Internship Report NBP

Employees Hierarchy

PRESIDENT

MEMBER BOARD

SENIOR EXECTIVE VICE-PRESIDENT

EXECUTIVE VICE PRESIDENT

SENIOR VICE PRESIDENT

BRANCH HIERARCHY

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

OFFICER GRADE I

OFFICER GRADE 2

OFFICER GRADE 3

MESSENGER

PEON

SWEEPER

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Internship Report NBP

National Bank of Pakistan

National Bank of Pakistan maintains its

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

Branch Introduction

I did internship in (National Bank of Pakistan) Main Branch, Kutchehry Chowk, Multan.
This branch was founded in July 1962. From last many years this branch is not only

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achieving its targets of deposits and advances rather it remains above the targets.
According to the financial record of last year this branch was earning more than 20% of
total profit of the region.
Every year the targets of this branch are increasing by 20 to 25 percent but still there is a
potential in the market to meet these additional targets. This branch is performing its
functions in traditional style and now it has been converted into an online branch.

What I Did…?

After joining the bank for internship initially it was so difficult for me to get the attention
of the employees, every body was terribly engaged in there own activities, no body was
having time to accommodate me. This was a crucial time for me to get the attention of
NBP’s management and to make them realize that their valuable information is so much
necessary for the up gradation of my knowledge and for the completion of the task which
I was assigned by the institution. But very soon I succeeded in making relationship with
the top influence people and with the help of these people I started permeated in the
system. This was my first step towards the completion of my task and with the passage of
time they realized that they can also utilize my efforts in a productive way to minimize
their burden.
They provided me their time and information which helped me to enhance my knowledge
and they also shared there experiences with me which I believe that it would be helpful in

my practical life. First two weeks I worked in operation

department, for next two weeks I worked in credit
department and for rest of the time I worked with
Business Manager where I learned lot of things
including how to deal with corporate customers, with

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individual customer and how loans can be recovered

from the customers.
During the internship session I got the chance to perform on different activities which are
listed below and short explanation is also given.

Account opening department

To open an account the customer have to meet the general banking
manager with an introducer (the person who is going go introduce that
person in the bank) and get an application form used for account
opening. Different color-coded application forms are available for each
type of account. Along with the form a card for specimen signature is
also supplied to customer. Manager has every right not to accept this
contract if he is not satisfied by the details provided by the customer.
In case the contract is acceptable to both, now it is ready to open the
account formally.

ACCOUNTS TYPES
Though in theory there many types of accounts but commonly account
operators can be classified in one of the following categories, each
have different documentation requirements:
 Single
 Joint
 Partnership
 Private Limited

Credit Department

The earning of a commercial bank are chiefly derived from interest charges on loans and
discounts it. Now loans are recognized as advances or finances. The advances are made

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through the deposits that are kept in the bank by the customers. The bank pays profit on
the deposited amount and receives mark up on the advances made of different amounts.
NBP introduced the mark up based advancing in Jan1, 1985 when the Islamization of the
economy was influence under this system of advancing the bank is entitled to receive a
constant sum of money on the amount that is outstanding on the account of the party.

Foreign Exchange

To promote flow of foreign exchange in the country, the Government of Pakistan started a
new scheme of opening of bank accounts in foreign currency. These accounts were
entitled to receive profit percentage in shape of the currency in which the account was
kept (Dollar account shall be paid profit in dollars). This has increased the flow of foreign
currency especially from the Pakistani foreign residents, who used to send money to their
families at home. The State Bank of Pakistan was given special rights to control and
monitor the performance of the “Authorized Dealers” in foreign exchange accounts.

Authorized Dealer is a person or an institution, which can deal with the foreign
exchange. The authority is given by SBP to all those scheduled Banks who have adequate
trained staff and facilities. These scheduled banks are given license to deal in foreign
currency transactions.

Remittance Department

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Remittance department provides services to the customer of the bank. The main function
of this department is transfer of funds.

INSTRUMENTS OF BILLS AND REMITTANCE DEPARTMENT

The instruments that are handled in the Remittance department are as follow:

 Demand Draft.

 Mail transfer.

 Telegraphic transfer.

 Pay order.

 Pay slip.

 OBC (outward bill for collections).

 IBC (inward bill for collections).

Clearing Department

There is no legal obligation on a banker to collect cheques drawn upon other banks for a
customer. However it is function of almost every modern bank of the collection of
cheques and bills on behalf of the customer.

Clearing department services are provided in order to make arrangements for the
economic collection of the cheques, DD and other negotiable instruments. A large part of
this work is carried on through the clearinghouse.

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After joining the bank in internship I got the practical exposure of all the above described
activities. The mechanism is not too simple to understand easily but still lots of
complexities have been solved.

Application of Learned Concepts

After getting entered into practical life this is a common complaint that practically things
are quite different from theoretical learning, but I did not face such big difference because
the concepts I got from the course of “Money and Banking” and “Business Institutions”
were so much close to the real world. In management and marketing style of the
employees there were somehow differences exist.

While doing internship I got lot of experience and I got the chance to apply my
knowledge practically which helped me in getting interest in learning new concepts. After
doing this practice I feel that I can even compare my practical knowledge in further
studies.

Financial Analysis

Liquidity Ratios:

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Ratios 2003 2004 2005 2006

Current
Ratio 0.484 0.780 0.809 0.870
Cash
Ratio 0.377 0.503 0.382 0.363

Net W.C -29385417 -106408508 -91049316 -68179014

Quick
Ratio 0.484 0.780 0.809 0.870

Description:
If we look at the liquidity ratios we can see that the bank has improved its liquidity
position from 2003 to 2006. There is a continuous improvement in NBP’s liquidity
position in 2003 the liquidity position was alarming and it was even less than 0.5.
Although in banks it is difficult to keep these ratios up because banks mainly depend
upon short term liabilities but still NBP’s improvement is appreciated.

Leverage Ratios:

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Ratios 2003 2004 2005 2006

Debt Ratio 0.941 0.922 0.869 0.870

Debt/Equi
Ratio 16.002 11.943 6.620 6.750
Times Int
Ear Ratio 2.080 2.348 2.659 2.930
Debt to
Tangible
N.W 16.002 11.943 6.620 6.750

Description:
If we look at the Debt ratio and Debt/Equity ratio it is clearly understandable that the
bank has greater portion of debts in its capital structure, but as compare to 2003 in 2006
the condition is better and the bank has gradually increased its equity portion as compare
to the debt. Still management need to change its capital structure and higher portion of
equity may result in better results, as it is present in times interest earned ratio which is
showing that increase in the equity is putting healthy effect in returns.

Profitability Ratios:

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Ratios 2003 2004 2005 2006

R.O.Assets 0.9% 1.2% 1.64% 2.7%

R.O.Equi 15.2% 14.7% 16.7% 20.8%

R.O.Inv 6.0% 17.7% 19.7% 23.2%

R.O.Op
Assets 3.7% 3.8% 5.3% 6.3%

Description:

As we have seen in other ratios of leverage and liquidity the company’s financial position
is much better in later years as compare to the year 2003, bank has got gradually and
continuous increase in its income which is increasing its return on assets, equity and
investment. Still return on assets is showing that bank is not utilizing its assets properly
and its efficiency is to be increased. Return on equity is satisfactory and showing that
bank is having very less portion of equity.

SWOT ANALYSIS

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Strengths:

 Public confidence

 Sound financial strength

 Highest profitability

 Vast operational network

 Role in economic development

 Utility bills collections

 Corporate branches

 Evening banking

 Efficient home remittance

 Recognition of hard work of staff

 SWIFT

 Internet access (www.NBP.com.pk)

 Pension & salaries payments

 Online city branch

Weaknesses:
 Lack of good delegation

 Inadequate, poorly placed network technology

 complex MIS

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 Deep rooted bureaucratic approval

 Lack of long term & short term plans

 Less share in import & export business

 Poor resource utilization

 Need better service policy

 Frequent change in senior management

Opportunities:

 New style management

 Introduction of new products and services
 Introduction of new technology & electronic banking
 Capital management & equity financing
 Secondary market operations
 New deposit scheme

Threats:

 Establishment of new private financial institutions & expansion

 Govt. sponsored schemes
 Political pressure
 Reducing branch network
 New products form private Pakistan Establishment of new private financial
institutions & expansion

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 New products form private Pakistani & foreign banks

 Non-banking institutions
 Inability to change
 Inability to change
 Stakeholders interests

PEST ANALYSIS

Political:

 Privatization policy and deregulation.

 Impact of subsidized credit affecting and NCB’s.

 Employment practices, Unions, Associations.

 Political Interference and harassment.

 Incidents of high taxation on banking industry.

Economical:

 Constraints in mobilization of public savings because of inflation.

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 Staff cost.

 Operating cost.

 Bad debts

Social & Cultural:

 Inadequate human resources.

 Cultural strain to savings.

 Defaulter’s lobby.

 Declining education and work ethics.

 Inadequate accountability.

 Adequate empowerment.

Technological:

 Inadequate communication infrastructure.

 Inadequate computer facilities.

 Inadequate IT training.

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Suggestions and Recommendations

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

∗ Bank should try to get rid of the political influence to be able to compete in the
industry with prudent and strong policies.
∗ The undue reliance on the public sector be minimized and ventures of private sectors
should be taken as well.
∗ Redefining of rules, regulations and policies should be made implemented at all costs.
∗ Efforts of great importance to be made for the over the counter services of general
banking making it more simple and faster to get a better response of the customers.
∗ The behavior of the employee, especially on the counter has to be strictly monitored
and checked.
∗ The still existed bureaucratic approval system has to be demolished.
∗ All advances should be made by getting the maximum security and should focus on
productive work.
∗ Better and comprehensive long-term and short-term planning should be made to
forecast the future needs.
∗ There is a possibility of establishing a task force to ascertain the effectiveness of the
policies being implemented.
∗ The Bank should develop a comprehensive recruitment policy to make only the
competent ones to be on the job.

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∗ There is a still a vast pool of incompetent employees that has to right sized.
∗ There is a lack of promotional element in the planning and budgetary decisions of the
Bank that has to think seriously.

∗ All branches of the Bank should be computerized for increasing the effectiveness and
efficiency of its employees.
∗ Efforts should be continued to keep the powers of employees union to the minimum,
like the current situation.
∗ Promotions must not be delayed and should be made on time to further increase the
commitment and efficiency of the employees.

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

∗ Right sizing of the employees.

∗ By closing unprofitable branches.
∗ By introducing a merit based selection criteria.
∗ Promotions made conditional with qualifications.

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