to 30 days
 No cheque book is issued
 A deposit receipt is given to customer

Call deposit:
 Used for bid purpose
 A deposit receipt is given

National daily income Account (NIDA):

 Minimum amount required to open this account is Rs.2million

General Principles:
1. No account will be opened on fictitious name.
2. All documents necessary required for opening account must be taken after
verification from original.
3. No operation of account should be allowed & check book must not be issued until
all formalities are confirmed.
4. Genuineness of introduction should be properly ensured.
5. All information on Account Opening Form should be filled at front of concerned
officer.

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Deposit:
Deposit area of National Bank of Pakistan works under the General Banking department.
This department is given the complete responsibility of cash, as a result of transaction in
the local currency. It is also responsible for the book keeping of these transactions and the
safe custody of cash. There are separate counters for cash receipts & cash payments.
This department mainly deals in two main forms:
a) Cash receipts/ payments
b) Clearing

The following process is maintained in the Cash payments:

a. Token
b. verification
c. posting
d. cashier
e. Scroll
f. recording
When the cheque or any negotiable instrument is presented at counter for payment, it is
entered in the token book and token is issued to the customer. Then the customer along
with token, verifies it from verification counter. In this process the responsibility is to
check the Guinness of the signature, account balance etc. when the instrument is cleared,
it is posted electronically and at the end of the day a hard copy is also maintained. After
the verification the instrument is presented for payment to cashier who pays the stated
amount. After the entire process the transaction is recorded for future use. At the close of
day, the Token Book and Paying Cashier Book are balanced.
Scroll:
Sometimes the account holders use to make payments in same the branch by transfer
facility, such work is done on scroll counter. For example a person having an account in

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the NBP wants to pay utility bill of Rs.3000, he can get an slip of that amount from
transfer scroll to pay the bill
This is very important department. All the books maintained in this department are
checked by an officer.

Clearing Section:
“The processes by which cheque are exchanged between the collecting and paying bank
and the ensuing financial settlement is called “Clearing”.
Every banker acts both as a paying as well as a collecting banker, it may be said that
there in theory no legal obligation on a banker to collect cheque, drawn, upon other banks
for customer. It is however an important function of crossed cheque. A large part of this

work in carried out through the bankers clearing house. A clearinghouse is a place where
representative of all banks of the city get together and settle the receipts and payment of
cheque drawn on each other. As the collecting banker runs certain risks in receipt of their
ownership the law has provided certain protections to the banks.
The Negotiable Instrument Act, 1881, lays down the drawer or holder of a cheque or
draft may cross the instrument generally or especially. It further lay down that a crossed
cheque can only be paid to a banker, who collects it for a customer who maintains an
account. This facility is provided by the State Bank of Pakistan for offsetting of cross
obligations between the different banks.
Clearing is of two types:
• Inward clearing
• Outward clearing
Now a days in all the clearing process an organization is providing its services as agent to
almost all banks. NIFT collects the all such cheques from each bank on daily basis and
provide he net result on the same day night electronically.

Accounts Department
Account department is the most important department of the bank.

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It is concerned with:
♦ Payment of salaries
♦ Monthly profit & loss statements
♦ Assets
♦ Liabilities
♦ Balancing and clearing the cash book
♦ NBP general account
These are the pillars of any business. In this department, all the vouchers that are posted
during one day are sent to the account department next day. These vouchers are already
posted to computer by the concerned department.

General there are two types of maintaining of an Account:

 Journal System
 Voucher System
Generally journal system is adopted by some commercial industrial institutions. In
journal system entries are reported on Journal Book and then posted to main ledger.
In banking, voucher system is used for every transaction. Voucher has to be prepared
either in cash, in transfer or in clearing. On the sheet, these vouchers are summarized
transaction wise and consolidated into figure called supplementary.
Types of Vouchers by colors:
 Pink (for those having account in nbp main branch)
 Green (other branches of nbp)
 Sky Blue (for banks other than nbp)

Remittance Section(Bills):

The need of remittance is commonly felt in today’s business. A major function of any
bank is to “transfer of funds from one place to another place”.
National Bank of Pakistan uses the following modes of transfer of funds:

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 • Demand Draft
• Mail Transfer
• Telegraphic Transfer
• Pay Order
• Call Deposit
• Govt. draft
• Short credit
• Traveler cheque

Demand Drafts:
If you are looking for a safe, speedy and reliable way to transfer money, you can now
purchase NBP Demand Drafts at very reasonable rates. Any person whether an account
holder of the bank or not, can purchase a Demand Draft from a bank branch. Demand
Draft is used to transfer money from one branch to another branch of NBP located in
different cities.
Issuance of Demand Draft
The amount both in words and figures is written and the applicant has to sign on two
places, which are helpful, in case DD is to be cancelled. The applicant then has to deposit
the cash at the counter. The officer in charge at the counter will affix the stamp cash
received at the DD issued from. After the cash has been deposited the DD will be issued
to him. Each DD has its own register along with the name of the party in whose favor the
DD was issued.
Cancellation of Demand Draft
For cancellation the client has to give an application to the bank that the DD is no longer
required and has to sign the proper verification of the signatures will cancel the DD, and
will pass the entry be debiting to main office and crediting party account. The bank will
then issue a debit advice to the main office.

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Mail Transfers
Move your money safely and quickly using NBP Mail Transfer service at competitive
rates in the market. MT is used to transfer funds among branches without a restriction of
branch location. Mail transfer is usually used to transfer bill’s receipts collection from
other branches to main branch at day end because accounts are located in main branch.
When a customer request the bank to transfer his funds between the branches of same
bank in the city, outside the city or outside the country the first thing he has to do is to fill
an application form in which he states that I want to transfer the money from this branch
to that branch by mail. If the customer is the account holder of this bank, the bank will
debit his account and the concerned officer will fill the six different forms to make the
mail transfer complete.

The six forms used for this purpose are listed below:
i. Branch Mail Transfer Mail
ii. Receiving branch registered copy
iii. Issuing Branch Register Copy
iv. Debt Voucher
v. Beneficiary's Advice
vi. Advice to Customer

PAY ORDER:
In this case no fund is transferred from one branch to another because issuing &
responding branch is same

Telegraphic Transfer:
This mode is used to transfer funds among branches through telephone. This mode is
faster then all modes except online transfer. An application form for TT is provided to the
client in whom he has to specify the name of the payee, the place of the transfer and the
amount. If the amount is deposited through cash or through self cheque a simple cash
voucher is passed giving a credit to main office. A telegraphic massage is sent to the

- 33 -
branch of the bank on which the TT is drawn specifying the TT number, date, the name
of the party in whose favor it is drawn and the test number.

Traveler Cheque:
Pak Rupee Traveler’s Cheque are a negotiable instrument having no restriction on the
period of validity, available at all branches of NBP all over the country, encashment at all
branches of NBP, no limit on purchase, & are the safest way to carry money

Call Deposit:
Branch may accept call deposit from local bank or from other on such rates as may be
prescribed by the head office. These deposits will be credited to call deposit account in

the favor of government and semi government department. This form is used when
payment is to be made in favor of some Govt. dept.

Foreign Exchange Department:

“The transfer of credits to a foreign country to settle debts or account between resident of
home country and those of the foreign country” or “the Foreign bills currencies etc used
to settle such accounts”.
Foreign Exchange department deals within exports, imports and Money transfer.
National Bank of Pakistan acts as importer bank as well as exporter bank for different
parties who are interested in the business of export & import.
Import means:
All goods and services taken from other countries to home country
Export means:
All goods and services sent from home country to countries

- 34 -
Types of Foreign Currency Account

The National Bank of Pakistan is currently providing foreign currency accounts

services in four currencies:

 US Dollars
 Pound Sterling
 Euro
 Japanese Yen

Foreign currency accounts can be operated by Pakistani residents abroad and residents at
home, plus foreign nationals who are residents in Pakistan. The opening of foreign

currency goes through the same kind of process that is used for opening of an ordinary
deposit account A prescribed form has to be filled as an application for opening of
account Personal identification card and introducer is required who can be an old account
holder with the Bank or an officer of the Bank. Foreign Currency accounts can be opened
in following three types.

Foreign Currency Current Account

Foreign currency current account can be opened with a minimum balance of $500. This
account is not entitled to any profit.

Foreign Currency PLS Account

Foreign currency PLS account require $100 for opening and this account is eligible to
share the profits and losses at the rate that is prescribed by the Head office from time to
time.

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Fixed Deposit Account

In this type of account the deposits are accepted for a period of minimum 3 months and
maximum up to 3 years. The profits are credited to the accounts after every six months on
a rate that is ascertained by the Treasury Division of the National Bank of Pakistan Head
Office Karachi. The profit is provided on daily product basis, which means that profit is
credited based on the balance in the account and the number of days it has remained in
the account.

Foreign Remittances

Remittance is transfer of funds from one place to the other by way of using an
intermediate dealer. These dealers are authorized agents who provide these services on
commission. Foreign remittances are the most significant type of transaction that is

carried on in case of a foreign currency accounts. The remittance can primarily of two
types.

1) Inward Remittances

Funds coming into the country on account

2) Outward Remittances

Funds going out of the country on account

Banks attached with NBP in remittances:

 NBP New York in Dollar Transactions

 UNB London in Pound sterling Transactions

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  NBP Frankford Germany in Euro Transactions

 NBP Tokyo in Yen Transactions

Home Remittances

To facilitate its customers in the area of Home Remittances, National Bank of

Pakistan has taken a number of measures to:

 Increase home remittances through the banking system

 Meet the SBP directives/instructions for timely and prompt delivery of remittances
to the beneficiaries

Western Union:

Western Union is a quick and convenient way of funds transfers. In Pakistan not only
the banks has the counters of western union but locally its services are available to
general public as well. This is a costly way of funds transfer. SBP has allowed banks to
receive funds through it but restricts banks to use western union for funds transfer as it
is not in the interest of banking. NBP has also maintained western union points within
the bank.

Process:

A person willing to transfer funds through western union deposits amount desire to
transfer in any western union point in the foreign country. The depositor office grants
the depositor a code for withdraw of money from the home country. That code is

- 37 -
 communicated by the depositor to beneficiary. The beneficiary can get the funds on
providing that code to receiving office of western union in the home country. The
beneficiaries also have to prove his identity.

New Features:

The existing system of home remittances has been revised/significantly improved and
well-trained field functionaries are posted to provide efficient and reliable home
remittance services to nonresident Pakistanis at 15 overseas branches of the Bank besides
Pakistan International Bank (UK) Ltd., and Bank Al. jazira, Saudi Arabia.

Zero Tariffs: NBP is providing home remittance services without any charges. Strict
monitoring of the system is done to ensure the highest possible security. Special courier
services are hired for expeditious delivery of home remittances to the beneficiaries.

S.W.I.F.T

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

Documents required for Export

The person who is exporting goods to the foreign countries requiring the following
documents:

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 • National tax number
• Registration with ICC
• Sales tax registration
• Commercial Invoices
• Bill of Lading
• Packing List
• Bill of exchange
• Promissory Note
• E-Form
• Letter of Credit
• Certificate of origin
• Beneficiary certificate
After compiling the entire task by resident country that is exporting goods in favor of
foreign importer now it will be his turn to make payment.

Types of Letter of credit

Importer bank issues a document on request stating that it will pay the exporter when
exporter fulfill the terms of letter of credit.

Letter of credit is of two types:

o At Usance L/C
o At Sight L/C

Sight L/C
Requires the importer / importing bank to pay as soon as it receives the clean documents
from exporter
Usance L/C
It extends time period (30days, 60days, 90days, 120days, 150days, & 180days) to
importing bank for payment. After specified time period importer has to pay to exporter.

- 39 -
Letter of guarantee gives in behalf of person by bank that it will pay in case of default.

Certificate of Origin

This certificate shows that goods are from Pakistan.

Covering Schedule

In it, for example, given that “Please remit proceed to our Karachi office account #
574348812 with (Standard Chartered Bank) USA for onward credit to National Bank of
Pakistan. A/c number & the branch are mentioned in it to get proceeds from importer

Beneficiary Certificate

If L/C requires some information as proof of anything from exporter then exporter has to
present beneficiary certificate for that proof.

E-FORM

E-form has four copies:

 One for custom officer

 One for exporter
 Triplicate copy for SBP
 Duplicate copy for bank

Bank reporting or duplicate and triplicate is done by bank. Custom officer should clear
product. (Date is given on the foot form).

Payment from Importer Bank

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It is the choice of importer to open L/C from any bank and the bank from which L/C is
opened can also refer to some other bank for payment. So bill of exchange is sent to refer
bank and other documents are sent to L/C opening bank.

IMPORTS

L/C is opened by the importer. There are two types of L/C:

 Revocable L/C
 Irrevocable L/C

Necessary Requirements

If place of issue and port of loading is different on bill of lading, then along with the
stamp of shipment on board, vessel name and port of shipment is written.

 Issue date of bill of lading – shipment on board.

 There should be no cutting on bill of lading without authentication.

 Bill of lading should show capacity of agent. If bill of lading can be taken by the
agent of Importer Company, then his name should be mentioned on bill of lading.
 Original GSP should be presented.
 If TT reimbursement is not acceptable, it means bill of lading is necessary.
 When documents are received for export, do enter into lodgment register.

Documents for Import

 Performa invoice signed by importer

 category pass book copy attested by any bank
 L/C opening application filled in by the customer
 Importer registration with ICC
 Annexure

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  L/C issued on basis of L/C application form
 Insurance if covered by buyer
 Insurance cover note
 Insurance policy

Four parties are involved in Letter of Credit:

1. Applicant Importer
2. Beneficiary Exporter
3. Issuing Bank Bank of importer
4. Advising bank Bank of importer

According to import policy, no import is valid without import license which is issued by
the International Chamber Of Commerce. If a person desires to take up import trade must
get his name, his firm or his limited company, registered with ICC. On being granted
registration certificate, he will be eligible to import goods according to import policy.
There is no special condition of eligibility for registration. Their only requirement is that
he should be a Pakistani and must be registered with income tax department.

L/C OPENING PROCEDURE:

When the importer obtained import license, then bank will open letter of credit. “A letter
of credit is undertaking by LC opening bank to put an agreed sum of money to seller’s
bank on behalf of the buyer of the goods under clearly defined terms and conditions”.
Pakistani banks open only irrevocable LC. An essential feature of the irrevocable LC is
that it can not be modified, altered, amended, or canceled without the prior consent of all
the parties. Party comes to the bank and fills the form which is provided on demand. This
form is filled by the party and is return to the bank, it includes details like:
o Name of company
o Address of company
o Country of origin

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 o Branch name
o Quantity
o Shipment to
o Insurance company
o Shipment from

Documents Required for L/C Opening

When the bank opens L/C, it requires following documents:
a) Application
b) Sales Contract
c) L.C offering sheet
d) Valid import license
e) Performa invoice
f) Importer should be Pakistani
g) Letter of undertaking from importer
h) Insurance cover.

An important point which the bank will consider before opening of L/C is that sufficient
funds be available in the L/C opener’s accounts. At the time of establishment of the L/C
the opening bank generally retains a maximum margin to safe guard its own commitment.
The margin may vary from nil to 100% according to the nature of commodities and it
also depends upon the party. At the item of establishing the L/C, opening bank charges
bank commission, postage and other charges from the L/C opener account. Another main
important point is that value of L/C should not increase the value of import license.
After all the documents are being checked and signs are verified by the bank, a sanction
slip is attached with each form so that the approval can be gained from the manager of
the bank.

- 43 -
After the approval is made four copies are prepared and the entries are made on the
computer and the printout is taken. The margin amount is checked from the importer
account and if the amount is not found then L/C is not opened and the party is informed
about the situation. On the deposit of the margin L/C is opened. L/C limit if set by the
bank are also checked.
Payment to Seller
The negotiating bank upon receiving the documents from the seller checks the documents
according to terms and conditions of credit. Upon satisfying it self of this the negotiating
bank makes payment to the seller if sight credit. It then forwards the documents to the
opening bank and reimburses it self through the opening banks account with itself.

Documents Received By the Opening Bank

Importer’s bank receives following documents from the exporter’s bank:
 Bill of exchange
 Invoices
 Bill of lading
 Certificate of origin
 Packing list
 Insurance

Finance Against Imported Merchandize (FIM):

It is a facility given by NBP to its customers who is unable to clear the bill amount. When
the bank has received the merchandize on behalf of its customer, bank pays the whole
amount of imported item. The customer can release the goods after paying the bank
which the bank has paid to exporter. But due to lack of funds the customer pays the
amount in installments to bank and bank releases the goods with same proportion.

CREDIT DEPARTMENT

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Credit:
It may be defined as:
“The sale of goods and services and money claims in the present in exchange for
a promise to pay in future. “
The most important activity of the bank is the granting of credit to the customers. NBP
provides both short term & long terms financing for domestic and international trade. The
policies made by central office can be amended on the basis of the rules, regulations &
economic risk of each country. Board of directors and committee of the NBP made this
type of decisions and informed about these decisions to the branch managers.
Managers can grant the credit limit to each customer with in the declared limits approved
by the controlling offices. Banks grant credit to the customer for a certain period of time.
The banks provided credit to the customers so that they can purchase ahead of their
liability. By giving these facilities to the customers large scale production of commodity
can be achieved and economic growth rate can be increased. The power to sanctioned
loans had been delegated for controlling different offices, according to amount of loan.
This department is also called as risk management group.

The following elements are used for credit selection:

Character:
It is based on the borrower willingness to repay the obligation. The loan officer sees the
family background, mode of living, business nature, habits, and moral reputation etc.
before giving the loan.
Capacity:
It means ability of the borrower to repay the loan. This ability to repay the loan is
assessed by the office so that he will be able to repay the loan in future.
Capital:

- 45 -
The officer assesses the capital of the borrower. If assets held by the borrower are liquid,
they can be easily convertible in cash; but if non liquid is used then it is risky to given
loan.
Collateral:
It is collateral security. It may consist of stocks bonds, bill of exchange, bills of lading,
etc. Bank protects itself from any discrepancy in the future. They increase the ability of
the borrower to obtain the funds from the bank.
Condition:
The economic condition of the borrower is determined. The economic conditions of the
borrower in and out side the country effects the repayment of loan. If condition is
favorable then loan is given otherwise not.

Credit administration:
In the the credit administration , the arrangements are made for the inland or domestic use
of L.C. although the trade within the country can be done without the use of L.C but the
use of L.C make the trading more safer. Nbp is providing the inland L.C facility to large
bussiness so small ones are unable to avail this facility. For all the large business
concerns the Main banch Karachi maintains a credit history or credit ranking which is
issued to all its branches. Credit history also help bank to determines the maximum credit
limit to for its customer.

Process:
Process is same like the outland L.C. and same documents are required as steted in the
prevous sectin. Only difference is that truck receipt is asked by the bank in case of inland
L.C. while in the other type Bill of Lading is asked.

Documents Required:
 Annexure A
 Performa invoice
 Insurance

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  Covering Letter

Advances:
Advances provided by the bank are of two types:

 Funded
 Non-funded

Funded:
In fund based, bank contributes its own fund.

Funded Types Of Advances:

Demand Finance:
One time disbursement of the whole amount sanctioned, as the limit for the credit allows.
Any person, individual, group, company, firm and all others can achieve this mode of
financing. The mark-up or interest is calculated on the total amount disbursed and
requires to be paid before the date of final adjustment. Amount, limit, and period depend
on the nature of the case in review.

Types of Demand Finance:

 Saiban House Financing
 Student Loan
 Computer Finance
 Staff Loan
 Car Finance

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1-Saiban House Financing
under this facility the NBP provide financing for the purpose of:-

House Purchase

• Max Loan=3.5 million

• Repayable in 3-20 years
• Debt to Equity= 85:15
 House Construction

• Max Loan=3.5 million

• Repayable in 3-20 years
• Debt to Equity= 85:15
 Home Imrovement

• Max Loan=15 million

• Repayable in 3-15 years
• Debt to Equity= 70:30

 Balance Transfer Facility

For those who have already taken loan from any other bank or financial institution for
home purchase etc. and willing to transfer the loan with NBP

Eligibility:

- 48 -
Any pakistani having the account with NBP
Pricing
• Variable Rate (with insurance) 15%
• Variable Rate (without insurance) 17%

Target market:
• Salarid class1

This class is also known as class 1, it includes all the persons who are employed in Govt.
organizations and National Bank Of Pakistan, their salaries are given through NBP and
having minimum income of Rs.5000/-, aging between 22 to 56 years and their debt
burden should not be more than 50% of their monthly income.
• salaried class2
This class is also known as class 2, it includes all the persons who are employed
Multinational organizations and Schedule Banks in Pakistan, or having the permanent
cotract and having minimum income of Rs.10000/-, aging between 22 to 56 years and
their debt burden should not be more than 50% of their monthly income.
• Business clas
All the person having their own business and their monthly income is not less than Rs.
15000/-

2- Computer loan
This loan is only for staff. Maximum limit is RS: 50000/- & repayment is done on
monthly basis through salary account on direct debit basis. Markup is 4% per annum &
maximum tenure is 10 years.

3- Car loan

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This loan is also only for staff on 4% markup per annum with 10 year tenure. No
insurance required & losses if any are beard by bank itself
4-Student loan
It is the finance facility for the students of Recognized Universities and Colleges to meet
their education plus boarding charges. Special thing of these loans are that these are
intrest free loans. Repayment is started after one year of completion the studies or
starting the job, which ever is earlier.
5-Staff loan (Advance salary)

-
• For the employees of Fed.,Semi,Autonomus Govt
• Max amount of loan is 20 net of their salary
• Payable in 60 monthly installments

Non-Fund:
Bank provide non fund advance in the following form:
 Guarantee
 Imports
Guarantees:
A guarantee is defined as
“An undertaking by a person to responsible for the debt of another person”

National bank of Pakistan issues guarantees to government agencies like atomic energy,
high way department, customs authorities, Sui Northern gas and others. It also issues
guarantee to multinational organization like Siba gigey, Sandoz, PBS, and etc. for the
purchase of pesticide or insecticide from any fertilizer company.
Bank usually accepts only other bank guarantee but in some cases personnel guarantee is
also accepted. The guarantee issued is treated as contingent liability. According to local

- 50 -
rules and regulation the policy for issuance of guarantee can be changed. The expiry of
the guarantee can be set by both bank and guarantor. The minimum period is one year
and the guarantee can be reissue for extra period with paying charges.

Imports:
Bank provides non-funded credit facility to the following basis.
 Sight L/C
 Usance L/C

Sight L/C:
In this type of L/C when payment is made documents are released. A cash margin of 30%
is kept by the bank.
Usance L/C:
The bank retains the payment after a period of days, which is given in the L/C, a margin
of 30%.

Types of Loans:
The credit department of NBP has providing the following types of loans:

 Short term loans

 Long term loans

 Working capital loan

 Syndicate (project) loan

Condition for security:

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The security must be liquid or radically convertible into cash with more then adequate
margin of safety fully under the banks control, having high value, which can with stand
volatile market condition. Secured by acceptable immovable tangible collateral with
necessary margin and fair degree of marketability under the forced sale situation, the
types of securities may vary from a piece of land or building to commercial papers or
ornaments. Further, security has its own importance, not only as constituting the ultimate
source of recovery in the event of failure of the borrower or his enterprise, but as
providing a measure to the borrowers own stake in the enterprise and also placing the
limitation on his future borrowings.
However, though security serves as a cushion to fall bank upon in case of need, but its
adequacy alone should not form the sole consideration for judging the suitability of the
loan. So the choice of security is not made in isolation, but keeping into consideration the
customer and security offered together.

Security:
It is an interest or right in the property gives to the creditor to convert it in cash in case of
debtor fails to meet the principal and interest.
The bank provides the following securities to the customers:

1-Pledge:
A pledge is an “a class security given to customers for stocks ware house, customs, and
etc”. It is defined as actual delivery of movable property to lender as security for a loan.
When the customer makes the payment of the loan in full he can back his mortgage
property from the bank i.e. when full payment is made the stock is released.

2-Hypothecation
This type of security is used in case where the debtor is unable to hand over the secured
item to bank. For example semi-finished goods, work in process etc.

- 52 -
 Financial Statement
Analysis

Financial statement analysis is the process of examining relationships among financial

statement elements and making comparisons with relevant information. It is a valuable

- 53 -
tool used by investors and creditors, financial analysts, and others in their decision-
making processes related to stocks, bonds, and other financial instruments. The goal in
analyzing financial statements is to assess past performance and current financial position
and to make predictions about the future performance of a company. Investors who buy
stock are primarily interested in a company's profitability and their prospects for earning
a return on their investment by receiving dividends and/or increasing the market value of
their stock holdings.

Creditors and investors who buy debt securities, such as bonds, are more interested in
liquidity and solvency: the company's short-and long-run ability to pay its debts.
Financial analysts, who frequently specialize in following certain industries, routinely
assess the profitability, liquidity, and solvency of companies in order to make
recommendations about the purchase or sale of securities, such as stocks and bonds.

Analysts can obtain useful information by comparing a company's most recent financial
statements with its results in previous years and with the results of other companies in the
same industry. Three primary types of financial statement analysis are commonly known
as horizontal analysis, vertical analysis, and ratio analysis.

National Bank of Pakistan

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 Half Yearly Accounts
As on June 30, 2010
Rs. in million
Net Profit before taxation for the six months 12,674
period ended June 30, 2008

Taxation

-Current year 6,336

-Prior year(s) _
-Deferred (1,544)
4,792
After tax profit 7,881

Un-appropriated profit brought forward 45,344

Transfer from surplus on revaluation of fixed

assets –

Incremental depreciation- net of deferred tax 46

Profit available for appropriation 53,271

Cash Dividend paid 6,116

Transfer to Statutory Reserve 788

(10% of after tax profit)

Bonus sharess issued 815

Un-appropriated profit carried forward 45,552

- 55 -
 NATIONAL BANK OF PAKISTAN

CONDENSED INTERIM BALANCE SHEET

AS AT JUNE 30, 2010

ASSETS
JUNE 30, 2009 June 30, 2008

(Un-audited) (Audited)
(Rs in 000) (Rs in 000)
Cash and balances with treasury banks 1 24,807,561 9 4,873,249
Balances with other banks 4 4,164,592 3 7,472,832
Lendings to financial institutions 2 1,463,116 2 1,464,600
Investments 6 1 72,665,033 2 11,142,868
Advances 7 3 72,766,231 3 40,322,100
Operating fixed assets 2 6,383,831 2 5,922,979
Deferred tax assets - -
Other assets 3 3,602,681 3 0,994,965
7 95,853,045 7 62,193,593
LIABILITIES
Bills payable 1 2,224,296 7 ,061,902
Borrowings 1 4,669,212 1 0,886,063
Deposits and other accounts 8 6 21,341,765 5 91,907,435
Sub-ordinated loans - -
Liabilities against assets subject to finance lease 2 5,200 3 3,554
Deferred tax liabilities – net 9 2 ,283,095 5 ,097,831
Other liabilities 3 1,922,084 3 0,869,154
6 82,465,652 6 45,855,939
NET ASSETS 1 13,387,393 1 16,337,654
REPRESENTED BY
Share capital 8 ,969,751 8 ,154,319
Reserves 1 7,682,573 1 5,772,124
Unappropriated profit 4 5,552,124 4 5,344,188
7 2,204,412 6 9,270,631
Surplus on revaluation of assets - net of tax 10 4 1,182,981 4 7,067,023
1 13,387,393 1 16,337,654

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Directors’ Report

It gives me great pleasure to present on behalf of the Board of Directors accounts for the
six months period

ended June 30, 2009.

The Profit for the six months period ended June 30,2009 after carry over of accumulated
profit of 2007 is proposed to be appropriated as follows: -

Pre tax profit stood at Rs. 12,674 million from Rs. 14,002 million of corresponding
period of last year, a reduction of 9.5%.

Bank’s operating performance have been quite impressive, operating revenue increased
by 30% from Rs. 20376 million to Rs.26,497 million, while pre provision profit increased
by Rs. 4,293 million an increase of 31.4%.

Diluted earning per share declined to Rs. 8.79 from Rs. 10.05 during the same period of
last year. Pre tax return on equity stands at 35.8% whereas Pre tax return on assets is at
3.3%.

Cost to income ratio of the bank remained in the top tier at 0.32

Net interest margin registered an impressive growth of Rs. 2,670 million or 16.4% mainly
due to growth in volumes.

Net advances increased by Rs. 41 billion and Rs. 32 billion as compared to corresponding
period of last year and year end 2007.

The growth in advances mainly emanated from corporate and commodity financing.
Deposits show impressive growth of Rs. 68 billion or 12.3% over corresponding period
last year.

Compared to year end December 2007 the deposits have increased by Rs. 29 billion or
5% mainly due to our marketing efforts and the trust that customers have in NBP.

Non interest base income has shown an impressive increase of Rs. 3.4 billion or 84%
over corresponding period due to higher commission, exchange income and a one off
receipt of Rs. 977.8 million as compensation for delayed tax refunds.

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The compensation on delayed refunds pertains to various assessment years from 1991-92
to 2001-02.

Our administrative expenses show a rise of Rs. 1,828 million or 27% compare to
corresponding period mainly due to inflation and salary increases.

Going forward we expect that with the technological / human resource upgradation
program our costs will rise in short term however we need to invest today for better
returns in the future.

Provision charge against advances for the corresponding period last year includes a) one
off items of Rs. 1.4 billion on account of one large cash recovery and reversal in general
provision of Rs. 825 million due to reduction in provision requirement on advance salary
from 5% to 3%.

If we exclude these one offs the provision charge last year comes to Rs. 1.8 billion.
Further b) last year the SBP changed its prudential regulations and withdrew the benefit
of Forced Sales Value in the third quarter of last year, therefore this year the banks can no
longer take the benefit of forced sales value of the collateral securities.

The additional provision charge on account of withdrawal of FSV impact last year was
Rs. 3.1 billion which was made in the 3rd and 4th quarter of last year.

This benefit of Rs 3.1 billion was being carried in the first half of 2009.

Therefore the comparison between the provision for the two periods should take into
account both these factors.

Additionally the bank is making all out efforts for recovery of non performing loans and
aggressive targets have been assigned to the units.

We extend our appreciation to the bank’s staff for their commitment, dedication and hard
work in achieving these excellent results.

We would like to express our appreciation to our stakeholders, regulators and our valued
customers for their support and continued confidence in NBP.

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 Ratio Analysis
Financial Ratios

1- Liquidity Ratios:

Liquidity ratios are measures of the short-term ability of the company to pay its debts
when they come due and to meet unexpected needs for cash.

(a) Net Working Capital (Rs. In 000)

= current assets- current liabilities

2009

= 7438393939 – 8648235273 =(1209841334)

2008

= 494132781- 609855400 =(115722619)

Bank’s net working capital has been increased this year from the previous year that
shows that their current assets are less than the current liabilities. We can say that their
working capital is negative.

(b) Quick Ratio

= Cash + Cash equivalents/ Current liabilities

2009

= 7438393939/ 8648235273 = 0.86

2008

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 = 494132781/609855400 = 0.81

Bank’s quick ratio that tells that how quickly the bank can pay its short term obligations
with in 3 months has been9 increased this year from the previous year. So, it show that
banks capacity increased to pay short term debts.

(c) Current Ratio

= Current assets/ Current liabilities

2009

= 7438393939/ 8648235273 = 0.86

2008

= 494132781/609855400 = 0.81

Banks current ratio that tells the ratio of current assets and current liabilities in a period is
al most constant at .84 that shows that banks current assets are greater than the portion of
current liabilities.

2- Activity Ratios:

Total Assets Turnover

= Net Sales(Revenues)/ Average total assets

2008

=21463389 /7 95,853,045 = 2.69%

2007

= 20881983 / 7 62,193,593 = 2.73%

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The bank’s total assets turnover that shows the portion or gain or sale on the assets used
in a specified period of time has been increased this year that shows that the bank had
generated more this year by using the assets of the bank.

3- Leverage Ratios:

d- Debt Ratio

= Total Debt/ Total Assets

2010

= 682465652/7 95,853,045= 85%

2009

= 645855939/7 62,193,593= 84.7%

Leverage ratio or debt ratio tells the degree of indebt ness of the entity. It tells how much
assets are financed from the external type of financing. The banks debt ratio has been
remain almost same this year that means the bank is getting debts.

e- Debt Equity ratio

= Total Liabilities/ Common Equity

2010

= 682465652/8969751= 76.08

2009

= 645855939/ 8154319 = 79.20

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 Debt equity ratio tells the portion of debt and equity in the total assets of the entity. In
year 2007 this portion of debt was about 3.01 times greater than the equity but in year
2008 it has been reduced.

f- Times Interest Earned Ratio

= Earning before Interest & Taxes/ Interest Expense

2010

= 21463389/ 12673707 = 1.69

2009

= 20881983/ 14001591 = 1.49

Times interest earned ratio tells the relationship between EBIT and the interest paid of
specific time period. This year this ratio has been increased that shows that they are paying
greater portion of interest relating to the previous year.

4- Profitability Ratio:

Profitability ratios are gauges of the company's operating success for a given period of
time.

E- Gross profit margin

= Gross Profit/ Total net sales

2010

= 75617167/21463389 = 35.23%

2009

= 4110275/ 20881983= 19.68%

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GP ratio tells the ratio of gross profit and the total sales for a specific time period. The
bank’s GP ratio has been increased this year relating to the previous year that means that
their selling expenses were decreased.

F- Profit margin

= Net Profit/ Total Net Sales

2010

= 53271439/ 21463389=248 %

2009

= 41106737/ 20881983= 196%

Profit margin tells the ratio between net profit of the entity and the total net sales. The
profit margin ratio has been increased this year relating to the previous year ratio.

G- Return on assets

= Net Income/ Average Total Assets

2010

= 53271439/ 7 95,853,045= 6.69%

2009

= 41106737/ 7 62,193,593= 5.93%

Return on assets that tells the profit that the bank earned on the use of the assets has been
increased this year relating to the previous year.

H- Return on common stock equity

= Net Income/ Common Equity

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 2010

=53271439 / 8969751= 6.13

2009

=41106737 / 8154319= 5.01

Return on equity that tells the profit generated through use of

common equity has been increased relating to the ratio of the
previous year.

5- Marketability ratios:

I- Earning per share

= Net Income-Preferred dividend/ Common Stock Outstanding

2010 = Rs.8.79

2009 = Rs.10.05

Earned per share ratio tells the earning by one share of common equity. This ratio has
been increased relating to the previous year that tells that each share is generating less
than the last year

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 SWOT ANALYSIS
Includes :

• Strengths

• Weaknesses (Dilemmas Faced by Bank)

• Threats

• Opportunities

• Suggestions & Recommendations

• conclusion

During my six weeks internship NBP, main branch, Lahore, I have extracted following
SWOT Analysis:

Strengths

• Govt. bank: All types of Govt. receipts are routed through NBP. NBP main
branch Lahore has major Govt. accounts & all the receipts from NBP branches of
all over the Lahore are deposited in Main Branch accounts at day end

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 • Large customer base, covering all types of persons from a normal poor person to
corporate client
• Vast network of branches all over the country & across the border
• Better customer service.
• Competitive Deposit rates & Advances rates
• Debit Card facility at minimum rate all over the Pakistan.
• Large market share in Home financing due to competitive rates & product
• Variety of products from Retail banking to SME & Corporate
• Western Union facility
• Online FOREX dept. using SWIFT technology to route it’s functions
• Good co-ordination among staff

Weakness

• Shortage of staff
• Customers are not properly guided to get the benefits of National Bank of
Pakistan’s facilities
• Online services are not offered to clients due to inability of staff of using online
facilities, especially in online remittances
• Shortage of cash and deposits counters.

• Using more persons to perform for a function.

Opportunities

• Banking industry is one of the most growing sectors in Pakistan. So NBP should
more expand its network of branches to get full benefit of growth

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 • NBP can get full benefit of Islamic banking by opening at least Islamic windows
in branches or Islamic branches in main cities
• Mobile banking & online banking should be started to compete in market.
• Proper extensive marketing should be adopted to get full advantage of vast
customer base & wide range of competitive products
• Establishing foreign branches.
• All products of Consumer Financing and other retail products should be
introduced to all the branches in the cities of Pakistan

Threats

• Lack of proper extensive marketing

• Lack of online services
• Lack of consumer products
• Old ways of banking
• Untrained staff
• Establishment of new private financial institutions and expansion
• Political pressure
• Establishment of new private financial institutions and expansion.
• New products form Private Pakistani and foreign banks.
• Non-banking institutions
• Slow pace of change
• Foreign banks
• Non-banking institution
• Stake holder’s interest.

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 Suggestions & Recommendations

Based on the SWOT analysis of the National Bank of Pakistan, it is observed that the
Bank like the other public sector Industries has not been showing up to mark
performance. There is a long list of weaknesses that is given on the previous page. Most
of them are going along since long time and that all efforts made to remove them have
not succeeded. On the basis of SWOT analysis of the Bank the following suggestions and
recommendations are given.

 NBP should be in pace with on going changing in banking industry, like other
bank. Now this bank combining all it power and trying to approach other banks.
 Latest reorganizing efforts are necessary to make it cost effective also making its
facility accordingly to modern banking. These must continue.
 Bank management has to put its all effort to change the prevailing culture of the
bank and to put the foundation stone of business oriented culture. In which
employees give important to the bank and its customer.
 Bank should try to get rid of the political influence to be able to compete in the
industry with prudent and strong policies.
 The undue reliance on the public sector be minimized and ventures of private
sectors should be taken as well
 Redefining of rules, regulations and policies should be made implemented at all
cost.
 Efforts of great importance to be made for the over the counter services of general
banking making it more simple and faster to get a better response of the

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 customers. The behavior of the employees, especially on the counter has to be
strictly monitored and checked.
 The still existed bureaucratic approval system has to be demolished.
 All advances should be made by getting the maximum security and should focus
on productive work.
 Better and comprehensive long-term and short-term planning should be made to
forecast the future needs.
 There is a possibility of establishing a task force to ascertain the effectiveness of
the policies being implemented.
 The Bank should develop a comprehensive recruitment policy to make only the
competent ones to be on the job.
 There is a still a vast pool of incompetent employees that has to right sized.
 There is lack of promotional element in the planning and budgetary decisions of
the Bank that has to think seriously.
 All branches of the Bank should be computerized for increasing the effectiveness
and efficiency of its employees.
 Efforts should be continued to keep the powers of employees union to the
minimum, like the current situation.
 Promotions must not be delayed and should be made on time to further increase
the commitment and efficiency of the employees.

These and many others can make a good set of recommendations, which have to be made
possible to escape from the threats and weaknesses and the risks in environment that
surrounds the Bank. The management do considers the policy matter that are not helping
the Bank, but are still in practice due the absence of prudentially regulated system to
protect them and the Bank, Efforts have been made with serious concern to give NBP a
status that It has to maintain by having practices of:

 Right sizing of the employees.

 By closing unprofitable branches.
 By introducing a merit based selection criteria.

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  Promotions made conditional with qualifications.

REFERENCES

I have concerned the following resources for the making of my internship report. These

resources include the different employees of NBP, different relevant internet websites

and the annual report of NBP.

WEB REFERENCES:

1. www.Nbp.com.pk

2. www.bankshistory.com

3. www.google.com

4. www.yahoosearch.com

5. www.hotmailsearch.com

6. www.gmailsearch.com

7. www.ask.com

8. www.allrefers.com

9. www.reports.com

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