NBP Report

Internship Report on
NATIONAL BANK OF PAKISTAN

National Bank of Pakistan Bannu
Cantt Branch
Submitted By:
ARIF ULLAH KHAN
MBA
INSTITUTE OF MANAGEMENT STUDIES

UNIVERSITY OF PESHAWAR
Session 2004-06
Bannu Cantt Branch Bannu
Internship report submitted to the Institute of

Management Studies, University of Peshawar in
Partial fulfillment of the requirements for the
Degree of Master in Business Administration
(Finance)
Supervised By:
Sir. AAMIR HUSSAIN
UNIVERSITY OF PESHAWAR
Session 2004-06
National Bank Bannu Cantt Branch
Supervisor:
Signature: _________________________________
Name: Sir. AAMIR HUSSAIN
Designation: Office Manager
Organization: Institute of Management Studies
University of Peshawar
ACKNOWLEDGEMENT
Keeping pace with time is the key to success, left behind means lost.
Commerce is a fast moving subject. The person who are engaged in
business and those who are to enter in this profession must acquaint
themselves with the fundamentals and new development of Business
organization and Management.
This report is an essence of my degree requirement and without writing

report the whole training process will end in smoke. Computation and
purification of data become fruitful when it comes in the shape of
information. It is very hard to convert data into information, it requires
wide span of time, but still it was a great experience for me to have a feel of
the practical world and keeping in view the limitation of the study. This
seems reasonable attempt.
Since banking wide spread profession, it is impossible to jot out each and
every function, so I highlighted is a few functions of banking. Being the
student of Banking & Finance I tried my level best to decimate as much
information as was necessary to bring justice to my internships at Deposits,
Remittances, Credit & Foreign Exchange departments at NBP.
I will like to thank all the staff of NBP Bannu Cantt Branch especially
Manager Mr.Mattiullah Khan & Operation manager Mr.Feroz Khan,
Mr.Farhad and Mr.Asif Shah who treated me with care and answered all
my quarries.
I will also like to thank Mr.Rehman ullah Khan for his support and
guidance. In the last but not the least I will like to thank my Mother for her
prayers and affection.
CHAPTER 1
INTRODUCTION
1.1BACK GROUND OF STUDY
The study is about the internship at National Bank of Pakistan. Internship is an

integral part of all management courses at IMS. The student requires spending a
specific time period in an organization in order to get first hand knowledge of
real life situation.
This study has been conducted in National Bank of Pakistan, Bannu Cantt
Branch. NBP is a highly profitable organization, having a huge network within
and outside the country. To know about the organization and its function it was
important to work there. This internship of two months helped the students write
some useful information about National Bank of Pakistan.
The socio-economic growth of any developing country depends mainly on the

health of its financial institutions. The banking sector is one, which plays a vital
role in the development of the economy. It’s involvement in the industrial sector,
trade and commerce of the country makes it an integral and important tool for the
over all development of the country. With the advent of modern technology and
increased competition, banks are undergoing major changes, thus making this
field a challenging one. Banking sector, no doubt, has a pivotal role in the
development of our national economy. Moreover, the role of banks in the NWFP
is of significant importance due to the huge amount of home remittances from
abroad. Home remittances contribute not only to this province, but also to the
national economy.
National Bank of Pakistan is one of the leading and first government recognized
bank in Pakistan. NBP was established in Nov 9, 1949 and it started functioning
from November 20, 1949.
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There are certain characteristics, which sets NBP apart from other nationalized
commercial banks. These characteristics are the reasons of the development of
NBP. The most important characteristic of NBP is that, it works, as an agent to
the State Bank, Where State Bank does not have a branch of its own. The NBP
also act as a trustee to the National Investment Trust (NIT), which is one of the
premier financial institutions of the country. It is charged the responsibility of
mobilizing small savings. The establishment of NBP thus signaled the
achievement of another milestone in the development of the banking industry in
Pakistan.
1.2 PURPOSE OF STUDY

The purpose or objective of this report is to define and describe different
functions and products offered by the bank to its valued customers, to identify
some weaknesses related to the management of the Bank, to analyze the
performance of the Bank and finally to give some necessary recommendation to
the management of the bank. This study can help the students of IMS in making
their reports about their organization. This can help the management of the NBP
in improving the performance of the Bank. As NBP is one of the oldest and well-
established banks in the public sector, so NBP is preferred in order to get more
knowledge of the organization. Also it is a degree requirement and a source of
practical knowledge. Internship in NBP had certain objectives such as:
• To observe the work in different departments of NBP.

• To develop the relationship to get more information.
• To apply managerial skills in real work place.
• To getting confidence while interviewing the heads of the different
departments.
• To develop analytical skills for organizational analysis and
financial analysis etc.
1.3 SCOPE OF STUDY

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The time duration of two months was quite adequate for the completion of study
and observation of the Bank. NBP is one of the oldest and well-established banks
of Pakistan; efforts were made to study the existing setup and functions of Bank.
Some of problems faced by the Bank have been identified and remedies have
been suggested to these problems. During internship at NBP Bannu Cantt Branch
the following departments were observed.
• Deposit Department
• Remittances Department
• Advances Department
• Account opening Department
While working in these department problems were identified and

recommendations were given to overcome those problems. Also comparative
analysis of three years financial statements and SWOT analysis of NBP was done.
An overview of the five- (5) year performance of the overall NBP is also
included.
1.4 LIMITATIONS OF THE STUDY
The vast scope of the operations of a bank is difficult to be analyzed in a

limited time of six months. The lack of information is another limitation
of the study.
1.5 METHODOLOGY OF STUDY
During internship at NBP the most important task was to collect as much quality
information about the organization as possible. Due to this reason, a number of
techniques wee used to collect the required material and compile the report. The
methodology, which was adopted for this research, is based on both the primary
data as well as secondary data.

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1.5.1 Primary Data
The first hand data, i.e. the data collected for the first time is called as Primary
Data.
The Sources of Primary Data
 Unstructured interviews with bank employees.
 Personal observations.
 Questioner.
1.5.2 Secondary Data
And the data which is collected from other sources and already processed through
mathematical and statistical techniques are called the Secondary Data.
The Source for Secondary Data
• Annual Reports
• Manuals of departments of the bank.
• Relevant books
• Brochures and circulars of the bank
• Internet
1.6 SCHEME OF REPORT
This report is divided into four (4) sections.

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Section I
This section consists of one chapter. First chapter of this report describes the
background, scope, methodology and scheme of the report.
Section II
This section consists of review of the organization. Chapter two includes a brief
history of overall banking sector in Pakistan .It discusses history of NBP,
activities performed by NBP and the role it is playing in the economic
development of the country. Chapter three consists of the organizational
structure of NBP, board of directors, executive committee. It also discusses the
human resource management of NBP. Chapter four has brief summary of
different departments and review of instruments and machines used in NBP Cantt.
Branch. Chapter five briefly explains all the functions of Deposit department.
Chapter six reviews the function of Remittances department. Chapter seven
consists of the review of activities performed by Establishment and Advances
department. Chapter eight includes the review of the activities performed in
Foreign Exchange department. Chapter nine includes different services offered
by NBP.
Section III
In this section of report comparative analysis of financial statements and SWOT

analysis of NBP is discussed. Chapter ten consists of Financial Analysis of the
NBP. It also includes comparison, graphical representation and interpretation of
three years financial performance of the NBP. Chapter eleven consists of SWOT
analysis & brief analysis of staff of NBP Bannu Cantt Branch Agency
Section IV
Keeping in view the SWOT Analysis is given in chapter eleven; chapter twelve
consists of the Findings and Recommendations.

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1
CHAPTER 2
HISTORY OF BANKING
2.1 WHAT IS BANK?
There is no consensus on the origin of the word Bank. According to some

authorities, the word bank itself is derived from the word “bancus” or “banque”,
means a bench. The early bankers, the Jews in Lombard, who are thought to be
the forefathers of Banking used to transact their business on benches in the market
places. The word bankrupt also comes from there. However, the Oxford
Dictionary’s Millennium Issue gives a precise meaning of the word bank defined
as” Bank is an establishment of depositing, with drawing and borrowing money”.
Although banking has developed too much than deposits withdrawl and
borrowing of money, yet the basic function of bank remains as described above.
2.2 BRIEF STUDY OF BANKING
Banking is thought to begin somewhere in early 2000 BC when the Babylonians

developed a banking system. The origin of modern banking can be found in the
modern dealers in Florence, who received money on deposits, and were lenders of
money in the 14th century, and the names of the Bardi, Acciajuoli, Peruzzi, Pitti
and Medici soon became famous throughout Europe as Bankers. The structure
and modern form of banking started taking shape when many of the Lombardy
merchants came to England in the 14th century and settled in the part of the city of
London now called Lombard Street. They were so resourceful that even the kings
had to depend on them for loans. The goldsmiths at that time also started issuing
receipts to their depositors in respect of the cash or gold articles left with them.
These were called Goldsmith Notes. An important step in the evolution of
banking was taken when these goldsmiths started lending at interest and issues
cheque books. Some of the goldsmiths, after they were refused payments by
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Charles II, formed themselves into a Corporation in1965, known as the Bank of
England.
This proved to be a turning point in banking history and paved the way for
modern banking through different legislatures by the British Government.
2.3 BANKING IN INDO-PAKISTAN SUBCONTINENT
Ever since, money became the medium of exchange in our society, banks existed
in one form or the other. In those days their function was mainly to lend money to
the people and the kings.
The Vedic Epics clearly mentioned about giving and taking of credit and also
contracts of debts at dicing. Later on, Manu in his “Sammurti” clearly mentioned
these transactions by saying, “a sensible man should deposit his money with a
person of good family, of good conduct, well acquainted with the law, veracious,
having many relatives wealthy and honorable”. Manu has also prescribed the rules
to govern the policy of loans and rates of interest.
During the fifth century people were accustomed to use “hundies” as a credit
instrument. The land revenue was collected generally in kind, while the services
were paid mostly in cash. Therefore, banker’s assistance in these and other
financial matters of State was very much necessary. The bankers enjoyed very
good reputation, and the people deposited their jewelry and cash holdings with
them for custody.
Loans were given to the people against personal and other securities such as
ornaments, goods and immovable properties and the banker and customer had
very cordial relations.
The Muslim rulers provided substantial encouragement to the farmers by giving

them interest-free loans and grants in cash. They also allowed them to pay the
land revenue in cash or kind. This “agricultural finance” resulted in bumper food

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production, which had a great surplus after consumption at home. Therefore, it
was being exported against pure gold.
Industrial development was not ignored at all. State loans were also given for
increase in production. These factories thus produced enough for local
consumption and left substantial quantities for exports. Textile, calico-printing
and dyeing, pottery, china-ware, indigo, opium, metal-work, paper, leather and
sugar etc. were being exported to foreign countries like China, East Indies and
Pacific Islands against pure gold. Thus the port towns of “Surat” and “Coa”
(Gujarat), “Calicut” and “Cochin” (Malabar coast); “Masulipatam” and
“Negapatam” (Coromandal coast) became the centers of the world trade, where
foreign buyers used to come for purchase of Indian commodities.
Muslim historians of the 12th century have also mentioned some, bankers known
as “Multani” and “Shroffs”. They used to act as agents to the government to
collect revenue. Such a prosperous society did need a well-regulated financial
administration and monetary system. Muhammad Tughlaq was the first king to
have introduced token currency in India. Akbar established mints all over the
country to prepare and issue currency. Royal Treasuries were also established all
over the country under a well conceived plan so that they could function as the
offices of “Central Bank” of that time, they also worked as the drawing and
disbursing offices to the Government.
Though the Muslim rulers did not establish “Bank” as such, yet the revolutionized
the entire financial and monetary structure in India and the old “Sahokars” and
“Mahajins” were eliminated. Government introduced reforms were so effective
that these “classical-bankers” were pushed into the past. Due to the prosperity of
Indian society of that time, the Royal mints and Treasuries did act as agencies for
transfer of money as well as for custody of valuables.

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2.4 BANKING IN PAKISTAN
At the time of independence, the areas, which now constitute Pakistan, were
producing only food grains and agricultural raw material for Indo-Pakistan
subcontinent. There were practically no industries, and whatever raw material was
produced was being exported from Pakistan. However, commercial Banking
facilities were provided fairly well here.
Before partition of sub-continent, the entire baking system was almost in the
hands of non-Muslims. When Hindus capitalists became sure of division of sub-
continent, they transferred their funds to safe places in India. Pakistan was
declared an independent state. In mass scale migration of Non-Muslim from
Pakistan to India caused the reduction in bank deposits. The number of scheduled
bank branches was reduced from 619 to 213, and the number of non-scheduled
bank reduced from 411 to 106. The independent state of Pakistan did not have a
central bank of its own at the time of independence.
As a new country without resources it was very difficult for Pakistan to run its
own banking system immediately. Therefore, in accordance with the provision of
Indian independence Act of 1947, an Expert Committee was appointed to study
the issue. The Committee recommended that the Reserve Bank of India should
continue to function in Pakistan until 30th September 1948, so that problems of
time and demand liability, coinage, currencies, exchange etc. are settled between
India and Pakistan. It was also stipulated that Pakistan would take over the
management of public debt and exchange control from Reserve Bank of India on
Ist. April, 1948, and that Indian Notes would continue to be legal tender in
Pakistan till 30th September 1948. Following the announcement of independence
Plan June 1947, the Hindus residing in the territories now comprising Pakistan
started transferring their assets to India. Moreover, the banks including those
having their registered offices in Pakistan transferred to India in order to bring a
collapse of new State. Some important dates are mentioned here,

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The first important date was establishment of Habib Bank Limited, on August 25,
1941 at Bombay. This was the first bank in Indian sub-continent, which was
operated by Muslims. Habib bank Limited transferred its Registered Head Office
to Karachi on August 07, 1947. It played a great role in the Pakistan’s Economic
Development.
The second important date in the history of Banking in Pakistan is the

establishment of Australasia Bank limited, at Lahore on December 03, 1942. Its
name was changed to Allied Bank of Pakistan Limited, on July 01, 1974. After
nationalization of the Banking Industry on January 01, 1974, three other banks
were merged in to it.
The other important date is July 09, 1947; when the Muslim Commercial Bank
Limited was registered and incorporated at Calcutta. Its registered Head Office
was transferred to Dacca on August 17, 1948. Subsequently its registered Head
office moved to Karachi on August 23, 1956.
The most important date is July 01, 1948, when State Bank of Pakistan was
established at Karachi as the Central Bank of the country. Central bank addressed
itself with an urgent task of creating a national banking system. In order to attain
this goal it provided every help and encouragement to Habib Bank to expand its
network of branches, and also recommended to Government the establishment of
a new bank which could serve as an agent of the State Bank. As a result, The
National Bank of Pakistan came into being on November 09, 1949, and by 1952 it
became strong enough to take over the agency function from the Imperial Bank of
India. This was the first Commercial Bank in the public sector. By December
1973 there were 14 scheduled banks with 3042 branches all over the country.
They were:
1. National Bank of Pakistan.
2. Habib Bank Limited.

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3. Habib Bank (overseas) limited.
4. United Bank Limited.
5. Muslim Commercial Bank Limited.
6. Pak bank Limited.
7. Standard Bank Limited.
8. Commercial Bank Limited.
9. Australia Bank Limited.
10. Bank of Bahawalpur Limited.
11. Premier Bank Limited.
12. Sarhad Bank Limited.
13. Lahore Cooperative Bank Limited.
14. Punjab Provincial Cooperation Bank Limited.
At the end of June 1999, the number of scheduled Banks in Pakistan was 52 with
7,874 branches .Out of these; there are 25 Pakistani banks with 7,779 branches
and 27 foreign banks with 95 branches.
2.5 HISTORY OF NATIONAL BANK OF PAKISTAN
With the establishment of the central banks, the country has ushered in new era in
the development of banking. Soon the industry was faced with another problem of
considerable magnitude. This happened in late 1949. The British Government
devalued its currency in September 1949 both Indian and Pakistan currencies
were pegged on a fixed exchange rate basis with the pound sterling.

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Inline with the British Government’s decision, the Indian Government also
devalued it rupee to maintain parity with the pound sterling. Pakistan, however,
did not devalue its currency. India did not view the Pakistani decision in the right
spirit and Pakistan’s refused to bring its currency at par with that of India led to a
crisis in trading between the two countries. India’s refusal to lift the Pakistani
jute, as reprisal resulted in a financial crisis for the jute growers, who could not be
paid. Only the Commercial bank in public sector could have offered payment, in
lieu, to magnitude the financial sufferings of jute growers.
The government responded to the situation quickly and decisively, on November

9, 1949, an order was promulgated by the Governor General bringing in being the
National Bank of Pakistan which started functioning from November 20, 1949.
In the course of its department the National Bank of Pakistan, in addition to being
a commercial bank in the public sector at a time when all other commercial bank
were in the private sector also came to acquire certain characteristics. The most
important of these characteristics is that the National Bank acts as an agent on
behalf of central bank. The National Bank also acts as a trustee to the National
Investment Trust (NIT), one of the premier financial institutions of the country,
charged with the responsibility of mobilizing small savings.
The establishment of National Bank thus signaled the achievement of another

milestone in the development of the banking industry in Pakistan.
2.6 THE HISTORY OF NBP (1996-2000 &ONWARDS)
Like all businesses in Pakistan, National Bank of Pakistan also endured a great
pressure in this period. When the biggest bank of the country was faced with
losses, Government of Pakistan made some reforms. Pakistan Banking Council
was demolished and all banks were put under independent board of governors.
Default of loans is the big issue since that time. In 1996-1997 the Government of
Pakistan pressurized all the institutions of the country to down size their staff so

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as to cut down the expenses. This was the demand of IMF. As a result Golden
Handshake Scheme was offered to the employees and a large number of
employees opted to leave. This decision was very costly and was amortized. In
the second phase of the cost reduction program, the number of branches including
the branches that were running in losses was reduced by a figure of 100.
The decision of May 28, 1998 nuclear tests followed by political decision of
freezing of foreign currency accounts gave hard time to NBP. But still, NBP
performed very well and succeeded in increasing the deposits. NBP was also
successful in collecting reasonable amount of money from the defaulters. After
some time the situation was made worst by economic crises of East Asian
countries. National Bank of Pakistan performed well in this region and maintained
its credibility.
National Bank of Pakistan as per its tradition, forwarded funds for revival of
almost sixty sick units with Rs.3.5 billion in 1998 .NBP also participated in self-
employment scheme with Rs.1.9 billion. NBP also introduced ATM card system
and became a member of SWIFT in New York as well. In November 2000, 10%
share of NBP’s shares were offered to general public and listed on all domestic
Stock exchanges. It has also prepared a plan for electronic banking and E-
commerce.
By analyzing these improvements we can say that the Officials and Directors of
the bank are fully aware and alert for the challenges of globalization and
modernization.

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2.7 ACTIVITIES PERFORMED BY NATIONAL BANK OF
PAKISTAN
NBP is providing all types of banking services of mercantile and commercial

banking permitted in the country, which includes:
• Handing of treasury transactions for the Government of Pakistan as an

agent to the State Bank of Pakistan.
• Providing services under a Trust Deed as Trustee to the National

Investment Trust (NIT) including safe custody of securities on behalf of NIT.
• Accepting of deposits of money against current, saving, term deposit and

profit and loss sharing accounts.
• Borrowing money and arranging finances 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 bonds, scripts and valuables for safe custody.
• Carrying on agency business of any description other than being agent on

behalf of clients including Government and local authorities.
• Generating, undertaking, promoting and issuing of shares and bonds, etc.
• Transacting guarantee and indemnity business.

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• Sale and encashment of Prize Bonds through its 266 authorized branches.
• Joint venturing with foreign dealers, agents and companies for is

representation abroad.
• Participating in “world Bank” and “Asian Development Bank” lines of

credit.
• Providing personalized Hajj services to intending Hajjis.
2.8 STATUS AND NATURE OF BUSINESS
National Bank of Pakistan (the bank) was established under the National Bank of
Pakistan Ordinance, 1949 and is listed on all the stock exchanges. It’s registered
and head office is in Karachi. The bank is engaged in commercial banking and
related services in Pakistan and overseas. The bank also handles treasury
transactions for the Government of Pakistan (GOP) and also provides services as
trustee to National Investment Trust (NIT) including safe custody of securities on
behalf of NIT.
2.9 ROLE OF NATIONAL BANK OF PAKISTAN IN
ECONOMIC DEVELOPMENT
Banks play significant role in promoting the economic activities and economic
development of a country. Industry, agriculture, trade, commerce and many other
economic activities are highly dependant on banks. Banks help in mobilization of
money. They also help in promoting the growth of internal resources for
development by attracting deposits into productive loan and investment. Banks
not only collects the savings of the people but also give loans for the development
of industry, trade and commerce.
NBP has been playing a major role in financing and developmental activities in
Pakistan. It helps in the growth of economy in all spheres of our national life. It

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has contributed significantly to economic growth of the country and has served to
trade and industry in a wide sphere of operations.
The NBP was the first bank to introduce scheme of credit to small borrowers like
farmers etc, for the promotion of agriculture. The bank advances liberal credit for
rural and agricultural development. Small short-term loans are given to the
farmers free of interest. These advances can be in the shape of fertilizers, seeds
and agricultural implements.
The NBP is able to attract large amount of deposits through its large number of
branches all over the country and thus is able to provide large amount of loans to
different sectors.
The NBP is also providing finances to small-scale industries for the period up to
five years; it has introduced the people’s credit facilities to the common man at
the large and more liberal scale than before. The main objective of this scheme is
to make a contribution toward building up of a developing nation. The NBP also
helps to promote the establishment of new companies by underwriting their
shares. The bank also contributes towards the earning of foreign exchange though
its foreign exchange business in Pakistan and abroad.

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MISSION:
“To be recognized in the market place by institutionalizing a merit and

performance culture, creating a powerful and distinctive brand identity.
Achieving top – tier financial performance, and adopting and living out our
core values”.
VISION:
“To be the pre-eminent financial institution in Pakistan and achieve market

recognition both in the quality and delivery of services as well as the range of
product offering.”

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CHAPTER 3
ORGANIZATIONAL STRUCTURE
Organizational structure is the framework that defines the boundaries of the

formal organization and with which the organization operates. A suitable
organizational structure for the nature of the organization leads to better
performance.
The organizational structure of the bank constitutes a board of directors and an

executive committee as the governing bodies. The National Bank of Pakistan
(NBP) has 1189 branches all over the country, 16 overseas branches & 4
subsidiaries. The head office is operationally in charge of central affairs including
the delegation of power and authority to the regional headquarters all over the
country. These regional headquarters direct the function of the 12 corporate
branches. The NBP has 29 regions (circles) in four provinces as given below:
Table 3.1 NBP Provincial Headquarters & No. of Regions
Provincial Headquarters No Of Regions
Sindh 6
Baluchistan 2
Punjab 14
NWFP 5
Azad Kashmir 2
Total 29

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3.1 HEAD OFFICE
The NBP has its own organizational structure and its Head Office is situated at
Karachi. All branches, regional offices and corporate branches work according to
the rules and regulations issued by the Head Office from time to time. The Head
Office of National Bank of Pakistan, which is primarily responsible for making
policies and execution of policy decision include,
a) Board of Directors
b) Executive Committee
c) Divisional head offices and provincial headquarters
The Head Office has nine divisions, which are further divided into different
wings. It is operationally in charge of central affairs including the delegation of
powers and authority to the 29 Regional Headquarters all over the country. These
Regional Headquarters direct the functions of the twelve corporate branches.
3.2 BOARD OF DIRECTORS

The Board of Directors nominates the executive committee, which nominates
divisional heads. It consists of president, six directors working under president
and one Secretary. President is the governing body and other six directors and one
Secretary work with him in a systematic way.

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The Board of Directors of National Bank of Pakistan NBP has one President
and six members as given below:
Table 3.2 NBP BOARD OF DIRECTORS STRENGTH
President of the bank 1
SEVPs of the bank 3
Representative of the PBC 1
Representative of government 1
Outsiders 1
Total 7
3.3EXECUTIVE COMMITTEE
Executive Committee consists of one President and nine members and among
these nine members, one member perform functions of both member and
Secretary. Board of Directors nominates executive committee and executive
committee nominates the divisional heads. NBP has an executive committee with
President as its chairman; five SEVPs are its members and president’s advisor as
an observer. This body monitors the day-to-day affairs of the entire bank and has
sanctioning authority for financial and business proposals.
3.4DIVISIONAL CHIEFS
In order to improve the management and operation of a bank, it has been split up
into a number of divisions. Each division of a bank is placed under the
supervision and control of Divisional Chief or Senior Executive Vice President
(SEVP) or Executive Vice President (EVP). The Head Office management
controls all the divisions. The nine divisions of NBP are as follows:
a. Management Support Division

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b. Audit and Inspection Division
c. Treasury Management Division
d. Credit Policy Management Division
e. Marketing and Development Division
f. Overseas Banking Division
g. Special Assets Management Division
h. Bank Secretary Division.
3.5PROVINCIAL CHIEFS
In order to improve the performance of the banking system, each bank has
Provincial Chief who has the power for sanctioning finance and other credit
facilities. The head quarters of the chiefs are situated in Lahore, Karachi,
Peshawar and Quetta. The National Bank has 29 regions (circles) in four
provinces and Azad Kashmir.
3.6REGIONS OF NBP
On May 13, 2000 a circular was issued in which zones were abolished and the
whole country and Azad Kashmir was divided into 29 regions. The changeover
process started from 1st August 2000 and was completed by 31st August 2000. The
new setup was made fully functional by 15th September.
3.6.1 Regional Management Committee
A regional management committee controls all regions. Regional management

consists of
i. Regional Business Chief

ii. Regional Operations Chief
iii. Risk management Chief
iv. Compliance Chief

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The Names of the Regions are:
S.No. Region S.No. Region
1 Karachi South 2 Karachi Central
3 Federal Capital 4 Karachi West
5 Rawalpindi 6 Lahore East
7 Faisalabad 8 Gujranwala
9 Peshawar 10 Mirpur A.K.
11 Multan 12 Gujrat
13 Sialkot 14 Hyderabad
15 Abbotabad 16 Sargodha
17 Mardan 18 Jhelum
19 Quetta 20 Sahiwaal
21 Bhawalpur 22 Dera Ghazi Khan
23 Dera Ismail Khan 24 Jhang
25 Muzaffarabad A.K. 26 Sakkhar
27 Larkana 28 Gawadar
29 Gilgit **** ****
3.7 CORPORATE BRANCHES

Corporate branches play an important role in the setup of National Bank of
Pakistan, to serve the businessmen and the corporate sector of Pakistan. There are
twelve corporate branches, present in the following cities.
TABLE 3.4 CORPORATE BRANCHES OF NBP

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City No Of Corporate Branches
Karachi 3
Lahore 3
Islamabad 1
Rawalpindi 1
Quetta 1
Peshawar 1
Mirpur (AJK) 1
Faisalabad 1
Total 12

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3.8OVERSEAS BRANCHES
NBP has 16 overseas branches, in the following 11 countries.
Table 3.5 NBP FOREIGN BRANCHES
S.No. Country S.No. Country
1 USA 2 France
3 Germany 4 United Kingdom
5 Egypt 6 Peoples Republic Of China
7 Korea 8 Africa & Middle East Region
9 Bangladesh 10 Central Asia States
11 Hong Kong 11 Afghanistan
NBP has four representative offices in the following countries:
S.No. Country S.No. Country
1 USA 2 Peoples Republic Of China
3 Uzbekistan 4 Azerbaijan
NBP has a subsidiary situated in Kazakhstan.
3.9NBP Cantt. Branch: PESHAWAR

This branch shifted to its new building in the year 2000. It is located in the
commercial heart of Peshawar. Its main customer is Government Of Pakistan. It is
also called “Main branch Peshawar”. It’s a large branch and has been serving both
civil and military personnel. All the cheques drawn on or by the bank are pooled
here and then taken to SBP for clearance. It’s one of the most profitable branch of
NBP in Peshawar.

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3.9.1 Set up
• Keeping in view the size of the branch the Operation manager will take
direct responsibilities for some of the operation functions depending on the nature
of activities in the branch and will act as Compliance officer also.
• The Operations area would comprise of Cash Counter Services and

Customer Services.
• The branch manager with the relationship officer(s), (if required) will
concentrate and fully devote to credit marketing and business/deposit
development.
• Operations manager will report directly to the regional chief operations

with dotted line reporting to the branch manager.
3.9.2. Branch Manger Responsibilities
• Overall affairs of the branch.
• Checking and ensure effectiveness of control system and working

procedures.
• Meeting existing and New Customers.
• Marketing business/deposit development and public relations.
• Assignments of accounts to relationship manger/officer.
• Income and business budget.
• Performance evaluation of reporting staff.
• Develop objectives for reporting staff.

25
• Review of reports.
• Conduct periodical meeting of the staff.
• Liaison with controlling offices.
• Approval of credit proposal with-in delegated authority
• Approval of expenses with in delegated authority.
• Follow-up for recovery of Non performing finances
• Restructuring and rescheduling of classified accounts.
• Special project/Assignments by controlling officers.
3.9.3 Operations Manager Responsibilities
• Supervision of all assigned operation department.
• Ensure check and control systems are in place.
• Create cordial and customer friendly atmosphere in branch.
• Ensure continuous satisfactory service to the customers.
• Review of daily activity reports.
• Ensure compliance of bank/SBP and local regulations.
• Approval of opening of new accounts.
• Approval of expenses with in delegated authority
• Preparation of expenses budget.

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• Develop duty list for all branch operation staff
• Develop objectives for operation staff
• Performance evaluation of reporting staff.
• Cross-training to the staff
• Management of staff attendance and vacation
• Provide leadership and guidance to operations departments
• Reporting of all exceptions to controlling office.
• Conduct periodical meetings of operation staff
• Represent branch on operation matters.
• Rectification of audit irregularities
• Maintenance and upkeep of the branch.
• Act as compliances officer.
• Special projects / Assignments by manager / controlling offices.
3.10 HUMAN RESOURCE MANAGEMENT
Human Resources Management is that part of organization, which is concerned

with the “people”. Every organization is comprised of people. It acquires their
services, develops their skills, motivates them to high level of performance and
ensures that they continue to maintain their commitment to the organization.
Getting and retaining good and competent people (employees) is critical to the
success of every organization regardless of its type. NBP also places great

27
importance on the qualification, caliber and competence of the staff. There are
three main steps at NBP for staffing and administration.
• Recruitment of the staff
• Development of the staff
• Motivating staff
3.10.1 Recruitment of the Staff
Recruiting is the discovery of potential skills of the employees to fulfill

organizational needs or we can say that it is the linking activity for bringing
together employees with skills to fill the vacancies. The recruitment procedure has
following steps:
i) Short- listing of the Application
In this step, thousands of candidates apply for limited posts available. The
candidates are scrutinized and the test calls are sent to them. The calls are sent by
the Head Office to only those candidates who fulfill the requirement of the job
advertised.
ii) Tests
NBP under the supervision of the Institute Of Bankers In Pakistan conducts test.
After the tests the applicants are further short-listed.
iii) Interviews
For the interviews only those candidates are called who qualify the written tests.
Different types of questions are asked from the candidates by the interviewing
board. Interview questions include,

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a. Questions about the personal background, extra curricular activities during
education and about personal contacts.
b. About the role of banking in current situation of economy.
c. Role of foreign enterprise in public economy etc
Apart from these questions, the candidate’s personal interests are also discussed
and an effort is made to have an understanding of the individual’s personality.
After these questions, an evaluation is made about whether the candidates will
prove himself as a valuable asset to the organization or not.
iv) Merit List
After the final result, the successful candidates are sent the appointment letter and
they are asked to sign the agreement with the bank.
3.10.2 Developing the Skills of Employees

Once the employees are recruited, it is very important to develop their skills.
There are two ways to develop their skills.
• Initial Training/Pre Service Training
• On the job Training
i) Initial Training/Pre Service Training
All the newly recruited personnel are provided with training facilities. During this
training, an employee is rotated through different sections of the branch so that he
may learn by practically doing the work. The minimum probation period is six
months.

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ii) On the Job Training
On the job training programs can be arranged at any time when the need arises for
training. These training courses are of short duration, mostly for two to four
weeks. These training courses are arranged at the home station or at any other
station. In case of outstation, the transportation and boarding charges are paid by
NBP. NBP has its own training institution. This training institute arranges
seminars/courses for the NBP employees.
3.10.3 Motivating Staff
People who are motivated exert greater efforts to perform the assigned tasks
effectively and efficiently than those who are not motivated. Various measures are
used in NBP for motivating the employees and for appraising their performance.
The techniques used are as follows.
i) Audit Report
These reports are prepared by auditors and are sent to the Head Office for
performance appraisal.
ii) Salaries Wages
The Government of Pakistan finance division sets salary. Presently, President put
suggestions to the board of directors and gets approval from the board for
increasing salaries.
iii) Provident Fund
7.5% of every employee’s salary is deducted as provident fund and the bank
contributes the same.

30
iv) Medical Allowance
The bank also compensates the cost of medical advice and medicines, claimed by
the employees for themselves and their dependents.
BOARD OF DIRECTORS OF NBP
Syed Ali Raza
(President)
Dr. Waqar Masood Khan Iftikhar Ali Malik Muhd.Arshad Chaudhry
Syed Sikandar Hayat

Sayed shafqat ali
M.Zubair Motiwala Jamali
shah jamot
Muhammd Khalid Malik
Source: Annual Report of NBP

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ORGANIZATIONAL STRUCTURE OF NBP HEAD
OFFICE
BOARD OF DIRECTORS
PRESIDENT
EXECUTIVE COMMITTEE
SEVPs/CHIEF SEVPs/CHIEF SEVPs SEVPs

SEVPs/CHIEF
SIND AND
NWFP OF AJK
BALUCHISTAN PUNJAB WINGS WINGS
Source: Annual Report of NBP

32
ORGANIZATIONAL STRUCTURE OF REGIONS
OF NBP
President
Corporate and
Investment
Commercial & Rental Regional Business Regional Marketing Banking Group
Banking Group Chief Chief Manager Chief
Corporation
North and
Regional Operations Corporation
Operate Group Chief Branch Manager Head South
Chief
Corporate
Regional Operation Deptt. of Branch Operation Branches
Compliance Chief the Region Manager
Risk Management Regional Risk

Group Chief Management Chief
Credit Department Branch Credit

of the Region Officer
Source: Circular No.11/2000 Dated May 13, 2000

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CHAPTER-4
DEPARTMENTATION
Departmentation is arranging the activities into meaningful groups. It distributes
the workload and increases efficiency and effectiveness. Departmentation can be
done on various bases for example, departmentation for customers, by function or
by location.
National bank of Pakistan Main Branch Batkhella Malakand Agency consists of

various departments based on its different functions. So it can be said that the
basis for departmentation at NBP is purely functional.
4.1 DEPARTMENTS OF NBP BANNU CANTT BRANCH
1. Deposits Department.
2. Remittances Department.
3. Advance Department
4. Cash Department.
5. Foreign Exchange Department.
4.1.1 Deposits Department

This department is responsible for the accounts opening, accounts closing and
answering customers’ queries regarding their accounts, check book issuance etc.
Lockers are also under the supervision of this department.
4.1.2 Remittances Department

This department is responsible for inward and outward remittances through
demand draft (DD), telegraphic transfer (TT) or cheque collection. It also
provides account statements to the customers and answering their queries
regarding their accounts.
4.1.3 Advances Department

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Its main function is to make correspondence with Head office Regional office and
other officials, and to advance consumer loans. It checks the credibility of the
consumer and maintains loans till maturity.
4.1.4 Cash Department
The head of this department is an accountant. All the cash is given with fixed
amount in the morning from which they can make payments. At the cash counter,
local currency receipts and payments are handled. Cheques are received and
presented for transfer or collection. All the money is kept in the strong room.
Cash handling is very risky job, therefore, only authorized person is allowed to
enter cash department.
4.1.5 Foreign Exchange Department
This department is responsible for opening and maintaining the foreign currency
accounts. At present it deals in EURO, US DOLARS & GBR POUND accounts.
It also provides the facilities of sending and receiving the foreign currency
through foreign TT, MT etc. It also facilitates the exporters and importers by
opening and clearing LCs for them.
4.2INSTRUMENTS USED BY THE BANK
The bank (NBP) is making the use of certain instruments, which are explained
below:
4.2.1 Signature Card
This instrument is used to keep a record of customers. The customer fills this card
at the time of account opening. It consists of the customer’s name, account
number, amount and specimen signature. All the signature cards are kept in the
stationary in the order of account numbers, so whenever the card is needed for
any purpose, it can easily be found.

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4.2.2 Vouchers
Vouchers are used in every bank. Every bank has its own printed vouchers.
Vouchers show the details about the amount received and paid by the bank. As
banks use a double entry system i.e. debt and credit system, therefore vouchers
are of two types.
i) Debit Voucher
To differentiate these types, for the convenience of the officers, debit vouchers are
printed in white color. Whenever bank incurs some expense; entries are made in
debit vouchers.
ii) Credit Voucher
These vouchers are printed in green color. They are used to enter the credit
transactions. Any income or amounts received by the bank are entered in a credit
voucher.
All the sections of the bank use vouchers because they are documentary proofs
that the transaction has taken place. Each section of bank collects its vouchers and
tallies with deposit department at the end of the day, for removing any
discrepancy.
4.3MACHINES USED BY THE BANK

In today’s modern world, an organization must adopt the modern technology to be
efficient and consequently profitable. The use of modern technology can save a
good deal of wastage of time and resources.

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i) Fax Machine
In the bank fax machine is used to communicate the massage from one bank to
another and for sending important letters or any other documents for urgent
consideration.
ii) Computers and Printers
There are several computers in the bank, which are used to save accounts
information and to keep the record of other departments. Daily balance sheet and
Other important documents are printed-out through the printer.
iii) Telephone and Intercom Sets

There are 3 telephone connections; one is used by the Manager and the other two
for the other bank purposes.
4.4 DEPOSITS DEPARTMENT
The principle source of funds of any commercial bank is the deposit account i.e.
demand, saving and time deposits. From banking point of view, the term deposit
means “the currency, Cheques, or draft given to a financial institution for
crediting to a customer’s account”.
Like all commercial banks, the primary function of National Bank of Pakistan is
to accept and receive surplus money from the people. In order to attract money it
offers different types of facilities to its customers.
The deposit department of National Bank of Pakistan,bannu Cantt. Branch mainly

performs the function of,
 Opening of Accounts
 Closing of Accounts

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 Issuance of Cheque book
 Issuance of Statement of account
NBP Bannu Cantt. Branch offers local currency accounts. Local currency
accounts are discussed as follows.
4.5 TYPES OF LOCAL CURRENCY ACCOUNTS
4.5.1 Current Account
A current account is a running account, which is continuously in operation. NBP

current account allows customers to deposit and withdraw cash at their own
convenience. The customer can withdraw the current deposits anytime, without
any previous notice to the bank. The bank has to honor the cheques to the extent
of credit balance in the account. No profit/interest is paid to the customer on these
deposits, but the customer is required to maintain a minimum balance in the
account. The initial amount required for opening of such an account is, Rs. 100.
The current account is opened and operated by traders, business companies,
public service bodies, industrialists etc.
4.5.2 PLS Saving Account
Saving deposits or profit and loss sharing (PLS) are those accounts on which bank
offers a relatively lower rates of interest. PLS saving account can be opened with
an initial deposit of not less than Rs. 500.
PLS Saving Account may be opened in the name of an individual or jointly in the
name of two or more persons. Charitable institutions, companies, Associations,
Societies, Educational institutions, firms etc, may also open these accounts.
Minors and illiterates are also eligible for opening saving accounts. However

38
illiterate customer must present themselves in person for withdrawals. The bank
determines the rate of profit or loss on PLS saving account.
4.5.3 Term Deposit Account
These are the deposits than can be withdrawn after a certain specified period of
time. The period of time varies from three months to five years. On these deposits
return/interest varies with the duration for which the amount is kept with the bank.
The rate of interest/return on term deposit is higher than that of a saving deposit.
Its interest/return is unaffected for the duration of the deposit irrespective of
market fluctuations.
Term deposit is best suited for short-term investment. Individuals as well as joint
account an be opened by sole proprietorships, partnerships, joint stock companies,
limited companies, clubs/associations/trusts, administration, executors etc. Profit
is paid at the maturity of deposit. On these deposits premature withdrawal is
permitted but against a reduced rate of interest as agreed at the time of deposit.
4.5.4 Finance Facility
Bank also extends finance facility to clients against saving and fixed term
deposits on comparatively low markup rate. The deposit is kept under lien,
however the customer may withdraw the profit amount credited to his
account
4.6 OPENING OF AN ACCOUNT WITH THE BANK
Account opening has the following requirements:
4.6.1 Formal Request
The person desirous of opening an account is required to fill an “Account opening

form”. It is a formal request by the customer to the bank to allow him to open and

39
operate the account. The form contains information about the customer i.e. his
name, address, business/profession, contact number etc.
4.6.2 Obtaining Introduction
Before opening an account the bank obtain introduction of the customer from an
old customer.
4.6.3 Specimen Signature
The bank takes specimen signature of the customer on the “signature book” or on
a card. Signature card is used for the verification of drawer’s signature on the
cheques.
4.6.4 Minimum Initial Deposit
The current account can be opened with minimum of Rs.100 and PLS Saving
Account with minimum of Rs. 500.
4.6.5 Operating the Account
Bank provides pay-in-slip book, cheques book and passbook to the customer for
operating the account.
4.7 ACCOUNTS TERMS AND CONDITIONS

Against the submission of the bank’s prescribed application form, duly introduced
in the manner provided and on supply of documents required, the account is made
fully functional under certain conditions. In case of account on PLS basis, bank
invest the amount in any manner it considers under PLS system.
4.7.1 Deposits
All money to be deposited to the credit of an account is accompanied by pay-in-

slip showing the name and number of account to be credited. Putting Bank’s

40
stamp under the signatures of two bank officers on the pay-in-slip then
authenticates the entry.
4.7.2 Withdrawals
Withdrawals from the account can be made only by means of cheques supplied by
the bank. Cheques should be signed according to the specimen signature. The
drawer under his full signature must authenticate any alteration in the instrument.
4.8 STATEMENT OF ACCOUNT

Account statement is provided to the customer by the bank. In these statements
the bank assures that all debit entries are correct. In case of error, the bank passes
an adjusting entry to rectify the error.
4.9 CLOSURE OF ACCOUNT

While closing the account, the account holder returns the unused cheques and
passbook to the bank. The customer also withdraws the credit balance of the
account (if any).
4.10 ISSUANCE OF CHEQUE BOOK

Before issuing a new cheques book, the bank is required to give a requisition slip
to the customer. The customer put his signature on the requisition slip. After
verifying the signature, the cost of cheques book is charged. The account number
of the customer is written on the cheques book as well as in a cheques book
register.
4.11 REMITTANCES DEPARTMENT
4.12 Remittances
The word “Remittance” means to send money by mail or any other method. It
may also be defined as “Payments send by mail to a center for processing”.
National Bank of Pakistan also provides the facility of transfer of funds from one

41
bank to other and from one place to another place. The transfer of funds is mainly
the responsibility of the remittances department. Remittances are divided mainly
into two categories.
4.12.1OUTWARD REMITTANCES
When the bank sends a telegram etc. to another bank (concerned branch) for
payment to the customers, it is called outward remittance. The sender is required
to apply through a firm in which he will give all the necessary details about the
sender and the beneficiary. The signature of the customers is verified. The details
regarding documents attached and exchange control regulations are scrutinized.
Telexes option and transactions number is recorded on the source document. This
source document is then forwarded for verification. No instrument is given to the
customers. Customers can receive the TT receipt at the end of the day and
document is credited to the beneficiary account.
4.12.2INWARD REMITTANCES
When TT through telexes etc is drawn on NBP Branch, it is called inward

remittance. Message is received from the Telex Department. The concerned office
duly checks authentication and purpose of remittance it is received from abroad.
In NBP remittance takes place in the following ways.
1. Telegraphic Transfer (TT)
2. Mail Transfer (M.T)
3. Demand Draft (D.D)/Payment Order.
4. Cheque collection
5. Clearing of Cheques.

42
4.12.3 TELEGRAPHIC TRANSFER
It is the fastest mode of transfer of money. Sometimes when the remitter urgently
desires the remittance, he may request to issue to telegraphic transfer. TT may be
issued to general public on their written request and against the value received.
The customers fill the forms and deposits cash. The official of the National Bank
of Pakistan send instruction regarding payment to the drawee branch
telephonically in the coded language and under confidential number known as
TEST NUMBERS. Or telephone call is making to the said branch the make
payment to customers. Vouchers are sent by ordinary mail to keep the record.
Telephone charges a re also taken from the customers. No excise duty is taken on
TT.
4.13 MAIL TRANSFER

It is a mode of transfer of transferring money from one branch to another branch
either within the same city or in cities through out country. MT advices
dispatched by mail. MTs may be issued for transferring funds in one account to
another account branch or to any person not requiring urgent remittance or draft.
Customers fill same application and deposit the cash in the same way. National
Bank of Pakistan official record the transaction voucher and advices are made and
sent to responding branch. National Bank of Pakistan takes Rs. 10 as mail charges
from application. No excise duty is charged on MT.
4.14 DEMAND DRAFT (DD)

“A bank draft is an order drawn by one branch of the bank to another of the same
bank to pay a certain sum of money on demand or to the person named there on”.

43
DD is another mode of transfer. It is just like a cheque. The application form is
filled in the beneficiary name, account number and sender’s name is written. The
customer deposits the amount of DD in the branch concerned. Then DD is made
and given to the customers. National Bank of Pakistan official note the transaction
in issuance registers on the page of that branch of National Bank of Pakistan in
which the DD will draw. They also send advice to the branch to which the DD is
sent. An OPEN DD is one in which direct payment is made. A CROSS DD is one
on which payment is made through account.
PAYMENT ORDER
Pay Order is made for the local transfer of money. National Bank of Pakistan
takes fix connection of RS. 15 on pay order. Pay order also comes for clearing
from SBP. NBP official checks with register and writes the entry in register.
4.15 CHEQUE COLLECTION
“A Cheque may be defined as a written order of a depositor upon a bank to pay to

or to the order of a designated party or to a bearer, a specified sum of money on
demand.”
Cheque is received form the customer by the bank and branch-crossing stamp on
the face of the cheque is checked. Cheque is received along with deposit slip.
4.16 CLEARING OF CHEQUES
Clearing of cheques is made through SC (short credit), LSC (Local short credit) in
clearing house.

44
4.16.1SC (Short Credit)
SC is the short credit, which consists of the cheque outside the district. These
cheques are sent in SC outside the district for clearance. Once they are cleared our
bank charge a certain amount of money spent on the process form the customer.
4.16.2LSC (Local Short Credit)
LSC is the short credit, which consists of the cheques inside the district. Separate
register is maintained for it. Local branches for clearance send these cheques for
clearance. Bank has no charges on the process form the customer.
4.17 DUPLICATE ACCOUNT STATEMENTS
If the customer has not received his account statement due to any reason, he can
get a duplicate account statement. Request is received form the customer for the
issuance of duplicate statement and signatures are verified. Statement is then
printed and delivered to the customer.
4.18 ADVANCES DEPARTMENT
Bank is a profit seeking institution. It attracts surplus balances from the customers
at a low rate of profit and makes advances/finances to individual and business
firms at higher rate of mark-up.
Advances and financing in banking business refers to provision (supply) of

money on credit and it is the most important function of a bank. The bank tries to
channelize the funds into profitable ventures to make profit. Advancing loans is
the most risky process as well and bank exercises utmost care while advancing
loans to its customer.
Another function of this department is to make correspondence with Head Office,

Regional Office and other Officials.

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4.19 RUNNING FINANCE
Running finance is usually provided on working capital. The running finance
facility given by NBP to its customers is only for short period. Interest/markup is
charged yearly. At the end of the year, the customer is required to renew the limit.
These are secured loans and are provided against personal security and against
hypothecation or collateral mortgage. These securities reduces the risk of loss,
therefore it is a safe investment.
4.20 DEMAND FINANCE

It is a facility in which it is obligatory on customer to withdraw the entire amount.
In demand finance, full amount of loan is advanced to the customer on the day the
loan is sanctioned. When this type of advance is given to the borrower, the bank
gives grace period after charging installments and markup. However, the
customer pays installments monthly.
4.21 PERSONAL LOANS

Customers whose salary account is maintained by bank are eligible for this type
of loan. It is up to three basic salaries of employees of government organization.
The objective of this type of loan is to improve the life style of customers.
4.22 STAFF LOANS

These types of loans include house loans, car loan etc. They are long-term loans.
Amount is deducted from the salary of employee every month.
4.23 ELIGIBILITY FOR FINANCE FACILITY

At NBP Advance is given after hundred percent backup guarantees. The types of
securities, which are accepted by the bank, are:
1. Government Bonds and Saving Certificate.

46
2. Cash deposits at the same bank.
3. Pledge of stock.
4.24 ADVANCE SALARY ACCOUNT
Before advance salary account was introduced by NBP, one important mode of
financing was the project financing in which there was a great deal of risk
involved for the non-performing of loans. (The risk of un-collection was not
diversified). While at the same time the salaried class was ignored too. As a result
the advance salary introduced by NBP in mid 2000 with a wide range purpose and
all branches were granted with adequate discretionary powers.
Advance salary is a modified form of running finance. It initially offered three

months advance salary to salaried class customers of any govt., non-govt. or a
registered firm with 11% markup rate per month. Advance salary account is
receiving a handsome response from existing and potential customers because of
its simple procedure and feasible nature.
Keeping in view the demand of advance salary the number of months has now
been increased to 10 months.
A potential customer of advance salary account has to bring and attach in

following documents with specified application form.
1. Three undated crossed cheques.
2. Last salary slip.
3. Photocopy of service card.
4. Copy of NIC.
5. Undertaking from the salary distribution authority.

47
4.25 GOLD FINANCE
National Bank of Pakistan also provides loans against gold to meet the domestic
needs of general public.
Gold Finance is provided against two personal guarantees. The loans sanction
limit is up to Rs. 5000. The bank keeps 25% margin as safety with itself. The loan
is to be paid in lump sum within one year time period.
4.26 LOAN PRE-SANCTION FORMALITIES
4.26.1 Against Liquid Securities (TDR, DSC, RIC etc)
1. Account (C/A or PLS )
2. Party’s request with purpose.
3. Legal status of party’s business (individual consumer, individual business,

firm, limited company).
4. Copy of National Identity Card.
5. Security (TDR, DSC, RIC etc).
6. Consent/ Undertaking if security owned by some one other than the

borrower.
7. Lien marked certificate (for National Center Securities).
8. Borrowers’ basic fact sheet.
9. Office note for approval with detailed terms and conditions.
10. Sanction advice (Acceptance of terms and conditions by borrowers).

48
4.26.2 Against Hypothecation of Goods and Machinery with
Additional Collateral of Mortgage of Property
1. Account (C/A or PLS).
2. Party’s request.
3. Statement of stock of hypothecated duly verified.
4. Statement of account.
5. Valuation certificate from bank’s engineer or approved valuer, as the case

may be.
6. Bank’s legal advisor’s certificate.
7. Title documents of the property to be mortgaged. Title deed mutation, Aks

Shajra, Naqsha Tasveeri, Fard Number, approved site plan.
8. Non encumbrance certificate (not more than three months old).
9. Personal guarantee (if property owned by someone other than the

borrower).
10. Borrower’s basic fact sheet.
12. Financial Statement (as per SBP prudential regulations).
13. CIB report (as per SBP prudential regulations).
15. Sanction advice (acceptance of terms and conditions by the borrower).

49
4.26.3 Against mortgage of Property Including Fixed Assets of
Industry for Industry only
1. Account ((C/A or PLS).
2. Party’s request.
3. Valuation certificate from bank’s engineer or approve value, as the case

may be.
4. Bank’s legal advisor’s certificate.
5. Title document of the property to the mortgage. Title deed, mutation, Aks
Shajra, Naqsha Tasveeri, Fard Number, approved site plan.
6. Non encumbrance certificate (not more than three months old).
7. Personal guarantee (if property owned by someone other than the

borrower).
8. Borrower’s basic fact sheet.
10. Financial Statements as per SBP prudential regulations.
12. Sanction advice (acceptance of terms & conditions).
FOREIGN EXCHANGE DEPARTMENT
In modern banking system, Foreign Exchange department plays very important

role from every aspect. It is parallel banking to the general banking with
additional functions of imports and exports business. Foreign exchange is
controlled by State Bank of Pakistan. Rules and regulations are framed by SBP.

50
NBP also carries the international banking through its Foreign Exchange
Department. All the transactions are carried at the rate authorized by SBP. For
this purpose US dollar has been fixed by SBP and the rate of other currencies are
calculated in accordance with the formula approved by SBP and as published
daily by Foreign Exchange Rate Committee in Karachi. NBP Head Office ensures
that the branches receive the rates published by Foreign exchange rate Committee
on the same day.
The Foreign Exchange Department provides the following services;
1) Foreign Currency Accounts.
2) Foreign Exchange Remittance Facility.
3) Import Advances to Importer.
4) Export Advances to Exporters.
4.27 FOREIGN CURRENCY ACCOUNTS:
NBP as an authorized commercial bank offers the facility of Foreign Currency

Account in four currencies, which are US Dollars, Japanese Yen, German Mark,
and UK Pound Sterling. Top management of NBP has authorized a few selected
branches for dealing in foreign currency accounts.
The foreign currency account facility by NBP is available both for Pakistani
Citizens and foreigners. The procedure for opening foreign currency account is
similar to opening of local currency accounts, except that in case of foreigners,
the bank requires photo copy of the applicant’s passport. The account may be an
individual or joint account.
The customer may open Foreign Currency Account in any of the mentioned
Foreign Currencies. Withdrawal and deposits are to be made in the same

51
currency. Similarly interest on the account will also be calculated in the currency
in which the account is maintained.
Broadly there are two types of foreign currency accounts.
• Current Account
• Saving Account
4.27.1 Current Account:
Just like local currency current account holder, no interest is given to the Foreign
Currency account holder. Foreign Currency accounts are also exempted from
Zakat, Income Tax, wealth Tax. The account holder can shift his money abroad
through foreign exchange remittance services.
4.27.2Saving Account:
NBP offers a rate of return on foreign currency saving accounts. The profit is paid
in the currency in which the account is opened. This account is also exempted
from Zakat, Income Tax and Wealth Tax. The facility of inward and outward
remittances is granted to the customer.
Foreign currency department of NBP also has a very extensive system for the
purchase and sale of foreign currencies. NBP is an authorized dealer in the foreign
currency, given the authority by the SBP. NBP deals in the buying and selling of
Foreign Currency notes only i.e. dealing in coins is avoided.
Head Office of NBP determines the maximum foreign Currency balances that can
be kept in every branch authorized to deal in Foreign Currencies. Those branches
of NBP which are authorized to deal in Foreign Currencies must submit the
following reports about foreign exchange,

52
 Report to General Manger Office
 Business Report to SBP (Monthly Basis)
 Monthly Report to Head Office
4.28 FOREIGN EXCHANGE REMITTANCES
The currency of one country is legal tender only in the same country and not in
other countries. So what should the businessmen do while doing international
business. To overcome such difficulty of businessmen the business is done
through Foreign Exchange. The importer will need the currency of the exporting
country. The international business is carried out by transferring credit from
debtor’s country to the creditor’s country.
Foreign remittances can be done in the following ways:
 Telegraphic Transfer(T.T)
 Mail Transfer (M.T)
 Foreign Demand Draft (F.D.D
4.29 IMPORT & EXPORT L/C
Now-a-days Export and Import business is very risky. The importer wants surety
of the good to be delivered to his prescribed destination; while exporters want
surety of the money to be sent to his prescribed bank. So, with a view to
overcome such difficulties a system of L/C is designed. Various banking
companies are involved in the business through L/C. NBP has also a very
extensive system of business through L/C.

53
The opening of L/C is a very complicated activity requiring vigilance and
banker’s shrewdness. Normally, in the preparation of L/C the following banks are
involved.
4.29.1Issuing Bank
It is the bank, which opens L/C and then sends to the country from where imports
are to be made. The issuing bank may send this L/C to one of its branch if present
there, if not, then to some other bank located in the exporter’s country.
4.29.2 Advising Bank
This bank informs the exporter that an L/C has been received and also acts
as an agent of the exporter.
4.29.3Negotiating Bank
Negotiating bank carries out the negotiation with the importer on behalf of the
exporter. It may or may or may not be the advising bank. The various credentials
related to L/C are settled as per agreed terms of L/C.
4.30 TYPES OF L/C
Following are the important types of Letter of credit;
4.30.1 Confirmed Letter Of Credit
It is a written agreement in which the bank give the guarantee that if the goods
will be of the standard and fulfilling the conditions of L/C, and then the exporter
(after presenting the L/C to the bank) will get the payment from the bank. The
characteristic of this kind of L/C is that, it can’t be cancelled after issuance and
the payment will be must.

54
4.30.2 Un-Confirmed Letter Of Credit
In this kind of written document the bank takes the responsibilities of receiving
the bills of exporter. But it doesn’t give the guarantee of paying these bills.
Unconfirmed L/C can be cancelled. The importer can cancel it and after
cancellation the bank don’t give the guarantee of payment of L/C. It is a kind of
conditional L/C i.e. the guarantee can be given in the case when the importer
didn’t cancel it.
4.30.3 Revocable Letter Of Credit
This kind of L/C can be cancelled by the bank or by the request of the importer. In
this kind of L/C the chances of cancellation are at every moment. So it is not dealt
widely and the importance of this L/C is very little.
4.30.4Irrevocable Letter Of Credit
This kind of L/C is issued for foreign payments. They could not be cancelled until
the given conditions are not broken. So with this kind of L/C the exporter has the
guarantee of payment.
4.30.5 Fixed Letter Of Credit
Those drafts or L/C, the amount of which is when paid once then it comes to an
end, are called fixed letter of credit.
4.30.6 Circular Letter Of Credit
This kind of L/C can be used for more than one time, e.g. if one L/C is of rupees
20 lack and the exporter provides the goods in installments, it has exported the
goods worth rupees 10 lack. The remaining goods worth rupees 10 lacks have to
be exported. And if he (exporter) pays rupees 10 lacks to the issuer (bank) so the
L/C of rupees 20 lack can be renewed.

55
4.30.7 Documentary Letter Of Credit
When we enclose important documents with the L/C then it becomes a

documentary L/C, i.e. insurance, invoice, post or draft, clearing certificates, etc.
4.31 THE MECHANISM OF OPENING AN L/C:
For buying any commodity from foreign country the buyer will reach the seller
(exporter) for the purchase of particular commodity of goods. After the
preliminary settling of agreement between the two parties, the importer will then
apply to his bank for the issuance of an L/C. The bank then asks the Importer to
fill the L/C application form. This form contains all the details discussed and
agreed upon by the two parties.
Besides containing information like description of merchandize, port of shipment

and unloading, it also mention the documents necessary for the honoring of draft
drawn upon the issuing bank by the importer.
Usually the following documents are attached with L/C.
 Application for L/C
 Membership Certificate of Chamber of Commerce or Association
 Insurance Certificate
 IBC charge form
4.32 NEGOTIATION OF L/C DOCUMENTS
The process of Negotiation starts when the exporter reaches the bank for honoring
the draft drawn on it by the importer. The exporter sends the documents
evidencing the shipment of goods to the bank where the credit is available and is
accompanied by a draft drawn on the issuing bank by the importer.

56
After complete scrutiny, if the documents meet the required terms and conditions,
the bank they may negotiate the draft. This negotiation by the bank will be with
recourse to the seller. Then this bank sends back the documents to the issuing
bank for reimbursement and is obtained in the pre-agreed manner.

57
CHAPTER - 5
DIFFERENT SERVICES PROVIDED BY NBP
5.1 DEMAND DRAFT

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

Negotiability: Pak Rupees Traveler’s 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 Traveler’s Cheque is the safest way to carry out the money.
5.3 PAY ORDER
NBP provides another reason to transfer your money using bank’s facilities. Its
pay orders are a secure and easy way to improve your money from one place to
another. And, as usual, bank’s charges for this service are extremely competitive.
A) Issuance of Pay order
1. For NBP Account Holder Rs. 50
2. For NBP Non- Account Holder Rs. 100/-
3. Rs. 25 from students for payment of fee favoring educational institution.

58
B) Issuance of Duplicate Pay Order
1. For NBP Account Holder Rs. 100/-
2. For NBP Non- Account Holder Rs.150/-
5.4 FOREIGN REMITTANCES
To facilitate its customers in the area of Home Remittances, National Bank of

Pakistan has taken a number of measures to:
a. Increase home remittances through the banking system.
b. Meet the SBP directives/ instructions for timely and prompt delivery of
remittances to the beneficiary.
New Features
The existing system of home remittances has been revised significantly improved
and well- trained field functionaries are posted to provide efficient and reliable
home remittance services to nonresident Pakistani at 16 overseas branches of the
Bank besides Pakistan International Bank (UK) Ltd, and Bank AL-Jazira, Saudi
Arabia.
Zero Tariffs
NBP is providing home remittance services without any charges.
Strict monitoring of the system is done to ensure the highest possible security.
Special courier services are hired for expeditious delivery of home remittances to
the beneficiaries.
5.5 SHORT TERM INVESTMENTS
NBP now offers excellent rates of profit on all its short term investment accounts.
Whether you are looking to invest for 3 months or 1 year, NBP’s rates of profit
are extremely attractive, along with the security and service only NBP can
provide.

59
5.5.1 AGRICULTURE FINANCE
Agriculture Finance
NBP provides Agriculture Finance to solidify faith, commitment and pride of

farmers who provide some of the best agriculture products in the world.
Agriculture Finance Services
“I Feed the World” program, a new product, is introduced by NBP with the aim to
help farmers maximize the per acre production with minimum of required input.
Select farms will be made role models for other farms and farmers to follow, thus
helping farmers across Pakistan to increase production.
Agriculture Credit
The agriculture financing strategy of NBP is aimed at three main objectives:
1. Providing reliable infrastructure for agriculture customers.
2. Help farmers utilize funds efficiency to further develop and achieve better
production.
3. Provide farmers as integrated package of credit with supplies of essential

inputs, technical knowledge, and supervision of farming.
Agriculture Credit (Medium Town)
• Production and development.
• Water course improvement.
• Wells.
• Farm power.
• Development loans for tea plantation.
• Fencing.
• Solar energy.

60
• Equipment for sprinklers.
Farm Credit
NBP also provides the following subsidized with the range of 3 months to 1 year
on a renewal basis.
5.5.2 NBP KISAN DOST
• Loans available for the farmers for production, development purposes, for
purchases of tractors, for installation of tube wells, for purchase of
agricultural Implements, micro loans, for godown construction, for
construction of fish pond, for live stock farming, for milk processing, for
cold storage, bio- gas plants etc.
• Mark-up 11% per annum.
• Loans available at the farmer’s door step.
• Agriculture experts to guide farmers.
• Loans available against agricultural passbooks, gold ornaments and paper

security.
5.5.3 NBP CASH n GOLD
• Facility of Rs.5000 against 10 gms of gold.
• Mark-up 11% per annum.
• No maximum limit of cash.
• Repayable after one year.
• Roll over facility.
• No penalty for early repayments.

61
5.5.4 NBP SAIBAN
• Finance available for home purchase, home construction and home

improvement.
• Period of repayment ranges between 3-20 years.
• Loans available upto a maximum of Rs.10 million.
• Mark-up choices available. Rate ranges between 7.5 %- 9.75%.
• Minimum approval and disbursement timing.
• Limited to areas where there are no documentation, fee, resale and

foreclosure related issues, so to protect the bank’s interest.
5.6 INTERNATIONAL BANKING
National Bank of Pakistan is all the fore front of international banking in Pakistan
which is proven by the fact that NBP has its branches in all of the major financial
capitals of the world.
NBP OFFERS
The lowest rates on exports and other international banking products access to
different local commercial banks in international banking.

62
CHAPTER-6
FINANCIAL ANALYSIS
10.1 LIQUIDITY RATIOS

Liquidity ratios are used to judge a firm’s ability to meet short term obligations. It
shows the cash solvency of a firm and its ability to remain solvent in the event of
adversities.
6.1.1 CURRENT RATIO
This ratio shows a firm ability to cover its short- term liabilities through short
term assets.
The three year comparison of NBP is given below:
Table 6.1.1: CURRENT RATIO
YEARS Current Assets / CURRENT RATIO

Current Liabilities
2003 365588 / 332090 1.10
2004 382889 / 348165 1.10
2005 279983543 / 417558742 0.67
Source: Annual Report 2005
Graph 6.1.1
CURRENT RATIO
2006
2005.5
2005
2004.5
2004 CURRENT RATIO
2003.5 YEARS
2003
2002.5
2002
2001.5
2003 2004 2005
63
INTERPRETATION
The current ratio for the financial year 2003 is just in line with the financial year
2004. It remained the same for both the years. It tells that for every Rupee 1
current liability it has 1.10 rupees, which covers through current assets. However
in 2005, it decreased to .67, as its mostly receivables are not collected.
6.1.2 ACID QUICK RATIO

A more conservative measure of liquidity is the acid quick ratio. This ratio is
same as current ratio except it excludes inventories and prepayments presumably
the least liquid portion of current assets. The ratio concentrates primarily on the
more liquid current assets, cash, marketable securities, receivables and advances.
Table 6.1.2: ACID QUICK RATIO
YEARS Current Assets – ACIDQUICK RATIO

Prepayments / Current
Liabilities
2003 365588 – 18091/ 332090 1.05
2004 382889 – 12746 / 348165 1.06
2005 279983543 – 10254 / 0.67
417558742
Graph 6.1.2:
ACID QUICK RATIO

2006
2005.5
2005
2004.5
2004 ACIDQUICK RATIO
2003.5 YEARS
2003
2002.5
2002
2001.5 2004
2003 2005

64
INTERPRETATION:
The Acid Quick Ratio for the financial year 2003 has slightly improved from 1.05
to 1.06 in the year 20002. The ratio in 2005 is lesser because of the excessive
prepayments. The reason for the improvement of the ratio in the next year is the
less prepayment.
6.1.3 CASH RATIO
Sometimes it needs to view the liquidity of the firm from an extremely

conservative point of view, for example the company may have pledged its
receivables and inventories. In such type of situations, the best indicator of the
firm of the short- term liquidity may be the cash ratio.
Table 6.1.3:
CASH RATIO
YEARS Cash / Current CASH RATIO
Liabilities
2003 84593 / 332090 0.25
2004 63525 / 348165 0.18
2005 59420502 / 417558742 0.14
Graph 6.1.3:
CASH RATIO
2005.5
2005
2004.5
2004
CASH RATIO
2003.5
YEARS
2003
2002.5
2002
2001.5
2003 2004 2005

65
INTERPRETATION:
The three year comparison shows the smaller cash ratio in 2003, it is clear that
probably NBP carried less cash in 2004 as compared to 2005.
6.1.4 OPERATING CAH FLOWS TO CURRENT LIABILITIES RATIO
Operating cash flow to current liability ratio compares cash flow to current
liabilities of a firm and indicates the funds flow per unit of current liability.
Table 6.1.4:
OPERATING CASH FLOW TO CURRENT LIABILITIES RATIO
YEARS Operating cash flow / CURRENT RATIO

Current Liabilities
2003 6799 / 332090 0.2
2004 42661 / 348165 0.12
2005 14633962 / 417558742 0.035

Graph 6.1.4:
OPERATING CASH FLOW TO

2005.5
CURRENT LIABILITIES RATIO
2005
2004.5
2004
CURRENT RATIO
2003.5
YEARS
2003
2002.5
2002
2001.5
2003 2004 2005

66
Interpretation:
NBP has improved its operating cash flow to current liability ratio.
The increase is attributed to the operating cash flows, which has
increased more then 6 times.
6.2 ACTIVITY RATIOS
Activity Ratios are also known as efficiency or turnover ratio it measures how
effectively the firm is using its assets.
6.2.1 RECEIAVABLES TURNOVER / ADVANCES TURNOVER
Receivables turnover or Advances turnover provides insight into the quality of the
firm receivables or advances and how successful the firm is in its collection.
Table 6.2.1:
RECEIVABLE TURNOVER RATIO
YEARS Markup/ Interest Receivable Turnover
Earned / Advances
2003 31290584 / 140547374 0.22
2004 27126839 / 140547374 0.19
2005 19452317 / 160990265 0.12
Graph 6.2.1:
RECEIVABLE TURNOVER RATIO
2005.5
2005
2004.5
2004
Receivable Turnover
2003.5
YEARS
2003
2002.5
2002
2001.5
2003 2004 2005

67
INTERPRETATION:
The bank has better Advances turnover ratio in the year 2005 compared to the
year 2003. and better in 2004 as well.
6.2.2 DEPOSITS TURNOVER RATIO
This ratio compares the Markup expense that the bank pays on deposits to the
deposits of the bank.
Table 6.2.2:
DEPOSIT TURNOVER RATIO

YEARS Current Assets / Deposit Turnover
Current Liabilities
2003 18877247 / 349617068 0.053
2004 14698507 / 362865637 0.040
2005 6735579 / 395568490 0.017

Graph 6.2.2:
DEPOSIT TURNOVER RATIO

2005.5
2005
2004.5
2004
Deposit Turnover
2003.5
Y EA RS
2003
2002.5
2002
2001.5
2003 2004 2005

68
INTERPRETATION:
The DTO for the year 2000 has declined. It is 0.04 and 0.05 for the year 2004 and
2003 respectively. It shows that for each rupees deposit by the customer it pays
0.06 as interest expense. In 2005 it is 0.017, which shows the lower interest.
6.2.3 TOTAL ASSET TURNOVER
Generally the total assets turnover measures the activity of the assets and the
ability of the firm to generate sales through the use of the asset.
Table 6.2.3:
TOTAL ASSET TURNOVER RATIO

YEARS Markup, Interest TST
Earned / Total Assets
2003 31290584 / 17510437 1.78
2004 27126839 / 23936263 1.13
2005 19452317 / 27584014 0.705

Graph 6.2.3:
TOTAL ASSET TURNOVER RATIO

2006
2005.5
2005
2004.5
2004 TST
2003.5 Y EA RS
2003
2002.5
2002
2001.5
2003 2004 2005

69
INTERPRETATION:
The Assets efficiency of the NBP has reduced for the year 2005 to 1.13%
compared to 2003 which was 1.78%. In other words we can say that each dollar
investment in total assets produces 6 cents as markup. The decline in ratio is
mainly because of decrease in Total Markup / Interest Earned amount in 2005. .
6.2.4 FIXED ASSETS TURNOVER
Sometimes it is needed to find the efficiency of fixed assets to generate interest

revenue or sales. Fixed assets turnover is a tool to find how efficiency one the
firm’s fixed assets to produce Markup / Interest revenue.
Table 6.2.4:
FIXED ASSETS RATIO
YEARS Markup or Interest Fixed Asset Turnover
Earned / Fixed Assets
2003 19452317 / 215423669 0.09
2004 27126839 / 176151526 0.15
2005 31290584 / 425446998 0.07
Graph: 6.2.4
FIXED ASSETS RATIO

2005.5
2005
2004.5
2004
Fixed Asset Turnover
2003.5
YEARS
2003
2002.5
2002
2001.5
2003 2004 2005

70
INTERPRETATION:
The three year comparison of fixed asset turnover for NBP shows that the ratio
has increased for the year 2004. The decrease in total amount of Markup / Interest
Earned and increase in fixed assets has brought this ratio down. However it
decreases in 2005; increase in fixed assets and markup cause this.
6.3 PROFITABILITY RATIOS
These ratios indicate the firm’s overall effectiveness of the operations.
6.3.1 NET PROFIT MARGINS
This is the conservative method of sales profitability. This ratio gives a measure
of Net Income in dollars generated by each dollar of sales.
Table 6.3.1
NET PROFIT MARGIN RATIO
YEARS Net Income / Markup Net Profit Margin
or Interest Earned
2003 752226 / 17510437 0.04
2004 3404593 / 23936263 0.14
2005 5897163 / 27584014 0.213
Graph 6.3.1
NET PROFIT MARGIN RATIO

2005.5
2005
2004.5
2004
Net Profit Margin
2003.5
YEARS
2003
2002.5
2002
2001.5
2003 2004 2005

71
INTERPRETATION:
The bank has considerably improved the Net Profit Margin. In 2004 it was
earning 10 paisas per rupee markup while previous year 2003 comparisons show
4 cents per dollar markup or return. And a 7% increase in 2005.
6.3.2 GROSS PROFIT MARGIN
This ratio shows the profit of the firm relative to the sales. It is a measure of
efficiency of the firms operations as well as an indication of how product or
services of the firm are provided.
Table 6.3.2
GROSS PROFIT MARGIN RATIO
YEARS Net Markup or Interest GPM

Expense / Markup or
Interest Earned
2003 18877247 / 31290584 0.60
2004 14698507 / 27126839 0.54
2005 6735579 / 19452317 0.34

Graph 6.3.2
GROSS PROFIT MARGIN RATIO

2006
2005.5
2005
2004.5
2004 GPM
2003.5 YEARS
2003
2002.5
2002
2001.5
2003 2004 2005

72
INTERPRETATION:
NBP bas a better Gross Profit Margin for the year 2003 compared to the year
2004. It shows that NBP has become more effective in producing the services
reasonably above cost and charging for them. While in 2005 it again decreases
that’s shows its good sign.
6.3.3 RETURN ON INVESTMENT
The return on the Investment measures the firm’s ability to utilize its assets to
create profits by comparing profits with the assets that generate the profits from
du pont approach.
Table 6.3.3
RETURN ON INVESTMENT
YEARS Net Profit Margin * ROI

Total Asset Turnover
2003 0.64 * 1.78 1.139
2004 0.14* 1.13 0.158
2005 0.213* 0.705 0.150

Graph 6.3.3
RETURN ON INVESTMENTS
2005.5
2005
2004.5
2004
ROI
2003.5
YEARS
2003
2002.5
2002
2001.5
2003 2004 2005
INTERPRETATION:

73
NBP shows a low ROI in the year 2005 compares to the year 2003 &2004. Its
ROI has decreased from, in the year 2004, 0.158 to .15 in 2005. The assets
turnover though reduced, still the improvement in NBP will bring this ratio up.
6.3.4 RETURN ON EQUITY
This ratio compares Net Profit after Taxes to the equity that the share holders
have invested in the firm. A high return on equity reflects the firm acceptance of
strong investment opportunities and effective expense management.
Table 6.3.4
RETURN ON EQUITY RATIO
YEARS Net Profit Margin * ROE

Asset Turnover *
Equity
2003 0.64 * 1.78 * 1195 1361.3
2004 0.14* 1.13 * 1427 225.7
2005 0.213* 0.705 * 1813 272.2

Graph 6.3.4
RET URN ON EQUITY RATIO

4000
3500
3000
2500
ROE
2000
Y EARS
1500
1000
500
0
2003 2004 2005

74
INTERPRETATION:
It is clear from the above ratio comparison that the ROE ratio for the year 2005
has increased to 272.2 from 225 in the year 2004. There is a decrease in equity
multiplier and asset turnover but still the improvement in Net Profit Margin in the
year 2005 has favorable effect on ROE ratio.
6.4 ADVANCES TO DEPOSITS RATIOS

The firm compares the advances to deposits and sees the comparisons of different
years
Table 6.3.5
ADVANCES TO DEPOSITS RATIOS RATIO
YEARS Advances / Deposits Equals
2003 170319096 / 349617068 0.487
2004 140547374 / 3628605637 0.387
2005 160990265 / 395568490 0.406
Graph 6.3.5
ADVANCESTODEPOSITSRATIOS RATIO
2006
2005.5
2005
Equals
2004.5 YEARS
2004
2003.5
2003
2002.5
2002
2001.5
2003 2004 2005

75
INTERPRETATION:
It shows that in 2005 there is an increase both in the deposits as well as in the
advances, which shows a good sign for the bank. Although it is decrease as
compare to 2003.
6.4. INVESTMENT TO DEPOSITS RATIOS
The firm compares the investments to deposits and sees the comparisons of
different years.
Table 6.3.6
INVESTMENT TO DEPOSITS RATIOS
YEARS Investments / Deposits Equals
2003 71759449 / 349617068 0.205
2004 143524971 / 3628605637 0.395
2005 166195619 / 395568490 0.420

INVESTMENT TO DEPOSIT RATIO
2006
2005.5
2005
2004.5
2004
Equals
2003.5 YEARS
2003
2002.5
2002
2001.5
2003 2004 2005

76
Graph 6.3.6

77
INTERPRETATION:
It shows that bank has done a good investment that increases its total in 2005, as
compare to 2004 & 2003. It’s a good sign for the bank; more cash is generated in
this way.
6.4.3 EQUITY MULTIPLIER
Equity multiplier compares the assets of the firm to the share holder equity.
Table 6.3.7
EQUITY MUTIPLIER
YEARS Total Assets / Equity Equity Multiplier
2003 17510437 / 11958673 0.96
2004 23936263 / 14279303 0.16
2005 27584014 / 18133897 1.52

Graph 6.3.7
EQUITY MUTIPLIER
2007
2006
2005
Equity Multiplier
2004
YEARS
2003
2002
2001
2003 2004 2005

78
INTERPRETATION:
The equity multiplier has also been reduced from in the year 2000. The main
factor here again is that the amount of equity has considerably increased. But
increase in the year 2000, with increase both in the assets and equity.
6.5 FIVE YEAR Performance Data Glance

Table 6.3.8
(Rs. In millions)
Years Total Deposits Advances Investment Shareholder

Assets s Equity
1998 325,057 273,391 109,524 102,969 9,978
1999 350,406 294,754 122,559 91,486 10,358
2000 371,636 316,493 140,318 72,609 11,378
2003 415,089 349,617 170,319 71,759 11,959
2004 432,803 362,866 140,547 143,525 14,279
2005 471,860 395,568 160,990 166,196 18,134

Graph 6.3.8.1 Graph 6.3.8.2
DEPOSITS
Total Assets
450000
400000
500000 350000
Rs. in millions
RS. in millions
400000 300000
Total Assets 250000 Deposits

300000
Years 200000 Years
200000
150000
100000
100000
0
1 2 3 4 5 6 50000
0
Years
1 2 3 4 5 6
YEARS

79
Graph 6.3.8.3
ADVANCES
200000
Rs in millions
150000
Advances
100000
Years
50000
0
1 2 3 4 5 6
YEARS
Graph 6.3.8.4
Investments
200000
Rs. in millions
150000
Investments
100000
Years
50000
0
1 2 3 4 5 6
Years
Graph 6.3.8.5
Share holder Equity

Rs. in millions
25000
20000
15000 Shareholder Equity
10000 Years
5000
0
1 2 3 4 5 6
Years

80
Table 6.3.9
(Rs. In millions )
Years Pre-Tax After- Number ob Number of
Profit Tax Branches Employees
Profit
1998 2,135 530 1,434 15,785
1999 520 31 1,431 15,541
2000 1,032 461 1,428 15,351
2003 3,016 1,149 1,245 15,163
2004 6,045 2,253 1,204 12,195
2005 9,009 4,198 1199 13272
Graph 6.3.9
35000
(Rs. In millions )
30000 Number of
Employees
25000 (Rs. In millions )
Rs. in millions
Number ob
20000 Branches
(Rs. In millions )
15000 After-Tax Profit
10000
(Rs. In millions )
5000 Pre-Tax Profit
0 (Rs. In millions )
1 2 3 4 5 6 Years
Years

81
6.6 FINANCIAL HIGHLIGHTS
Table 6.3.10
Rs. In Millions
Authorized Capital 5,000
Paid up Capital 4,130
Shareholder Equity & Reserves 27,584
Deposits 395,568
Advances –Net 160,990
Investment Net 166,196
Total Assets 471,860
Pre-Tax Profit 9,009
After-Tax Profit 4,198
No. of Branches 1199
No. Of Employees 13272

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6.7 BALANCE SHHET AS AT DECEMBER 31, 2005
2004 2005 DISCRIPTION 2005 2004
US DOLLARS IN
000 ASSETS Rupees in 000
Cash and Balance with treasury
966,294 1,033,967 Banks 55,531,453 59,420,502
624,309 420,301 Balance with other Banks 35,878,101 24,154,070
377,891 525,738 .Landing to Financial Institutions 21,716,802 30,213,352
2,497,45 166,195,61
5 2,891,943 Investments 143,524,971 9
2,445,64 160,990,26
2 2,801,365 Advances 140,547,374 5
478,332 381,892 Other Assets 27,489,021 21,946,846
141,210 155,554 Operating Fixed Assets 8,115,131 8,939,483
…. …. Deferred Tax Assets …. ….
7,531,13 471,860,13
3 8,210,760 432,802,853 7
LIABILITIES
58,567 95,647 Bills Payable 5.496.738 3,365,744
Borrowings for Financial
174,568 287,001 Institutions 16,493,514 10,032,135
6,314,16 362,865,63
6 6,883,222 Deposits and other accounts 395,568,490 7
…. …. Sub- ordinate loans …. ….
Liabilities against assets subject
1,289 715 to finance lease 41,117 74,051
516,506 453,821 Other liabilities 26,080,400 29,682,837
49,526 10,369 Deferred Tax Liabilities 595,864 2,846,186
7,114,62 408,866,59
2 7,730,775 444,276,123 0
416,511 479,985 Net Assets 27,584,014 23,936,263
REPRESENTED BY
64,912 71,403 Share Capital 4,103,422 3,730,384
124,317 141,526 Reserves 8,133,312 7,144,326
59,243 102,616 Un- appropriated Profit 5,897,163 3,404,593
248,472 315,545 18,133,897 14,279,303
168,039 164,440 Surplus on revaluation of assets 9,450,117 9,656,960
416,511 479,985 27,584,014 23,936,263

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CHAPTER-7
SWOT ANALYSIS OF NBP
SWOT Analysis is an acronym used for strengths, weaknesses, opportunities and
threats. Strengths and weaknesses are the initial strength and weaknesses of an
organization, whereas opportunities and threats are the external one.
7.1 STRENGTHS
• NBP is high profitable organization.
• The only bank providing the advance salary account up to 10 months.
• NBP uses the fastest ways of money transfer.
• High liquidity is strength of NBP.
• People have more confidence in NBP due to strong government support.
• NBP is a very sound financial institute.
• Role in national economic development.
• Bank with more deposits than any other commercial bank.
• Professional confidence.
• Recognition of the hard work of staff through incentives.
• Intellectual commitment to change.
7.2 WEAKNESSES
• NBP has a good staff combination on the basis of experience, but their
training capabilities are not up to the requirements of the fast changing
banking environment.
• The customers’ relations of the NBP staff are much weaker as compared
to other private banks.

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• Long term contacts are not maintained with customers.
• Most of the staff is from families with strong political background so it is

very difficult to remove them or punish their negative behavior.
• The technical training of the staff is negligible e.g. in case of absence of

the computer operator there is no alternate trained person who can record
the daily transactions.
• The organization is very much mechanistic and provides no flexibility to

encourage creativity.
• The lower staff is non-cooperative as compared to the lower staff of other

branches. The control of manager is not effective.
• The discretionary powers of manager are very low to offer more

incentives and value added services to its customers. There is a lack of
commitment and professionalism on part of the employees. The staff is
always in a hurry to leave the bank as soon as possible. They were also
observed to be starting their operations comparatively late. The
organizational culture is not cooperative and friendly. Nepotism was
observed on part of the manager as well as the top management towards
some staff members.
• The level of technology management in the branch is very low. The

technology available is not maintained well mainly because of the lack of
technically trained staff. In spite of the presence of technology many jobs
are done manually such as the letters, fax messages and other calculations,
which could be easily, done in MS Word and MS Excel.
• The job distribution is not up to the mark. The immediate result of this is
inefficiency and delay in work. The filing system is not up-to-date.

85
• Much time is wasted while searching for even a week old document.
• The staff spends more time in collections than required. The bank
collections are usually late because of the non-availability of staff.
• No efforts are made to recover the outstanding debts. There is no facility

for complaints and suggestions.
• Customers coming to the Bank for TTs, TCs etc. are not received with
open hearts and thus deprive the bank of revenues.
• There is a lack of functional and proper research and development, which

could scan the micro and macro environmental data for future planning
and strategy.
• Financial audits are conducted but operational audits have not received
proper attention as much as it should get.
• There is no procedure, which could encourage the middle and lower level
management to initiate creativity.
• The lack of professional bodies is a major weakness.
• Instructions are not conveyed systematically but rather than casual

manner.
7.3 OPPORTUNITIES
• New marketing strategies to invest money in new projects.
• There is a great opportunity for NBP in field of micro finance.
• Privatization of NBP.
• There is a good opportunity to utilize the skill of educated young talent for
the enhancement of business.

86
• Advance is the main area, which has a tremendous potential in the share of
profit. This area can be profitable for the organization.
• Wide range of products and product line can enhance the business.
• Leasing business.
• Hiring the new MBA’s, new talent which can control the administrative
expenses.
7.4 THREATS
• The biggest threat to the operational success is the better competitors’
services. Many private sector banks are offering higher rates of return
to customers than NBP.
• The banks in the neighborhood of NBP have become online e.g. Union
Bank, Habib Bank, Muslim Commercial Bank and Standard Chartered
Bank, while it lacks this.
• Cannibalization of profits is yet another threat to the success of NBP.

The branches of NBP are located very close to each other. All these
branches are taking away each other’s customers.
• One of the biggest threats to the NBP is the increasing rate of

dissatisfied customers. Most of these customers were observed to be
dissatisfied with the delays in their services.
• The greatest threat to the performance of NBP is the decreasing morale

of employees. They feel that they are not provided with bonuses, they
are not given proper attention to have a say in the meetings.
• High-pressure interest groups are developing which poses a constant

threat to NBP.

87
• Establishment of new private financial institutions and expansion.
• Merger of some of financial institutions.
• Political pressure.
• New products from private Pakistani and Foreign Banks.
• Quality of human resources.
7.5 CRITICAL ANALYSIS OF NBP Bannu Cantt Branch

The critical analysis is about the National Bank of Pakistan Bannu Cantt Branch
beside some of the good aspect of the branch, there are some reactive sides which
are to be given consideration in their first priority. There are some point which
were noticed during the internship period.
7.5.1 Professional Training
Number of Employees are Six Chief Manager to Control all the staff. Operation
Manager Control all the banking activities. Two Cashiers to control all the cash
activities of the Branch one Remittances officer one is of Computer Work. They
do not have the required background to properly conduct the operation of the
bank. Many of the employees have background which is completely irrelative to
the banking profession. They do not know about the modern technology just like a
computer and don’t know how to use it properly. Although staff training colleges
are working in all major cities but they are not performing well. For this purpose
these staff colleges should be reorganized and their syllabus should be made in
such a way to help the employees understand the ever changing.

88
7.5.2 The Transfer Criteria
The transfer criteria and policies really want amendment. There are Six members
in the branch for more then 5 years where as on the other hand some of them are
always in rotation. Therefore, those who are permanently working they have no
fear and they don’t work properly and those who are always in transition they are
not interested in working hard because they had to leave the seat and had to
transfer to another place with net work. So there are not such fixed rules for an
employee transfer. Ultimately the bank has to suffer losses. The transfer means
when a person is shifted from one place to another, transfer are not properly
carried out. Some of the employees are continuously serving at the same post.
They are simply rotated at the same branch. Therefore, it is recommended that
evenly rotation of every employee should take place after three years in different
branches of the bank.
7.5.3 Unavailability of Computerized System
Unavailability of the computerized system has made difficult to operate accounts
for the customers. Cashing of the cheques takes too much time of the bank and the
customers. It is a new technique for quick operation and to increase the numbers
of account holders.
7.5.4 Wrong Decision of the Government
In past the every department funds would be sent to their own department but now
salaries of the Education and Health department is paid to the teachers, doctors
and lady health workers through banks. For receiving their salaries all of the
employees of that department come to the bank, which is out of the control for the
bank management. Even the ladies and the elders have to wait for hours. And now
the utility bills are also received over there, which is also an essential load for the
bank.
7.5.5 Dress Code
Most of the employees come to the bank in a very casual dress. This shows their
least care about their bank reputation and image, which gives a bad impression to
the customers.

89
CHAPTER 8
FINDINGS AND RECOMMENDATIONS

There is always a better way of doing things so some of recommendations
suggested for the bank in accordance to the critical analysis.
8.1 IMPROVE QUALIFICATION OF THE STAFF

Academically staff is quite qualified but most of the staff lacks professional
qualification i.e. they should do diploma in banking. It will help them a lot in
banking and also in their promotions. The cost of diploma in banking is low. It
has three stages and the cost per stage is - Rs.2, 000.
8.2 STAFF SHOULD BE TRAINED

Proper training should be given to the staff of the branch. Staff college people
should come and train the staff because some times it is difficult for staff to visit
Staff Collage Peshawar to get the required training. The cost estimates for the
Staff College employees to come to the branch and give them training will be like
Rs.1, 000 per Staff College Employee for one day. So if two people come for two
days after six months then the cost will be Rs.8, 000 per year, which is negligible.
8.3 IMPROVE TECHNOLOGY

This branch has fax, telephones and computers. It is suggested that there should
be on line banking facility and ATM (Auto Teller Machine) facility. The existing
computers should be interconnected by networking, which will cost only Rs.10,
000 for only one time. The benefit of Networking will be that the different
departments will be able to work and easily, efficiently and with least wastage of
time.

90
8.4 RANK INFLUENCE SHOULD BE AVOIDED
Some times high rank officers come and want themselves to be given priority. In
these cases bank should strictly follow the rule of ‘first come first serve’. This
will maintain the trust of other customers that they are not neglected just because
they have no rank.
8.5 SECRECY MEASURES MUST BE MAINTAINED

The branch must maintain the secrecy of its customer’s account especially when
the bank is asked on telephone to tell about the financial standing and balance in
the account.
8.6 GOLD LOAN AND LOCKER FACILITY
Bank should utilize its deposits by extending gold loans and all other kind of
loans to attract the potential customers to utilize their full capacity. This will
increase their business circle, and will increase profits by decreasing per unit
costs.
8.7 MOTIVITATE THE EMPLOYEES
The staff of the NBP Cantt. Branch Peshawar, especially the lower staff is found
very much demotivated. They are dissatisfied with the performance appraisal
system of the bank. They also complain about the nepotism of the upper
management. The Branch manager should establish a systematic and efficient
appraisal system to over come the demotivation and dissatisfaction of the
employees.
8.8 CUSTOMER ORIENTATION
Every leading organization considers its customers as the kings. So the bank
manager needs to keep in close contact with the existing and the potential
customers. He should inform them about new products of the bank. The
customers should be asked about the bank’s services from time to time. And the

91
deficiencies pointed out by the customers should be removed. The customer and
staff relationship should be made mild, soft, courteous, cooperative, and caring,
which is not like this in NBP now a days, as compared to other private banks.
8.9 JOB ROTATION

The employees should be rotated through different seats of different departments,
so that each and every employee is aware of the whole banking system. It will
benefit in the absence of employees.
8.10 DECISION OF GOVERNMENT

The government is sending the salaries of some of the departments of the NBP,
which creates a lot of rush and voice in the bank, at the end of each month the
NBP should have to appeal to the government to retake this order and send their
salaries to each department independently. The NBP is getting nothing out of it
except disaster in the bank.
8.11 DRESS CODE

Dress takes a great role in presenting somebody’s personality. Especially for
bankers, dress code should come in a very formal dress and thus they can show
their customers about their seriousness towards work.

92
BIBLIOGRAPHY
1. Decenzo, David. A and Robbins, Stephen. P. (1994). Human Resource

Management. USA John Wiley and Sons Inc.
2. Roman (2000). Internship report on NBP submitted to Institute of

Management Studies.
3. Hassan, Mumtaz (1998). The story of NBP, Karachi.
4. Harold, Koontz and Heiz Weihrich (1984). Management. McGraw

hill, 8th edition.
5. http://www.nbp.com.pk
6. Kid, Well, David, Peterson, Richard and Black Well. (1993).

Financial Institution, Markets and Money. USA the Dyden Press Harcourt
Brace Jovanovich College Publisher.
7. Koontz, Harold and Heinz Weihrich. (1993). Management. 10th

Edition. Singapore: McGraw Hill.
8. Nasir, M. Saeed. (1998). Banking Currency and Finance. Pakistan

Kitab Markaz.
9. Nasir, M. Saeed. (1998). Economic Theory. IImi Kitab Khana.
10. National Bank of Pakistan, (2000). Annual Report 2000. Karachi.
11. National Bank of Pakistan, Economic Bulletin of NBP, Karachi.
12. National Bank of Pakistan, Statements of Liabilities and Assets,

Statements of Profit and Loss (2000, 2000, 2000).
13. NBP, BBI. (1997-1998). National Institute of Banking and Finance.

RHQ Peshawar.

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14. President Office June 21, Circular No. 13/2000. Head Office National
Bank of Pakistan, Karachi.
15. President Office Mays 13, Circular No. 11/2000. Head Office.
National Bank of Pakistan, Karachi.
16. Rue, Leslie. W and Lloyd L. Byers. (1992). Management. Boston:

Donnelley and Sons Company.
17. Siddiqi, Asrar. H. (1998). Practice and Law of Banking in Pakistan.

Karachi: Decent Print Enterprises.
18. www.nbp.com.pk
19. www.sbp.org.com
20. www.janggroup.com

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LIST OF PERSONS INTERVIEWED
• Mr.Asif shah, O.G-3, NBP Bannu Cantt Branch
• Mr.Farhad , O.G-2, NBP City Branch Bannu.

95

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Internship Report on

NATIONAL BANK OF PAKISTAN

INSTITUTE OF MANAGEMENT STUDIES

Internship report submitted to the Institute of

INSTITUTE OF MANAGEMENT STUDIES

Name: Sir. AAMIR HUSSAIN

Designation: Office Manager

Organization: Institute of Management Studies

This report is an essence of my degree requirement and without writing

1.1BACK GROUND OF STUDY

The study is about the internship at National Bank of Pakistan. Internship is an

The socio-economic growth of any developing country depends mainly on the

Institute Of Management Studies

1.2 PURPOSE OF STUDY

• To observe the work in different departments of NBP.

1.3 SCOPE OF STUDY

Institute Of Management Studies

• Account opening Department

While working in these department problems were identified and

1.4 LIMITATIONS OF THE STUDY

The vast scope of the operations of a bank is difficult to be analyzed in a

1.5 METHODOLOGY OF STUDY

Institute Of Management Studies

The Sources of Primary Data

 Unstructured interviews with bank employees.

1.5.2 Secondary Data

The Source for Secondary Data

• Manuals of departments of the bank.

• Brochures and circulars of the bank

1.6 SCHEME OF REPORT

This report is divided into four (4) sections.

Institute Of Management Studies

In this section of report comparative analysis of financial statements and SWOT

Institute Of Management Studies

There is no consensus on the origin of the word Bank. According to some

2.2 BRIEF STUDY OF BANKING

Banking is thought to begin somewhere in early 2000 BC when the Babylonians

institute Of Management Studies

2.3 BANKING IN INDO-PAKISTAN SUBCONTINENT

The Muslim rulers provided substantial encouragement to the farmers by giving

institute Of Management Studies

institute Of Management Studies

institute Of Management Studies

The second important date in the history of Banking in Pakistan is the

1. National Bank of Pakistan.

2. Habib Bank Limited.

institute Of Management Studies

4. United Bank Limited.

5. Muslim Commercial Bank Limited.

6. Pak bank Limited.

7. Standard Bank Limited.

8. Commercial Bank Limited.

9. Australia Bank Limited.

10. Bank of Bahawalpur Limited.

11. Premier Bank Limited.

12. Sarhad Bank Limited.

13. Lahore Cooperative Bank Limited.

14. Punjab Provincial Cooperation Bank Limited.

2.5 HISTORY OF NATIONAL BANK OF PAKISTAN

institute Of Management Studies

The government responded to the situation quickly and decisively, on November

The establishment of National Bank thus signaled the achievement of another

2.6 THE HISTORY OF NBP (1996-2000 &ONWARDS)

institute Of Management Studies

29 Gilgit