Nbp internship-report-on-national-bank-of-pakistan-2012Document Transcript

1. NATIONAL BANK OF PAKISTAN INTERNSHIP REPORT Muhammad Farhan Javed

Federal Urdu University Art Science & Technology Islamabad@M.Farhan Javed: This Is
The Approved Internship Report Of National Bank Of Pakistan.
2. P a g e |2TABLE OF CONTENTSFederal Urdu University Art Science & Technology
Islamabad......................................................................................1Table of
Contents.................................................................................................................................
...........................2Objectives of Studying the
Organization........................................................................................................................6
Brief History of National Bank of
Pakistan......................................................................................................................7Natur
e of National Bank of
Pakistan.............................................................................................................................10
Business volume of National Bank of
Pakistan.............................................................................................................12Branch
Network of National Bank of
Pakistan..............................................................................................................16Number
of Employees of National Bank of
Pakistan....................................................................................................18Product
Lines.......................................................................................................................................
..........................19
1.Deposits...............................................................................................................................
...................................20 a)Current
Deposits..................................................................................................................................
..............20 b)PLS Saving
Deposits..................................................................................................................................
.........21 c)Fixed Deposit Account (Time
Deposits).............................................................................................................22
d)Foreign Currency
Account.................................................................................................................................
22 e)NBP Premium
Aamdani.................................................................................................................................
....23 g)National Income Daily Account
(NIDA)..............................................................................................................23
2.Advances.............................................................................................................................
...................................25 a)NBP
Saibaan...................................................................................................................................
....................25 b)NBP Advance
Salary.....................................................................................................................................
......26 c)NBP Cash &
Gold........................................................................................................................................
........28 d)Students Loan
Scheme...................................................................................................................................
....28 e)NBP Karobar- Presidents Rozgar
Scheme.........................................................................................................28 3.Corporate
Advances................................................................................................................................
...............32 a)Cash
Finance...................................................................................................................................
...................32 b)Running Finance/
Overdraft..............................................................................................................................3
2 c)Demand
Finance...................................................................................................................................
..............32
4.Remittances.........................................................................................................................
..................................33 a)Demand
Drafts......................................................................................................................................
.............33 b)Travelers
Cheques..................................................................................................................................
............34 c)Letter Of Credit
................................................................................................................................................
..34 d)Foreign Remittances
.........................................................................................................................................35
e)Swift
System....................................................................................................................................
...................35
3. P a g e |3 f)Mail
Transfer..................................................................................................................................
.....................36 g)Telegraphic
Transfer..................................................................................................................................
........36 h)Pay
Order......................................................................................................................................
.....................36
5.Miscellaneous.....................................................................................................................
...................................37
a)Lockers................................................................................................................................
...............................37 b)NBP Cash
Card........................................................................................................................................
...........37 c)International
Banking..................................................................................................................................
.......38Organizational Structure of National Bank of
Pakistan................................................................................................39 Board of
Directors.................................................................................................................................
....................40 Senior
Management...........................................................................................................................
.......................42 1.Corporate & Investment Banking
Group...........................................................................................................44
2.Compliance
Group.....................................................................................................................................
........46 3.Islamic Banking
Group.....................................................................................................................................
..47 4.Treasury Management
Group............................................................................................................................48
5.Credit Management
Group................................................................................................................................50
6.Audit & Inspection
Group..................................................................................................................................5
1 7.Human Resource Management & Administration
Group.................................................................................53 8.Information technology
group...........................................................................................................................54
9.Financial control
Division..................................................................................................................................
.55 10.Overseas Coordination & Management
Group...............................................................................................56 11.Commercial &
Retail Banking Group
..............................................................................................................58 12.Special Assets
Management
Group.................................................................................................................59
13.Employee Benefits, Disbursements & Trustee
Division...................................................................................59 14.Core Banking
Application.............................................................................................................................
....61 15.Operations
Group.....................................................................................................................................
.......63 Provincial & Regional
Management..........................................................................................................................
63 Branch
Management...........................................................................................................................
......................64Organizational (Management) levels at
NBP................................................................................................................64 Top
Managers................................................................................................................................
...........................65 Middle
Managers................................................................................................................................
......................65 First Line Managers or Lower Level
Management....................................................................................................66 Non
Managerial
Employees..............................................................................................................................
........66Hierarchy of National Bank of
Pakistan........................................................................................................................66Org
anization Structure of the
Branch...........................................................................................................................67
4. P a g e |4 a)Centralized Decision
Making..................................................................................................................................
68 b)Downward
Communication......................................................................................................................
.............69 c)Chain of
Command...............................................................................................................................
..................69 d)Authority and
Responsibility........................................................................................................................
.........70
e)Delegation...........................................................................................................................
...................................70
................................................................................................................................................
...................................70Departments of the
Branch....................................................................................................................................
......71 1.Clearing House
Department.............................................................................................................................
.....71 2.Remittance
Department.............................................................................................................................
...........75 3.Account Opening
Department.............................................................................................................................
..78 4.Cash
Department.............................................................................................................................
......................79 5.Deposits
Department.............................................................................................................................
................81 6.Advances
Department.............................................................................................................................
..............81 7.Computer
Department.............................................................................................................................
..............83 a)Online
branches.................................................................................................................................
................83 b)Batch
Branches.................................................................................................................................
.................83 c)Manual
Branches.................................................................................................................................
...............84 8.Pension Disbursement
Department......................................................................................................................85
9.Accounts
Department.............................................................................................................................
...............86Structure of Branchs Accounts
Department................................................................................................................88Bank
Accounting
Operations..............................................................................................................................
...........92Role Of CFO (Chief Financial
Officer)............................................................................................................................94U
se of Electronic Data in Decision
Making...................................................................................................................98
Information System Resources of
NBP.....................................................................................................................99 a)People
Resources...............................................................................................................................
................99 b)Hardware
Resources...............................................................................................................................
...........99 c)Software
Resources...............................................................................................................................
...........100 d)Data
Resources...............................................................................................................................
.................100 e)Network
Resources...............................................................................................................................
...........100Sources of
Funds......................................................................................................................................
...................101Generation of
funds.......................................................................................................................................
.............104Allocation of
Funds......................................................................................................................................
...............108Critical Analysis (Theory vs Practical)
.........................................................................................................................112Balance
Sheet.......................................................................................................................................
.......................114
5. P a g e |5Income
Statement................................................................................................................................
.......................115Financial Statements
Analysis..................................................................................................................................
...116 Ratio
Analysis..................................................................................................................................
........................117 a)Profitability
Ratios.....................................................................................................................................
.......117 b)Liquidity
Ratios.....................................................................................................................................
............123 c)Debt
Ratios.....................................................................................................................................
..................128 d)Capital Adequacy
Ratios..................................................................................................................................1
31 e)Operating Performance
Ratios........................................................................................................................132
Horizontal
Analysis..................................................................................................................................
................134 Horizontal Analysis of Balance
Sheet......................................................................................................................136
Horizontal Analysis of Income
Statement...............................................................................................................145
................................................................................................................................................
.................................146
................................................................................................................................................
.................................147 Vertical
Analysis..................................................................................................................................
....................154 Vertical Analysis of Balance
Sheet..........................................................................................................................155
Vertical Analysis of Income
Statement...................................................................................................................164.......
................................................................................................................................................
..............................165Bank Analysis with refernce to commercial Banks listed on stock
exchange............................................................172Future prospects of National Bank of
Pakistan..........................................................................................................175Short falls/
Weaknesses of National Bank of
Pakistan...............................................................................................177Conclusions.........
................................................................................................................................................
........180Recommendations....................................................................................................
..................................................181References......................................................................
.............................................................................................183
6. P a g e |6OBJECTIVES OF STUDYING THE ORGANIZATIONThe primary purpose of
this study is to fulfillment of the requirements for the degree of MBA(Finance).For this
connection each student of this particular course is required to undertaketraining in a
relevant organization selected by them, for a period of 6-8 weeks.The secondary purpose
of this internship is to understand how the theoretical knowledge can beapplied to the
practical situations and examine an organizations financial issues and identify
itsopportunities/ problems and also suggest corrective measures. This internship is also
verynecessary to gain confidence and become aware of the mechanism of an
organization. As aninternee I want to achieve following objectives during my internship
and organization study: 1. To familiarize with a business organization. 2. To familiarize
with the different departments in the organization and their functioning. 3. To enable
myself to understand how the key business process are carried out in organization. 4. To
understand how information is used in an organization for decision making at various
levels. 5. To relate theory with practice. 6. I was also keen to gain professional
experience in an actual testing environment. 7. I want to develop my skills in the
application of theory to practical work situations. 8. To develop my attitude conducive to
effective interpersonal relationships. 9. To acquire good work habits and sense of
responsibility. 10. To enhance my learning experience by application of fundamental
concepts previously learned. 11. To observe, analyze and interpret the relevant data
competently and in a useful manner.
7. P a g e |7 12. To develop my interpersonal communication. 13. I want to enhance my
knowledge of the discipline of banking administration.BRIEF HISTORY OF
NATIONAL BANK OF PAKISTANThe history of National Bank of Pakistan is part of
Pakistans struggle for economicindependence. National Bank of Pakistan was
established on November 9, 1949 under theNational Bank of Pakistan Ordinance, 1949 in
order to cope with the crisis conditions whichwere developed after trade deadlock with
India and devaluation of Indian Rupee in 1949.Initially the Bank was established with the
objective to extend credit to the agriculture sector.The normal procedure of establishing a
banking company under the Companies Law was setaside and the Bank was established
through the promulgation of an Ordinance, due to the crisissituation that had developed
with regard to financing of jute trade. The Bank commenced itsoperations from
November 20, 1949 at six important jute centers in the then, East Pakistan anddirected its
resources in financing of jute crop. The Banks Karachi and Lahore offices
weresubsequently opened in December 1949. The National Bank of Pakistan came
forward toestablish its offices in the Cotton growing areas and extended credit facilities
liberally in order torestore stability to the market. In 1951, the country was once again
faced with a crisis in thecotton trade when prices was crashed and touched the lowest
level since independence followingthe cessation of hostilities in Korea. The bank in
collaboration with the cotton board provided thenecessary Credit facilities to the trade
and the crisis was tided over. The nature ofresponsibilities of the Bank is different and
unique from other banks/financial institutions. TheBank acts as the agent to the State
Bank of Pakistan for handling Provincial/Federal GovernmentReceipts and Payments on
their behalf. The Bank has also played an important role in financingthe countrys
growing trade, which has expanded through the years as diversification took place.1The
National Bank of Pakistan has its headquarters in Karachi, Pakistan. The bank
operates1249(2008) branches in Pakistan and 22(2008) overseas branches. Under a trust
Deed, the bankalso provides services as trustee to National Investment Trust (NIT)
including safe custody of
8. P a g e |8securities on behalf of NIT. The National Bank of Pakistan has assets worth
Rupees 737976.44million on September 30, 2008.2National Bank of Pakistan is today a
progressive, efficient, and customer focused institution. Ithas developed a wide range of
consumer products, to enhance business and cater to the differentsegments of society.
Some schemes have been specifically designed for the low to middleincome segments of
the population. These include NBP Karobar, NBP Advance Salary, NBPSaibaan, NBP
Kisan Dost, and NBP Cash n Gold.The National Bank of Pakistan has implemented
special credit schemes like small finance foragriculture, business and industries,
administrator to Qarz-e-Hasna loans to students, selfemployment scheme for unemployed
persons, public transport scheme. The Bank has expandedits range of products and
services to include Shariah Compliant Islamic Banking products. Forthe promotion of
literature, NBP recently initiated the Annual Awards for Excellence inLiterature. NBP
will confer annual awards to the best books in Urdu and in all prominentregional
languages published during the defined period. Patronage from NBP would helpcreative
work in the field of literature. The Bank is also the largest sponsor of sports in Pakistan.It
has provided generously to philanthropic causes whenever the need arose.It has taken
various measures to facilitate overseas Pakistanis to send their remittances in aconvenient
and efficient manner. In 2002 the Bank signed an agreement with Western Union
forexpanding the base for documented remittances. More recently it has started
Electronic HomeRemittances Project. This project introduces technology based system to
handle inwardremittances efficiently, by ensuring that the Banks branches keep a track of
the remittancereceived from abroad till its final receipt.A number of initiatives have been
taken, in terms of institutional restructuring, changes in thefield structure, in policies and
procedures, in internal control systems with special emphasis oncorporate governance,
adoption of Capital Adequacy Standards under Basel II framework, in theup gradation of
the IT infrastructure and developing the human resources.National Bank has earned
recognition and numerous awards internationally. It has been therecipient of The Bank of
the Year 2001, 2002, 2004 and 2005 Award by The Banker Magazine,the Best Foreign
Exchange Bank Pakistan for 2004, 2005, 2006 and 2007, Global Finance,
9. P a g e |9Best Emerging Market Bank from Pakistan for the year 2005, Global Finance,
Kisan TimeAwards 2005 for NBPs services in the agriculture field. It is listed amongst
the Regionslargest banks and also amongst the largest banks in South Asia 2005, The
Asian Banker. It hasalso been presented a Recognition Award 2004 for having a
Gender Sensitive Managementby WEBCOP AASHA besides other awards.3 The precise
summary of National Bank of Pakistan regarding its countrywide and overseasoperations
is as fallows: 1949 National Bank of Pakistan (NBP) was established under the National
Bank of Pakistan Ordinance 1949 and was 100% govt.-owned. NBP acted as an agent of
the Central Bank wherever the State Bank did not have its own Branch. It also undertook
Government Treasury operations. Its first branches were in jute growing areas in East
Pakistan. Offices in Karachi and Lahore followed. 1950 NBP established a branch in
Jeddah, Saudi Arabia. The Bank in 1950 had one subsidiary The Bank of Bahawalpur
on December4, 1947 by the former Bahawalpur State 1955 By this time NBP had
branches in London and Calcutta. 1957 NBP established a branch in Baghdad, Iraq.
1962 NBP established a branch in Dar-es-Salaam, Tanganyika. 1964 The Iraqi
government nationalized NBPs Baghdad branch. 1965 The Indian government seized
the Calcutta branch on the outbreak of hostilities between India and Pakistan. 1967 The
Tanzanian government nationalized the Dar-Es-Salaam branch. 1971 NBP acquired
Bank of Chinas two branches, one in Karachi and one at Chittagong. At separation of
East Pakistan NBP lost its branches there. NBP merged with Eastern Mercantile Bank
and with Eastern Bank Corporation.
10. P a g e | 10 1974 The government of Pakistan nationalized NBP. As part of the
concomitant consolidation of the banking sector, NBP acquired Bank of Bahawalpur (est.
1947). 1977 NBP opened an offshore brain Cairo. 1994 NBP amalgamated Mehran
Bank (est. 1991). 1997 NBPs branch in Ashgabat, Turkmenistan commenced
operations. 2000 NBP opened a representative office in Almaty, Kazakhstan. 2001
State Bank of Pakistan and Bank of England agree to allow only 2 Pakistani banks to
operate in the UK. NBP and United Bank agreed to merge their operations to form
Pakistan International Bank, of which NBP would own 45% and United Bank 55%.
2003 NBP received permission to open a branch in Afghanistan. 2005 NBP closed its
offshore branch in Cairo.NATURE OF NATIONAL BANK OF PAKISTANNational
Bank of Pakistan was incorporated in Pakistan under the National Bank of
PakistanOrdinance, 1949 and is listed on all the stock exchanges in Pakistan. The bank is
engaged inproviding commercial banking and related services in Pakistan and overseas.
The bank operates1,249 (2007:1,232) branches in Pakistan and 22 (2007:18) overseas
branches (including theExport Processing Zone branch, Karachi). Under a Trust Deed,
the bank also provides servicesas trustee to National investment Trust (NIT) including
safe custody of securities on behalf ofNIT.4The nature of responsibilities of the Bank is
different and unique from other banks/financialinstitutions. The bank also handles
treasury transactions for the Government of Pakistan as anagent to the State Bank of
Pakistan for handling provincial/Federal Government receipts andpayments on their
behalf. The National Bank of Pakistan has also played an important role infinancing the
countrys growing trade, which has expanded through the years as diversification
11. P a g e | 11took place. The bank is providing all banking services of mercantile and
commercial bankingpermissible in the country, which include: Accepting of deposits of
money on current, fixed, saving, term deposit and 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, term finance and musharika certificates,
etc. Buying, selling, dealing, including entering into forward contracts of foreign
exchange. Financing of seasonal crops like cotton, wheat, rice, sugar cane, tobacco, etc.
Receiving of bonds, valuables, etc. for safe custody. Carrying on agency business for
any description other than managing agent, on behalf of clients including Government
and local authorities. Generating, undertaking, promoting, etc. of issue of shares and,
bonds etc. Transacting guarantee and indemnity business. Undertaking and executing
trusts. Joint venturing with foreign dealers, agents and companies for its representation
abroad. Participating in World Bank and Asian Development Banks lines of credit.
Providing personalized Hajj services to intending Hajjis.
12. P a g e | 12BUSINESS VOLUME OF NATIONAL BANK OF PAKISTANRupees
inMillionsYear 2004 2005 2006 2007 2008Total Assets 553,231,467 577,719,114
645,132,711 762,193,593 817,758,326Deposits 465,571,717 463,426,602 501,872,243
591,907,435 624,939,016Advances 220,794,075 268,838,779 316,110,406 340,677,100
412,986,865Reserves 10,813,914 13,536,041 13,879,260 15,772,124
19,941,047Investments 149,350,096 156,985,686 139,946,995 210,787,868 170,822,491
Horizontal Analysis (%)Total Assets 100 104 117 138 148Deposits 100 100 108 127
134Advances 100 122 143 154 187Reserves 100 125 128 146 184Investments 100 105
94 141 114The business volume of National Bank of Pakistan is stated in terms of total
assets, deposits,advances, reserves and investments. To analyze the trend in these items
the Horizontal analysisof each item is calculated.
13. P a g e | 13A NALYSISThe Total Assets of National Bank of Pakistan fluctuates during
all years as they show anincreasing trend. The total assets are increased 4 % in 2005 and
17 % in 2006. The year 2007represents second highest percentage on account of total
assets as it was increased to 38%. Therewas an increase of 48 % in 2008 as compare to
base year and 10% as compare to 2007.A NALYSISThe deposits and other accounts of
National Bank of Pakistan show a mixed trend during allyears. In the year 2005, the
deposits were increased very marginally, with the year 2006represents an increase of 8%.
The deposits are increased 27% & 34% in the years 2007 and 2008respectively.
14. P a g e | 14A NALYSISThe advances made by National Bank of Pakistan shows an
increasing trend in all years ascompare to base year. This implies that National Bank of
Pakistan is keener to advance money tolenders. The advances were increased 22 % in the
year 2005 and 43 % in 2006 as compare tobase year. The year 2007 represents an
increase of 54 % and 2008 represents highest percentageamong all years that is 87 % as
compare to base year.A NALYSISThe Banks reserves are banks holdings of deposits in
accounts with their central bank pluscurrency that is physically held in bank vaults (vault
cash). The reserves of National Bank ofPakistan fluctuate during all years as they show
an increasing trend. The reserves are increased25 %, 28 % & 46 % in the years 2005,
2006 & 2007 respectively. The year 2008 representshighest increasing percentage of 84%
as compare to base and previous years.
15. P a g e | 15A NALYSISThe investments made by National Bank of Pakistan fluctuate
during all years. There was anincrease of 5 % in 2005. The year 2006 indicates a decrease
of 6% in investments. The year 2007represents an increase of 41 %, highest among all
years. The investments are increased 14 % in2008 as compare to base year; however
investments are decreased 27 % as compare to the year2007.
16. P a g e | 16BRANCH NETWORK OF NATIONAL BANK OF PAKISTANWith the
geographical development of its branches, the National Bank of Pakistan has been ableto
extend its services to a much larger number of Pakistanis all over the country. Today the
Bankhas more than 8.8 million accounts & Bank maintains its presence in all the major
financialcenters of the world through its 22 (2008) overseas branches and 5 representative
offices. Ofthese, three representative offices have recently been set up at Tashkent
(Uzbekistan), Baku(Azerbaijan) and Almaty (Kazakhstan) to take advantage of the
emerging opportunities in CIScountries. Banks role Apart from having a vast branch
network, Bank is at the forefront in theacquisition and application of new technologies in
every aspect of its banking facilities. It hasacquired leased telephone lines for on-line
banking. The Bank has 12 Regional ComputerCenters to cover various on-line and batch
system requirements of branches and controllingoffices.Presently the National Bank of
Pakistan is divided into various Groups headed by SEVPs/EVPs.Its field operations are
controlled by 29 regions ( Annexed II) reporting to as many Regionalchiefs, who control
40 zones and 15 single Branch zones headed by Zonal Chiefs; 12 corporatebranches and
1249 domestic branches headed by Branch Managers. The bank has 12 SWIFTlocal
centers.Apart from having a vast branch network, Bank is at the forefront in the
acquisition andapplication of new technologies in every aspect of its banking facilities. It
has acquired leasedtelephone lines for on-line banking. Bank has also a presence on the
internet. The National Bank
17. P a g e | 17of Pakistan has 156 online branches throughout the country. It has modernized
its services byinstalling Automated Teller Machines (ATMs) called CASH LINK at
selected branches.The Banks organizational structure reflects the three levels at which it
operates: international,national and local. The Head Office formulates and implements
the strategic, management andoperational policies.The Banks geographical organization
consists of branches located in the regional capitals and insome provincial capitals. The
branches activities relate to the State treasury service, paymentsystem services, currency
circulation, banking and financial supervision, and the analysis ofeconomic and financial
developments at the local level.The Bank has representative offices abroad, in London,
New York and Tokyo; a number ofofficers are seconded as financial experts to Italian
embassies and consulates. The Bank hasrepresentative offices in Beijing, Tashkent,
Chicago and Toronto. It has agency arrangementswith more than 3000 correspondent
banks worldwide. Its subsidiaries are Taurus Securities Ltd,NBP Exchange Company
Ltd, NBP Capital Ltd, NBP Modaraba Management Company Ltd,and CJSC Bank,
Almaty, Kazakhstan. The Banks joint ventures are, United National Bank(UK), First
Investment Bank and NAFA, an Asset Management Company (a joint venture withNIB
Bank & Fullerton Fund Management of Singapore).5The Branch network of National
Bank of Pakistan is divided into following categories ATM network ( Total ATMs 101
& Total ATMs machines 104) Domestic network ( 1249 Branches) Islamic network (
5 Branches) Online network ( 156 Branches) Overseas network ( 29 Branches) Swift
network ( 12 Branches) Customer Facilitation Centers (6 Customer Facilitation Centers)
18. P a g e | 18 Agriculture branches ( 825 Branches)NUMBER OF EMPLOYEES OF
NATIONAL BANK OF PAKISTANPermanent 13237Temporary/ On Contractual basis
842Banks own staff strength at the end of the year 14079Outsourced 2350Total Staff
Strength 16429An employee may be defined as: "A person in the service of another
under any contract of hire,express or implied, oral or written, where the employer has the
power or right to control anddirect the employee in the material details of how the work
is to be performed." 6An employeecontributes labor and expertise to an endeavor.
Employees perform the discrete activity ofeconomic production. Of the three factors of
production, employees usually provide the labour.Specifically, an employee is any person
hired by an employer to do a specific "job". In mostmodern economies, the term
employee refers to a specific defined relationship between an
19. P a g e | 19individual and a corporation, which differs from those of customer, or client.
The relationshipbetween National Bank of Pakistan and its employees is usually handled
through the HumanResource Management & Administration Group & Employees benefit
disbursement & trusteedivision. These groups handle the incorporation of new hires, and
the disbursement of anybenefits which the employee may be entitled, or any grievances
that employee may have.There are differing classifications of workers within National
Bank of Pakistan, these are: Permanent Temporary / On Contractual OutsourcedThe
Employees of National Bank of Pakistan are organizing into trade unions, which
representmost of the available work force in National Bank of Pakistan. These trade
Unions utilize theirrepresentative power to collectively bargain with the management of
bank in order to advanceconcerns and demands of their membership.PRODUCT
LINESThe most precise definition of product is anything capable of satisfying needs,
including tangibleitems, services and ideas. In marketing, a product is anything that can
be offered to a market thatmight satisfy a want or need.7 Since 1575, the word "product"
has referred to anything produced.Since 1695, the word has referred to "thing or things
produced. The economic or commercialmeaning of product was first used by political
economist Adam Smith. In general usage, productmay refer to a single item or unit, a
group of equivalent products, a grouping of goods orservices, or an industrial
classification for the goods or services. The consumer banking productsinclude personal
accounts, credit cards, loans, investment products, treasury products and manymore. The
National Bank of Pakistan offering for sale several related products individually,which is
commonly known as product lining. A product line is defined as A group of
productsthat are closely related because they function in a similar manner, are sold to the
same customer
20. P a g e | 20groups, are marketed through same types of outlets, or fall within the given
price ranges. 8 Thefollowings are the main consumer banking products of NBP. 1.
DEPOSITSThe National Bank of Pakistan offers to their clients a variety of Deposit
Schemes withpersonalized services at competitive rates of interest. Any Pakistani citizen
can open his/heraccount for any deposit scheme at any of its Branches strategically
located throughout Pakistan.The Bank with its huge network of 1243 branches garners
savings from both the rich and thepoor in urban as well as rural areas. Even a poor farmer
in a remote village, with his meagerannual income, feels secure to safe keep his
minuscule savings in National Bank of Pakistan,Because National Bank of Pakistan has a
long heritage of trust and professional commitment. A) CURRENT DEPOSITSThese are
payable to the customer when ever they are demanded. When a banker accepts ademand
deposit, he incurs the obligation of paying all cheques etc, drawn against him to theextent
of the balance in the account. Because of their nature, these deposits are treated as
currentliabilities by the banks. Bankers in Pakistan do not allow nay profit on these
deposits, andcustomers are required to maintain a minimum balance, failing which
incidental charges arededucted from such accounts. This is because Current Deposits may
be withdrawn by thedepositors at any time, and as such the bank is not entirely free to
employ such deposits. 9 CurrentAccounts/ Basic Banking accounts are opened, on proper
introduction and submission ofrequired documents along with initial deposit prescribed
from time to time. Basic bankingaccounts are opened for an individuals (single or joint)
only whereas current accounts are openedfor individuals (single or joint) Charitable
institution, provident and other funds of benevolentnature of local bodies, autonomous
corporations, companies, associations, educationalinstitutions, firms etc. and in all other
cases where the accounts are to opened under the order ofa competent court of law. No
profit is paid on the balances of current/basic banking accounts.The bank is authorized to
deduct service charges (incidental charges) on current accounts leviedthrough its half
yearly schedule of charges, in case the average balance falls below the minimumbalance
as prescribed by the bank. No balance maintenance condition is applied on basic
bankingaccount.
21. P a g e | 21 B) PLS SAVING DEPOSITSIn Pakistan a Savings Deposits Account can be
opened with a very small amount of money, andthe depositor is issued a cheque book for
withdrawals. Profit is paid at a flexible rate calculatedon six monthly basis under the
Interest Free Banking System. There is no restriction on thewithdrawals from the deposit
accounts but the amount of money withdraw is deleted from theamount to be taken for
calculation of products for assessment of profit to be paid to the accountholder. It
discourages unnecessary withdrawals from the deposits. In order to popularize thescheme
the SBP has allowed the Savings Scheme for school and college students and
industriallabour also. The purpose of these accounts is to inculcate the habit of savings in
the constituents.As such, the initial deposits required for opening these accounts are very
nominal. 10NBP chargeRs.500 for opening of PLS Savings deposits.The silent features
of profit and loss sharing and saving accounts of NBP are as fallows 1. These accounts
can be opened by individuals in their own single or joint name. The PLS savings account
can also be opened for provident fund or other benevolent funds of companies, firms,
organizations, NGOs and educational institutions. 2. PLS saving account can be opened
with a minimum amount of Rs.500/- only 3. To share in the profit a minimum balance of
Rs.500/- must be maintained in the account. The minimum balance on sixth and last of
month will qualify for the profits. The profits will be calculated on the basis of monthly
minimum balance for the periods of six months i.e. from January to June and July to
December 4. The head office of NBP determines the profit or loss on PLS saving deposits
and advice its branches the rate and time of distribution of these profits. 5. There shall be
no restrictions on maintaining the maximum balance in PLS saving account. 6. On the
first day of Ramzan each year the Zakat at the rate of 2.5% will be deducted from these
deposits on the balance of that day. But if depositors affix an affidavit of Zakat
22. P a g e | 22 deduction along with account opening form or he is a non-Muslim, no Zakat
will be deducted from his account. C) FIXED DEPOSIT ACCOUNT (TIME
DEPOSITS)The deposits that can be withdrawn after a specified period of time are
referred to as Fixed orTerm Deposits. The period for which these deposits are kept by the
bank ordinarily varies fromthree months to five years in accordance with the agreement
made between the customer and thebanker. Profit/Return is paid to the depositors on all
fixed or Time deposits, and the rate ofprofit/Return varies with the duration for which the
amount is kept with the banker. By lendingout or investing these funds, the bank earns
more than the Profit/Return that it has to pay on themto the depositors.11 By giving an
advance notice to the bank the deposit can be withdraw fromthe bank before the expiry of
the period. Fixed deposit accounts have higher rate of interest ascompare to other
accounts. The rate of interest rises with the length of period and the amount ofdeposit.
The bank grants to the depositor a fix deposit (FDR) which is not transferable to anyother
person. The silent features of fixed deposit account of NBP are as fallows 1. The PLS
term deposit are opened for individuals in their own single or joint names, companies
firms and other organizations. 2. The PLS term deposit receipt are issued for any amount.
There is minimum or maximum limit or deposits in a single term deposit account. 3. PLS
term depositors may be allowed some facilities against the security of these receipt
credits, after making Lien on the relevant receipt and subject to recovery of service
charges. 4. Under term deposit scheme the depositors not cease to earn the profit
immediately, after the respective maturity date. D) FOREIGN CURRENCY
ACCOUNTGovernment of Pakistan has introduced many important reforms in Foreign
Exchange Control inthe country since February, 1990, for the purpose of strengthening
the Foreign ExchangeReserves. One of these reforms relates to foreign currency
accounts, which can be opened inUnited States Dollars, Pound Sterling, Euro and
Japanese Yen in any of the authorized branches
23. P a g e | 23of commercial banks throughout the country. 12 Foreign currency accounts
are opened, on properintroduction and submission of required documents along with an
initial deposit prescribed fromtime to time. Rates of return on foreign currency deposits
are subject to fluctuation as determinedin accordance with State Bank of Pakistan
directives and will be paid on six monthly basiswhereas the return on term deposit/SNTD
will be paid on maturity or as prescribed by SBP. Thebank shall have no responsibility
for or liability to the account holders for any diminution due totaxes imposed or
depreciation in the value of funds credited to the account whether due todevaluation or
fluctuation in the exchange rate or other wise. E) NBP PREMIUM AAMDANINBP
Premium aamdani is a retail product of the bank. The amount of investment required
forthis account is Rs. 20,000/-to Rs. 5,000,000.The investment period is 5 years. Zakat
andwithholding tax will be deducted as per rules. In NBP premium aamdani, the account
holdershave benefit of free demand draft, pay order; free cheque book and NBP cash
card(ATM+Debit). The Financing facility is available up to 90% of the deposit value. 13
Profit paidevery period as follows: Period Profit Rates 1st year 7.50% 2nd years 8.50%
3rd years 9.50% 4th years 10.50% 5th years 11% f) NBP Premium SaverNBP Premium
saver is a retail product of the bank. The minimum saving balance of Rs. 20,001and a
maximum balance of Rs. 300,000 are required for opening a premium saver account.
Twodebit withdrawals allowed in a month and no limit on number of deposit
transactions. The profitis calculated monthly and Paid on half yearly basis. Free NBP
Cash Card (ATM + Debit) facilityis available to account holder.14 G) NATIONAL
INCOME DAILY ACCOUNT (NIDA)The scheme of National income daily account was
launched in December 1995 to attractcorporate customers. It is a current account scheme
and is part of the profit and loss system of
24. P a g e | 24accounts in operation throughout the country. Deposits in the NIDA accepted
on the conditionthat the depositor shall always maintain a minimum balance as prescribed
by the bank in hisaccount. In the event however, that any depositor wishes to withdraw
the amount and the balancein his account is less than the required amount, the account
will be converted to the ordinary PLSSB account for the purpose of calculating profit. An
example of how the NIDA accounts aremaintained is shown on the next page.R ATES
ON N ATIONAL INCOME DAILY ACCOUNT From Rs 2/- million to Rs 50/- the rate
is 1.4%. From Rs50/- million but less than Rs 500/-million, the rate is 1.5%. From Rs
500/- million but below Rs 1000/- the rate is 1.6%. From Rs 1000/- and above the rate
is 1.75%.S ALIENT F EATURES Rs 2-million is required to open an account and there
is no maximum limit. Profit is paid on half yearly basis on monthly balances. The rates
of profit vary according to the slabs of deposit. On Deposits of Rs.2 million to 2,000
million, the rate fluctuates from 1.4 to 1.75 It is a checking account and there is no limit
of withdrawals.NIDA 1 Date Description of Transaction C Debit (-) Credit (+) Balance
Days Products 01/05/2008 Balance 10,000,000 10,000,000 05/05/2008 Cash 500,000
9,500,000 4 38000000
25. P a g e | 25 08/05/2008 Cash 100,000 9,600,000 3 28800000 11/05/2008 Transfer
75,000,000 84,600,000 3 253800000 15/05/2008 Cash 3,000,000 81,600,000 4
326400000 18/05/2008 Cash 78,600,000 160,200,000 3 480600000 20/05/2008 Cash
1,000,000 159,200,000 2 318400000 22/05/2008 Cash 5,000,000 164,200,000 2
328400000 23/05/2008 Cash 700,000 163,500,000 1 163500000 25/05/2008 Cash 10,000
163,510,000 2 327020000 27/05/2008 Cash 300 163,509,700 2 327019400 31/05/2008
Transfer 500,000 164,009,700 4 656038800 01/06/2008 Cash 2,100,000 161,909,700 1
161909700 06/06/2008 Transfer 36,000,000 197,909,700 5 989548500 10/06/2008 Cash
9,870,000 188,039,700 4 752158800 2. ADVANCESNational Bank of Pakistan plays a
pivotal role in translating the governments development plansin terms of growth in
industrial, commercial and agricultural sectors in Pakistan. Accordingly theBank has
formulated its Credit Policy under the guidelines of SBP-the Central Bank of Pakistan. A)
NBP SAIBAANThe NBP Saibaan is retail product of the bank. It has different product
items which are homepurchase, home construction, home renovation and purchase of
land plus construction. If anyonehas a Home Finance Facility outstanding with another
bank he can have it transferred to NBPthrough a hassle-free process. 15 A brief
description of these products is as fallows
26. P a g e | 26TYPE OF ADVANCE Financing Amount Financing Period Debt to equity
RatioHome Purchase (House or Apartment) Rs. 35 Million 3 to 20 years 85:15
(maximum)Home Rs. 35 Million 3 to 20 years 85:15 (maximum)ConstructionHome
Renovation Rs. 15 Million 3 to 15 years 80:20 (maximum)Purchase of land Plus
Construction Rs.35 Million 3 to 20 years 80:20 (maximum) B) NBP ADVANCE
SALARYThe NBP Advance salary has been the flag-ship product for NBP. NBP
Advance Salary, theleading personal loan product of the country, is maintaining its
inimitability ever since it waslaunched. This was only possible due to its swift growth
and remarkable loan disbursement ofover 118 billion.16 You can avail up to 20 net take
home salaries with easy repaymentinstallments. Its hassle free acquisition with no prior
formalities and easy availability in a shortturn around time is attributed as the most
distinguishing features of the product. The product isoffered countrywide. The terms and
conditions of NBP Advance salary is shown on next page:T ERMS & C ONDITIONS
Eligibility Permanent Employees of Govt., Semi-Govt., Autonomous, Semi Autonomous,
Local & other bodies who are maintaining their Salary A/Cs at NBP. Repayment Direct
deduction from Salary A/C Maximum Loan Rs. 490,000/- Amount Security Employer
will provide undertaking that borrowers Salary and end of service benefits will route
through his/her Salary A/C maintained at NBP during the tenure of the loan and his/her
end of service benefits are at least equal to the amount of Advance Salary required.
Hypothecation of Consumer durables owned by the
27. P a g e | 27 borrower. Three (3) Undated ChequesMax. Repayment 5 years (60
months)PeriodAdvance in terms of # Up to 20 net take home salariesof net take
homesalariesMarkup Rate 15 % (Based on diminishing balance method)Processing Fee
1% of Loan AmountVerification Charges Rs 500/-Life Insurance No Insurance of any
kind.Documentation at actualChargesContact Your Salary disbursing NBP
Branch.Remaining Service At the time of approval and disbursement the applicantsAge
remaining service age should be 6 months after maturity of the loanDebt Burden
50%Minimum net take no minimum take home requirementhome salary
28. P a g e | 28 C) NBP CASH & GOLDWith NBPs Cash & Gold, the customers meet their
need for ready cash against their idle goldjewelry. The rate of mark up is 13% p.a. This
product has following features17 Facility of Rs. 7,000 against each 10 grams of net
contents of gold No maximum limits of cash Repayment after one year Only gold
ornaments acceptable Weight and quality of gold to be determined by NBPs appointed
schroffs No penalty for early repayment D) STUDENTS LOAN SCHEMEPursuant to
the announcement made by the Federal Finance Minister in his 2001-2002 budgetspeech,
a Student Loan Scheme (SLS) for Education was launched by the Government ofPakistan
in collaboration with major commercial banks of Pakistan (NBP, HBL, UBL, MCB
andABL). Under the Scheme, financial assistance is provided by way of Interest Free
Loans to themeritorious students who have financial constraints for pursuing their studies
in Scientific,Technical and Professional education within Pakistan. The Scheme is being
administered by ahigh powered committee comprising Deputy Governor, State Bank of
Pakistan, Presidents of thecommercial banks and representative of Ministry of Finance,
Government of Pakistan. 18 E) NBP KAROBAR- PRESIDENTS ROZGAR
SCHEMEThe solution of Pakistans major socio-economic problems primarily lies in the
development andgrowth of small & micro businesses. These will not only provide
employment opportunities toever-growing population demand but will also become the
catalyst for breaking the vicious circleof poverty. In this regard, NBP has developed a full
range of Products under the PresidentsRozgar Scheme with a brand name of NBP
KAROBAR. The scheme will be offered to eligible
29. P a g e | 29young and literate citizens of Pakistan, falling within an age group of 18-40
years having aminimum qualification of Matriculation (except for females in the
PCO/Tele-center product).The eligible borrowers will be required to make a down
payment of 15%. Asset and Life &Disability insurances will be mandatory under this
scheme. The 15% down payment will include1st years asset insurance premium.
However, the cost of life and disability insurance will beborne by GOP. The mark-up rate
for the 1st year will be 12% and for the subsequent years it willbe 1 year KIBOR + 2%.
Fifty percent (50%) of this rate will be paid by the customer i.e. 6% andthe balance of 6%
will be borne by GOP. Additionally, first 10% of the losses under the schemewill be
taken-up by GOP. Initially, under the Presidents Rozgar scheme, NBP will
offerfollowing products: a) NBP Karobar Utility Store (under a Franchise with Utility
Stores Corporation) b) NBP Karobar Mobile General Store (without USC Franchise) c)
NBP Karobar Transport d) NBP Karobar PCO e) NBP Karobar Tele-center A) NBP K
AROBAR U TILITY S TOREThe product has been designed in collaboration with
UTILITY STORES CORPORATION OFPAKISTAN (USC) to provide financing
facility of an average amount of Rs.100, 000/- for amaximum period of five years with
grace period of three months. This is available to all eligiblecitizens of Pakistan for
setting-up small-scale Retail Outlet or Mobile Utility Store. The USCwill give its
franchise to qualifying Pakistani citizens. Following two financing options areavailable
under this product: 1. NBP KAROBAR Utility Store (Shop)The Financing facility is
available to set-up a small scale Retail Outlet (Utility Store in a shop)for purchase of
furniture & fixtures. This is also applicable on payment of security deposit /advance rent
under franchise from the USC. However, stocks will be purchased by the customer.
30. P a g e | 30 2. NBP KAROBAR Mobile Utility StoreFinancing facility available to
purchase a 2/3 wheeler, 4 stroke Petrol/CNG/LPG Vehicle (AutoScooter / Motorcycle
Rickshaw) with attached Loader body (Thehla type) under franchise fromthe USC to
carry utility goods for retail sale ideally in areas where accessibility to conventionalutility
stores is difficult. B) NBP K AROBAR M OBILE G ENERAL S TORE ( WITHOUT
USC F RANCHISE )This financing program has been designed on the similar pattern of
Mobile Utility Store. Theonly difference is that the borrower will have the liberty of
procuring stock/supplies/groceryitems from open market. Under this product the average
loan size of Rs.100, 000/- will be givenfor a maximum period of five years with a grace
period of three months. C) NBP K AROBAR T RANSPORTThe NBP Karobar Transport
is designed to finance 2/3 wheeler, 4 stroke Petrol/CNG/LPGVehicle (Auto Scooter /
Motorcycle Rickshaw) to the eligible citizens of Pakistan for providingless expensive
environment friendly transport facility. Under this product average loan size ofRs.100,
000/- will be provided for a maximum period of five years with a grace period of
threemonths. D) NBP K AROBAR PCOThis product is designed to finance setting-up a
PCO. NBP will be providing financing for thepurchase of Mobile/Wireless Telephone Set
with connection, Credit Balance. The averageamount of financing under this product will
be Rs.5, 000/- for a maximum period of two yearswith a grace period of three months. E)
NBP K AROBAR T ELE - CENTERThis product is specially designed to finance
setting-up a Tele-center. NBP will be providingfinancing for the purchase of
Mobile/Wireless Telephone Set with connection, Computer, Printerand Fax machine cum
Photocopier etc. to establish tele-center on a rented shop or ownedpremises. The average
amount of financing under this product will be Rs.50, 000/- for amaximum period of two
years with a grace period of three months.
31. P a g e | 31
32. P a g e | 32 3. CORPORATE ADVANCES A) CASH FINANCEThis is a very common
form of borrowing by commercial and industrial concerns and is madeavailable either
against pledge or hypothecation of goods, produce or merchandise. In cashfinance, a
borrower is allowed to borrow money from the banker up to a certain limit, either atonce
or as and when required. The borrower prefers this form of lending due to the facility
ofpaying markup/services charges only on the amount he actually utilizes. If the borrower
does notutilize the full limit, the banker has to lose return on the un-utilized amount. In
order to offsetthis loss, the banker may provide for a suitable clause in the cash finance
agreement, accordingto which the borrower has to pay markup/service charges on at least
on self or one quarter of theamount of cash finance limit allowed to him even when he
does not utilize that amount. B) RUNNING FINANCE/ OVERDRAFTThis is the most
common form of bank lending. When a borrower requires temporaryaccommodation his
banker allows withdrawals on his account in excess of the balance which theborrowing
customer has in credit, and an overdraft thus occurs. This accommodation is
generallyallowed against collateral securities. When it is against collateral securities it is
called SecuredOverdraft and when the borrowing customer cannot offer any collateral
security except hispersonal security, the accommodation is called a Clean Overdraft.
The borrowing customer isin an advantageous position in an overdraft, because he has to
pay service charges only on thebalance outstanding against him. The main difference
between a cash finance and overdraft liesin the fact that cash finance is a bank finance
used for long term by commercial and industrialconcern on regular basis, while an
overdraft is a temporary accommodation occasionally resortedto. C) DEMAND
FINANCEWhen a customer borrows from a banker a fixed amount repayable either in
periodic installmentsor in lump sum at a fixed future time, it is called a loan. When
bankers allow loans to their
33. P a g e | 33customers against collateral securities they are called secured loans and
when no collateralsecurity is taken they are called clean loans.The amount of loan is
placed at the borrowers disposal in lump sum for the period agreed upon,and the
borrowing customer has to pay interest on the entire amount. Thus the borrower gets
afixed amount of money for his use, while the banker feels satisfied in lending money in
fixedamounts for definite short periods against a satisfactory security. 4.
REMITTANCES A) DEMAND DRAFTSDrafts drawn by one branch on another branch
or on the Head Office of same bank or vice versa,are not cheques or bills, as these have
no distinct drawer and drawee. Section 85-A reads: Where any draft, that is, an order to
pay money, drawn by one office of bank upon anotheroffice of the same bank for a sum
of money payable to order on demand, purports to be issued byor on behalf of the payee,
the bank is discharged by payment in due course.Bankers drafts payable to order on
demand are within the protection of Sections 10 and 131-Aof the Negotiable Instruments
Act. However, if a demand draft drawn on a bank by its ownbranch bears a forged
endorsement, the person in possession of it cannot compel that bank to payit. As far as
possible the bankers draft should be crossed and it should never be drawn payableto
bearer.When a person requires a draft he should be asked to complete the prescribed
application form inwhich he should state the amount of the draft, the name of the payee,
and the place of payment.This application form should be signed by the purchaser or by
those persons who have been dulyauthorized to act on his behalf. When a customer
requests his banker to provide him with abankers draft, the amount of which is to be
debited to his account, he should enclose with hiswritten request a cheque covering the
amount of the required draft and other charges etc. payableto banker.19
34. P a g e | 34The National Bank of Pakistan provides demand drafts at very reasonable
rates with safety,speedy and reliable way to transfer money. Any person whether an
account holder of the bank ornot, can purchase a Demand Draft form a bank. B)
TRAVELERS CHEQUESThey are generally issued for the convenience of person
travelling abroad, but some Pakistanibanks issue them in Pakistan currency also for use
within the country as well. Before issuing, thebankers receive an amount equal to the face
value of the cheques, and also charge a smallcommission. The travelers cheques are for
fixed amount and are treated as Order chequespayable only to the purchaser whose
specimen signature appears on each travelers cheque itself.Foreign currency travelers
cheques are issued and encashed in accordance with the provisions ofthe Exchange
Control Regulation Act, 1947. While making payment, the paying banker mustinsist that
the holder signs in his presence.20The National Bank of Pakistan provides their services
for travelers cheque at very reasonableand competitive rates. It has following features
Negotiability Pak Rupees Travelers Cheques are a negotiable instrument Validity There
is no restriction on the period of validity Availability At 700 branches of NBP all over the
country Encashment At all 400 branches of NBP Limitation No limit on purchase Safety
NBP Travelers Cheques are the safest way to carry our money C) LETTER OF
CREDITLetters of credit are very useful instruments in facilitating commercial relations
betweenbusinessmen at various places. Letter of credit state the limit of the credit and the
time duringwhich it is held at the disposal of the grantee, but they are neither negotiable
nor transferable.Letter of credit may be revocable. There are many kinds of letter of
credit such as Revolvingcredit, Back to Back credit, Claused credit etc. 21 NBP is
committed to offering its businesscustomers the widest range of options in the area of
money transfer. If you are a commercial
35. P a g e | 35enterprise then our Letter of Credit service is just what you are looking for.
With competitiverates, security, and ease of transaction, NBP Letters of Credit are the
best way to do yourbusiness transactions. D) FOREIGN REMITTANCESTo facilitate its
customers in the area of Home Remittances, National Bank of Pakistan has takena
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.The new features of NBP foreign remittances include: The existing system
of home remittances has been revised/significantly improved and well-trained field
functionaries are posted to provide efficient and reliable home remittance services to
nonresident Pakistanis at 15 overseas branches of the Bank besides United National Bank
(the joint venture between NBP and UBL in UK)., 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. E)
SWIFT SYSTEMThe SWIFT system (Society for Worldwide Inter bank Financial
Telecommunication) has beenintroduced for speedy services in the area of home
remittances. The system has built-in featuresof computerized test keys, which eliminates
the manual application of tests that often cause delayin the payment of home remittances.
The SWIFT Center is operational at National Bank of
36. P a g e | 36Pakistan with a universal access number NBP-PKKA. All NBP overseas
branches and overseascorrespondents (over 450) are drawing remittances through
SWIFT. Using the NBP network ofbranches, we can safely and speedily transfer money
for our business and personal needs. F) MAIL TRANSFERA Mail Transfer is a form of
remittance in which the amount remitted by a customer or a non-customer is directly
credited to the account of the beneficiary with another branch. Move yourmoney safely
and quickly using NBP Mail Transfer service. And NBP also offer the mostcompetitive
rates in the market. They charges Rs 50/- exchange rate and RS 75/- postage chargeson
issuing mail transfer. When the money is not required immediately, the remittances can
alsobe made by mail transfer (MT). Here the selling office of the bank sends instructions
in writingby mail to the paying bank for the payment of a specified amount of money.
Debiting to thebuyers account at the selling office and crediting to the recipients
account at the paying bankmake the payment under this transfer. NBP taxes mail charges
from the applicant where noexcise duty is charged. Postage charges on mail transfer are
actual minimum Rs. 40/- if sent byregistered post locally Rs.40/- if sent by registered post
inland on partys request. G) TELEGRAPHIC TRANSFERTelegraphic Transfer is a
form of remittance, which is advised by telegram, telex or faxmachines. The fundamental
principles of such transfer are otherwise identical with the MailTransfer. It is the
message, which is sent from one branch to another on the order of payer topayee through
wire. It is one of the quickest means to transfer fund through the use oftelex/fax/internet
or cable. Payment to the beneficiary is affected directly by the drawee officeupon
identification or through credit into beneficiarys bank account. As such remitting office
isnot required to issue any instrument payment to the remitter for delivery to the
beneficiary. H) PAY ORDERNBP provides another reason to transfer your money using
our facilities. NBP pay orders are asecure and easy way to move your money from one
place to another. And, as usual, NBPcharges for this service are extremely competitive.
The charges of NBP are very low all over thePakistan. It charges Rs 50/- for NBP
account holders on issuing one payment order, and chargesRs 100/- for NBP non-account
holders on issuing one payment order. It charges Rs 25/- for
37. P a g e | 37students on payment of fees of educational institutions. If some one want a
duplicate of paymentorder they charges Rs 100/- for NBP account holders and Rs 150/-
for non account holders. 5. MISCELLANEOUS A) LOCKERSNational of Pakistan also
provides lockers facility in the country. The lockers issued only to thedepositors. No
lockers are issued to any unknown person. The dual control system is used forlockers.
The officer has master key to apply on the locker but he cannot open the locker of
anyperson. The locker holder provides the bank has specimen signature. Whenever the
lockerholders come to open the locker, his signatures are verified by the officer and then
will be able toopen his locker. If the key of the locker is lost company providing these
lockers breaks the lockerand new lock is fitted in its locker and lock is destroyed in the
presence of the locker holder andbank charges RS 1200 for that. In case the locker holder
dies, the court opens his locker in thepresence of his heir as mentioned in his will or and
his belongings are given to them and thelocker is closed. B) NBP CASH CARDNBP
Cash Card is a 24-hour direct access ATM/Debit card to your bank account, which lets
youpay directly from your account as an alternative payment method to cash. The
transaction isauthorized and processed by entering PIN. The NBP Cash Card holders are
able to transact atany of the 4000 + Merchants where Orix logo is displayed and can
withdraw cash from NBP, 1-Link & M-NET ATMs across the country. The followings
are the main features of this product: You wont need to carry a lot of cash with you
every time you go out. Secure and Safe transaction.
38. P a g e | 38 Account Information on tips (like: Mini Statement, Balance Inquiry, Utility
Bill Payment etc.) Enable To Withdraw Cash From 1-Link ATMs / MNET ATMs.
Enable to Make Purchases from Around 4000 POS (Merchants) Countrywide including
2500+ POS in Karachi. No Card Issuance Fee for first 12 Months C )
INTERNATIONAL BANKINGNational Bank of Pakistan is at the forefront of
international banking in Pakistan which is provenby the fact that NBP has its branches in
all of the major financial capitals of the world.Additionally, the Bank has recently set up
the Financial Institution Wing, which is placed underthe Risk Management Group. The
role of the Financial Institution Wing is:- To effectively manage NBPs exposure to
foreign and domestic correspondence Manage the monetary aspect of NBPs relationship
with the correspondents to support trade, treasury and other key business areas, thereby
contributing to the banks profitability Generation of incremental trade-finance business
and revenues
39. P a g e | 39ORGANIZATIONAL STRUCTURE OF NATIONAL BANK OF
PAKISTANA well-developed and properly coordinate structure is an important
requirement for the successof any organization. It provides the basic framework within
which functions and procedures areperformed. Any organization needs a structure, which
provides a framework for successfuloperations. The operation of an organization involves
a number of activities, which are related todecision making, and communication of these
decisions. These activities must be wellcoordinated so that the goals of the organization
are achieved successfully.The Organization Structure (Annexed I) shows the internal
operations and reporting lines of theNational Bank of Pakistan. The bank has clearly
defined organizational structure, which supportsclear lines of communications and
reporting relationships. There exists a properly definedfinancial and administrative power
of various committees and key management personnel, whichsupports delegations of
authority and accountability. The internal operations of the Bank are organized into 15
main departments and divisionsheaded by senior management of the bank and are report
directly to the Board of Directors. Theorganizational structure of National Bank of
Pakistan is centralized because all the decisions ofthe bank are taken by the top
Management. The National Bank of Pakistans Departmental keyroles and functions are
as follows:
40. P a g e | 40BOARD OF DIRECTORSPursuant to Section 11 of The Banks
(Nationalization) Act, 1974, the number of Directors ofthe Bank shall not be less than 5
and not more than 7, excluding the President. The FederalGovernment may, if deems
necessary, appoint a Chairman of the Board in respect of the Bank.At present National
Bank of Pakistans Board of Directors consist of 6 Directors and a Presidentwho is the
Chief Executive of the Bank and presides over the meetings of the Board.
Theresponsibilities of Directors include the followings:22 1. The Board of Directors shall
assume its role independent of the influence of the Management and should know its
responsibilities and powers in clear terms. it should be ensured that the Board of
Directors focus on policy making and general direction, oversight and supervision of the
affairs and business of the Bank and does not play any role in the day-to-day operations,
as that is the role of the Management. 2. The Board shall approve and monitor the
objectives, strategies and overall business plans of the institution and shall oversee that
the affairs of the institution are carried out prudently within the framework of existing
laws & regulations and high business ethics. 3. All the members of the Board should
undertake and fulfill their duties & responsibilities keeping in view their legal obligations
under all the applicable laws and regulations. 4. The Board shall clearly define the
authorities and key responsibilities of both the Directors and the Senior Management
without delegating its policy-making powers to the Management and shall ensure that the
Management is in the hands of qualified personnel. 5. The Board shall approve and
ensure implementation of policies, including but not limited to, in areas of Risk
Management, Credit, Treasury & Investment, Internal Control System and Audit, IT
Security, Human Resource, Expenditure, Accounting & Disclosure, and any other
operational area which the Board may deem appropriate from time to time. The Board
shall also be responsible to review and update policies periodically and whenever
circumstances justify. 6. As regards Internal Audit or Internal Control, a separate
department shall be created which shall be manned preferably by professionals
responsible to conduct audit of the Bank, Various Divisions, Offices, and Units Branches
etc. The Head of this department will report directly to the BOD or Board Committee on
Internal Audit.
41. P a g e | 417. The business conditions and markets are ever changing and so are their
requirements. The Board, therefore, is required to ensure existence of an effective
Management Information system to remain fully informed of the activities, operating
performance and financial condition of the institution, the environment in which it
operates, the various risks it is exposed to and to evaluate performance of the
Management at regular intervals.8. The Board should meet frequently (preferably on
monthly basis, but in any event, not less than once every quarter) and the individual
directors of an institution should attend at least half of the meetings held in a financial
year. The Board should ensure that it receives sufficient information from Management
on the agenda items well in advance of each meeting to enable it to effectively participate
in and contribute to each meeting.9. The Board should carry out its responsibilities in
such a way that the external auditors and supervisors can see and form judgment on the
quality of Boards work and its contributions through proper and detailed minutes of the
deliberations held and decisions taken during the Board meetings.10. To share the load of
activities, the Board may form specialized committees with well- defined objectives,
authorities and tenure. These committees, preferably comprising of Non- Executive
Board members, shall oversee areas like audit, risk management, credit, recruitment,
compensation etc. these committees of the Board should neither indulge in day-to-day
affairs/operations of the bank and enjoy any credit approval authority for
transaction/limits. These committees should apprise the Board of their activities and
achievements on regular basis.11. The Board should ensure that it receives management
letter from the external auditors without delay. It should also be ensured that appropriate
action is taken in consultation with the Audit Committee of the Board to deal with control
or other weaknesses identified in the management letter. A copy of that letter should be
submitted to the State Bank of Pakistan so that it can monitor follow-up actions. The
Following table mentioned the names & designation of Board of Directors of National
Bank of Pakistan:
42. P a g e | 42 Name Designation Syed Ali Raza Chairman & President Mr. Sikandar Hayat
Jamali Director Mian Kausar Hameed Director Mr. Ibrar A. Mumtaz Director Mr. Tariq
Kirmani Director Mr. Muhammad Arshad Chaudhry Director Mr. Mohammad Ayub
Khan Tarin Director Mr. Ekhlaq Secretary Board of Ahmed DirectorsSENIOR
MANAGEMENTThe senior management of National Bank of Pakistan is consists of
Group chiefs, who reportdirectly to the Directors of Bank. The whole functions of
National Bank of Pakistan areperformed under these Groups. The National Bank of
Pakistan has following groups anddivisions: Corporate and investment Banking Group
Operations Group Credit Management Group Audit & Inspection Group Compliance
Group HRM & Administration Group Commercial & Retail Banking Group
Treasury Management Group
43. P a g e | 43 Special Assets Management Group Employees benefit & Disbursements
Group Overseas & Coordination Group Islamic Banking Core Banking Application,
PMO Financial Control Division Information Technology Group
44. P a g e | 44Name Group Name & DesignationMasood Karim Shaikh SEVP & Group
Chief, Corporate & Investment Banking GroupShahid Anwar Khan SEVP & Group
Chief, Credit Management GroupDr. Asif A. Brohi SEVP & Group Chief, Operations
GroupImam Bakhsh Baloch SEVP & Group Chief, Audit & Inspection GroupZiaullah
Khan SEVP & Group Chief, Compliance GroupDr. Mirza Abrar Baig SEVP & Group
Chief, Human Resources Management & Administration GroupAmer Siddiqui SEVP &
Group Chief, Commercial & Retail Banking GroupMuhammad NusratVohra SEVP &
Group Chief, Treasury Management GroupAmim Akhtar EVP & PSO to the
PresidentEkhlaq Ahmed EVP & Secretary Board of DirectorsTajammal Hussain
Bokharee EVP/Divisional Head, Special Assets Management GroupMrs. Khurshid
Maqsood Ali EVP & Divisional Head Employee Benefits, Disbursements & Trustee
DivisionTahir Yaqoob EVP & Group Chief, Overseas Coordination & Management
GroupAnwar Ahmed Meenai EVP & Divisional Head, Islamic BankingNaeemSyed EVP
& Head, Core Banking Application, PMOAamir Financial Controller & Divisional Head,
Financial ControlSattar DivisionAtif Hassan Khan Group Chief (A), Information
Technology Group 1. CORPORATE & INVESTMENT BANKING GROUP The
corporate & investment banking group is headed by Mr. Masood Karim Shaikh. This
group performs its function through its following two units: Corporate Banking
Investment Banking The corporate and investment banking will continue to play a major
role in loan syndications, structured financing and debt / capital raising transactions with
the objective of providing entire range of corporate and investment banking solutions to
its valued clients under one umbrella. The Corporate Banking Group achieved excellent
results in 2007 with a number of landmark transactions in cement, energy,
communication and fertilizer sectors. In addition to the funded income, our corporate and
investment banking has substantially increased its fee base income this year by being the
lead advisor in a number of transactions in the corporate world of Pakistan
45. P a g e | 45The challenges to corporate business in year 2007 were manifold including
reduction in PrivateCredit Investment as a result of slowing down of economy as well as
rising interest rates. Theincreasing pressure on the textile industry reduced the lending to
this sector. In addition thebanks corporate loans yields also faced pressure as substitute
form of funding sources areavailable in the market in form of Islamic financing, mutual
funds, issuance of debt instrumentslike TFCs and Bonds and the Capital markets.Despite
these threats and challenges at NBP, our corporate team not only increased the volumeas
well as the yield of the loans they also maintained a strong franchise with the
leadingPakistani corporate so as to ensure that NBP not only maintains its market share
but is in aposition to meet any challenges in future. NBP during the year also participated
in a number ofTFC issues and mutual funds subscriptions thereby increasing the overall
yield on investmentportfolio.NBP has the largest equity portfolio in the banking sector
primarily due to 27% holding in NITunits, the largest mutual fund in Pakistan. During the
year 2008 the bank redeemed 10% of itsNIT holding covered under LoC, which resulted
in capital gain of Rs. 1.8 billion in 2008. The National Bank of Pakistan has initiated a
structured approach to corporate banking byintroducing a single point of contact through
Relationship Managers. For this purpose, newRelationship Managers as well as team
leaders has been inducted to expedite this process. TheArea Managers of National Bank
of Pakistan are appointed to manage relationships and to betterservice the needs of
multinationals and large local corporate. An investment banking team hasalso been
formed by National Bank of Pakistan to offer specialized services to majorrelationships
including advisory and debt syndications. The National Bank o Pakistan havespecial
focus on Corporate Banking with a presence in all major locations through out
thecountry, offering full range of Banking products / services and one window interface
throughdesignated Relationship Managers. Corporate Banking offers tailor made
products / solutions asrequired by corporate customers which includes:The key features
of corporate Banking includes: Funded facilities, ranging from short to medium and
long term lending
46. P a g e | 46 Trade related financing. Foreign currency financing. All sorts of non-
funded facilities / services which include Cash receipts / payments, Remittances,
Collections, guarantees, letter of credit etc. Customized products / solutions 2.
COMPLIANCE GROUPThe Compliance Group of National Bank of Pakistan is headed
by Mr. Ziaullah Khan and isreport directly to the President/ Chief executive of NBP. In
order to keep the working of AuditDepartment aligned with the best international
practices Compliance Group has been created.This group is responsible for monitoring
compliance of various administrative / operativeinstructions, rules, and regulations by
constantly reviewing and reporting status of complianceand non-compliance. The
Compliance Group of NBP is set to ensure that all relevant laws arecomplied with, in
letter and spirit, and, thus, minimize legal and regulatory risks. TheCompliance officers
will primarily be responsible for Banks effective compliance relating to: Relevant
provisions of existing laws and regulations. Guidelines for KYC. Anti money
laundering laws and regulations. Timely submission of accurate data / returns to
regulator and other agencies. Monitor and report suspicious transactions to President /
Chief Executive Officer of the bank and other related agencies. The Compliance
Officers will serve as a contact point between President /Chief executive officers and
senior management, with regard to functioning of compliance program provide assistance
in this area to branches and other departments of the bank, and act as liaison with State
Bank of Pakistan concerning the issues related to compliance.The functions of
compliance group of National Bank of Pakistan are as fallows: Study and emphasize
compliance of best international practices in audit of various functions of NBP. Monitor
compliance of Administrative/Operational Instructions, Rules, Regulations issued from
time to time by the Management.
47. P a g e | 47 Review over the compliance carried out by the audit departments. Prepare
and put up a consolidated Report to the Directors of National Bank of Pakistan regarding
the status of compliance and non-compliance of the recommendations agreed by the
Departmental Management. 3. ISLAMIC BANKING GROUPThe divisional head of
Islamic Banking group is Mr. Anwar Ahmed Meenai. Islamic Banking isone of the
emerging field in global financial market, having tremendous potential and growing ata
very fast pace all around the world. Al-Hamdulillah, the progress of Islamic Banking
inPakistan has also been commendable during the last Five years. The year 2007 marked
the firstyear of Islamic Banking operations. During the year under review, in addition to
activeparticipation in various Sukuk transactions, two more Islamic Banking branches at
Lahore andPeshawar started operations. NBPs plans for the year 2008 include opening of
Faisalabad andRawalpindi branches with the focus on growing organically by opening
more standalone IslamicBanking branches, utilizing NBPs existing branch network of
1,200 plus conventional branchesand looking into strategic acquisitions for expansion in
this field. The products & services beingoffered by National Bank of Pakistans Islamic
Banking are fully Shariah Compliant and havebeen certified by NBPs Shariah Advisor.
Deposit Schemes being offered by NBPs IslamicBanking Branches include the
following: a) Current Deposit Scheme b) Profit & Loss Sharing (PLS) Deposit
SchemeCommercial and Corporate customers requiring financing will have the following
financingfacilities available to them to meet their requirements: a) Murabaha b)
Murabaha Facility c) Ijarah (Leasing)In addition to Shariah acceptable standard general
banking services, following services are alsobeing offered at the Islamic Banking
Branches: Letter of Credit Facility Handling of Remittances Issuance of Bank Drafts
and Pay Orders.
48. P a g e | 48 Collection of Export Bills. Collection of Local Bills. Government
Collections Utility Bills Collection 4. TREASURY MANAGEMENT GROUPThe
group chief of Treasury management group of National Bank of Pakistan is Mr.
MuhammadNusrat Vohra. The NBP treasury and capital market group has developed a
reputation of beingthe market leader in coming up with customized solutions for a large
and varied client base thatis spread virtually all across the country. The client base does
not consist of only blue chips onesbut encompasses public sector clients, retail sector,
multinationals, local conglomerates as wellas individuals.National bank treasury is
currently regarded as a market leader in both foreign exchange andrupee denominated
products because of its emphasis on service quality. The Treasurymanagement group of
National Bank of Pakistans offer:23 Narrowest bid / offer spread and quickest on line
quotes Customized solutions to minimize risk and optimize returns as per the needs and
circumstances of the clients Focus on building sustained and long term relationship with
institutional, corporate and retail clients. Local presence across the nation as well as
internationally.Currently the National Bank of Pakistan offer following Treasury
Products:24 A) P LAIN V ANILLA FX P RODUCTSNBP Treasury Management Group
is a market price maker and trend setter in the plain vanillaForeign Exchange products.
Its ability to offer tight prices, coupled with timely and accurateresearch making it a bank
of choice for clients seeking to favorably position their currency riskAs a result, National
bank has one of the largest FX book in the country. B) P AKISTAN I NVESTMENT B
ONDS
49. P a g e | 49Pakistan Investment Bonds issued by Government of Pakistan are a preferred
means for amajority of institutional investors to invest their surplus funds for a longer
time horizon. Thisway they are able to lock a higher yield for a relatively long term rather
than take the risk of re-pricing after relatively shorter time periods. Furthermore, PIBs are
highly secured and risk freeas they are guaranteed by the government of Pakistan.NBP is
the leading Primary Dealer for PIBs primarily because of its inventory size and
theappetite for such a long-term instrument given its deposit base. While most foreign /
privatebanks would have to go to the secondary market in order to satisfy a large order
from aninstitutional investor, NBP can execute such large orders through its own book.
This means thatit can offer tight prices for large amounts even under volatile market
conditions. C) D ERIVATIVES P RODUCTSNBP treasury Management group has been
at the forefront in developing the derivatives marketin Pakistan and has contributed both
individually and from the FMA (Financial MarketAssociation) front as well. The first
ever Derivative transaction of the Pakistani banking sectorwas done by NBP. Some of the
more common derivative structures being offered include: 1) C URRENCY O
PTIONSAn option gives the buyer the right but not the obligation to buy or sell an asset
at a pre-specifieddate and price. So the upside profit potential is unlimited whereas the
downside loss is protectedat a pre determined level. Various structures of currency
options are available including Knock-ins / Knock outs Participating Forwards 2) I
NTEREST R ATE S WAPS AND FRA SA client can convert a fix rate loan into floating
rate one or vice versa by using these derivativeinstruments. This allows the clients to
develop and implement their views about the evolvinginterest rate scenario. For example,
if the borrower feels that the interest rate might go up in the
50. P a g e | 50future, than he may choose to enter into a Pay Fixed Received Floating swap
with its bank toeffectively hedge its floating rate loans. 3) C ROSS C URRENCY S
WAPSThis product allows a client to convert its rupee based loans into a dollar based
loan. The clientsexposure is shifted from PKR KIBOR to USD LIBOR.The functions of
Treasury management group include: The Management of National Bank of Pakistans
holdings in and trading in government and corporate bonds, currencies, financial futures,
options and derivatives, payment systems and the associated financial risk management.
The management of cash flows, banking, money-market and capital-market transactions;
the effective control of the risks associated with those activities; and the pursuit of
optimum performance consistent with those risks. Presentations of information on
which treasury-management decisions are to be taken reflect the principles of
trustworthiness, honesty, truthfulness and objectivity. Employing National Bank of
Pakistans treasury-management policies and practices accurately reflect the legal and
regulatory regimes under which the Bank operates. Review of National Bank of
Pakistans treasury-management policies and practices on a regular basis with a view to
identifying ways of minimizing the risks of losses through improved checks and
safeguards and through clarity and segregation of responsibilities and dealing procedure.
5. CREDIT MANAGEMENT GROUPThe group chief of Credit Management Group is
Mr. Shahid Anwar Khan. This group usuallydeals with Banks allocations of payments or
cash application, internal fund movements,reconciliations and also maintaining positive
working relationships with customer during thedebt collection or credit review and
approval process, screening of customers and only those whois credit worthy are allowed
to do business. The divisions of this group are distributed accordingto different areas
which are: 1) NWFP Azad Kashmir Sind & Balochistan area wing 2) Karachi area wing
3) Special Credit Cell & Punjab area Wing
51. P a g e | 51The functions of this department include: Enforcing the State Policies,
financial regulations, and credit rules of the bank Framing credit policies and
regulations; supervising the staff to execute orders Putting forward the proposal of
credit management and development; guiding and supervising the branch-banks to deal
with credit business Managing the authorized business; dealing with the legal affairs
consulted and coordinated Establishing development rules on credit; dealing with the
acceptance draft; estimating the loaning accounts Responsible for reporting the credit
statistic statement Responsible for training client managers Responsible for dealing
with other work according to the directors of the bank Responsible for the credit-
registered consulting system; regulating the five-graded loans 6. AUDIT &
INSPECTION GROUPThe group chief of National Bank of Pakistans Audit &
inspection group is Mr. Imam BakhshBaloch. It is one of the core departments at NBP.
Its mission is to strive for soundness & stabilityof the financial system and safeguard
interest of stakeholders through proactive inspection,compatible with best international
practices. This group plays a vital role in meeting NBPs mainresponsibility of
supervising the banks soundness of the system and protection of the interest
ofdepositors, thereby ensuring public confidence in the system. In order to assess the
branches,Audit & inspection group conducts regular audit & inspection of branches.
Banks managementhas established and is managing an adequate and effective system of
internal control whichencompasses the policies, procedures, processes and tasks as
approved by the Board of Directorsthat facilitate effective and efficient operations. The
management and the employees at all levelswithin the Bank are required to perform as
per these approved Internal Control Systemcomponents. The Internal Control System
ensures quality of external and internal reporting,maintenance of proper records and
processes, compliance with applicable laws and regulationsand internal policies with
respect to conduct of business. The management ensures that anefficient and effective
Internal Control System is in place by identifying control objectives,reviewing existing
procedures and policies and ensuing that control procedure and policies are
52. P a g e | 52amended for time to time wherever required. However, Internal Control
System is designed tomanage rather than eliminate the risk of failure to achieve
objectives and provide reasonable butnot absolute assurance against material
misstatement or loss.25 The audit system of NationalBank of Pakistan consists of
following: a) Internal Audit b) External Audit c) Statutory Audit A ) I NTERNAL A
UDITThe Bank has an independent Internal Audit Group that conducts audit of all
Branches, Regionsand Groups at Head Office on an on-going basis to evaluate the
efficiency and effectiveness ofInternal Control System. In addition to that, Compliance
Group is also in place with independentCompliance Officer in 119 Branches and 29
Regional Compliance Chiefs with supporting staffto take care of compliance related
issues to strengthen the control environment.26For the purpose of inspection the National
Bank of Pakistan inspects its branches throughinspectors. Inspections are conducted on
regular basis in the branches. The current chairmen ofaudit committee of NBP are Azam
Faruque, Ibrar. A. Mumtaz & Mian Kausar Hameed. TheState Bank of Pakistan conducts
the regular full scope examination of banks pursuant to aninspection schedule; however,
flexibility exists in policy for frequency of inspections dependingupon the need to
maintain safety & soundness. The CAMELS (Capital, Asset Quality,Management,
Earnings, Liquidity, Sensitivity and System & Controls) rating is a criteria todetermine
the frequency of inspection of banks as weak institutions are given greater
attention.Special investigations (targeted inspections) are also conducted as and when
circumstances sowarrant on the basis of complaints or market reports about specific
institution. B) E XTERNAL A UDITThe Board of Directors on the recommendations of
Audit Committee has also recommendedname of Messers Ford Rhodes Sidat Hyder,
Chartered Accountants and Yousaf Adil Saleem &Co. as auditors of National Bank of
Pakistan. C) S TATUTORY A UDIT
53. P a g e | 53The statutory audit of National Bank of Pakistan is conducted to meet the
particular requirementsof State Bank of Pakistan. The scope and audit programs are set
by the State Bank of Pakistan.The National Bank of Pakistan has to pay a penalty of
Rs.20000 for each mistake in the Booksand procedures as prescribed by the law plus
surcharge of per day from the date of mistake to thedate of statutory audit.The functions
of Audit & inspection group of National Bank of Pakistan are as fallows: Examine and
evaluate adequacy and effectiveness of the internal control systems in the Bank. Review
the applications and effectiveness of risk management procedures and risk assessment
methodologies in financial, operational and Corporate Governance aspects of the Banks
activities. Review financial, automation technology and MIS. Review and ensure
accuracy and reliability of accounting records and financial reports. Perform testing of
both transactions and functioning of specific internal control procedures. Evaluate and
ensure that approved policies and procedures meet legal and regulatory requirements.
Examine and evaluate effectiveness of existing policies, procedures and give
recommendations for improvements. Identify opportunities for cost savings in Bank
operations and make recommendations. Examining those resources are acquired
economically, used efficiently and safeguarded adequately. Review various reports of
Banks subsidiaries, recommend improvements and provide policy guideline 7. HUMAN
RESOURCE MANAGEMENT & ADMINISTRATION GROUPThe group chief of
Human resource management & administration group is Mr. Dr. Mirza AbrarBaig. This
Division is responsible for fresh induction of employees and other professionalsthrough a
rigorous induction process in order to ensure presence of quality professionals.Following
units and areas of work are the part of this division. This group is responsible to
54. P a g e | 54develop annual manpower plan for National Bank of Pakistan, conduct job
analysis, prepare jobdescriptions, and conduct job evaluation process. The other functions
of this group includeattracting, selecting and recruiting the right people from the market.
The group firmly works onadopting latest organizational theories & change management
processes to bring in efficiency.This group also performs following functions: Deals
from placing job advertisements to timely recruitment of competent personnel by using
modern selection techniques. Systematically observes & measures
employees/candidates performance for the purpose of recruitment, selection and
promotions. Facilitates in establishing successful productive working relationships
through effectively orienting new employees to their respective departments/divisions
and to their positions. Encourages employees to seek promotion/transfers to fill internal
openings and meet employees personal objectives. Foster a culture of
acknowledgement and appreciation amongst employees for introducing innovative
business practices, showing extra ordinary efforts for achievement of goals and
enhancing Banks corporate image uses various methods of recognition ranging from
simple Thank you letters to elaborate celebrations and monetary rewards. Conducting
motivation surveys and developing market based employee satisfaction & retention
strategies. Conduction of evaluation of positions and grades to ascertain employees
position in the grade structure. This Group supervises all the staff colleges, at Karachi,
Islamabad, Lahore and Peshawar. 8. INFORMATION TECHNOLOGY GROUPThe
group chief of Information technology group is Mr. Atif Hassan Khan. This group is
formedto implement latest technology to keep National Bank of Pakistan online with the
domestic andinternational financial industry, and other stakeholders in order to promote
efficiency andstability in the financial market. The groups objective is to provide
appropriate technicalsolutions to business requirements and develop state of the art
integrated system that willfacilitate internal and external stakeholders to acquire accurate
information in the most effectivemanner. The National Bank of Pakistan with its
capabilities, methodologies and experience aims
55. P a g e | 55at technological advancement in bank, focusing on solutions that intend to
reduce operatingcosts, improves end user performance, and meet overall business
goal.The group provides services and solutions to improve and strengthen NBPs
technology portfolioand identify future requirements. Besides providing these useful
resources, IT group focuses onsafeguarding the information assets and relevant systems,
critical to NBP, through its Securityplans and policies. The information technology group
has following divisions: In-house Development Software development Web
development Central Server System Admin UNIX System Admin Windows
Customer Support Database Management Network Management Production Support
Administration Director Section 9. FINANCIAL CONTROL DIVISIONThis division
is headed by Mr. Atif Hassan Khan, who is also financial controller of NationalBank of
Pakistan. The financial control division is responsible to perform and manage
followingfunctions: Maintenance of books of accounts and preparation of financial
statements of the Bank in accordance with the IAS, as adopted by the Bank.
Coordination and facilitation for Business planning and budgeting function in the Bank
and periodic reporting to the management and to the Board. Preparation of Annual
Financial Statements Accounting Policies for the bank. Quarterly profit updates to the
Board of Directors. Consolidation of Departmental Budgets.
56. P a g e | 56 Maintenance of Federal & Provincial Government Account on the basis of
receipt and payments. Monthly Abstract, Daily Reserves and Weekly review reporting.
Short/Medium term investment and Swap deposits and maintenance of Foreign
Currency accounts and revaluation of Foreign Currency Assets & Liabilities. Making of
payments to external suppliers and employees of the Bank after independent verification
of transaction documents on the basis of bills/ invoices/claims approved by the
processing units. Checking and verifying the selected financial transactions to ensure
accuracy and compliance to respective rules and regulations. Assets capitalization,
assets transfers and overall responsibility to manage and maintain assets physical
inventory, keeping track of physical location of assets. To ensure the smooth and
unhampered running of the Fixed Assets Management function. To record all the
expenses regarding repair/ maintenance and rent taxes for NBP buildings and
equipments. To deal with various administrative matters arising in the Finance
Department. To respond to various queries rose from various internal and external
sources. 10. OVERSEAS COORDINATION & MANAGEMENT GROUPThe group
chief of NBPs overseas coordination & management group is Mr. Tahir Yaqoob.This
department is in charge of the management and operation of foreign exchange
businessincluding marketing and operating of the financial products and trade financing
of foreignexchange in the light of National foreign exchange management policy, and is
the governingdepartment of foreign exchange. The functions of this group are as follows:
Establishing marketing strategy, policy and management system of foreign exchange.
Making annual operating and working plan. Selecting and opening overseas account
under supervision, and establishing and harmonizing the business among agent banks.
Corresponding and dealing with foreign exchange business among branches.
57. P a g e | 57 Showing business requirement of costumers and development of new
products; publicizing foreign exchange business; training managers of customer-service
for foreign exchange business. Managing and operating foreign fund of the whole bank.
Making deposit and loan rate of each wholesale foreign exchange according to
management and market situation of deposit and loan rate of foreign exchange Focusing
on direct marketing of VIP customers and overall plans to put all resources together so as
to provide one-stop service. Examining and approving international business
financing(import & export bill purchase, foreign exchange bill discount, acceptance,
documentary credit, stand-by L/C, international non-financing guarantee and so on) .
Auditing foreign exchange business. Management and operation of researching credit,
and consult and testimony business. Managing turnover position of exchange settlement
and sales. Declaring international balance, register foreign loans and manage foreign
exchange account. Supervising wholesale foreign exchange deposit and payment to
defend money laundering and bank swindle. Managing and operating SWIFT system
and foreign exchange system. Organizing international business research and statistic;
establishing and improving foreign exchange files; making accounting report forms and
business report forms. Regularly examining the executive results of all system of foreign
exchange and renovate all the problems. Contacting and corresponding with National
foreign trade department, customs, industry governing department and foreign exchange
department. Examining and approving the branches launching foreign exchange
business, applying for new foreign business category to the Peoples Bank of China
according to current foreign exchange policy.
58. P a g e | 58 The National Bank of Pakistan is shifting focusing on expanding its market
share in tradefinance, home remittance and foreign investments. The Bank is setting high-
speed satellite linkalong with the extension of S.W.IF.T service to large domestic and
international branches. 11. COMMERCIAL & RETAIL BANKING GROUPThe group
chief of National Bank of Pakistans commercial & retail Banking group is Mr.
AmerSiddiqui. Retail banking includes retail lending and deposits, banking services, trust
and estates,private lending and deposits, banking service, trust and estates investment
advice, merchant /commercial / corporate cards and private labels and retail. 27
Commercial banking includesproject finance, real estate, export finance, trade finance,
factoring, lending, guarantees, bills ofexchange and deposits.This group is responsible for
serving the needs of the retail and commercial market, focusing onindividual consumers
and small and medium size enterprises. This group is responsible fordeveloping and
managing brands which serve the investment needs of the consumer market, andfocuses
on deposit mobilization, provision of value added services based on modern
technologyand undertaking the centralized marketing and advertising for the Bank. This
group is engaged inthe development and management of retail credit schemes. The
consumer market in Pakistan hasnot only grows exponentially over the last decade or so,
but the needs of this segment havebecome extremely diverse. In order to sustain
competition, it is but imperative to continueoffering innovative consumer credit
schemes.The National Bank of Pakistan plan to establish commercial centers across the
country looking atthe business potential in the area, size of the branch and its capabilities
to deliver the desiredservice in order to attract quality customers. The objective is to
target the untapped sectors andprovide them professional quality service, through one
window operations and RelationshipManagers stationed at those centers. We expect and
hope to reduce the turn around time andbecome more competitive and market oriented.
Further this customer friendly and dedicated setup at convenient locations would help in
improving the image of the Bank as well. These Centerswould work in conjunction with
the existing setup of Commercial Lending done throughout theNBP branch network.
The main purpose of these centers is to generate ancillary business inaddition to funded
and non-funded facilities, with quick turn around time in decisions forcustomer
satisfaction.
59. P a g e | 59 12. SPECIAL ASSETS MANAGEMENT GROUPThe group chief of Special
assets management group is Mr. Tajammal Hussain Bokharee. TheSpecial Asset
Management Group (SAMG) is a group of people with specialized skills inmanaging the
"stressed" assets of National Bank of Pakistan. The group was created with a viewto
enable restructuring and recoveries through various initiatives like innovative work-
outs,merger & acquisition strategies, asset stripping, security enhancements and
structured sell-downs. The group has also been working with / advising various
governmental and regulatorybodies in evolving a framework for implementing
international best practices like assetreconstruction companies in the country.With
provision coverage of 84% we believe that going forward our Special Assets
ManagementGroup will make major contribution towards the Banks profitability through
recoveries andreversal of provision charge as a result of declassification / rescheduling.
We have revamped ourspecial assets management business and have coordinated our
efforts to expedite recoveries andsettlements. 13. EMPLOYEE BENEFITS ,
DISBURSEMENTS & TRUSTEE DIVISIONThe divisional head of this division is Mr.
Mrs. Khurshid Maqsood Ali. The function of theNational Bank of Pakistans Employee
benefits, disbursement & trustee division is to handle theadministration of trust funds,
provide estate planning support, and in some cases see to thedisposition of the estate of a
deceased customer. One of the factors that make the use of thisdepartment so attractive is
that it tends to be somewhat conservative with their managementapproach. This means
that this department is likely to take time to evaluate all options wheninvolved in settling
estates, establishing guardianships, or administering trusts that have been setup for the
survivors of a major depositor. This methodical approach is often in line with
themotivation for establishing the asset in the first place, which was to provide a source
of financialsupport for loved ones, even after a parent or significant other has died.Along
with estate settlement, this department also provides a number of other agency
services,such as functioning as the trustee of record for corporate bonds or administering
a pension orprofit sharing plan. As a means of ensuring that the resources of the bank
safely protect theinvestments involved, the department makes it relatively easy for the
client to deal with othermatters. Thus, the investor can focus more on family or other
business matters, and be less
60. P a g e | 60involved in the task of protecting assets that are already established and set on
a path ofconsistent growth.E MPLOYEE BENEFITS OF NATIONAL B ANK OF P
AKISTAND EFINED B ENEFIT P LANS 1. P ENSION S CHEMEThe bank operates
defined benefit approved funded pension scheme for its eligible employees.The banks
costs are determined based on actuarial valuation carried out using Projected UnitCredit
Method. Net cumulative un-recognized actuarial gains/losses relating to
previousreporting period in excess of the highest of 10% of present value of defined
benefit obligation or10% of the fair value of plan assets are recognized as income or
expense over the estimatedworking lives of the employees. Where the fair value of plan
assets exceeds the present value ofdefined benefit obligation together with unrecognized
actuarial gains or losses and unrecognizedpast service cost, the bank reduces the resulting
asset to an amount equal to the total of presentvalue of any economic benefit in the form
of reduction in future contributions to the plan andunrecognized actuarial losses and past
service costs. 2. P OST RETIREMENT MEDICAL BENEFITSThe bank operates an un-
funded defined post retirement medical benefits scheme for all of itsemployees. Provision
is made in the financial statements for the benefit based on actuarialvaluation carried out
using the Projected Unit Credit Method. Actuarial gains/losses areaccounted for in a
manner similar to the pension scheme. 3. B ENEVOLENT SCHEMEThe bank also
operates an un-funded defined benefit benevolent scheme for its eligibleemployees.
Provision is made in the financial statements based on the actuarial valuation usingthe
Projected Unit Credit Method. Actuarial gains/losses are recognized in the period in
whichthey arise. 4. G RATUITY SCHEMEThe bank also operates an un-funded defined
benefit gratuity scheme for its eligible contractualemployees. Provision is made in the
financial statements based on the actuarial valuation using
61. P a g e | 61the Projected Unit Credit Method. Actuarial gains/losses are accounted for in a
manner similar topension scheme.O THER EMPLOYEE BENEFITS 1. E MPLOYEES
COMPENSATED ABSENCESThe bank accounts for all accumulating compensated
absences when employees render servicethat increases their entitlement to future
compensated absences. The liability is determined basedon actuarial valuation carried out
using the Projected Unit Credit Method.T RUST ACTIVITIES OF N ATIONAL B ANK
OF P AKISTAN A) N ATIONAL I NVESTMENT T RUST (NIT)Under a trust deed, the
bank provides services, as a trustee to NIT and is performing functions ofsale/purchase of
NIT units, safe custody and maintaining unit holders accounts. B) L ONG - TERM C
REDIT F UND (LTCF)Consequent upon the NDFC amalgamation, the bank manages on
behalf of the Government ofPakistan, LTCF established from the proceeds of loans
disbursed by various internationalfunding agencies for financing private sector energy
development projects. The National Bank ofPakistan is in process of negotiating the
charge of fee in consideration of administrative servicesto the LTCF. C) Q ARZ - E -H
ASNA F UNDThe work relating to Qarz-e-Hasna Scheme was attended by Pakistan
Banking Council (PBC)since inception. PBC was dissolved in January 1997. In order to
fill the void created by thedissolution of PBC and in order to continue the scheme, SBP
decided to entrust all funds andtransfer all record relating to Qarz-e-Hasna scheme for
education to the bank with theinstructions to perform all work relating to the Fund. 14.
CORE BANKING APPLICATION
62. P a g e | 62The head of core banking application is Mr. Naeem Syed. The core banking
application is anintegrated application that supports real time, multi banking and multi
channel strategies. Thesingle biggest achievement of implementing the Core Banking
Solution is that each customer istruly the customer of the Bank and not just the customer
of the Branch, where his/her account ismaintained. The customer can go to a branch
anywhere in the country and perform a transaction.This is possible as the entire Customer
Database is centrally located at the central Data Centreand can be accessed throughout
the network of branches. Business processes in all the branchesof National Bank of
Pakistan update a common database in a central server located at datacentre, which gives
a consolidated view of banks operations.Key features of the Core banking application of
NBP 24X7 BankingAs a result of implementing Core Banking, most of the facilities
being offered by bank areavailable to Customers 24 hours a day, 7 days a week. The
transactions are performed usingmultiple channels such as ATMs, Internet Banking,
Phone Banking and Mobile Banking. Anywhere BankingCustomers can avail of
banking services across the branch and Channel network irrespective oflocation where
their account is maintained. Integration with strategic sectorsCore Banking integrates all
strategic sectors of Banking such as Trade Finance, Treasury, Asset-Liability
Management and Corporate Balance Sheet. As a result, the information related to
theseareas is centrally available for use or reference. Strengthening MIS, DSS and
EISCore banking application is more than just a transaction processing system. It
provides updateddata for generating various reports for Management information system
(MIS), and will facilitateDecision Support System (DSS) and Executive Information
System (EIS). As data is located onCDC, branches and administrative offices can
concurrently avail updated data when required. Business Process Re-engineeringCore
Banking would enable implementation of BPR initiatives of a Bank and
facilitatecentralized handling of various processes. Branches would do less and less back
office work andwould be able to focus on marketing, customer relationship management
and cross selling.
63. P a g e | 63 15. OPERATIONS GROUPThe group chief of National Bank of Pakistans
Operation group is Mr. Dr. Asif A. Brohi. Thisgroup is being created to efficiently collect
and utilize the feedback from the branches to supportproduct development and enhance
the quality of service. The National Bank of Pakistan iscurrently improving the service
orientation at its branches, as these constitute the front line ofthe Bank in terms of
contact with its customers. The operations group is in the process ofintroducing E-
Commerce initiatives based on customer friendly technologies. The group
createsproducts to utilize the benefits of E-Commerce for its customers.We are
committed and focused towards good quality customer service and in 2007 with themotto
of Putting a smile on our Customers face. We made concerted efforts and took
anumber of initiatives. Workshops and seminars were conducted to disseminate the
veryimportant message of Excellent Customer Service. We are transforming our
branches to give amodern look and convenience. A number of branches have been shifted
to prominent andspacious locations. We also have established specialized customer
facilitation centers toexclusively cater to pension payments, utility and government
collections. These are expected toreduce counter traffic at our branches and will increase
our distribution channels for better andconvenient services. Business hours have been
extended with establishment of customerfacilitation offices at the regional levels to help
on the spot resolution of customer complaints.PROVINCIAL & REGIONAL
MANAGEMENTThere are four executives of National Bank of Pakistan to supervise the
Banks maters of everyprovince, as they are called Provincial Chiefs. These provincial
chiefs are responsible for theentire banking operations in their respective provinces. The
provincial management includes: The Provincial Chief Punjab
64. P a g e | 64 The Provincial Chief Sind The Provincial Chief Baluchistan The
Provincial Chief N.W.FP & KashmirThese provinces are sub-divided into regions, the
regions are controlled and manage by Regionalheads, which are responsible for the
supervision in their circles and deal with the problems oftheir respective Regions. The
regional management of National Bank of Pakistan is divided intotwo areas which are:
Overseas CountrywideThe overseas regions include Middle East, Far East, Europe &
USA, and Central Asia. Thecountry has been divided into 29 regions by National Bank of
Pakistan to facilitate its functions.The detail about National Bank of Pakistans regions is
shown as Annexed-II at the end of thereport. These regions are sub divided into Zones,
the in charge of a Zone is called Zonal Chief.BRANCH MANAGEMENTThe National
Bank of Pakistan, in order to facilitate its functions on branch level appointsBranch
Managers & other staff according to branchs activities and volume of business.
Thebranch managers are responsible for all functions and staff within the branch office.
The job ofbranch managers is to take charge of the entire operation of his branch, making
sure thateverything runs smoothly. The other functions involves scheduling of employee
work hours,overseeing training, hiring and firing, assuring that proper procedures are
followed, and reportingto upper management any problems or providing reports and
updates as required by banksprotocol.ORGANIZATIONAL (MANAGEMENT)
LEVELS AT NBPSuccessful and profitable banking management deepens upon two
principal factors:
65. P a g e | 65 a) The manner in which the function of banking, that is, the acquiring of
deposits, the investing or converting such deposits into earning assets, and the servicing
of each deposits, are performed. b) The degree to which officers and employees
contribute their talents to the progress and welfare of the bank in discharging duties and
responsibilities.Management is a distinct process consisting of activities of planning,
organizing, actuating andcontrolling performed to determine and accomplish stated
objectives with the use of humanbeing and other resources.28 The management has two
types i.e.., a) Centralized (Centralized Management tends to concentrate decision making
at the top of the organization) b) Decentralized (Decentralized disperses decision making
and authority throughout and further down the organizational hierarchy)National Bank of
Pakistan has a centralized type of management because all the decisions aretaken by the
top management. The National Bank of Pakistan has four types of managementlevels
which are as fallows:TOP MANAGERSTop managers are responsible for making
organization-wide decisions and establishing the plansand goals that affect the entire
organization. These individuals typically have titles such asexecutive vice president,
president, managing director, chief operating officer, chief executiveofficer or chairman
of the board. The NBP have its top management in their head office atKarachi. They are
responsible for making the plans and establishing goals the run their businesssmoothly all
over Pakistan & around the globe. Among seven member of group Chief Executiveis
called the president. The bank has directors for superintendence and direction of its
business.The Government appoints six directors as members and one president. These
members are alsoresponsible for making the policy of the bank.MIDDLE MANAGERS
66. P a g e | 66Middle managers include all levels of management between the first line level
and the top levelof the organization. These managers manage the work of first line
managers and may have titlessuch as department head, project leader, plant manager or
division manager.29 NBP divided hismanagement into various regions such as
Rawalpindi region, Gujranwala region etc. In NBP,regional management falls under this
category. They are responsible for the planning,organizing, leading and controlling of the
resources and staff of the whole region.FIRST LINE MANAGERS OR LOWER LEVEL
MANAGEMENTFirst level managers are the lowest level of management and manage
the work of non-managerialindividuals who are involved with the production or creation
of the organizations products. Thebranch managers of NBP fall under this category.
These managers are responsible for planning,organizing, leading and controlling the staff
and all affairs of the branch.NON MANAGERIAL EMPLOYEESNon managerial
employees are not concerned with any decision making. They are normallyspecialized in
their work. The nature of their job is repetitive & clerical as they do same workagain &
again. The non managerial employees of NBP consist of OG-II, OG III and
clericalstaff.HIERARCHY OF NATIONAL BANK OF PAKISTANThe Hierarchy (An
arrangement of objects, people, elements, values, grades, orders, classes etc.,any system
of persons or things ranked one above another) of National Bank of Pakistan isshown as
Annexed III at the end of this report. The hierarchy may include:
67. P a g e | 67 Categorization of a group of people according to ability or status. A body
of clergy organized into successive ranks or grades with each level subordinate to the one
above. A series in which each element is graded or ranked A body of officials
disposed organically in ranks and orders each subordinate to the one above it; a body of
ecclesiastical rulers. An organization with few things, or one thing, at the top and with
several things below each other thing. The President of National Bank of Pakistan is
ranked Top at the hierarchy. The other sixdirectors of National Bank of Pakistan are
ranked second in the hierarchy. The Provisional,Regional & Zonal chiefs are ranked 3rd,
4th & 5th respectively. The vice President & assistant vicePresidents of National Bank of
Pakistan are ranked 6 th & 7th respectively. The Officers Grade I, II& III are ranked 8th
at the hierarchy of National Bank of Pakistan. The lower level of NationalBank of
Pakistan is consist of Clerical & non- clerical staff.ORGANIZATION STRUCTURE OF
THE BRANCH
68. P a g e | 68A well-developed and properly coordinate structure is an important
requirement for the successof any organization. It provides the basic framework within
which functions and procedures areperformed. Any organization needs a structure, which
provides a framework for successfuloperations. The operation of an organization involves
a number of activities, which are related todecision making, and communication of these
decisions. These activities must be wellcoordinated so that the goals of the organization
are achieved successfully.The organization chart & Organogram of National Bank of
Pakistan Rawat Branch is shown onAnnexed IV & Annexed V at the end of this report.
This chart defines the line of authority in thebranch and its departments. It is a sort of
visual presentation of the organizational structure. Itspecifies the duties and
responsibilities of the personnel or staff of the branch. The purpose of anorganizational
structure is to help in creating an environment for human performance. Althoughthe
structure must define the task to be done, the rules so established must also be designed
in thelight of abilities and motivation of the human recourse available. By analyzing the
organizationstructure of the branch following elements can be found in the structure. A)
CENTRALIZED DECISION MAKINGThe Branch Manager of National Bank of
Pakistan is responsible for all the affairs of the Bank.All the decisions relating to Branch
are made by him and the subordinates have to obey thesedecisions. All the employees of
the Bank are report directly to the Branch Manager. The branchhas two operation
Managers. Operation Manager I controls Clearing house & RemittanceDepartment and
Operation Manager II controls Deposits, Advance & Branch accountsdepartment. Both of
them are report directly to the Manager regarding affairs of theirdepartments. The Chief
Accountant controls Accounts department & is report directly to branchManager. The
branch also has two cashiers responsible for cash & Pension disbursementdepartment
reports directly to branch Manger. The BBO (Branch Back Office System)
Operatorcontrols computer department of the branch and is report directly to Operation
Manager I andBranch Manager.
69. P a g e | 69 B) DOWNWARD COMMUNICATIONCommunication is the process by
which information is exchanged and understood by two ormore people, usually with the
interest to motivate or influence the behavior of others in theorganization. Downward
communication is the message and information sent from topmanagement to subordinates
in a downward direction. The same pattern is followed at NationalBank of Pakistan
Rawat branch, the Manager of the branch sent orders, information & messagesto
following subordinates Operation Manager I Operation Manager II BBO ( Branch
Back Office System) Operator Chief Accountant Cashier I Cashier II Clerk I
Clerk II Non Clerical Staff C) CHAIN OF COMMANDThe chain of command is an
unbroken line of authority that links all persons in an organizationand shows who reports
to whom. By analyzing the organizational structure of the National Bankof Pakistan
Rawat branch it can be found that there is a scalar principle followed with in thebranch
because each and every employee of the branch knows to whom they can report.
Theauthority and responsibility for different tasks and duties are different, as well as
every oneknows the successive levels of management all the way to the top.
70. P a g e | 70 D) AUTHORITY AND RESPONSIBILITYThe chain of command illustrates
the authority structure of National Bank of Pakistan RawatBranch. Authority is the
formal and legitimate right of the manger to make decisions, issuesorders and allocates
resources to achieve organizational desired outcomes. By analyzing thechain of
command of NBP, one can come to the conclusion that, as there is scalar patternfollowed
at the organizational setup of NBP, therefore it is implied that everyone in his
positionknows that what is ones authority and what is the responsibility and the authority
it allocated. E) DELEGATIONDelegation is the process, which managers use to transfer
the authority and responsibility toposition below in the hierarchy. Most organizations
today encourage managers to delegateauthority to the lowest possible level to provide
maximum flexibility to meet customer needs andadapts to the environment. At National
Bank of Pakistan Rawat branch Operation Managers havesome authority & responsibility
relating to affairs of the Branch.
71. P a g e | 71DEPARTMENTS OF THE BRANCHBanking procedures are divided
between various departments. Different departments do theirjobs in occurrence with the
bank policies. In National Bank of Pakistan each branch is dividedinto various
departments depending on their size and volume of business. Head of
departmentmanages each department & officials of the branch follow procedures. The
departments workingwithin National Bank of Pakistan Rawat branch are as under: 1.
Clearing House Department 2. Remittance Department 3. Computer Department 4.
Deposits Department 5. Advances Department 6. Account Opening Department 7.
Accounts Department 8. Cash Department 9. Pension Disbursement Department 1.
CLEARING HOUSE DEPARTMENTAs part of their daily business activity, banks
receive cheques and other financial instrumentsfrom their customers drawn on other
banks, to be collected and credited to their accounts.Similarly, banks receive
cheques/instruments from other banks, deposited by customers of thebanks drawn on the
customers of the drawee banks. Therefore, the banks act as Collecting Bankswhen they
send cheques/instruments for collection and as paying Banks, when they
receivecheques/instruments for collection from other banks. Since each bank receive and
sendscheques/instruments for collection to and from an number of banks, the process of
settlementwould clearly be very cumbersome and time consuming if every
cheques/instrument had to besent by the collection bank to each of the drawee banks or
branch upon which different collection
72. P a g e | 72items are drawn and to individually pay the proceeds to each of the bank
sendingcheques/instrument in for collection. Therefore, the banks have evolved what is
called theBankers Clearing arrangement.The Clearing System enables cheques to be paid
or cleared centrally and settlement made forreceivables and payables between the banks.
The SBP co-ordinates clearing activity through itsoffices, called the Clearing Houses, set
up in big cities and towns. Where SBP does not maintainits own office, some other bank,
usually National Bank of Pakistan (NBP) performs thisfunction. But the clearing house
facility is available only for cheques/instruments drawn onbanks situated within the same
city/clearing house area.W ORKING OF THE C LEARING P ROCESSUnder the
clearing arrangements, the State Bank of Pakistan (SBP) offers a Clearing House or
acentralized exchange facility, which works on the following general lines:All the banks
operating in a city who are members of the Clearing House maintain an accountwith the
SBPs Clearing House.Every day representatives of all the banks in every city meet the
Clearing House, first meeting inthe morning, at an appointed time, for the purpose of
depositing their own customers ,cheques/instruments to be collected from other banks
and receiving cheques/instrument drawnon their account holders from the others
banks.At the Clearing House accounts of all the banks are debited by the total amount
ofcheques/instruments drawn on their customers accounts and credited with the amount
of theircustomers cheques/instruments drawn on other banks, as per the list of cheques
submitted byeach bank.The cheques/instruments received, also called Inward Clearing,
and are taking back by each bankto its bank/branch. The amounts of each
cheques/instrument is debited or recovered from eachdrawee customers account and
credited to the Clearing House account. Similarly, against theamount credited by the
Clearing House as Outward Clearing, the appropriate customersaccounts are credited
and clearing House account is debited.
73. P a g e | 73Any cheques/instruments received by a bank that cannot be paid, due to
insufficient balance inits customers account or for any other reason, are returned back to
the Clearing House and acredit is claimed and obtained there against.R ULES & R
EGULATIONS OF C LEARING H OUSE Timing:(Monday to Saturday) i. 1st
Clearing at 10:00 a.m. ii. 2nd Clearing at 2.30 p.m. Each bank will send competent
representative to exchange the cheques. Each bank is required to insure that all cheques
and other negotiable instruments are properly stamped and suitably discharged An
objection memo must accompany each and every cheque when return unpaid duly
initialed. Each bank is required to maintain sufficient funds in the principal account
with SBP to meet the payment obligations. The State Bank of Pakistan debit the account
of each member of the clearinghouse with the proportionate working expenses incurred
on the operation of clearing house. These expenses are very nominal.O UTWARD C
LEARING AT THE B RANCHThe following points are to be taken into consideration
while an instrument is accepted at thecounter to be presented in outward clearing: The
name of the branch appears on its face where it is drawn o. It should not stale or post
dated or without date. Amount in words and figures does not differ. Signature of the
drawer appears on the face of the instrument. Instrument is not mutilated.
74. P a g e | 74 There should be no material alteration, if so, it should be properly
authenticated. If order instrument suitably indorsed and the last endorsees account
being credited. Endorsement is in accordance with the crossing if any. The amount of
the instrument is same as mentioned on the paying-in-slip and counterfoil. The title of
the account on the paying-in-slip is that of payee or endorsee (with the exception of
bearer cheque). If an instrument received other than National Bank of Pakistan then
special crossing stamp is affixed across the face of the instrument. Clearing stamp is
affixed on the face of the instruments, paying-in-slip and counterfoil (The stamp is
affixed in such a manner that half appears on counterfoil and paying-in-slip). The
instrument is suitably discharged, where a bearer cheque does not require any discharge
and also an instrument in favor a bank not need be discharged.The instrument along with
pay-in-slip is retained while the counterfoil is given to the customerduly signed. Then the
following steps are to be taken: 1. The particulars of the instrument and the pay-in-slip or
credit voucher are entered in the outward clearing register. 2. Serial no is given to each
voucher. 3. The register is balanced; the credit vouchers are balanced from the
instruments and are released to the respective departments against acknowledgement in
the register. 4. The instruments are arranged bank wise. 5. The schedules are prepared in
triplicate, two copies which are attached with the relevant instrument and the third is kept
as office copy. 6. The house page is prepared from schedules in triplicate. 7. The
schedules and house pages are signed by the house in charge with branch stamp.
75. P a g e | 75 8. The grand total of the house page is taken and agreed with that of the
outward clearing register. 9. The instrument along with duplicate schedule and house
page are sent to the main office. 10. The entry of the instrument returned unpaid is made
in Cheques returned Register. If the instrument is not to be presented again in clearing
then a covering memo is prepared. The covering memo along with returned instrument
and objection memo is sent to the customer who sent the same to his account.I NWARD
C LEARING OF THE B RANCH 1. The particulars of the instruments are compared
with the list. 2. The instruments are detached and sort out department wise. 3. The entry
is made in the inward clearing register (serial no. Instrument no. Account No) 4. The
instruments are sent top the respective departments 5. The instruments are scrutinized in
each respect before honoring the same.S PECIAL C LEARINGIn addition to the normal
clearing function at Clearing house it is mutually agreed to hold anextra clearing at the
clearing house on the particular day and time which is known as specialclearing it is
arranged due to the rush of work arising out of say, more Holidays declared by theCentral
Govt. at a time, but normally special clearing is held on last working day of half
yearlyand yearly closing i.e. 30th June and 31st Dec. every year. 2. REMITTANCE
DEPARTMENTThe Remittance department deals with the transfer of money from one
place to another. Fundstransfer facility or remittance of funds is on of the key functions
of the banks all over the world.Remittances through banking channels save time, costs
less and eliminate the risks involved inphysical transportation of money from one place
to another. National Bank of Pakistan transfersmoney in the following ways.
76. P a g e | 76 Pay Order Demand Draft Mail Transfer Telegraphic Transfer Pay Slip
Call Deposit Receipt Letter of Credit Travelers ChequeThe Job responsibilities &
requirements of remittance department include: Responsible for money transfers,
issuance of pay-orders & drafts, collection items, maintenance of cheque books & ATM
cards and all other counter specific products and services Ensure highest level of
customer service in a professional and competent manner Must ensure that the activities
are carried out strictly in accordance with the laid down procedures/processes, and
SBP/Compliance guidelines Responsible for Cash, Clearing, Inland remittances
including Demand Drafts and Pay Orders Ensure high standards of customer services
within the assigned turn around time Ensure compliance with SBPs regulations and
internal controls handling cash, clearing, local remittances, and other related activities at
branch levelP ARTIES INVOLVED IN R EMITTANCES
77. P a g e | 77There are four parties involved in Remittance, which are Remitter Remittee
Issuing Bank paying BankR EMITTEROne who initiates, or requests for a remittance.
The remitter comes to the issuing or originatingbranch, asks for a remittance to be made,
and deposits the money to be remitted. The bankcharges him a commission for this
service. He may or may not be the branchs customer.R EMITTEEA Remittee is also
called the beneficiary, or the payee. The person in whose name the remittanceis made. A
Remittee is also the one who receive the payment.I SSUING B ANKThe bank that sends
or affects the remittance through demand drafts, telegraphic transfers, MailTransfers, Pay
order etcP AYING B ANKPaying Bank also knows as the drawee branch, the branch on
which the instrument is drawn. Ithas to make the payment (usually located in a different
city or country).K INDS OF R EMITTANCES Transfer within the branch Transfer
from one branch to another Transfer from one bank to another bank in the same city
78. P a g e | 78 Transfers from one bank to another bank in two cities. 3. ACCOUNT
OPENING DEPARTMENTThe opening of an account is the establishment of banker-
customer relationship. This departmentperforms the duty of opening accounts for
customers. It also issues checkbooks to customers. Aperson who wishes to open an
account with the bank has to fill an account opening formobtained from any branch of
National Bank of Pakistan. The bank officer tactfully obtainsinformation about character,
integrity, responsibility, occupation and the nature of business ofthe perspective
customer. Any individual, who has attained the age of majority and is of soundmind can
open and maintain his/her account. Two or more individuals may open an accountjointly.
Similarly, business organizations such as sole proprietary concerns, partnership firms,and
limited liability companies as well as non-profit organizations like clubs, trusts,
societies,associations and NGOs etc, may open their accounts. The documents required
for NationalBank of Pakistans Account opening are showed as Annexed VII at the end
of this report.The following requirements are necessary for opening an
account.Identification of the new customer.Ascertaining the genuineness of the stated
occupation business of the customer.Determining the correct residential and permanent
address.Completion of all relevant columns of the Account opening form.Proper
completion of documentation.F UNCTIONS OF A CCOUNT O PENING D
EPARTMENT Providing account opening form according to the customers
requirements, Guide the customer about the requirements of the account opening and
form filling, Check the forms whether they are correctly completed or not, Preparing
checklist, Stamping on the form, Maintaining account opening register, Pasting of
forms in register after release from general banking in charge,
79. P a g e | 79 Issuance of cheque books, Issuance of accounts maintenance certificate,
Closure of account Verification of signature in case of cheque presented before
releasing of account opening from SS card is not yet scanned 4. CASH
DEPARTMENTAll physical movement of cash in the bank is made through the cash
department. As bank isborrowing and lending institution, therefore cash is the top most
priority of Bank. Another aspectis that cash department is for the security purpose,
security in a sense that there should be noembezzlement of funds or in money leaded to
bank by any party or person. The efficiency ofbank is also related to this department the
more efficient the bank is the stronger and busy is thecash department. Cash department
perform following functionsCash department owes its important to the fact that it is a
major point of contract between thebank and the customer, the banks most valued
relationships. This department is the showcase ofthe bank and conveys the first
impressions about the banks commitment to professionalism in itssystems and
procedures and to courteous and efficient customer service.Normally cash department
performs following functions Collection of funds Acceptance of deposits Collection
of utility bills Payment of checks Remittances Act according to any standing
instructions Transfer of funds from one account to another
80. P a g e | 80 Verification of signatures Posting Handling of Prize bondThe two main
activities of cash department are as fallows:D EPOSIT C ASH I N C USTOMER S A
CCOUNTWhen the customer want to deposit amount in his account at opening of
account or after that thenhe has to fill a deposit slip that shows the amount and the
account in which the cash will bedeposited. Then teller will receive amount and credit the
customers account that shows increasein customers bank account.M AKE P
AYMENTS F ROM C USTOMER S A CCOUNTWhen the customer draws a cheque
on the bank to pay a certain amount then BBO Operator willdebit the customers account
that shows reduction in his account balance.C HEQUE ENCASHMENT PROCEDURER
ECEIVING O F C HEQUESThe cash is paid against the cheques of the client. The
following points are important.Cheque is drawn on same branchCheque is not post
dated.Amount in words and figure are same.It should be bearer cheques so the word
bearer should not cross.V ERIFICATION OF S IGNATUREAfter receiving the cheques
the cheques the operation manager verify the signature of theaccount holder and the
signature on the cheques. If the signature is not same it is returned backotherwise forward
to BBO Operator for posting.
81. P a g e | 81C OMPUTER T ERMINAL P ROCESSThe cheque is received in computer
terminal, where BBO operator checks the balance of theaccount holder. The BBO
operator also sees the stop payment instructions, whether receivedfrom account holder or
not. After considering these points BBO Operator post the cheque inBBO (Branch back
office system) and forward to operation manager.P AYMENT O F C ASHAfter posting
the cheque the operation manager cancelled the cheque and returned back tocashier. The
cashier enters the cheque in cash paid registered and pays against the secondsignature of
receiver on the back of the cheque. 5. DEPOSITS DEPARTMENTThe primary function
of National Bank of Pakistan is to accept and receive surplus money fromthe people,
which they willingly deposit with the Bank. Like all other Banks, National Bank
ofPakistan also take incitation to attract as much depositors as it can. The deposit
departmentaccepts/collects deposit from accountholders.The National Bank of Pakistan
offer different deposit schemes to its customers, which includesthe following: Current
Deposits PLS Saving Deposits Fixed Deposit Account ( Time Deposits) Foreign
Currency Account NBP Premium Aamdani Foreign Currency Account National
Income Daily Account (NIDA) 6. ADVANCES DEPARTMENT
82. P a g e | 82The bank is profit seeking institution. It attracts surplus balance from the
customer at low rate ofinterest and makes advances at a higher rate of interest to the
individuals and business firms.Credit extensions are the most important activity of all the
financial institutions, because it is themain source of earnings. Advances department is
one of the most sensitive and importantdepartment of the bank. The major portion of the
profit is usually earned through thisdepartment. The job of this department is to make
proposals about the loans; the creditmanagement division of head office directly controls
all the advances.The advances Department receive application from intending borrowers.
After receivingapplication the advance department processes it further. After analyzing
and detailedinvestigation, they decide whether to approve the loan or not. Some loan
approvals are made bythe Manager of the branch within his powers as prescribed by the
banks higher authorities,while some loan applications are submit to higher authorities for
their approval. Some advancesare of the following nature Loan against Gold
Agriculture advance to farmers Medium term advance for working capital Long term
advance for setting industry Short term advance to businessmanThe National Bank of
Pakistan offer following products (Advances) to its customers NBP Saibaan NBP
Advance Salary NBP Cash & Gold Students Loan Scheme NBP Karobar
83. P a g e | 83 The Advances department deals in following transactions: 1. Preparation and
submission of proposals of Running finance, Cash finance, Demand finance, Export
finance, Staff finance, Finance against imported merchandise etc for sanction of finance
limit from the hire authority. 2. Preparation and posting of vouchering of all type of
finance. 3. Accruals & recovering of Markup on finances on periodical basis. 4. Approval
of transfer of funds through DD-TT, PO, MT, IBCO etc to various branches by debiting
the limits. 5. Preparation of weekly, monthly, quarterly, and annually statement to the
hire authority. 6. Transfer of funds from one account to another account of the party
taking the authority letter. 7. Preparation of advances record. 8. Timely submission of
returns/reports, daily, weekly, monthly & quarterly. 9. Checking of computer outputs of
the department on daily basis. 10. Balancing of all financing heads. 7. COMPUTER
DEPARTMENTThis department is playing a very important role in making the banking
procedures faster andhelping the bank for providing better services to its customers. The
National Bank of Pakistanhas three types of branches in all over Pakistan, these included
A) Online branchesThe branches, which are directly, link with central computer AS-400,
through wide areanetworking through fiber optics. These branches have dumb terminal
directly linked with centralcomputer. B) BATCH BRANCHES
84. P a g e | 84The branches where all transactions are carried out with the computer base
system but thesebranches are not connected to the central computer with wide area net
working. Batch branchesare using three type of system, Branch Back Office (BBO) based
on FoxPro, Branch AutomatedSystem based (BAS) on UNIX, Branch Integrated System
(BIS) based on FoxPro in Karachimostly branches are facing this problem. BAS was
establish in the beginning while BBO iscurrently implemented now efforts are under way
to convert all branches into Electronic BankingSystem (EBS) which is used by online
branches as this system does not require a person toremain sitting till the branch closed
its daily operation but the system automatically close it selfwhen the branch timing is
over. The database in head office is also based on this system. C) MANUAL
BRANCHESThe branches where all transactions are carried out manually and records
are maintained onregisters usually stored in big wardrobes. Manual branches reports
Regional head officeregarding their daily transactions. In Regional head office through
On Line, terminal data goes tohead office central computer; Except for branches those are
On Line as they transfer there dailydata directly through there own terminal. As day-to-
day, activities of all branches are recorded ina central computer.E VENING DATA
RECEIVING CENTERData form batch branches reach the main branch in floppy
diskettes while form manual branchesit is in form of hard copy. Data comprises of
transactions in profit loss account, current account,advances etc termed as Daily
Transaction Report. Clerk in charge register all diskettes andmanual in registers called
job booking register one for each of two type of data. These floppiesand manual are
bring in by riders. There are fourteen riders in total who bring information formall
branches located in Karachi region.D ATA ENTRY D EPARTMENTThe next task after
receiving the data is to enter that data in to a computer. The floppy disk isdirectly inserted
in the computer. The program in used is based on COBOL language. Thisprogram is
designed in away that it demand Hash Value value before opening the floppy forfurther
action this value serve the purpose of password or pin code send by the branch onentering
that value the data enter in to the computer. This computer is attached with the terminal
85. P a g e | 85of central computer. The operator of that terminal takes the data from the
computer andconverted it in to a text file through that terminal the data finally goes to the
central computer.D EFECTS AND E RROR H ANDLINGErrors of different origin occur
when the data goes to central computer. Sometime retrieving datafrom the system (BAS,
BBO, and BIS), other than used in HO (EBS) also caused errors. Othererrors include
Unmatched (This error occurs when document no matched with the previous oneexists),
no master (when opening of new account is not mentioned), Date in Valid,
duplicatecheques (this error occur when the last objection is not removed). These and
other such errors areseen by the person in charge. In the end of day print out of the data
enter in central computer istaken. Any Incomplete information for any branch and any
information require by that particularbranch is sent to that branch. More over material is
used to make a WST which is sent to StateBank of Pakistan. 8. PENSION
DISBURSEMENT DEPARTMENTThe National Bank of Pakistan was Pakistans
leading institution which performs the function ofpension payments or disbursements to
pensioners. The pension disbursement department isresponsible for making pension
payments to Government Pensioners. The person who wants toreceive his/her pension
from National Bank of Pakistan can open an account with any branch ofNational Bank of
Pakistan. The bank performs this function through Demand Draft Purchase orsimply
called DD Purchase. This department performs following functions: Making Pension
Payments Opening of Account of Pensioner Entry of amount paid to pensioner in
Government Pensioners Register Verifications of Signatures of Pensioners Making
Demand Draft Purchase Register
86. P a g e | 86 9. ACCOUNTS DEPARTMENTAccounts Department of the bank can be
considered the most important department. Thisdepartment is basically concerned with
processes and activities of recovering, sorting,summarizing and reporting data resulting
from the whole day transactions of all the departments.Actually the process of this
activity starts from the preparation of all the required vouchers bydifferent related
departments. When these vouchers are prepared, these are posted into respectivecomputer
terminals by the relevant departments. Before merging, a batch list is printed out
byComputer Department and duly checked by the respective departments. After this,
merging stagecomes, after which a proof list is printed out. This is the stage, where
Accounts Departmentstarts performing its function. Proof list is checked by the Accounts
Department. The accountdepartment prepare following vouchers and reports Monthly
Profit & Loss account- F48 General Ledger General Ledger- Abstract Check Book
Issue Register Western Union payments Register Demand Notices Miscellaneous
Book Bank Transfer scroll Posting NBP Advance Salary Daily Statement- F21
General Ledger- Head wise Hash Value Register End of Day register Posting
National Income Daily Account (NIDA) Monthly return register Charges A/c register
P-L-S Profit list
87. P a g e | 87 Weekly Telegram Mail Transfer Register Government Scroll Provident
file Government Scroll Debit & Credit Transfer Responding Advice Dispatched
Register-F15 Cash Remittance IN Cash Remittance OUT NBP General Account
Utilities register Statement of affairs Closing entries Daily activity checking Minor
expense recording
88. P a g e | 88STRUCTURE OF BRANCHS ACCOUNTS DEPARTMENTThe structure
of National Bank of Pakistans Accounts department is shown as Annexed VI atthe end
of this report. The Accounts department of the branch is controlled by the
ChiefAccountant under direct supervision of Branch Manager. The Branch has one
cashier & twoclerks for assistance and help of Chief Accountant. The BBO (Branch Back
Office system)Operator has also assist Chief Accountant in various tasks. The head of
branchs Accounts department is called Chief Accountant, who performs hisfunctions
under direct supervision of Branch Manager. The Chief Accountant is responsible forthe
central accounting records and controls over all financial transactions of the Branch. He
alsodirects a wide variety of accounting activities and meets important deadlines &
analyzes andinterprets accounting data of the branch. The other responsibilities of Chief
Accountant include: Plans and directs the activities of Cashier, BBO Operator and
clerical employees of the branch engaged in the maintenance of a variety of accounting
records. Directs and participates in the development and revision of procedures in order
to meet requirements of law, provide services to Branch Manager, improve efficiency in
branch activities, and coordinate branch activities with those of other departments.
89. P a g e | 89 Directs and reviews the preparation of periodic and special financial
statements, reports, projections, and recommendations, on which important
administrative decisions are based. Directs and reviews the study of new and revised
laws, rules, and programs affecting the central accounting system and records and installs
or recommends changes as appropriate. Designing and operating a system to capture,
record, process, and store all relevant documents and information about the financial
activities of the branch. Ensuring the integrity and reliability of the information system,
and preventing fraud from inside and outside the branch. Preparing financial statements
that are reported to Regional Management of National Bank of Pakistan. Preparing
financial statements and accounting reports for distribution to the branch Manager for
their planning, control, and decision-making needs. The Chief Accountant with the help
of branchs clerical staff is preparing following reports: o Monthly Profit & Loss
account- F48 o Daily Statement- F21 o General Ledger o General Ledger Abstract o
General Ledger head wise o Bank transfer Scroll o Posting NBP Advance Salary
90. P a g e | 90 o Misc Book o Posting National Income Daily Account (NIDA) o Monthly
return file o Charger List o PLS Profit list o Weekly Telegram o Government Scroll o
Government Scroll Dr & Cr o Transfer Responding Advice Dispatched Register- F15 o
Cash Remittance In o Cash Remittance Out o NBP General Account o Clearing register o
Debit & Credit supplementaryDebit supplementary is used for debit voucher and credit
supplementary is used for creditvoucher books and register maintained by bank are as
fallowsGeneral ledger included: Statement of daily affairs Cash book or cash cum day
book Transfer book
91. P a g e | 91 Income & expenditure ledgerIncome & expenditure includes: 1. Discount 2.
Service charges 3. Commission from utility services 4. Salaries allowances & provident
fund 5. Rent taxes insurance lighting 6. Profit paid on deposits and borrowings 7.
Auditors fee & legal charges
92. P a g e | 92BANK ACCOUNTING OPERATIONSThe National Bank of Pakistans
accounting consists in making computerized, written andpermanent records of every
transaction. For Computerized recording of transactions the bankused software called
BBO (Branch Back Office). BBO enable Bank to record a variety oftransactions. The
most common part of BBO which is operating by the BBO Operator isIndividual
Ledgers. Individual Ledgers are the accounts in which accounts with depositors arekept.
They are kept so that the balance of each depositors account may at any time be
readilyseen, and they should be frequently balanced to verify their correctness. The three
column formof individual ledger is used because it has a column for checks paid or other
debit entries, one fordeposits or other items credited, and a third for showing the balance
after each entry or the daysentries are made in the account. The BBO enlist Chart of
Accounts of the Bank shown inAnnexed VIII. All the accounts shown in Annexed are
opened and managed through BBO. Allthe Remittances of the bank are recorded
managed and control through BBO. The End of theDay report is also generated through
BBO.The most important record keeping and report generated by Banks Accounts
Department isStatement of the Bank. The statement of the bank shows the general, or
control, accounts of thebank, and the various books of the bank show the detail of these
items. It would not beimpossible, but it would be entirely impractical, to enter every
figure directly on the statement ofcondition. Instead of total deposits, the balance of each
depositor would appear opposite hisname. On the other side, instead of loans and
discounts, there would be an itemized list of theloans with the names of the borrowers.
The first principle in bank accounting, as in all otherbookkeeping, is that for every debit
there must be a credit, and vice-versa. In accordance withthis fundamental theory the
books are maintained. With respect to the statement, every Rupee ofliabilities is
accounted for by another Rupee of resources. Similarly each accounts at the end ofthe
day for each item of cash is balanced. Each bank employee has had the experience
ofremaining at his desk until a late hour at night checking up his days work searching for
adifference of a few cents. Often they become embittered at what seems to them a
tyranny whenthe small sum of money involved is considered. The reason they must
settle, however, is not on
93. P a g e | 93account of the possible loss of ten cents, but because the most important
principle in bankaccounting is involved. "Accuracy first" is a motto that should be
framed, figuratively at least,upon the wall of every banking room.The books used by
National Bank of Pakistan are of various kinds and their purpose is indicatedby name. A
ledger is a book used to keep a record of balances. To "post" means to enter in theproper
columns either the debits or credits on the ledger, and the difference between
themrepresents the balance either due by or to the bank. Another important book which is
used by theNational Bank of Pakistan is journal, a book in which daily transactions are
listed in regularorder as to accounts, and the total debit or credit is then posted on the
ledgers. All other books,cards and sheets used by bank of whatever nature is a part or
subdivisions of these books. Oftenthey become known among the clerks by some other
name descriptive of their generalappearance. For instance, the general ledger scratcher in
one bank is known as the "red book,"while the collection scratcher is the "black
book."The records made by one clerk upon one set of books go to check the records of
another clerkupon a different set of books. For instance, the paying teller and the
receiving teller will eachkeep a record of checks cashed or deposited payable within the
bank. The debit postings of theindividual bookkeeper would agree with the tellers figures.
Skillful accounting lies in makingthe fullest possible use of original entries, at the same
time having a check on all figures to guardagainst either error or fraud.Every transaction
ultimately affects the banks statement of condition by debit or credit. Forexample, a
deposit of Rs.1000 is made, consisting of Rs.200 cash and checks as follows: Rs.200on
the bank itself and Rs. 600 payable in another city. At the end of the day (assuming this
to bethe only deposit), on the liabilities side there is an increase of Rs 800 all of which
appears in theitem "deposits" being the total Rs.1000, less the check for Rs 200 which is
charged to theaccount of the drawer. On the resource side, then, a corresponding increase
of Rs.800 and this ismade up by an increase in the cash of Rs 200 and an increase of
Rs.600 in the item "due frombanks." Or a transaction may appear on one side of the
statement only. The bank has sold Rs.5,000.00 of the bonds it owns.
94. P a g e | 94ROLE OF CFO (CHIEF FINANCIAL OFFICER)The performance of any
organization is reflected by the financial statements, any ambiguity ifremains there,
makes the reflection of the performance doubtful. Therefore, the role of CFObecomes
very important as he controls the reflection of performance, which is reported todifferent
authorities and the organization is assessed by them, and they must perform their jobwith
professional competency and integrity, so that the financial statements give
credibleinformation to its users. The code of corporate governance provides the
guidelines andopportunity to do this.The Chief Financial Officers of National Bank of
Pakistan used to perform several tasks whichwere preparing accounts, preparing budgets,
operational reporting and interpreting, evaluatingoperating results, preparing income tax
returns, establishing internal control procedures to safe-guard the companies assets.Due
to increased governance requirement there arises a need to empower the chief
accountantand to make him responsible by requiring him to sign the accounts. There
comes the code ofcorporate governance, which makes the chief accountant powerful and
more responsible. Withthe new role, Chief Accountant becomes Chief Financial Officer
(CFO). The appointment,removal and remuneration terms and conditions of employment
of the chief financial officer of alisted company shell are determined by the Chief
Executive Officer with the approval of theBoard of Directors.Q UALIFICATION R
EQUIREMENTThe qualification requirement is defined under the code of corporate
governance that is theperson appointed as the Chief Financial Officer must be Member
of recognized body of professional accountants or A graduate from a recognized
university or equivalent, having at least 5 years experience in handling financial and
corporate affairs of a listed company.
95. P a g e | 95R ESPONSIBILITIES OF CFOThe new responsibilities apply to all Chief
Financial Officers of Listed Companies, InsuranceCompanies, Banks and DFIs. Mostly
the CFO presents the financial position relating to theperiod which has been over, and the
period which has to come that is the financial positionattained and the financial
projection i.e. where the organization will be.R ESPONSIBILITIES TOWARDS B
OARD OF D IRECTORSThe Chief Financial Officer is required to furnish necessary and
classified information to theboard of directors along with his analysis and suggestions as
the Chief Financial Officer attendsthe board meetings, any issue with financial
implications is being discussed, the person likely tobe most in command of these
implication is on the spot and immediately available for questions.In order to strengthen
and formalize corporate decision-making process, significant issues arerequired to be
placed for the information, consideration and decision of the boards of directors bythe
CFO. These are: Annual business planes, cash flow projection, forecasts and long term
planes. Budgets include capital, manpower and overhead budgets along with variance
analyses. Quarterly operating results of the company as a whole and in terms of its
operating divisions or business segments. Details of joint ventures or collaboration
agreements or agreements with distributors, agents, etc. Default in payment of principal
and/or interest, including penalties on late payments and other dues, to a creditor, bank or
financial institution, or default in payment of public deposit. Failure to recover material
amounts of loans, advances, and deposits made by the company, including trade debts
and inter-corporate finances. Significant public or product liability claims likely to be
made against the company, including any adverse judgment or order made on the conduct
of the company.
96. P a g e | 96R ESPONSIBILITIES TOWARDS S HAREHOLDERSThe Chief Financial
Officer is required to provide all the necessary data to be presented in theDirectors
Report. For this purpose Chief Financial Officer must ensure the following. The
financial statement, prepared by the management of company, present fairly its states of
affairs, the results of its operation, cash flows and changes in equities. Proper books of
accounts of the company have been maintained Appropriate accounting policies have
been consistently applied in preparation in financial statements and accounting estimates
are based on reasonable and prudent judgment. International accounting standards, as
applicable in Pakistan, have been followed in preparation of financial statements and any
departure there from has been adequately disclosed. The system of internal control is
sound in design and has been effectively implemented and monitored. There are no
significant doubts upon the companies ability to continue as going concern. There has
been no material departure from the best practice of corporate governance as detailed in
the listing regulations.I NTERNAL AND E XTERNAL R EPORTINGChief Financial
Officer now has extensive responsibilities for internal and external reporting. Allthe
information required for decision-making by the Board of Directors and Chief Executive
isprocessed and furnished by the Chief Financial Officer. Apart from this, external
reportingrequirement is fulfilled by Chief Financial Officer, the accounts and financial
statements aresigned by the Chief Financial Officer before they are sent to concerned
authorities.CCG requiresthat the listed companies submit their quarterly accounts to the
shareholders within one month ofthe close of the first and third quarter of year of
account. The CCG does not prescribe the timefor submitting half yearly accounts to the
shareholders. Here we can refer to section 245 ofcompanies ordinance 1984 for this
purpose, which requires half yearly accounts to be submittedwithin two months of the
close of first half. The CCG requires a limited review of half yearly
97. P a g e | 97accounts by external auditor. Annual audited accounts are now required to be
submitted withinfour months of the close of financial year.The Securities and Exchange
Commission of Pakistan is exercising strict vigilance to ensurecompliance of 4th and 5th
schedule of the Companies Ordinance, 1984 and timely submission ofaccounts by
companies. It has recently imposed penalties on Directors of nine listed companieswho
failed to prepare and circulate the quarterly accounts. Furthermore, fines have been
imposedon chief executives.
98. P a g e | 98USE OF ELECTRONIC DATA IN DECISION MAKINGThe technological
development in the field of information systems make it possible formanagement to use
electronic data in decision making. An understanding of the effective andresponsible use
and management of information systems and technologies is important formanagers,
business professionals, and other knowledge workers in todays
internetworkedenterprises. Information systems play a vital role in the e-business and e-
commerce operations,enterprise collaboration and management, and strategic success of
businesses that must operatein an internetworked global environment. Thus, the field of
information systems has become amajor functional area of business administration. The
management of a business can useinformation systems in their decision making process.
Before proceeds its important to discussprecisely about decision making.Decision
making can be regarded as an outcome of mental processes leading to the selection of
acourse of action among several alternatives. Every decision making process produces a
finalchoice.30 The output can be an action or an opinion of choice. A significant part of
decisionmaking skills is in knowing and practicing good decision making techniques.
One of the mostpractical decision making techniques can be summarized in following
simple decision makingsteps: 1. Identify the purpose of your decision. What is exactly
the problem to be solved? Why it should be solved? 2. Gather information. What factors
does the problem involve? 3. Identify the principles to judge the alternatives. What
standards and judgment criteria should the solution meet? 4. Brainstorm and list different
possible choices. Generate ideas for possible solutions. See more on extending your
options for your decisions on my brainstorming tips page.
99. P a g e | 99 5. Evaluate each choice in terms of its consequences. Use your standards and
judgment criteria to determine the cons and pros of each alternative. 6. Determine the
best alternative. This is much easier after you go through the above preparation steps. 7.
Put the decision into action. Transform your decision into specific plan of action steps.
Execute your plan. 8. Evaluate the outcome of your decision and action steps. What
lessons can be learnt? This is an important step for further development of your decision
making skills and judgment.The decision making of Management of National Bank of
Pakistan rely on information systemresources which includes people and a variety of
hardware, software, data, and communicationsnetwork technologies as resources to
collect, transform, and disseminate information in Bank.INFORMATION SYSTEM
RESOURCES OF NBP A) PEOPLE RESOURCESPeople are required for the operation
of all information systems. These people resources includeend users and Information
system Specialists. The Management and employees of National Bankof Pakistan are end
users and Knowledge workers of information system. These are theemployees of the
Bank who spend most of their time communicating and collaborating in teamsand
workgroups and creating, using and distributing information.The Information systems
Specialist are people who develop and operate information systems.They include System
analysts, software developers, system operators, and other managerial,technical, and
clerical IS personnel of National Bank of Pakistan. The system analysts ofNational Bank
of Pakistan design information systems of the Bank based on the
informationrequirements of the end users. The software developers create computer
programs based on thespecification of system analysts of National Bank of Pakistan. B)
HARDWARE RESOURCES
100. P a g e | 100The Hardware resources of National Bank of Pakistan include all
physical devices and materialsused in information processing. Specifically, it includes not
only machines, such as computersand other equipments, but also all data media, that is,
tangible objects on which data arerecorded, from sheets of paper to magnetic or optical
disks. C) SOFTWARE RESOURCESThe software resources of National Bank of
Pakistan include all sets of information processinginstructions. It also includes sets of
operating instructions called programs, which direct andcontrol computer hardware. The
followings are the examples of National Bank of Pakistanssoftware resources: System
Software: The National Bank of Pakistan uses Windows Operating Systems for controls
and supports the operations of a computer system. Application Software: These are the
programs that direct processing for a particular use of computers by employees of the
Bank. Bank uses BBO system, Microsoft Office suit as application software. D) DATA
RESOURCESThe data resources of National Bank of Pakistan are typically organized,
stored, and accessed bya variety of data resource management technologies. The data
about Branch transactions isaccumulated, processed, and stored in a BBO system that can
be accessed by Manager for ananalysis and decision making. E) NETWORK
RESOURCESThe network resources of National Bank of Pakistan include:
Communication Media: The Banks communication media include cellular and landline.
Network Support: The Bank uses hardware, software, and data technologies which are
needed to support the operation and use of a communication network. The Bank uses
101. P a g e | 101 communication processers such as Modems and internetwork
processors, and communication control software such as network operating systems and
Internet Browser packages (Opera).SOURCES OF FUNDSRupees in MillionsYear 2004
2005 2006 2007 2008Share Capital 4,924,106 5,908,927 7,090,712 8,154,319
8,969,751Reserves 10,813,914 13,536,041 13,879,260 15,772,124
19,941,047Borrowings 11,084,790 8,756,847 11,704,079 10,886,063 40,458,926Deposits
465,571,717 463,426,602 501,872,243 591,907,435 624,939,016Other Liabilities
23,068,314 24,974,450 26,596,300 30,869,154 39,656,831 Horizontal Analysis (%)Share
Capital 100 120 144 166 182Reserves 100 125 128 146 184Borrowings 100 79 106 98
365Deposits 100 100 108 127 134Other Liabilities 100 108 115 134 172The National
Bank of Pakistans sources of funds includes share capital, reserves, borrowings,deposits
and other liabilities etc. To analyze trend, Horizontal analysis of each item is calculated.
102. P a g e | 102A NALYSISThe Share capital refers to the portion of a Banks equity
that has been obtained by trading stockto a shareholder for cash or an equivalent item of
capital value. The share capital of NationalBank of Pakistan shows an increasing trend in
all years as compare to base year. The increase inshare capital during all years indicates
share holders concern toward National Bank of Pakistanand efficient banks
Management policies.A NALYSISThe Banks reserves are banks holdings of deposits in
accounts with their central bank pluscurrency that is physically held in bank vaults (vault
cash). The reserves of National Bank ofPakistan fluctuate during all years as they show
an increasing trend. The reserves are increased25 %, 28 % & 46 % in the years 2005,
2006 & 2007 respectively. The year 2008 representshighest increasing percentage of 84%
as compare to base and previous years.
103. P a g e | 103A NALYSISThe National Bank of Pakistans borrowings fluctuates
during all years and shows a mixed trend.The borrowings were decreased 21 % in 2005;
however same are increased 6 % in 2006 ascompare to base year. There was a marginal
decrease of 2% in banks borrowings in the year2007. The year 2008 represents highest
percentage of borrowings as these were increased to 265% comparing with base year and
are increased 267 % as compare to 2007.A NALYSISThe deposits and other accounts of
National Bank of Pakistan show a mixed trend during allyears. In the year 2005 the
deposits were increased very marginally, with the year 2006represents an increase of 8%
as compare to base year. The year 2007 represents second highestpercentage as deposits
are increased to 27%. The year 2008 indicates an increase of 34%, highestamong all
years.
104. P a g e | 104 A NALYSIS The other liabilities of National Bank of Pakistan are
fluctuating during all years and show an increasing trend. The year 2005 indicates an
increase of 8 % and 2006 indicates an increase of 15%. The other liabilities in the year
2007 represent an increase of 34%. The other liabilities were on their peak percentage in
2008 as the shows an increase of 72%. GENERATION OF FUNDSRupees
inMillionsYear 2004 2005 2006 2007 2008Markup/return/interest earned 20,947,333
33,692,665 44,100,934 50,569,481 60,942,798Net markup/interest income 14,387,935
23,370,897 30,153,716 33,629,470 37,058,030Net markup/interest income after
provisions 12,639,770 21,146,970 27,782,170 28,906,735 26,087,216Total non-markup/
Interest income 8,304,716 9,392,351 12,162,892 13,544,845 16,415,862Total income (
Interest + non-Interest) 20,944,486 30,539,321 39,945,062 42,451,580
42,503,078PROFIT BEFORE TAXATION 11,977,601 19,056,028 26,310,577
28,060,501 23,000,998 Horizontal Analysis (%)Markup/return/interest earned 100 161
211 241 291Net markup/interest income 100 162 210 234 258Net markup/interest
income after provisions 100 167 220 229 206Total non-markup/ Interest income 100 113
146 163 198Total income ( Interest + non-Interest) 100 146 191 203 203PROFIT
BEFORE TAXATION 100 159 220 234 192 The National Bank of Pakistans generation
of funds include Interest earned Net interest income Net interest income after
provisions Total non markup interest income Total income ( Interest plus non-
Interest)
105. P a g e | 105 Profit before TaxationA NALYSISThe interest earned by National
Bank of Pakistan fluctuates during all years, as it was increasedduring all years as
compare to base year. The interest earned is increased 61% in 2005 and 111%in 2006.
The year 2007 represents second highest percentage on account of interest earned as
itwas increase 141 %. The year 2008 represents peak percentage of 191 % as compare to
all years.A NALYSISThe net markup/ Interest income of National Bank of Pakistan
fluctuates during all years as itshows an increasing trend. It was increased 62 % in 2005
and 110% in 2006 as compare to baseyear. The year 2007 represents second highest
percentage on account of Net markup/ Interestincome as it was increased to 134%,
comparing with base year. The percentage is increased 158% in 2008, highest among all
years.
106. P a g e | 106A NALYSISThe net markup/ interest income after provisions
fluctuates and shows a mixed trend during allyears. It was increased 67% (2005), 120%
(2006) and 129% in 2007. The income is increased106 % as compare to base year but the
same was decreased by 23% as compare to 2007.A NALYSISThe Total non- markup/
Interest income of National Bank of Pakistan shows an increasing trendduring all years. It
was increased 13% in 2005 and 46% in 2006. The income is increased 63 %in 2007,
second highest among all years. There was an increase of 98% in 2008, highest amongall
years.
107. P a g e | 107A NALYSISThe total income of National Bank of Pakistan shows an
increasing trend. It was increased 46%in 2005 and 91% in 2006. The total income is
increased 103% in 2007 and also increase verymarginally in 2008.A NALYSISThe profit
before taxation of National Bank of Pakistan fluctuates and shows a mixed trendduring
all years. It was increased 59% in 2005 and 120% in 2006. The year 2007
representshighest percentage on account of profit before taxation as it was increased to
134%. The year
108. P a g e | 108 2008 indicates an increase of 92% as compare with base year but it
was decreased in 2008 by 42% as compare to 2007. ALLOCATION OF FUNDSRupees
inMillionsYear 2004 2005 2006 2007 2008Lendings to Financial Institutions 10,511,322
16,282,942 23,012,732 21,464,600 17,128,032Investments 149,350,096 156,985,686
139,946,995 210,787,868 170,822,491Advances 220,794,075 268,838,779 316,110,406
340,677,100 412,986,865Operating Fixed Assets 9,202,969 9,454,365 9,681,974
25,922,979 24,217,655Other Assets 19,141,569 23,941,056 37,113,698 30,994,965
44,550,347 Horizontal Analysis (%)Lendings to Financial Institutions 100 155 219 204
163Investments 100 105 94 141 114Advances 100 122 143 154 187Operating Fixed
Assets 100 103 105 282 263Other Assets 100 125 194 162 233 After the acquisition of
the funds their allocation becomes necessary. The Bank seeks the best way for making
investment to get more profit with the maximum security. The Bank has an investment
portfolio in which it allocate its funds for crediting to borrowers, investment in the stock
market etc. The National Bank of Pakistan allocate its funds in Lendings to financial
109. P a g e | 109institutions, investments, advances, operating fixed assets and other
assets etc. To analyze trendin these items, Horizontal analysis of each item is
calculated.A NALYSISThe lendings to financial institutions by National Bank of
Pakistan fluctuates during all years.The lendings increased by 55 % in 2005. The year
2006 represents highest percentage of 119 %among all years on account of lendings to
financial institutions. The year 2007 also shows anincrease of 104 % as compare to base
year. The year 2008 indicates an increase of 63% ascompare to base year but lendings
decreased by 41% in 2008 as compare to the year 2007.A NALYSIS
110. P a g e | 110The investments made by National Bank of Pakistan fluctuate during
all years. There was anincrease of 5 % in 2005. The year 2006 indicates a decrease of 6%
in investments. The year 2007represents an increase of 41 %, highest among all years.
The investments are increased 14 % in2008 as compare to base year; however
investments are decreased 27 % as compare to the year2007.A NALYSISThe advances
made by National Bank of Pakistan shows an increasing trend in all years ascompare to
base year. This implies that National Bank of Pakistan is keener to advance money
tolenders. The advances were increased 22 % in the year 2005 and 43 % in 2006 as
compare tobase year. The year 2007 represents an increase of 54 % and 2008 represents
highest percentageamong all years that is 87 % as compare to base year.A NALYSIS
111. P a g e | 111The operating fixed assets of National Bank of Pakistan shows a
mixed trend during all years.There was an increase of 3 % in 2005 & 5 % in 2006. There
was a very sharp increase inoperating fixed assets in the year 2007 of 182 % as compare
to base year. There was an increaseof 163% in 2008 as compare to base year but the same
was decreased by 19% as compare to2007.A NALYSISThe other assets of National Bank
of Pakistan are fluctuating during all years. The other assetsare increased 25 % in 2005
and 94 % in 2006. The year 2007 indicates an increase of 62% ascompare to base year.
The other assets of National Bank of Pakistan are on their peak percentageof 133 % in
2008 as compare with base year.
112. P a g e | 112CRITICAL ANALYSIS (THEORY VS PRACTICAL)During
Internship it was my prime objective to furnish my knowledge (Theory) to
variouspractical situations. The practical work presents an analytical problem while
relating theory withpractice. As a result, analysis of practical versus theory requires a
distinct approach. This part ofreport is the essence of the internship, as this will help to
better understand the workingenvironment of the bank by finding the relationship
between what is written in the books andwhat is actually going on in fields. The theory
written in the books in cases is not implementedas it is. In some cases theory is
implemented with a little modification but in other cases theoryhas nothing to do with
practice. In accounting, banks dont prepare worksheet, but part of worksheet is prepared
like trialbalance. The securities for the loans are handled in the same way as theory says
like mortgage,pledge, hypothecation, advances against insurance policies or liquidation
procedure is the same.There is some difference lies in types of loans in bank that is
theory talks about four or five typesof loans that is cash finance, overdraft, loans etc., but
in practice there are some more types usedby bank like running finance, demand finance
etc. All other concepts of remittances, bills,
113. P a g e | 113foreign exchange deposits, letters of credit are in accordance with
theory almost. A banksbalance sheet is different from that of a typical company. You
wont find inventory, accountsreceivable, or accounts payable. Instead, under assets, youll
see mostly loans and investments,and on the liabilities side, youll see deposits and
borrowings.C ONCLUSION To me, Theory gives the direction to understand the
processes and the terminologies goingacross the World using best business practices in a
broader view covering each and every aspectof possible business scenarios. On the
contrary practical life is specific, enclosed in a jar.
114. P a g e | 114 BALANCE SHEET Rupees in MillionsASSETS 2004 2005 2006
2007 2008Cash and balances with treasurybanks 94,446,552 71,196,956 78,625,227
94,873,249 106,503,756Balances with other banks 49,784,884 31,019,330 40,641,679
37,472,832 38,344,608Lendings to financial institutions 10,511,322 16,282,942
23,012,732 21,464,600 17,128,032 149,350,09 156,985,68 139,946,99
210,787,86Investments 6 6 5 8 170,822,491 220,794,07 268,838,77 316,110,40
340,677,10Advances 5 9 6 0 412,986,865Other assets 19,141,569 23,941,056 27,113,698
30,994,965 44,550,347Operating fixed assets 9,202,969 9,454,365 9,681,974 25,922,979
24,217,655Deferred tax assets _ _ _ _ 3,204,572 553,231,4 577,719,11 635,132,71
762,193,59 67 4 1 3 817,758,326LIABILITIESBills payable 7,214,671 1,741,156
10,605,663 7,061,902 10,219,061Borrowings from financial institutions 11,084,790
8,756,847 11,704,079 10,886,063 40,458,926 465,571,71 463,426,60 501,872,24
591,907,43Deposits and other accounts 7 2 3 5 624,939,016Sub-ordinated loans _ _ _ _
_Liabilities against assets subject tofinance lease 17,058 16,629 13,235 33,554
25,274Other liabilities 23,068,314 24,974,450 26,596,300 30,869,154
39,656,831Deferred tax liabilities net 29,185 4,462,718 2,387,073 5,097,831 _ 506,985,7
503,378,4 553,178,5 645,855,9 715,299,10 35 02 93 39 8 46,245,7 74,340,7 81,954,1
116,337,6 102,459,21NET ASSETS 32 12 18 54 8REPRESENTED BYShare capital
4,924,106 5,908,927 7,090,712 8,154,319 8,969,751Reserves 10,813,914 13,536,041
13,879,260 15,772,124 19,941,047Unappropriated Profit 9,161,747 16,713,506
32,074,677 45,344,188 52,456,204 24,899,7 67 36,158,474 53,044,649 69,270,631
81,367,002Surplus 21,345,965 38,182,238 28,909,469 47,067,023 21,092,216
115. P a g e | 115 46,245,7 74,340,7 81,954,1 116,337,6 102,459,21 32 12 18 54 8
INCOME STATEMENT Rupees in Millions 2004 2005 2006 2007
2008Markup/return/interest earned 20,947,333 33,692,665 44,100,934 50,569,481
60,942,798Markup/return/interest expensed 6,559,398 10,321,768 13,947,218
16,940,011 23,884,768Net markup/interest income 14,387,935 23,370,897 30,153,716
33,629,470 37,058,030Provisions against non-performing advances 1,515,354 2,446,739
3,075,723 4,723,084 10,593,565provision for/(reversal of) diminution in the valueof
investments 185,707 -245,881 -709,461 -40,248 373,249provision against off balance
sheet obligations 14,297 Nil Nil Nil 4,000bad debts written off directly 32,807 23,069
5,284 39,899 Nil 1,748,165 2,223,927 2,371,546 4,722,735 10,970,814Net
markup/interest income after provisions 12,639,770 21,146,970 27,782,170 28,906,735
26,087,216NON MARKUP/ INTEREST INCOMEFee, Commission & brokerage
income 5,099,195 4,926,604 6,144,628 6,781,683 7,925,370Dividend income 1,273,863
1,718,478 2,891,755 3,263,246 2,878,932Income form dealing in foreign currencies
1,008,988 1,205,638 1,333,840 1,042,827 3,969,057Gain on sale & redemption of
securities-net 47,557 1,365,771 1,169,515 2,341,690 395,427Investments classified as
held for trading Nil -1,979 -4,464 -31,964 1,707Other income 875,113 177,839 627,618
147,363 1,245,369Total non-markup/ Interest income 8,304,716 9,392,351 12,162,892
13,544,845 16,415,862Total income ( Interest + non-Interest) 20,944,486 30,539,321
39,945,062 42,451,580 42,503,078NON MARKUP/ INTERSET
EXPENSESAdministration expenses 8,878,801 11,221,789 13,443,441 14,205,911
18,171,198Other provisions written off 32,243 198,298 -17,283 168,027 747,521Other
charges 8,284 63,206 208,327 17,141 583,361Total non markup/ Interest expenses
8,919,328 11,483,293 13,634,485 14,391,079 19,502,080PROFIT BEFORE TAXATION
11,977,601 19,056,028 26,310,577 28,060,501 23,000,998Taxation Current 4,950,000
7,154,002 8,695,598 8,311,500 11,762,650 Prior years 847,958 -1,098,709 530,652
391,497 Nil Deferre d -15,729 291,291 61,981 323,731 -4,220,242 5,782,229 6,346,584
9,288,231 9,026,728 7,542,408PROFIT AFTER TAXATION 6,195,372 12,709,444
17,022,346 19,033,773 15,458,590Unappropriated Profit brought forward 5,892,902
9,161,747 19,372,523 32,074,677 45,344,188Transfer from surplus on revaluation of
fixedassets on account of incremental depreciation 45,496 43,221 41,060 39,007 130,456
116. P a g e | 116Profit available for appropriation 12,133,770 21,914,412 36,435,929
51,147,457 60,933,234 FINANCIAL STATEMENTS ANALYSIS Financial analysis is a
process which involves reclassification and summarization of information through the
establishment of ratios and trends. Financial statement analysis is the process of
examining relationships among financial statement elements and making comparisons
with relevant information. It is a valuable 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
companys 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 companys 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. The analysis of
financial statement refers to the examination of the statements for the purpose of
acquiring additional information regarding the activities of the business. The users of the
financial information often find analysis desirable for the interpretation of the firms
activities. The overall objective of financial statement analysis is the examination of a
firms financial position and returns in relation to risk. This must be done with a view to
forecasting the firms future prospective. Analysts can obtain useful information by
comparing a companys 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.
117. P a g e | 117RATIO ANALYSISRatio analysis enables the analyst to compare
items on a single financial statement or to examinethe relationships between items on two
financial statements. After calculating ratios for eachyears financial data, the analyst can
then examine trends for the company across years. Sinceratios adjust for size, using this
analytical tool facilitates intercompany as well as intercompanycomparisons. Ratios are
often classified using the following terms: profitability ratios (alsoknown as operating
ratios), liquidity ratios, and solvency ratios. Profitability ratios are gauges ofthe
companys operating success for a given period of time. Liquidity ratios are measures of
theshort-term ability of the company to pay its debts when they come due and to meet
unexpectedneeds for cash. Solvency ratios indicate the ability of the company to meet its
long-termobligations on a continuing basis and thus to survive over a long period of time.
Financial ratiosallow for comparison: Between companies Between industries
Between different time periods for one company Between a single company and its
industry average A) PROFITABILITY RATIOSThe continued viability of any bank
depends on its ability to earn an appropriate return on itsassets and capital. Good earning
performance enables a bank to fund its operations, remaincompetitive in the market and
increase or decrease in market funds. Profitability ratios relateprofit to sales and
investments. These ratios indicate the firms overall effectiveness ofoperations and give
us idea how well firm utilized its resources in generating profit andshareholder value.
118. P a g e | 118G ROSS P ROFIT M ARGIN R ATIOGross profit margin ratio is
used to assess the profitability of a Banks core activities. Gross profitmargin indicates the
relationship between gross profit and interest earned. A high gross profitmargin indicates
that a Bank can make a reasonable profit.Formula = Gross Profit / Interest earned
(Revenue) Year 2004 2005 2006 2007 2008 Ratio 57.17 56.55 59.65 55.48 37.74 %A
NALYSISThe Year 2006 has been an outstanding year with the bank recording the
highest profit in itshistory i.e.., 59.65 %.The National Bank of Pakistans wide range of
product offering, largebranch network and committed workforce are some of
fundamental strengths that enabled NBPto achieve exceptional in a very competitive
market. The gross profit is 37.74% in 2008. Thelowest percentage among all years.N ET
P ROFIT M ARGIN R ATIONet profit margin measures the percentage of revenue
remaining after all cost and expenses,including interest and taxes have been
deducted.Formula = Net Profit after Taxes / Interest earned Year 2004 2005 2006 2007
2008 Ratio 29.57 37.72 38.59 37.63 25.36 %
119. P a g e | 119A NALYSISNet profit margin shows positive trend till 2006 and was
the highest in the same year as it was38.59%, the percentage is decreased in 2007 as it
was 37.63%. The net profit margin is on itslowest level at the end of 2008 as it indicates a
percentage of 25.63%. The primary reason of thisdecline is current global economic
conditions and current political crisis in Pakistan.A SSETS T URNOVERThis ratio is
useful to determine the amount of revenue that is generated from each Rupee ofassets.
The Banks with low profit margins tend to have high asset turnover, those with high
profitmargins have low asset turnover.Formula = Revenue/ Total Assets Year 2004 2005
2006 2007 2008 Rati 0.03 0.05 0.06 0.05 0.05 o
120. P a g e | 120A NALYSISThe year 2004 represents a ratio of 0.03, lowest among
all years. The years 2005, 2007 and 2008indicates almost same percentage of 0.05% on
account of banks assets turnover. The NationalBank of Pakistans assets turnover in
2006 is 0.06, peak ratio among all years.R ETURN ON C APITAL F UNDThis ratio
relates the net profits to the amount of capital funds that have been employed inmaking
that profit.Formula = Net markup received / Capital Funds Year 2004 2005 2006 2007
2008 Ratio 2.92 3.95 4.25 4.12 4.13A NALYSIS
121. P a g e | 121The above given ratios suggest that the profitability of the bank has a
mixed trend during fiveyears. The first three years 2004 (2.92), 2005 (3.95), 2006 (4.95)
shows an increasing trend,indicating more profitable operations of the bank. It was
decreased in the year 2007 (4.12) andhas increased in 2008 as the ratio was 4.13.R
ETURN ON I NVESTMENTThis ratio indicates the profit earned by the bank on the
resources employed.Formula = Net income after taxes / Total Assets Year 2004 2005
2006 2007 2008 Rati 0.011 0.021 0.026 0.024 0.018 oA NALYSISThere was an increase
in the utilization of the resources till 2006 i.e.., 0.011(2004), 0.021 (2005)and 0.026
(2007). The ratio was decreased to 0.024 (2007) and 0.018 (2008).R ETURN ON D
EPOSITSThis ratio indicates to what extent deposits which represent funds mobilization
on the part of thebank contribute towards income generation.Formula = Net income
before taxes / Total Deposits Year 2004 2005 2006 2007 2008 Rati 0.025 0.041 0.052
0.047 0.036 o
122. P a g e | 122A NALYSISDuring all five years the return on deposits ratio of
National Bank of Pakistan shows a mix trend.The year 2006 (0.052) was the best year for
bank in terms of its funds mobilization. Although theratio was decreasing in 2008
(0.036), indicating Bank is more keen to kept deposits and a changein policy of the Bank
regarding its funds mobilization.E FFECTIVE T AX R ATEThis ratio is a measurement
of a companys tax rate, which is calculated by comparing its incometax expense to its
pretax income. This amount will often differ from the companys statedjurisdictional rate
due to many accounting factors, including foreign exchange provisions. Thiseffective tax
rate gives a good understanding of the tax rate the company faces.Formula = Income Tax
expense/ Pretax Income Year 2004 2005 2006 2007 2008 Ratio 0.48 0.33 0.35 0.32 0.32
%
123. P a g e | 123A NALYSISThe effective tax rate of National Bank of Pakistan was
highest in the year 2004 (0.48%).However bank is able to reduce its tax burden because
the Bank is able to adopt Taxmanagement techniques to lessen the tax burden. A
relatively stable effective tax rate percentage,and resulting net profit margin, would seem
to indicate that the Banks operational managers aremore responsible for a companys
profitability than the companys tax accountants. B) LIQUIDITY RATIOSThe liquidity
position of a bank is like a reservoir. It may be adequate, although nearly depleted,just
before the start of the rainy season. Or it may be inadequate, although three quarters full
justbefore the summer drought.Liquidity can be defined as:The banks ability not only
to meet possible deposit withdrawals but also to provide for thelegitimate needs of the
economy as wellC URRENT R ATIOCurrent ratio is a measure of the current adequacy
of companys current assets to meet its currentobligations. It must be greater than 1. If it is
less than 1, liabilities exceed current assets. Forevery Rs.1 of liabilities, the company has
a ratio amount of current assets available. The conceptbehind this ratio is to ascertain
whether a companys short-term assets (cash, cash equivalents,marketable securities,
receivables and inventory) are readily available to pay off its short-term
124. P a g e | 124liabilities (notes payable, current portion of term debt, payables,
accrued expenses and taxes). Intheory, the higher the current ratio, the better.Formula =
Current Assets / Current Liabilities Yea 2004 2005 2006 2007 2008 r Ratio 0.83 0.96
1.02 1.00 1.12A NALYSISThe year 2004 (0.83) and 2005 (0.96) were not satisfied for
bank as current assets are less thancurrent liabilities. However, in 2006 (1.02) the
management of National Bank of Pakistan is ableto overcome this problem. The year
2007 (1.00) is also good for bank as per standards of thisratio. Again in the year 2008
(1.12) the management of bank is able to increase its current ratio.C ASH R ATIOThis
ratio shows that the cash is enough for payment of current liabilities or not. This ratio
isobtained by dividing cash by current liabilities. For a bank this is the cash held by the
bank as aproportion of deposits in the bank.Formula = Cash / Current Liabilities Year
2004 2005 2006 2007 2008 Ratio 4.09 2.85 2.96 3.07 2.69
125. P a g e | 125A NALYSISThe cash ratio of National Bank of Pakistan shows a
mixed trend during five years of operations.During all years, the ratio is satisfactory as
per standards of this ratio. The year 2004 (4.09),representing highest and 2005 (2.85) &
2008 (2.69), representing lowest ratio in all five years.A DVANCES TO D EPOSIT R
ATIOIt demonstrate the degree to which bank has already used up its available resources
toaccommodate the credit needs of its customers.Formula = Advances / Total Deposits
Year 2004 2005 2006 2007 2008 Ratio% 47.42 58.01 62.99 57.56 66.08A NALYSISThis
ratio, a comparison of funds generation and its funds mobilization, indicates the total
loanssanctioned by the bank in relation to total amount of money deposited with the
bank, stands
126. P a g e | 126highest in 2008 ( 66.08%) as compared with the previous year
figures. This shows that the bankhas greater potential to advance additional loans. During
all other years the ratio is quietsatisfactory representing National Bank of Pakistans
credit management decisions.D UE FROM B ANKS TO T OTAL A SSETSIt is an
indication of Banks funds management policies.Formula = Due from banks / Total
Assets Year 2004 2005 2006 2007 2008 Ratio 0.019 0.028 0.036 0.028 0.021A
NALYSISThe National Bank of Pakistans due from banks to total assets ratio is
fluctuating and indicates amixed trend during all years. The ratio is 0.019 in 2004 and
0.028 in the year 2005. The year2006 represents highest ratio of 0.036 among all years.
There was a decrease in ratio at the endof financial year 2007 that is 0.028. The year
2008 represents a decrease in ratio (0.021) onaccount of due from banks to total assets.D
UE FROM B ANKS TO D UE TO B ANKSIt shows the relationship between what the
bank owes from other banks and what is due to it.Formula = Due from banks / Due to
banks Year 2004 2005 2006 2007 2008 Ratio 94.83 185.95 196.62 197.18 42.33
127. P a g e | 127 %A NALYSISThe ratio indicates an increasing trend till 2007 that is
94.83 (2004), 185.95 (2005), 196.62(2006) and 197.18 in 2007. The year 2008 represents
the lowest percentage of 42.33 on accountof due from banks to due to banks.D UE TO B
ANKS TO T OTAL D EPOSITSThis ratio is an indicative of the proportion of the
lending from the financial institutions inrelation to the total funds raised by the bank in
the form of deposits.Formula = Due to banks / Total Deposits Year 2004 2005 2006 2007
2008 Rati 0.024 0.019 0.023 0.018 0.065 o
128. P a g e | 128A NALYSISThe due to banks to total deposits ratio of National Bank
of Pakistan is fluctuating and indicatesa mixed trend during all years. The ratio is 0.024
in 2004 and decreased to 0.019 in 2005. Theratio is increased in 2006 as the ratio is
0.023. The year 2007 represents the lowest percentage of0.018 and the year 2008
represents the peak percentage of 0.065. C) DEBT RATIOSThese ratios give users a
general idea of the companys overall debt load as well as its mix ofequity and debt. Debt
ratios can be used to determine the overall level of financial risk acompany and its
shareholders face. In general, the greater the amount of debt held by a companythe
greater the financial risk of bankruptcy.T HE D EBT TO E QUITY R ATIOThe debt-
equity ratio compares a companys total liabilities to its total shareholders equity. Thisis a
measurement of how much suppliers, lenders, creditors and obligors have committed to
thecompany versus what the shareholders have committed.To a large degree, the debt-
equity ratio provides another vantage point on a companys leverageposition, in this case,
comparing total liabilities to shareholders equity, as opposed to total assetsin the debt
ratio. Similar to the debt ratio, a lower the percentage means that a company is usingless
leverage and has a stronger equity position.Formula = Total Liabilities/ Total
Shareholders equity
129. P a g e | 129 Year 2004 2005 2006 2007 2008 Rati 112.35 97.77 89.57 93.47
91.17 oA NALYSISThe debt to equity ratio of National Bank of Pakistan shows a ratio
of 112.35 % in 2004. Theratio is decreased to 97.77% in the year 2005. The ratio is
further decreased in 2006 as it shows apercentage of 89.57%. There was an increase in
the ratio as it shows a percentage of 93.47%.The year 2008 represents the ratio of 91.17%
.I NTEREST C OVERAGE R ATIOIt shows whether the bank is earning enough profit
before mark up charges to be paid to thefinanciers and the taxation obligations due to the
government in order to remain solvent. Theinterest coverage ratio is used to determine
how easily a company can pay interest expenses onoutstanding debt. The ratio is
calculated by dividing a companys earnings before interest andtaxes (EBIT) by the
companys interest expenses for the same period. The lower the ratio, themore the
company is burdened by debt expense. When a companys interest coverage ratio isonly
1.5 or lower, its ability to meet interest expenses may be questionable.Formula =
Earnings before interest & Taxes / Interest expense Year 2004 2005 2006 2007 2008
Ratio 1.83 1.85 1.89 1.66 0.97 times times times times times
130. P a g e | 130A NALYSISThe amount of interest a Bank pays in relation to its
revenue and earnings is tremendouslyimportant. The National Bank of Pakistans interest
coverage ratio is 1.83 times in the year 2005.The ratio was increased in the years 2005
and 2006 as it was 1.85 times & 1.89 timesrespectively. There sudden decrease of 1.66
times is observed in 2007. The ratio is furtherdecrease to 0.97 times in 2008, representing
the lowest ratio among all years.L OAN L OSS C OVERAGE R ATIOBanks use the
loan-loss coverage ratio to define the quality of its assets and how well it protectsitself
from losses caused by problematic loans. The higher this ratio is, the better the bank
ishandling itself in regards to loans.Formula = Provision against non-performance loans
& advances/ Profit or loss before taxation Year 2004 2005 2006 2007 2008 Rati 0.13
0.13 0.12 0.17 0.47 o
131. P a g e | 131A NALYSISThe loan loss coverage ratio of National Bank of
Pakistan is almost same in the years 2004 and2005 as it was 0.13 in both years. There
was a slight decrease in this ratio as it was 0.12 in 2006.The year 2006 shows an increase
in loan loss coverage ratio as it was 0.17. The year 2008represents highest ratio of 0.47
on account of loan loss coverage, as compare to all years. D) CAPITAL ADEQUACY
RATIOSC APITAL F UNDS TO T OTAL A SSETSThis ratio indicates the extent of the
funds employed by the bank in the total resources as shownin the balance sheet.Formula
= Capital Funds / Total Assets Year 2004 2005 2006 2007 2008 Ratio 0.89 1.02 1.10
1.07 1.09 %
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