AN INTERNSHIP REPORT

ON
NATIONAL BANK OF PAKISTAN

Submitted by:
This internship report is submitted in partial fulfillment of the requirements for the
degree of Master of Commerce awarded by the Hazara University Mansehra.

Hazara University, Mansehra

January, 2010
Department of Management Sciences
Hazara University, Mansehra

Approval Sheet

Internship Title: An internship report on National Bank of Pakistan

Name:

Muhammad Usman Khan

Registration #:

08-MBA-HAV/HU-F-4

Program:

MBA (Finance)

Approved by: Mr Zulqarnain Safdar

(Supervisor)
Signature:

_________________________

External Examiner
Signature:

ii

________________________

iii

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DEDICATION
To Allah Almighty
The Omnipotent, the Omnipresent, the most
Merciful and the Mighty.

To my loving parents
The greatest gift I ever had come from God

To my nice self
Who want to make tomorrow better than
yesterday
And
All those who love me and whom I love

Acknowledgements

In The name of Allah, the most Gracious, the most Merciful. We glorify Allah and seek
his blessings and salutations for his noble Prophet (P.B.U.H), his companions and those
who follow him in upholding the cause of the right religion. I pray to his greatness to
inspire me the right path to his content and to enable me to continue the work started in
this report.
I am very grateful for an inspiring and the fruitful period, spend working on this report. I
would like to give my sincere thankfulness to my report supervisor, Mr Zulqarnain
Safdar, for his friendliness insight and personal commitment opened up a wide range of
possibilities and exciting new paths for me to explore
I feel highly privileged to express my sincere thanks to my supervisor and my uncle
Shabbir Khan (AVP - NBP City Branch Atd) for his sincerely attitude. I am also thankful
to Mr Ejaz Munir and Mr Munawar Hussain Shah for their willingness and valuable help.
I offer my humblest gratitude to my Mother and my family members who supported me
throughout my career financially and morally, and sacrificed their comforts for my future.
Whatever I am today could never have been true without the efforts, prayers and good
wishes of them. I am also thankful to my siblings, for their prayers, moral support and
unconditional love.
I gratefully acknowledge the support and encouragement of my dearest friends.
The last but not least, I am feeling incomplete without my Late father, who always stays
in my memory.

Preface
vi

To every country and the people living there, a need of such an institution is always
needed that can circulate and deal in money. Such institutions are also required to fulfill
other financial needs such as provision of place to deposit money, serving for the utilities
and also advancing money in order to facilitate the needs of people and the businesses.
These organizations in any form can collectively be called as banks. Banking has
always been the main field of interest for most of the students of MBA.. The NBP
organizational paradigm has been thoroughly studied and analyzed. National Bank of
Pakistan has various departments in General Banking, Cash Management, Deposit
Management, Establishment sector, Clearing section, Customer service, Advance and
Credit management.
This report covers all the areas of the bank that clearly show that how the bank is being
excelling in many areas. The report also covers the analysis portion with the help of
which we come to know that where it is strong and where it needs to be strong. National
Bank of Pakistan maintains its position as Pakistan's premier bank determined to set
higher standards of achievements. Due to the induction of new team at the higher level,
that brought some new methodologies as well as some new ideas that took NBP to the
heights where no other bank in Pakistan can even think of clinching. 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.

Table of contents

vii

CHAPTER 1
INTRODUCTION TO REPORT
1.1

Background of study

1.2

Objective of study

1.3

Scope of the study

1.4

Limitation of the study

1.5

Merits of the study

1.5

Research methodology

1.5.1

Primary data :

1.5.2

Secondary data:

CHAPTER 2
INTRODUCTION TO ORGANIZATION (NBP)
2.1

Evaluation of banking / industry in world

2.2

Evaluation of banking / industry in Pakistan

2.3

The following banks were also opened

2.4

Historical introduction to the organization (NBP)

2.4.1

History of NBP

2.4.2

Present status

10

2.5

Credit ratings

11

2.6

Auditors

11

2.7

Board of directors

12

2.8

Organizational structure

12

2.9

Head office

13

2.10

Domestic network

13

2.10.1 Subsidiaries

13

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2.11

Overseas network

14

2.11.1 Overseas branches

14

2.11.2 Representative offices

14

2.12

Corporate branches

14

2.13

Mission statement

15

2.14

Vision statement

15

2.15

Objectives

16

2.16

Core values

16

CHAPTER 3
DEPOSITS & REMMITTANCES
3.1

Introduction

3.2

Types of deposits/products offered by national bank of PAKISTAN 17

3.3

17

3.2.1

Pls (saving deposits)

17

3.2.2

National income daily account (NIDA)

18

3.2.3

Pls (term deposits)

19

3.2.4

Pls special notice deposits

19

3.2.5

Current deposits

20

3.2.6

Call deposit account

20

3.2.7

Foreign currency term deposits

21

Account opening procedure for opening of an account

21

3.3.1

Formal application:

22

3.3.2

Obtaining introduction:

22

3.3.3

Specimen signature:

22

3.3.4

Minimum initial deposit:

22

3.3.5

Operating the account:

22

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3.3.6
3.4

3.5

Qualification of a customer:

23

Nature of accounts

23

3.4.1

Individual accounts

23

3.4.2

Partnership firms account

23

3.4.3

Joint accounts

24

3.4.4

Joint stock companies accoun

25

3.4.5

Associations, societies & clubs accounts

25

3.4.6

Proprietary fitrms account

26

3.4.7

Trust account

26

Remittances/clearing

27

3.5.1

Introduction

27

3.5.2

Mail transfer

27

3.5.3

Telegraphic transfer

27

3.5.4

Demand draft

28

3.5.5

Collection cell/clearing department

29

CHAPTER 4
FINANCES
ADVANCES/FINANCES

32

4.1

Introduction

32

4.2

Principles of financing

32

4.2.1

Safety:

32

4.2.2

Liquidity:

32

4.2.3

Term or period of the time:

33

4.2.4

Dispersal:

33

4.2.5

Remuneration:

33

4.2.6

Suitability:

33

4.3

Types of credit

33

4.4

Types of advances offered by NBP

34

4.4.1

Running finance

34

4.4.2

Secured running finance

34

4.4.3

Cash finance

35

4.4.4

Demand finance

36

4.4.5

Industrial small finance

38

4.4.6

Staff finance

39

4.4.7

House building finance

39

4.4.8

Motor cycle, car, and personal vehicle finance

40

4.4.9

Consumer finance

40

4.4.10 Export finance scheme

40

4.4.11 Finance against trust receipt (fatr)

41

4.4.12 Finance against imported merchandise (fim)

41

4.4.13 Inland bills purchased (documentary / clean)

41

4.4.14 Term finance or NIDF

4.5

42

Procedure for applying for finance

42

4.5.1

Loan process

42

4.5.2

Establishment of relationship:

43

4.5.3

Credit investigation:

43

4.5.4

Evaluation of feasibility reports:

44

4.5.5

Processing of credit proposal:

45

4.5.6

Sanction of credit:

45

4.5.7

Security documentation:

45
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4.5.8

Disbursement:

46

4.5.9

Monitoring and periodic evaluation:

46

4.5.10 Recovery and follow up:

46

CHAPTER 5
FINANCIAL ANALYSIS
5.1

Financial statement analysis

47

5.2

The financial data of NBP is analyzed in the following two ways

48

5.3

Common size analysis

48

5.3.1

Horizontal analysis

48

5.3.2

Vertical analysis

53

Financial ratio analysis

58

5.4.1

Earning assets to total assets

59

5.4.2

Return on earning assets

60

5.4.3

Interest margin to average earning assets

61

5.4.4

Equity capital to total assets

62

5.4.5

Deposit times capital

63

5.4.6

Loan to deposit

64

5.4.7

Operating cost to income ratio

65

5.4.8

Interest income per employee

66

5.4.9

Profit per employee

67

5.4

5.4.10 Business per employee

68

5.4.11 Business per branch

69

5.4.12 Employees per branch

70

CHAPTER 6
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SWOT ANALYSIS

72

6.1

Strengths

73

6.1.1

Oldest institution

73

6.1.2

Alternate duties in SBP absence

73

6.1.3

More deposits than other bank

73

6.1.4

Employee benefits

73

6.1.5

Broad network

73

6.1.6

Strictly followed rules & regulation

73

6.1.7

Professional competence

74

6.1.8

Healthy environment

74

6.1.9

Relation between staff and other employees

74

6.2

6.3

6.4

Weaknesses

74

6.2.1

Lack of marketing effort

74

6.2.2

NBP under political pressure

74

6.2.3

Favoritism and nepotism

75

6.2.4

Lack of financial product

75

6.2.5

Inefficient counter services in the rush hours

75

6.2.6

Lack of computerized network

75

6.2.7

Lack of modern equipment

75

6.2.8

Uneven work distribution

76

Opportunities

76

6.3.1

Electronic banking

76

6.3.2

Micro financing

76

Threats
76

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6.4.1

Emergence of new competitors

76

6.4.2

Political pressure by elected government

77

6.4.3

Downsizing

77

6.4.4

Customers complaints

77

6.4.5

Competitive analysis

77

6.4.6

Porters five forces model

77

CHAPTER # 7
CONCLUSION AND RECOMMENDATIONS

79

7.1

Conclusion

79

7.2

Problems and recommendations

80

7.2.1

Performance of general banking departments

80

7.2.2

Lack of proper training

80

7.2.3

Interference of union

81

7.2.4

Delegation of authority

81

7.2.5

Distribution of work

81

7.2.6

In adequacy of staff

81

7.2.7

Inadequate building

82

7.2.8

Non-installation of computer

82

7.2.9

Lack of library

82
BIBLIOGRAPHY

83

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List of Tables
Table 5.1

Horizontal analysis of balance sheet

49

Table 5.2

Horizontal analysis of income statement

51

Table 5.3

Vertical analysis of balance sheet

53

Table 5.4

Vertical analysis of income statement

56

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List of Graphs
Graph 5.1

Earning assets to total assets

60

Graph 5.2

Return on earning assets

61

Graph 5.3

Interest margin to average earning assets

62

Graph 5.4

Equity capital to total assets

63

Graph 4.5

Deposit times capital

64

Graph 4.6

Loan to deposit

65

Graph 4.7

Operating cost to income ratio

66

Graph 4.8

Interest income per employee

67

Graph 4.9

Profit per employee

68

Graph 4.10

Business per employee

69

Graph 4.11

Business per branch

70

Graph 4.12

Employees per branch

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Executive summary
The banking structure in Pakistan comprises of the following types, State Bank of
Pakistan, Commercial Bank of Pakistan; Exchange Banks, Saving banks, Cooperative
banks, Specialized Credit Institutions. The state bank of Pakistan is the Central bank of
the country and was established on July01, 1948. The network of bank branches now
covers a very large segment of national economy
National bank of Pakistan was established under the National bank of Pakistan Ordinance
1949. This bank provides all types of banking services of the Government and general
public. The bank acts as an agent of central Bank wherever the state Bank does not have
its own branches. The bank is a scheduled commercial bank and is principally engaged in
the business of banking companies Ordinance 1962.
The internship reports compiled and submitted in the partial fulfillment of an academic
obligation for the degree of Master of Business Administration awarded by Hazara
University Dodhial Mansehra. The underlying purpose of this report is to studying and
analyzing the internship being carried out at in a reputable organization.
I did my internship in National Bank of Pakistan. During this time I experienced working
in different departments such as Remittances, Deposit Management, collection of
cheques, government section, credit administration, NBP advance salary and western
union money transfer etc. In remittance department like any other bank, NBP also have
instruments for transferring of money, Telegraphic Transfer, Mail Transfer. In cash
department both deposits and withdrawals go side by side.
Bank does not pay any profit on current deposits. The following are the financial
products/services of PLS Account, Saving Account, Term deposit and Foreign currency
accounts.
Moreover this report contains introduction to study in 1st chapter, Evaluation of banking
industry in Pakistan and Historical introduction to NBP in 2nd chapter, 3rd chapter includes
Deposits & Remittances. Finances and advances are discussed in detail in chapter 4.

xvii

Financial analysis, SWOT analysis its strategies and all, are essential to represent a true
picture of organization. Chapter 5 is based on 2 types of financial analysis of NBP,
common size analysis & financial Ratio analysis. In common size analysis horizontal and
vertical analysis of Balance sheet and income statement are done. In this analysis each
element of financial statements of 2007, 2008 and 2009 are compared, and in financial
ratio analysis different Ratios are computed. The main theme of financial analysis is to
looking closely on the financial statements of NBP, and note down the major changes
made as compared to previous year.
By looking closely to elements of financial statements we come to know that different
changes are made. Total liabilities and Total equity increased by 11.40% in 2008 and
28.57% in 2009, and share capital of NBP increase to 10% in 2008 and 32% in 2009. We
also find an absolute increase in the gross profit. Gross profit increases by 10.19% in
2008 and 14.35% in 2009. But profit after tax decreases in 2008 and 2009 from base year
2007.

But there is slight increase in 2009 as compared to 2008, this is because

management has been able to gain control over the markup expenses then previous year.
After gaining some experience I am recommending to bank that, the employees should be
given special training for customer relationship. There is no proper distribution of work.
All work must be distributed properly among the employees. In my observation, I felt
that the strength of the present staff is insufficient. The staff is affecting badly due to
burden of over work. The shortage of staff must be fulfilled immediately, in this way, the
staff will be able to perform their duties appropriately. If internal employees are satisfied,
they will do their work more efficiently, and it will be profitable for the organization in
long run.

xviii